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Toyo Tire Expects 2012 Profit to Rebound 30% on Overseas Output

Toyo Tire & Rubber Co. expects profit to rise at least 30 percent next year as increased production in China and the U.S. offsets the yen’s strength and it rebounds from the effects of Japan’s March 11 disaster.

“We’re targeting at least 10 billion yen ($130 million) in operating profit as a result of overseas expansion,” President Kenji Nakakura said last week in an interview. The company, which supplies Toyota Motor Corp. (7203) and Volkswagen’s Audi AG, forecasts profit will fall 37 percent to 7.7 billion yen this year after Japan’s record earthquake disrupted auto-parts supply chains and the yen hovers at a postwar high against the dollar.

Production shifts, including raising capacity at an Atlanta plant this year and starting output in December at a factory in Jiangsu, China, will “help improve” earnings after the year starting April, Nakakura said. Toyo Tire, which expects revenue to gain 9.5 percent to 322 billion yen this year, hasn’t disclosed a sales target for next year.

The company, Japan’s fourth biggest tire maker, said in May it seeks to boost annual sales to 400 billion yen and increase operating profit, or sales minus the cost of goods and administrative expenses, to 30 billion yen in the year ending March 2016. The target is based on an assumption the yen averages 90 yen per dollar over the next five years. The Japanese currency has averaged 80.41 against the dollar this year and traded at 76.80 as of 8:46 a.m. in Tokyo.

Overseas Shift

Toyo Tire, founded in 1943 and based in Osaka, aims to reduce the rate of domestic tire production to less than 60 percent from about 80 percent last year, Nakakura said. It also plans to boost sales of products that net a higher profit margin and cut outsourcing expenses to make up for a possible losses related to the stronger yen, he said.

“If we could take these countermeasures properly, we should be able to achieve the goal we set for the next five years,” Nakakura, 63, said.

Toyo Tire shares, down 4.1 percent this year compared with a 4.3 percent increase in the 11-member Topix Rubber Products Index, closed 1.1 percent lower at 188 yen yesterday on the Tokyo Stock Exchange.

To contact the reporter on this story: Masatsugu Horie in Osaka at mhorie3@bloomberg.net

To contact the editor responsible for this story: Drew Gibson in Osaka at dgibson2@bloomberg.net

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