Kumho Tires achieves double digit growth
Kumho Tires posted first quarter sales of KRW 586.4 billion (parent company only, not consolidated) – a growth of 27.7 percent quarter-on-quarter and 18 percent year-on-year. This resulted in an operating profit of KRW 21.3 billion and a net income of KRW 20.9 billion.
The gains result from an improved plant operation rate and increased export sales. Export volume for the period was up 40 percent year-on-year, thanks in particular to the general recovery of both the car and tyre markets in North America – one of the company’s key sales territories. Furthermore, exports of UHP tyres to the world’s largest tyre market were up no less than 150 percent. On the operations front, the company raised its production rate to 90 percent – an impressive 30 percent increase over the same period last year. This achievement was aided by the efforts made to maintain appropriate inventory levels since the appointment of the company’s CEO, Jong-Ho Kim in mid-2009.
Ho Lee, Senior Vice President of Strategic Planning for Kumho Tires, said: “The company’s return to profit is very encouraging for all its stakeholders. The results are even more promising when one takes into account the fact that production could not meet demand due to prolonged collective bargaining and wage negotiations with the union. This, in turn, delayed the injection of much needed emergency funding.
“The positive effect of restructuring will become still more apparent in the second quarter as the company accelerates the recovery process required to complete the work-out programme it is currently undergoing,” he added.
The company’s Q2 forecast is based on the improved cost competitiveness expected to ensue from its recent agreement with the union that called for both wage cuts and increased productivity, plus a full order book resulting from increased demand for its tyres over the peak summer season.
The turnaround will be still further aided by significantly reduced interest charges once the company’s business normalisation plan, which includes debt to equity swaps by creditor institutions, is implemented as intended. In addition, the normalisation currently being undertaken by overseas subsidiaries will help Kumho reduce its equity method losses.
Kumho Tires requested a work-out programme at the end of last year, mainly as a result of liquidity shortages caused by the global economic slowdown and the accumulated deficit of recent years.
