We apologize for the concern caused our shareholders by the fire that broke out on May 14 at Yokohama Tire Philippines, Inc. And we assure you that we are taking measures throughout our organization to prevent a recurrence of such an event. Updates about our progress in repairing the fire damage and resuming production are available at this link.
Posting Strong Tire Sales in Japan and Overseas
Our profit attributable to owners of parent in the first half (January–June) of fiscal 2017 increased 38.7% over the same period of the previous year, to ¥11.4 billion, on a 16.8% increase in operating income, to ¥18.4 billion, and a 15.9% increase in net sales, to ¥310.8 billion. Underlying our strong fiscal performance were progress in bolstering our marketing, in raising operational efficiency, and in trimming costs and price increases that we instituted on tire shipments. We posted sales gains in tires in Japan and overseas and, in our MB (Multiple Business) segment, sales gains in high-pressure hoses and in Hamatite-brand automotive sealants. Those positive factors more than offset the adverse earnings effect of an upward trend in raw material prices.
Regarding our full-year fiscal performance in 2017, we have revised upward our original projection for operating income, and we now expect operating income to increase 18.2%, to ¥50.0 billion. We abide by our earlier projections for profit attributable to owners of parent and net sales. Those projections call for increases of 59.7% in profit attributable to owners of parent, to ¥30.0 billion, and 10.7% in net sales, to ¥660.0 billion. We will adopt the International Financial Reporting Standards (IFRS) in fiscal 2017. Recalculating the full-year projections under those standards results in projections of ¥51.0 billion for operating income and ¥635.0 billion for net sales.
We have declared an ordinary interim dividend of ¥26 per share and have supplemented that dividend with a special dividend of ¥5 per share to commemorate the company’s centennial. Similarly, we propose to pay and ordinary year-end dividend of ¥26 per share and to also supplement that dividend with a special, centennial dividend of ¥5 per share. Our annual dividends per share would thus total ¥62.
Wrapping Up Grand Design 100
We launched the medium-term management plan Grand Design 100 in 2006 as a roadmap for the 12 years to our centennial in 2017. The plan comprises four three-year phases. Two thousand seventeen is the final year of the concluding phase of Grand Design 100. We are addressing strategic priorities in our Tires and MB segments in the Phase IV spirit of “All for Growth—Focusing our energy on growth.” The Grand Design 100 targets initially called for attaining annual net sales of ¥770.0 billion and
annual operating income of ¥80.0 billion by 2017. Our latest projections for 2017 suggest, however, that we will fall short of those targets.
Expanding Business in Original Equipment Tires, Strengthening Our Product Portfolio
Allocating more resources to winning business with automakers worldwide is a strategic emphasis in our tire operations, and we aim to increase our overseas unit sales to automakers fourfold by 2020, compared with 2014. We took a step toward fortifying our original equipment business in March 2016 by dissolving our joint venture with Continental AG. That has broadened our latitude in developing business with Japanese automakers worldwide under our own brand. It has already resulted in new business with Japanese automakers in North America, and we are negotiating other possible supply arrangements with Japanese automakers there. We are also cultivating business with European automakers and have secured a growing number of fitments on luxury models from Audi, Mercedes-Benz, and Porsche.
Strengthening our presence in our principal markets is another strategic emphasis in our tire operations. Highlighting our initiatives in connection with that emphasis is our partnership agreement with a standout in the English Premier League, the Chelsea Football Club (Chelsea FC). That agreement, which took effect in July 2015, raises our profile in the world at large. It has already generated a substantative contribution to our marketing effort in Europe, in Asian nations, and elsewhere. And the benefits for our “YOKOHAMA” logo exposure and for our name recognition multiplied when Chelsea FC won the league championship in the 2016–2017 season.
We are strengthening our product portfolio with several notable additions this year. That has included launching the GEOLANDAR M/T G003 mud-terrain tire for sport-utility vehicles and pickup trucks in North America, and the initial response to that launch has been gratifying. We are readying overseas launches of two products in our BluEarth line of fuel-saving tires and two winter tires. In Japan, we will launch the all-new iceGUARD 6, a studless snow tire. The iceGUARD 6 provides a 15% improvement in grip on icy surfaces, compared with previous-generation studless tires, and a 5% improvement in wet grip.
Positioning Commercial Tires as a Strategic Pillar
Recent acquisitions have furthered our progress in fulfilling another Grand Design 100 emphasis, expanding business in commercial tires. We acquired Alliance Tire Group, a company that specializes in manufacturing and marketing off-highway tires, in July 2016, and Aichi Tire Industry, which manufactures and markets tires for forklifts and other industrial machinery, in March 2017. Those acquisitions have supplemented our established presence in commercial tires for trucks, buses, and light trucks with a new presence in tires for agricultural and forestry machinery and have buttressed our presence in tires for industrial equipment.
We are especially positive about our prospects for asserting distinctive strengths in agricultural tires, where the competitors are few and profit margins are high. Both acquisitions offer potential for fostering profitable synergies. A good example is a new line of passenger car tires that we launched in Europe in May 2017. We launched the new product line under the Alliance name, which has excellent name recognition in Europe.
Asserting Leadership in MB Sectors where We Boast Special Strengths
In the MB segment, our Grand Design 100 emphases include expanding business globally in automotive components. Our US subsidiary Yokohama Industries Americas Inc. supplies a growing volume of automotive hoses to US and Japanese automakers in North America. Our business portfolio in the MB segment includes products, such as marine hoses, where we have a large share of the global market and products, such as automotive sealants, where our sales volume is expanding steadily. And we will continue to nurture our business momentum in those product categories.
All of us at Yokohama are determined to mark our centennial with further growth in 2017 and to lay the groundwork for another century of progress for our company. We welcome your careful attention to our efforts and pledge to strive unwaveringly to fulfill your highest expectations.
Chairman and Representative Member of the Board
President and Representative Member of the Board