Bridgestone forecasts profit surge on drops in rubber, yen

By Anna Mukai and Yasumasa Song
Bloomberg News

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The Bridgestone Corp. logo is displayed at the Tokyo Auto Salon 2013 at Makuhari Messe in Chiba, Japan. (Kiyoshi Ota/Bloomberg)

Bridgestone Corp., the world’s biggest tire maker that has Akron operations, on Monday forecast a 37 percent surge in profit this fiscal year as material costs decline, production increases and a weaker Japanese currency boosts the value of overseas sales.

Net income will probably jump to $2.5 billion this year from $1.83 billion in 2012, Bridgestone said in a statement. The forecast compares with the $2.19 billion average of 15 analysts’ estimates compiled by Bloomberg.

The tire maker also expects to increase output 9.6 percent this year to meet rising demand in emerging markets, it said. Bridgestone is also benefiting from a decline in materials costs.

“I expect the price of rubber to fall further because of an excess supply and the weaker yen will of course be an advantage,” said Shiro Sakamaki, an analyst at Daiwa Securities Co. “Considering all these, I’d guess their earnings will grow even more this year.”

Rubber will probably average between $3.30 and $3.50 a kilogram this year, Akihiro Eto, chief financial officer at Bridgestone, said in Tokyo at a briefing to discuss earnings. The material averaged about $3.38 last year, based on prices for so-called ribbed smoked sheet.

Bridgestone, which owns Firestone brands, gets about 80 percent of its revenue outside Japan, with about 45 percent of sales coming from the Americas as of the three months ended Sept. 30, according to data compiled by Bloomberg.

Passenger vehicle and light truck tire sales in North America were unchanged from 2011, the company reported. Sales of replacement tires in Europe “decreased substantially” from 2011 figures, Bridgestone said.

The company said while there are signs of a U.S. economic recovery, there are concerns of a serious recession in Europe and decelerating growth in emerging countries.

“The degree of uncertainty and risk in the global economy has increased beyond previous levels,” the company said in a statement.

“We are watching the yen’s moves carefully,” Bridgestone’s Chief Executive Officer Masaaki Tsuya said in Tokyo.

A 1 yen decline in the Japanese currency’s value against the dollar adds about 3.9 billion yen ($41.52 million), and about 900 million yen ($9.58 million) versus the euro, to Bridgestone’s operating profit, Eto said.

Bridgestone shares gained 2.8 percent to close at 2,555 yen ($27.20) in Tokyo before the earnings announcement. The shares have climbed 15 percent this year, compared with a 9.7 percent gain for the Nikkei 225 Stock Average.

Sales will probably surge 17 percent this year to $37.8 billion, or 3.55 trillion yen, according to a company statement.

Tsuya, 60, said he will double as chairman after Shoshi Arakawa, 68, leaves his post March 26 over health concerns.

The company said its goal is to be “Dan-Totsu,” meaning the absolute or clear leader in all of its industries and far outperforming competitors.

Beacon Journal business writer Jim Mackinnon contributed to this report.

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