Sumitomo Rubber Industries : 2025 3Q Financial Results with transcripts

Financial Results Briefing for Nine Months Ended Sep. 30, 2025 November 12, 2025

(Total: 105 minutes, Presentation: 51 minutes, Q&A: 54 minutes)

Satoru Yamamoto President and CEO, Representative Director Hidekazu Nishiguchi Director, Managing Executive Officer

Naoki Okawa Director, Senior Executive Officer

Shinji Araki General Manager, Accounting & Finance Headquarters

Arifumi Yoshida Citigroup Global Markets

Shiro Sakamaki BofA Securities

Tairiku Sakaguchi Mizuho Securities

Kenji Kanai Tokai Tokyo Intelligence Laboratory

*Analysts that SCRIPTS Asia was able to identify from the audio who spoke during Q&A or whose questions were read by moderator/company representatives.

Let me begin by introducing today's attendees. This is Satoru Yamamoto, President and CEO, Representative Director of Sumitomo Rubber Industries.

First, Mr. Yamamoto, President and CEO, will give an overview of the financial results and explain current major initiatives, and then Mr. Okawa, Senior Executive Officer, will explain the details of the financial results. Before closing, President Yamamoto will give an update on the progress of our long-term corporate strategy,

R.I.S.E. 2035. After the presentation, we would like to take your questions. Thank you for your cooperation.

Mr. Yamamoto will now give an overview of the financial results and the current major initiatives.

I will now give you an overview of our performance for Q3 of FY2025 and our current major initiatives. I would like to show you slide six.

From July to September 2025, our group's sales revenue was JPY289.4 billion , 101% of the same period last year, business profit was JPY20.2 billion, 105% of the same period last year, operating profit was JPY19.1 billion, and profit attributable to owners of parent was JPY11.6 billion, all of which were higher than the previous fiscal year.

The business profit margin was raised to 7%.

In the tire business, sales volume in the July-September period were down from the previous year, but premium tire sales remained strong in major markets such as Japan, North America, and Europe.

In the sports business, sales of both golf and tennis products increased in Japan and North America from July to September. Golf sales are steadily increasing, especially for SRIXON clubs, which were newly launched in 2025.

In the industrial products and others business, sales increased in the vibration control and construction businesses.

Next, I would like to introduce some topics. The next-generation all-season tire, SYNCHRO WEATHER, equipped with our proprietary active tread technology, has expanded its lineup from 40 sizes at the end of last year to 76 sizes at the end of March. And at the end of October, we expanded its lineup to 98 sizes.

We believe that we can increase profits by aggressively marketing SYNCHRO WEATHER during the upcoming winter sales season. In December, we plan to add two sizes of SYNCHRO WEATHER for light vehicles, and we hope that more people will use our newly invented tires with the active tread technology.

As for the expansion of the DUNLOP brand, we started sales in North America and Australia in Q2 of this year. We already launched our own products for North America in November, and we plan to add a new series next year. At the same time, we will expand the size range and sales. In January 2026, we will start selling our own products in Europe.

We will expand sales of our premium products under the DUNLOP brand in the US, Australia, and Europe, and we hope you will look forward to our future DUNLOP brand strategy.

We are also strengthening our development structure in Europe, and will further enhance our sales for new vehicles in Europe from the beginning of next year.

Next, I would like to explain the In-House New Factory that we are promoting to develop and produce high-inch tires and premium products. We plan to introduce and start operation of a compact next-generation molding machine developed in-house that is capable of producing high-performance tires with high precision and efficiency by the end of this year, while maintaining current operations at our domestic plants.

The installation of the compact next-generation molding machine will save 35% space compared to standard general-purpose equipment, and the installation of a seamless automatic transfer system will not only reduce the investment in new equipment, but will also improve productivity and reduce costs. We will gradually introduce this system to each plant from next year onward.

In addition, for alternative tires for large SUVs and pickups, we will introduce our new proprietary SUN-TITAN SYSTEM manufacturing system, which will enable us to achieve both high design quality and high roundness, as well as weight balance and weight reduction at a high level. We are planning to introduce this SUN-TITAN SYSTEM to our factory in Thailand by next year 2026.

Next, I would like to show you slide seven regarding our current main effort to respond to US tariffs.

The US tariff impact reflects the results from July to September, changes in the tax rate, and a decrease in sales volume in the US.

