Tokyo: Top Japanese tyre maker Bridgestone tumbled to an operating loss in the second quarter, hit by the economic slump and a stronger yen, but raised its full-year outlook again after a surprise upgrade in June.
Crediting deeper-than-expected cost cuts, Bridgestone lifted its 2009 operating profit forecast to ¥61 billion ($641 million) from ¥56 billion, catching up with the average projection of a ¥60.5 billion profit in a poll of 11 analysts by Thomson Reuters.
On 25 June the company raised its full-year earnings forecasts, citing improved demand prospects in the second half as well as a weaker-than-expected yen. The surprise upgrade sent Bridgestone shares surging 8% next day.
“The upgrade was positive but not a big surprise. I expected Bridgestone to exceed the 26 June operating profit forecast, but it achieved deeper cost cuts than I expected,” said UBS Securities analyst Kunihiro Matsumoto. At this pace of cost cutting the company has a good chance of making another upward revision to its profit outlook, though demand is highly likely to stay poor this year, he said.
Bridgestone’s rivals have also beaten analysts’ expectations and suggested a degree of recovery in the second half of the year, while they similarly suffered losses in recent months on the back of slumping demand for cars and replacement tyres.
France’s Michelin, which vies with Bridgestone to be the world’s No.1 tyre maker, last month posted a smaller-than-expected loss for January-June and forecast a recovery in the second half. Goodyear Tire & Rubber of the United States booked a smaller second-quarter loss than expected and said there were signs the downturn was easing.
Bridgestone expects its tyre sales volume for both new cars and for replacement tyres in the second half to recover in the United States and Europe compared with a year ago, but not in Japan, chief financial officer Koki Takahashi told a news conference.
“Sales in the second half will likely rise compared with the year-ago level, helped by governments’ measures to promote new car sales, but we are worried that the measures may only help bring forward demand meant for later,” he said, referring to the European market.
On profitability, Takahashi said sales and administration costs have dropped below expected levels, while inventory has returned to a healthy level.
Bridgestone expects its factory utilisation rate in Japan, which it has kept low due to plunging global sales and which has thereby weighed heavily on profits, to climb to 67 percent for the full year from 57% in the first half, though that is still well below the 2008 level of 96%, he said.
Bridgestone booked an operating loss of ¥7.6 billion ($79.7 million) for April-June, swinging from a profit of ¥31.2 billion a year earlier. The firm did not provide quarterly figures, which were calculated by Reuters.
It expects its operating profit to more than halve in the full calendar year from last year’s ¥131.6 billion.
Shares of Bridgestone rose 14% in the last quarter, underperforming the Nikkei average, which rose 18%.
The shares ended down 0.2% at ¥1,690 before the announcement, underperforming a 0.2% gain in the Nikkei average.