TOKYO Feb 14 Sumitomo Rubber Industries Ltd
said surging cost of raw materials would likely impact
earnings in 2017, as Japan's second-largest tyre maker forecast
a more than 30 percent fall in full-year operating profit.
Asia benchmark rubber futures at the Tokyo Commodity
Exchange (TOCOM) hit their highest levels in more than five
years late last month.
"We expect raw material prices to continue at the current
levels through this year, though butadiene prices may come
down," Sumitomo Rubber President Ikuji Ikeda told a news
conference on Tuesday.
Prices of rubber, which climbed 26 percent in January before
paring gains due to the Chinese New Year holiday, and butadiene,
which is used to produce synthetic rubber, are expected to cut
its operating profit by 55.1 billion yen, the company said.
After factoring in sales growth and cost savings, Sumitomo
Rubber forecast 2017 operating profit to fall 32 percent to 50
billion yen ($440.2 million), below a consensus estimate of
71.65 billion yen from 13 analysts polled by Thomson Reuters
"It will be our challenge to take speedy measures to reflect
soaring prices of raw materials," Ikeda said, implying that the
company may need to increase product prices, cut costs and
"Surging prices of raw materials are our biggest concern for
this year," he said.
The company, which also owns natural rubber farms in
Thailand, wants to increase output to cushion volatile material
prices, Ikeda said.
"We do think about expanding our own production of natural
rubber in the future to secure good quality rubber at a low
cost, and make value-added products using that material, which
may help us differentiate from others," he said. "But our own
production currently makes up only a few percent of our needs."
For 2016, the world's sixth-biggest tyre maker by sales,
reported an 18 percent decline in operating profit to 73.28
billion yen, weighed down by lower product prices and a higher
yen against the U.S. dollar.
($1 = 113.5800 yen)
(Reporting by Yuka Obayashi; Editing by Biju Dwarakanath)