[Asia Economy Reporter Ki-min Lee] Domestic tire companies, which faced adverse conditions such as rising raw material prices and ship shortages in the second quarter of this year following COVID-19 in the second quarter of last year, are expected to have rebounded in performance thanks to increased demand for replacement tires (RE).
According to the tire industry and securities industry on the 1st, the three domestic tire companies, Hankook Tire & Technology, Kumho Tire, and Nexen Tire, are expected to announce improved performance in the second quarter of this year compared to the same period last year.
For Hankook Tire, the average performance forecast for the second quarter of this year compiled by financial information firm FnGuide is sales of 1.7475 trillion KRW and operating profit of 176.6 billion KRW. This represents an increase of 28.08% in sales and 152.04% in operating profit compared to the same period last year. In particular, net profit, which recorded a loss previously, is expected to turn positive at around 127.3 billion KRW.
Kumho Tire and Nexen Tire, which recorded losses of 35.4 billion KRW and 22.5 billion KRW respectively in the second quarter of last year, are also expected to turn profitable in the second quarter of this year. Kumho Tire is forecasted to record a profit of 8.4 billion KRW, and Nexen Tire around 23.3 billion KRW.
At the beginning of this year, demand for original equipment tires (OE) decreased as automakers faced production disruptions due to a shortage of vehicle semiconductors, but demand for replacement tires (RE) increased as the used car market boomed.
Moreover, tire companies defended against performance declines by raising product prices in response to rising freight costs caused by raw material price increases and shortages of export containers and ships earlier this year, which also contributed to the strong performance.
With global tire companies raising prices and expectations for normalization of vehicle semiconductor supply, the three tire companies are expected to continue strong performance in the third quarter as well.
Researcher Kwon Soon-woo of SK Securities stated in a recent report, "With increased driving distances and normalization of vehicle semiconductor supply, demand for both RE and OE is expected to remain favorable in the second half of the year. Additionally, sales expansion of high-inch tires, price increases by major companies continuing through September, and increased orders and installation of electric vehicle-specific tires are expected to improve the product mix."
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