The impact in 2025 is expected to be JPY13 billion, a decrease of JPY1.5 billion from JPY14.5 billion. As in the past, we plan to respond by passing on prices and reducing costs and expenses.

In the tire business, we have already passed on prices in the US since May, and in the sports business, we have raised some prices since June while monitoring the competition, and are generally progressing as planned.

On the other hand, although there will be a decrease in tire sales volume due to price hikes, we are committed to responding flexibly and promptly by paying close attention to trends in the US tariff policy, US market conditions and other companies.

We will respond to this impact by first raising prices, but prices will be affected by the competitive environment and the supply-demand balance in the market, so we will continue to firmly reduce costs. We are already working on cost reduction at our main export factory in Thailand, and we will make progress toward defining a goal. We believe this will have a significant effect.

As further support, a new project, "Project ARK" was launched in May of this year to generate profits and total costs, and has been in full operation since July. We will explain Project ARK in the growth strategy section that will follow.

I would like you to take a look at slide 20.

For the full year 2025, we forecast sales revenue of JPY1,200 billion, 99% of the previous year's level; business profit of JPY95 billion, 108% of the previous year's level; operating profit of JPY84 billion, 751% of the previous year's level; and net profit of JPY45 billion, 456% of the previous year's level.

Only sales revenue has been changed from the forecast announced in August of this year. It has reflected January-September results, sales forecasts for H2, and the impact of foreign exchange rates. Profits, on the other hand, are in line with the target set at the beginning of the year.

Please turn to slide 33.

We plan to pay a year-end dividend of JPY35 for 2025 and an annual dividend of JPY70, the highest level ever. There is no change from the dividend forecast announced in February of this year. We aim for a consolidated dividend payout ratio of 40% or more, and will strive to pay stable dividends whenever possible.

This concludes my explanation. Thank you very much.

I will now explain the details of the financial results for Q3 of FY2025. First, please take a look at slide six. I would like to explain the highlights of our financial results during the quarter under review.

As stated here, consolidated results for July-September 2025 were sales revenue of JPY289.4 billion, business profit of JPY20.2 billion, operating profit of JPY19.1 billion, and profit attributable to owners of parent of JPY11.6 billion, with a business profit margin of 7%. The results for the period from July to September returned to a profit growth trend with a YoY increase in both revenue and profit.

Next, please turn to slide seven.

As Yamamoto mentioned earlier, we expect to reduce the annual US tariff impact to minus JPY13 billion, mainly due to a decrease in sales volume. We will respond to this impact firmly with initiatives such as cost reduction.

Please turn to slide eight.

As shown in the blue box, consolidated results for the first nine months from January to September of FY2025 were sales revenue of JPY861.6 billion, business profit of JPY48.5 billion, operating profit of JPY46.1 billion, and quarterly profit of JPY26 billion.

Although business profit decreased, operating profit and quarterly profit increased significantly YoY, partly due to the impact of the North American structural reforms implemented last year.

Please turn to slide 10. This shows sales revenue and business profit by segment, and the January-September results are shown in the blue box.

Tire sales revenue was JPY740.2 billion, 99% of the same period last year, and business profit was JPY40.9 billion, 80% of the same period last year. Sales volume decreased from the same period last year, and both sales revenue and business profit declined in the January-September period.

In the sports business below that, both sales revenue and business profit declined, with sales revenue of JPY93.2 billion, 95% of the previous year's level, and business profit of JPY4.7 billion, 59% of the previous year's level, due in part to the impact of the still deteriorating Korean market conditions.

Revenues from the industrial products and other business were almost unchanged from the same period of the previous year at JPY28.3 billion. Business profit increased to JPY2.9 billion, 121% of the previous year's level.

Please turn to slide 13. The graph here shows the trends in business profit by region for the tire business, one of our KPIs, for the period from January to September. Of these, those exported and sold directly from Japan without going through group sales companies are counted in Japan.

First, in Europe, the Middle East, and Africa, shown in the upper left graph, the results remain in the red, but as indicated in the balloon, they have returned to the black for the July-September period due to the penetration of price increases, strong sales of winter tires on the market, and recovery of market share.

On the other hand, in Asia and Oceania, the bottom left, during the January-September period, China's market conditions remained unfavorable, resulting in a decrease in profit, while its right neighbor, Japan, improved its performance. In addition, North America, on the right end of the page, showed an increase due in part to the effect of structural reforms in North America.

Please turn to slide 14. I will briefly explain the analysis of YoY increase in business profit for the July-September period, which Yamamoto mentioned a little earlier.

