Bridgestone May Use Less Rubber on U.S. Demand, Nomura Says

Bridgestone Corp., the biggest tiremaker, may use 2.6 percent less rubber in the year though December than projected in February as demand in the U.S. will be slower than forecast, said a Nomura Holdings Inc. analyst. Rubber futures and Bridgestone shares fell.

A decline in raw material costs and the Japanese currency mean the Tokyo-based company will still book a record profit this year even with weaker demand, Hisahiro Yamaoka at the equity research department said in an interview on April 11. His recommendations on equities returned 15 percent in the past year, according to data compiled by Bloomberg. Makoto Shiomi, a Bridgestone spokesman, said the tiremaker hasn’t changed any of its estimates.

Bridgestone said on Feb. 18 it would probably consume a record 1.93 million tons of rubber for tire production globally this year, up 9.7 percent from last year. Yamaoka, who has covered the tire industry for almost six years, said consumption of natural and synthetic rubber may be 50,000 metric tons lower than the company projection.

Slower demand from tiremakers may accelerate a drop in rubber futures on the Tokyo Commodity Exchange, the global benchmark, which entered a bear market this month. The most-active contract tumbled as much as 5.4 percent today, the most since July 2012, to 261.4 a kilogram ($2,654 a metric ton).

Bridgestone shares lost as much as 2.6 percent to 3,685 yen today. The stock reached 3,785 yen on April 12, the highest level since July 1999. Yamaoka’s target for the stock is 2,900 yen while the consensus figure is 3,773 yen.

‘Replacement Tires’

U.S. light-vehicle sales in March climbed 3.4 percent to 1.45 million, the highest monthly total for the industry since August 2007, according to researcher Autodata Corp. The robust deliveries were not enough to offset weakness in sales of replacement tires, which represent about 70 percent of total tire demand in the market, Yamaoka said.

“U.S. demand for replacement tires is not recovering as people use them for a longer period than before,” he said.

Bridgestone’s February forecast for full-year operating profit to jump 34 percent to 382 billion yen remains unchanged, Shiomi said. The company plans to release the first-quarter financial results on May 8.

Masahiro Akita, Tokyo-based analyst at Credit Suisse Group AG, said in a report on April 9 that Bridgestone’s tire sales in the U.S. and Europe will probably fall short of the company’s projection.

The yen’s 12 percent slump against the dollar this year has enabled Japanese tiremakers to lower prices to stimulate demand, Yamaoka said. Possible reductions would be minor adjustments rather than large discounts, as the companies want to maintain product prices at high levels amid caution that the yen’s depreciation may not last, he said.

A weakening yen is expected to boost Bridgestone profits by 62 billion yen this year, while declining rubber prices will help the company cut costs by 28 billion yen, Yamaoka said.