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Raw material prices cut into earnings of tire manufacturers

November 02, 2006|From the Associated Press

Higher prices for rubber and oil let the air out of earnings reported Wednesday by tire makers Continental and Bridgestone.

Both companies reported smaller profits in part because of the higher prices they had to pay for raw materials, along with charges related to the closing of plants in the United States.

Tokyo-based Bridgestone Corp., which is vying with France's Michelin to be the world's biggest tire maker, said it earned 50 billion yen ($427.4 million) in the January-September period, down nearly 69% from the same period last year.

Bridgestone said that while its net profit declined, sales in Japan, the U.S. and Europe were stronger, helping overall sales rise 13% to 2.163 trillion yen ($18.5 billion), from 1.921 trillion yen the year before. It did not release third-quarter figures.

Nashville-based Bridgestone Firestone North American Tire is a subsidiary of Bridgestone Americas Holding Inc., whose parent company, Bridgestone Corp., is the world's largest tire and rubber company.

Germany's Continental, which sells tires under the Continental, General and Uniroyal brands, said its third-quarter net income fell 27% on charges related to U.S. plant closings and restructuring and higher prices for raw materials.

The world's fourth-biggest tire maker by sales earned 235 million euros ($298.4 million) in the July-September period, compared with 322 million euros a year earlier. Sales rose 8% to 3.71 billion euros ($4.71 billion).

Continental's figures "were slightly disappointing, with good performance in the automotive systems and Conti Tech division, but weak earnings from the tire businesses," said Stephen Cheetham, senior European auto analyst at Sanford C. Bernstein Ltd. in London.

Despite the lower profits, both companies said they were optimistic about future growth and planned to raise prices to offset higher costs.

Bridgestone said last month it would increase prices for tires, tubes and flaps for the replacement market in Japan on Feb. 1 and raise the price of winter tires on April 1. Continental said it had started raising its own prices, as well as adjusting its product line and making production more efficient.

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