First, the raw material, which had been negative until H1, has finally stabilized, resulting in a positive JPY4.3 billion. On the other hand, there were negative factors such as the Trump tariffs and the impact of volume declines due to price hikes in North America, which outweighed the positive price effect of JPY10 billion. As a result, the volume and mix showed a negative JPY18.3 billion. However, the direct cost and fixed cost reductions resulting from the closure of the plant in North America last year cancelled out the negative JPY18.3 billion, and the total profit for the entire company was JPY20.2 billion, an increase of JPY1 billion from the July-September period of last year, showing a solid recovery in profit on a quarterly basis.

Please turn to slide 15. This shows an analysis of the factors that contributed to the increase or decrease in business profit from the same period of the previous year for the January-September period, including the July-September results mentioned earlier.

First, the raw material was minus JPY9.5 billion due to the impact of the natural rubber market. On the other hand, the price was up JPY18.6 billion, continuing the effect of price hikes since the beginning of the year. Volume and mix were minus JPY18.4 billion due to lower sales volume in North America and China, as well as the impact of the Trump tariffs in North America.

Of this amount, unrealized profit was minus JPY4.2 billion due to the impact of increased inventory in North America. Fixed costs were positive JPY7 billion, partly due to the effect of structural reform of the North American business. In addition, foreign exchange was minus JPY2.6 billion. Expense was minus JPY6 billion due to higher personnel and DX-related costs.

As a result, in the tire business as a whole, profit decreased by JPY10.4 billion, and with the addition of a JPY3.3 billion decrease in the sports business and a JPY0.7 billion increase in the industrial products and other business, the total decrease for the entire company was JPY13 billion. I am sorry to repeat this, but the results for the July-September period improved YoY, showing a recovery trend.

Please turn to slide 16. I will explain the items below business profit in the consolidated statements, mainly in comparison with last year.

First of all, in the item three, other expenses, the amount of expenses has been significantly reduced this year because JPY46.5 billion of restructuring expenses in North America were recorded last year. In the item four, the financial income, there was a significant improvement of JPY11.9 billion due to an increase in the impact of inflation adjustment in Turkey.

In the item five, financial expenses, there was a foreign exchange loss of JPY15.8 billion, mainly on the US dollar. Below that, although not numbered, due to the elimination of a portion of the tax effect amount recorded last year and a return to normal tax rates, profit increased by JPY22 billion YoY to JPY26 billion.

Please turn to slide 17.

As for the consolidated balance sheet, total assets amounted to JPY1,417.2 billion, an increase of JPY76.1 billion from the end of the previous fiscal year. This is mainly due to the acquisition of the DUNLOP trademark.

As a result, the ratio of debt to equity increased slightly, and the equity ratio was 46.7%, down 2.2 percentage points from the end of the previous year.

Please turn to slide 20. As for the consolidated earnings forecast for FY2025, as shown in the blue box, we have revised the forecast for sales revenue to JPY1.2 trillion, 99% of the previous year's level, while business profit is expected to remain at JPY95 billion, 108% of the previous year's level, unchanged from the Q2 forecast.

Profit is expected to be JPY45 billion, a significant increase YoY. As a result, ROIC and ROE for the current fiscal year are expected to be 6.6% and 6.8%, respectively.

Please turn to slide 22. This is the forecast of segment sales revenue and business profit for FY2025.

The fourth line from the bottom of the blue frame shows the business profit of tires, which is expected to increase by 10% from JPY76.2 billion in FY2024 to JPY84 billion. Below that, in sports, profit is expected to decline. The forecast for the industrial products and other is for an increase in profit.

Please turn to slide 23. This shows an analysis of the factors contributing to the increase or decrease in business profit for the October-December period from the same period of the previous year.

First, the raw material is expected to be positive JPY4.4 billon partly due to price declines of natural rubber. In the petroleum related, we forecast plus JPY2.8 billion, and a total plus of JPY8.2 billion, including others. The price is expected to be positive JPY7.6 billion, as the effect of commercial price increases in North America, Europe, and Japan continues.

On the other hand, the volume and mix are expected to be minus JPY3.6 billion due to the impact of the Trump tariffs, in addition to the volume decline. The direct costs are expected to be plus JPY3.6 billion due to the effect of structural reforms in the North American business and the effect of Project ARK. As a result, the tire business as a whole is expected to post an increase of JPY18.3 billion in profit.

