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The cost of raw materials is falling and tire companies are selling poorly but making more money
Time of Release：
2012-12-05 15:09
China's Yicai.com reported that rubber prices have fallen sharply in the past year as the auto market continues to slump, while the performance reports of several listed companies in the tire industry show that despite the decline in the sales of auto tires, corporate profitability is growing. Take Fengshen Stock as an example. From January to September 2012, the company achieved a total operating revenue of 6.977 billion yuan, down 12.4% year on year. Net profit attributable to the parent company reached 227 million yuan, up 5.2% year on year.
Since the cancellation of relevant preferential policies in 2011, the sales growth of family car tires (semi-steel) has been weak; As a result of the overall economic slowdown, heavy truck tire (all steel) sales have also declined, and factories are operating at lower operating rates, some of which are even less than 50%.
The main raw material of tires is rubber. Natural rubber accounts for about 40%-50% of the rubber used in all steel tires, and about 20%-30% of the rubber used in half steel radial tires. At a relatively average cost, 10 kilograms of natural rubber can produce a tire.
Other data show that the growth rate of China's rubber industry has dropped to less than 10% this year, while in the past the growth rate was 20% to 30%.
As a whole, the price of natural rubber has fallen more than the price of tyres. Under the condition that the price drop of tire is lower than the cost drop, the profitability of tire enterprises has rebounded. A number of listed tire companies in spite of the decline in operating revenue, but still increased net profit.
In the rubber price into the slide channel, many foreign enterprises have also handed over the profit report card. Hankook Tire's third-quarter operating profit surged 40.96 percent year-on-year to 670.4 billion won (589 million U.S. dollars), according to the company. Over the same period, Michelin's net sales rose 5.7 percent to $7.09 billion.
In those results, the companies said declines in raw materials did have an impact. Michelin, for one, said about €200m to €300m of its recurring revenues came from the favourable impact of lower raw material prices in the second half.
In addition to the fall in raw material costs, tire companies also ushered in the expiration of the United States tire special insurance program this positive factor. Until now, Chinese tire exports to the United States had been largely halted due to the imposition of a special protection case on tires by the United States, which imposed punitive tariffs of up to 35 percent.
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