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Date 11/02/2008 Hits67,657

Category Corporate

Hankook Tire Sustain Double Digit Sales Growth and Industry Leading Profit Margin in 2007

Hankook Tire Sustain Double Digit Sales Growth and Industry Leading Profit Margin in 2007
 
- Global sales increase 11.8% ; Operating profit margin remains over 8%
- Hankook Tire target global sales approaching KRW3.9 trillion (19.6% increase from 2007 result)
- Profitable UHP tire sales increase 10.5% year on year
- Ongoing investment in new European factory and in UHP capacity to
      provide supply platform for long term growth
 
SEOUL , KOREA 11th February - Hankook Tire (www.hankooktire.com) remains one of the fastest growing tire manufacturers in the world, posting global sales of KRW3.2 trillion (US$3.4 billion, €2.5 billion, CNY26.5 billion***) in 2007.
 
Hankook Tire also announced a profit margin of 8.1%, with consolidated operating profit increasing 5.1% to KRW263.6 billion (283.6 million USD***) (2006’s operating profit margin of 8.7% was the highest among all major tire makers outstripping the nearest competitor by over 2 points*.). The company’s consistent investment of approximately 5% of revenue in R&D continued to pay dividends toward its reputation for quality and high-performance tires. Growth factors included a 9% increase in European sales in the 4th quarter, 2007 and a 10.5% year-on year increase in global ultra-high performance tire sales.
 
Chief Executive Officer, Mr. Seung Hwa Suh said, “Our focus on improving global management structures and processes in recent years has maintained our ability to balance increasing global sales with industry-leading profit margins. Despite a challenging year for the industry as a whole, our strategy of increasing the quality and reputation of our products has allowed us to build margins without adversely affecting our sales growth in both new and established markets for the Hankook brand.”
 
Cost of sales increased by 12.4% in 2007. Raw material costs supplied to Korea production facilities ? including the cost of rubber and oil products ? increased by 2.5% year-on-year. Costs remained high with the average quarterly cost of raw materials at US$1,721 per ton.
 
Hankook Tire remains positive about 2008 growth prospects**. The company is aggressively targeting global sales approaching approximately KRW3.9 trillion representing potential growth of 19.6%. This target reflects increasing demand for Hankook’s high-performance tires, increased capacity through its recently opened €500 million European production facility in Hungary and investment in ultra-high performance (UHP) tire production at its fully-automated, flagship Geumsan facility in Korea .
 
The company produced almost a million tires in Hungary in its first 6 months and expects an additional 4 million tires to be produced in 2008. The continuous investment at Geumsan will increase production capacity for profitable ultra-high performance (UHP) tires; by the end of 2009, capacity will have increased by 50% or 5 million units annually. The company remains in a strong position to invest further in overseas production facilities, with EBITDA increasing from KRW500 billion to KRW541 billion in 2007, alongside low debt and strong cash flow.
 
Mr. Suh, discussing Hankook’s investment activities, continued, “The new facility in Europe is increasing our ability to meet the increasing demand for our products and also helping the company spread risk and reduce logistics costs. The final completion of the Hungarian facility will reduce delivery times from over one month to within five days to all locations in Europe .”
 
Hankook Tire expects to target profit margins to 9% this year but predicts an increase in cost of sales of 18.3% in 2008 driven by ongoing investments and high raw materials costs.
 
Hankook Tire will maintain its long term growth strategy of focusing on four key business drivers: ongoing improvement of management and leadership processes and structures; increased production and distribution capabilities; consistent investment in technological innovation; and building the Hankook Tire brand by leveraging OEM reputation and conducting ‘smart marketing’ activities.
 
 
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* According to Modern Tire Dealer (Jan. 2008)
** Subject to current market outlook and industry environment February 2008
 
2007 Consolidated Profit (KRW)

(Unit : billion KRW)

  06 07

YoY%

08 Target**

Global Sales

2,899

3,241

11.8%

3,877

Cost of Sales

2,030

2,281

12.4%

 

 


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