The sports business segment is expected to post an increase of JPY1.9 billion, despite the sluggish Korean market, due in part to XXIO14, which went on sale in the second half of this month and has already received a large number of orders. The industrial products and other will be minus JPY0.1 billion, and we are forecasting a significant increase in profits to JPY46.5 billion, a total increase of JPY20.1 billion YoY for the entire company. We will certainly strive to achieve our profit target while controlling costs as much as possible toward the end of the fiscal year.

Please turn to slide 24. This is an analysis of the factors that contribute to the YoY increase or decrease in business profit in FY2025.

As I explained earlier, this is the sum of the analysis of the increase or decrease factors for the January-September and October-December periods. From JPY87.9 billion in the previous year to the current year's forecast of JPY95 billion, an increase of JPY7.1 billion in business profit is expected, as forecasted at the beginning of the year. Please refer to the table on the right for changes in unit prices of raw materials, including natural rubber and crude oil.

In addition, in the column at the bottom of the table, I will explain the consolidated business profit items that differ significantly from the Q2 forecast, or from the previous announcement.

First, as shown in the red balloon above, in the volume and mix, the other volume and mix decreased by JPY15.9 billion, a significant negative impact, due to a decline in volume and a deterioration in the sales mix. On the other hand, due to positive effects from the raw material and cost reductions through Project ARK, as well as the weaker yen and foreign exchange gains, and reductions in fixed costs and expenses, the Company plans to firmly achieve its annual business profit target of JPY95 billion.

Please turn to slide 26.

As shown in the lower blue box in the middle of the graph, sales volume of tires during the period from July to September totaled 24.21 million tires, 93% of the previous fiscal year's level.

By market, first, domestic O.E. was 98%, showing the impact of production cuts by some domestic manufacturers. In the domestic Rep., industry demand exceeded the previous year's level, but the Company's sales were 98%, partly due to a decrease in offtake sales.

Overseas O.E. increased YoY in Europe and the US, but continued to struggle in the Chinese market, accounting for 92% of the previous fiscal year's level. Overseas Rep. was 90%. By region, North America recorded 81%, Europe 108%, Asia 89%, and others 86%.

Sales in North America decreased due to the impact of the price pass-through of increased tariffs, while sales in Europe increased YoY due to an increase in market share of all-season tires, a key area of focus. On the other hand, sales declined in Asia and other regions, resulting in overseas Rep., as a whole, below the previous year's level.

The annual sales volume for FY2025 is expected to be 97.77 million, a 5% decrease YoY, as shown in the lower blue box on the right.

By market, domestic O.E. demand recovered from last year's decline due to quality problems at some manufacturers, and the impact of US tariffs on domestic manufacturers is expected to be limited, showing 105% of the previous fiscal year's level.

In domestic Rep., in addition to the volume decline due to the launch of low-margin tires in September of the previous year, we continue to focus on our profit-oriented strategy and expect 94% for the full year. On the other hand, overseas O.E. is expected to continue to struggle throughout the year in China, and are forecast at 91%.

Overseas Rep. is 93%, and by region, 88% in North America, 99% in Europe, 95% in Asia, and 92% in other areas. The annual total is expected to be slightly lower than the forecast at the time of Q2 on the far right.

Please turn to slide 29.

As for cash flow trends, operating cash flow for January-September 2025 at the right end is JPY85.8 billion. Net cash used in investing activities was negative JPY154.3 billion, an increase of approximately JPY100 billion YoY due to the JPY98.5 billion acquisition of DUNLOP trademark rights, resulting in a net cash outflow of JPY68.5 billion, a decrease of JPY80 billion YoY.

Lastly, please turn to slide 32.

As for the tire operating ratio and production volume, the annual production volume for FY2025 on the far right is 559,000 tons, which is a YoY decrease, but the annual operating ratio is expected to increase to 83%, which is a YoY increase, due to the closure of North America. This is almost the same level as the forecast made in Q2.

Regarding slide 33, the details of shareholder returns, Yamamoto explained earlier, and I will conclude my explanation now.

Thank you for your attention.

We acquired DUNLOP in Europe, the US, and Australia in January of this year, and we also plan to complete the restructuring of approximately 10 businesses by the end of this year as planned.

As a result, starting next year in 2026, we will move into the concrete implementation phase of various profit growth strategies, starting with the new development of the DUNLOP brand in the European, US, and Australian markets and leveraging the foundation for growth that we have established to date.

