Bridgestone Corp., the world's second-biggest tiremaker, said first-half profit slumped 68% as higher rubber and oil prices squeezed earnings and the company had a year-earlier one-time gain. Net income fell to 32.8 billion yen ($284.3 million), or 42.04 yen a share, for the six months ended June 30 from 101.7 billion yen, or 127.03 yen in the same period a year ago, Tokyo-based Bridgestone said in a release today. Sales rose 13% to 1.42 trillion yen. The company had forecast profit of 30 billion yen on sales of 1.43 trillion yen. Rising raw material prices forced President Shoshi Arakawa to cut the company's outlook earlier this year, mirroring Michelin & Cie., the world's largest tiremaker. Bridgestone is charging more for tires to blunt the impact of increasing rubber and oil costs. "Prices for rubber and other raw materials will probably remain high, which may keep hurting Bridgestone's profits," said Makoto Kikuchi, who manages $800 million including auto-related shares as chief executive officer at Myojo Asset Management Japan Co. in Tokyo. "Higher tire prices may not be able to catch up with rising costs." Bridgestone had an 80.8 billion yen gain in the first-half last year, mainly because of a change in its pension system. The company this year booked a $140 million charge to prepare for closing a U.S. factory by Dec. 31. A defining trend of the business environment in the first half was continued global upward movement in the cost of crude oil and other raw materials. The Japanese economy continued to recover as a result of improving corporate earnings and increases in capital spending and personal consumption. In the United States, the economy was favourable as personal consumption and capital spending continued to increase. Economic recovery proceeded gradually in Europe. Strong economic growth continued in China while other Asian economies expanded steadily. Bridgestone cut its full-year net income forecast to 62 billion yen from the 65 billion yen made on June 27. The tiremaker reiterated its annual sales forecast of 2.95 trillion yen and its operating profit forecast of 165 billion yen. Michelin on July 28 lowered its annual profit target after first-half earnings slumped on higher rubber prices. Rising commodity costs, mainly natural rubber, cut operating profit by 352 million euros ($450.4 million) in the first half and will be a greater burden the rest of this year, the company said. Hankook Tire Co., South Korea's largest tiremaker, today lowered its operating profit target for this year by 25% because of higher raw material costs. Shares of Bridgestone slipped 0.2% to 2,145 yen at the 3 p.m. close of trading on the Tokyo Stock Exchange. The stock has dropped 13% from the start of the year. (Bloomberg, bridgestone.eu)
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