Despite Soaring Ocean Freight Rates, Hankook Tire Smiles... Saving 5 Billion KRW in Logistics Costs

10% Reduction in Q3 Transportation Costs
"Thanks to Proactive Logistics Management Utilizing Local Bases"

Hankook Tire & Technology's overseas logistics warehouses are playing a leading role in avoiding the surge in maritime freight rates. It is evaluated that they minimized costs through strategic logistics management.

According to Hankook Tire & Technology's quarterly report on the 21st, transportation expenses under selling and administrative expenses in the third quarter of this year amounted to 44.6 billion KRW, nearly 10% less than the same period last year. Compared to the previous quarter, it also decreased by 9.2%, recording the lowest transportation expenses this year. This contrasts with concerns over rising costs due to the Shanghai Containerized Freight Index (SCFI) soaring since the end of last year.

The transportation cost savings achieved by the company in the third quarter alone amounted to about 5 billion KRW. This is a significant amount, accounting for 1% of the total operating profit for the third quarter of this year. Hankook Tire recorded consolidated sales of 2.4352 trillion KRW and operating profit of 470.2 billion KRW during this period. Sales increased by 4.1% and operating profit by 18.6% compared to the same period last year. In particular, there were many evaluations that cost burdens increased after renewing transportation contracts since the second quarter. Because of this, as of the end of last month, financial information analysis firm WiseReport forecasted the company's third-quarter operating profit to be only 194.4 billion KRW.

Hankook Tire reduced logistics costs as a result of strategically stockpiling export volumes steadily at overseas factories and sales bases. Considering that tires, unlike food or other goods, do not lose much marketability even after long-term storage, the company actively utilized major local bases in the US and Europe. A company official explained, "During the surge in logistics costs amid COVID-19, we established a more stable and conservative material management strategy," adding, "We managed costs by forecasting demand, transporting tires with long shelf lives in advance to local warehouses, and maximizing the use of land transportation."

With the Croatian corporation established in May entering normal operation from the end of the third quarter, transportation cost management is expected to stabilize further. The Croatian corporation operates a large-scale logistics center and serves as a distributor for nine Balkan countries nearby. It also shares a border with Hungary, where production plants are located, so once the corporation's operations stabilize, it is expected to contribute to targeting the European market.