Since profits are expected to rise steadily from 2026, I would like to explain the progress of our long-term corporate strategy, R.I.S.E. 2035, from this perspective.

I will proceed with this content today.

This is the roadmap for our long-term corporate strategy. In order to realize our vision for 2035, we are steadily implementing strategies based on three growth drivers.

First, by 2027, we will reform our profit structure through tire premiumization and prepare for growth businesses. We will expand our business by making DUNLOP even stronger through strengthening our brand management. In addition to North America and Australia, new products under the DUNLOP brand will be available in Europe from 2026.

Today, I would like to explain our growth image toward 2030, with a particular focus on specific initiatives through 2027.

This is an image of the business profit that we will accumulate based on our long-term corporate strategy,

R.I.S.E. 2035.

The left-hand side shows specific measures that have already been initiated. By further accelerating these initiatives, we will exceed our 2027 target of 10% business profit margin and achieve our 2030 goal of 15% business profit margin.

From the next page, I will explain the specifics of each initiative.

This is our roadmap for tire premiumization.

We will promote product development focusing on all-season tires, ultra-high-performance sports tires and large outer diameter off-road tires for pickups and SUVs. These products will be equipped with our proprietary active tread technology, and as it evolves, we will differentiate them from other products.

In terms of production facilities, in addition to utilizing our proprietary NEO-T01, we will accelerate our response to premiumization by introducing the latest equipment to our domestic and overseas plants based on the In-House New Factory concept, which enables equipment upgrades while maintaining operating ratio.

Through these efforts, we plan to achieve a premium product ratio of 50% by 2026 and raise it to more than 60% by 2030.

First, I would like to explain the global expansion of all-season tires, our strength, into the European and US markets.

For the European and US markets, we will expand sales of premium tires that can be worn all year round under the DUNLOP brand and with the active tread technology. Taking advantage of the warming climate and decreasing snowfall, we will utilize the opportunity to achieve a premium position as the DUNLOP brand in the new category of all-season tires in the European market and all-weather tires in the North American market.

DUNLOP gains premium position with the active tread. And as we maintain a top position within Tier two with FALKEN, we will steadily promote a multi-brand strategy that clearly defines each position and accelerate sales expansion as shown in the graph here.

I will explain the key strategy of technologies.

The active tread technology incorporated in SYNCHRO WEATHER, which was first marketed in Japan, has been highly acclaimed both in Japan and abroad and has received numerous awards.

Among other things, we were awarded the "R&D Breakthrough of the Year award" at the" Tire Technology International Awards", an international authority in the field of tire technology. We accept this as a high evaluation of our technical capabilities that have realized performance both on wet and snowy roads, which are contradictory to each other. This technology has long been a challenge in the tyre industry.

We are expanding our lineup of SYNCHRO WEATHER products equipped with this technology to 100 sizes, including those for light vehicles, and will link this to sales expansion and earnings improvement from 2026 onward.

We are further evolving this active tread technology for the European and US markets to achieve higher driving performance.

In the water-switch area, the active binding points have been reduced and the volume has been increased to further enhance flexibility on wet surfaces and further improve grip performance. In addition, in the thermal switch area, we have replaced the gripping component, which does not become hard at low temperatures, to enhance softness on snow and further improve safety performance in winter.

These technologies have already been patented and are important elements that support our unique technological superiority.

We will introduce this advanced active tread technology to achieve a high level of performance on snow and meet the performance needs of advanced systems in the European and US markets.

This figure shows the difference in performance between SYNCHRO WEATHER for Europe and the US, which is currently under development, and our existing products. In the European market, there is a demand for both wet performance and snow performance, which are contradictory to each other. In the North American market, wet performance and snow performance are emphasized along with ensuring life performance.

In response to these market needs, we will achieve a high level of compatibility between each performance by combining our evolved active tread technology and our fundamental technologies. We will utilize this proprietary technology to accelerate our global expansion in the European and US markets.

As the Company's further evolution of the active tread technology, a new response mechanism, "3rd switch", is being developed.

This technology has unprecedented responsiveness in that it changes its flexibility in response to the force applied to the rubber, enabling it to perform in response to driving conditions, such as during acceleration and off-road driving. The development of this technology is based on materials analysis using the 3 GeV High Brilliance synchrotron radiation facility, Nano Terasu, and the accumulation of research results, processes, and know-how accumulated at SPring-8 since 2001.

We will continue to utilize these advanced research platforms to create rubber-based innovations.