Seoul: Hankook Tire and Technology Co., South Korea's leading tiremaker, announced that its first-quarter net profit fell by 13.4 percent, attributing the decline to increased manufacturing costs. Net profit for the quarter ending in March decreased to 312.2 billion won (US$221.8 million), down from 360.4 billion won in the same period the previous year, as reported in a regulatory filing by the company.
According to Yonhap News Agency, the depreciation of the won against the dollar escalated the costs of raw materials and shipping, negatively impacting the quarterly net results. A weaker won raises the expenses associated with importing raw materials and other dollar-denominated inputs, further weighing on the financial outcomes.
Hankook Tire also reported a decline in operating profit, which fell by 11.1 percent to 354.6 billion won in the first quarter, compared to 398.7 billion won a year earlier. Despite this, the company's sales more than doubled, reaching 4.96 trillion won, up from 2.12 trillion won during the same timeframe. This growth in sales was primarily driven by the strong performance of electric vehicle (EV) and high-end tire products.
The company is a supplier of original equipment (OE) tire products for 280 vehicle types from 50 foreign carmakers, including notable brands such as Audi, BMW, Mercedes-Benz, and Porsche. Supplying OE tires can enhance a tiremaker's image and potentially lead to higher product prices over time, although selling replacement equipment (RE) tires in the after-sales market is generally more profitable.
Hankook Tire operates eight manufacturing plants globally-two in South Korea, one in Hungary, one in the United States, three in China, and one in Indonesia-with a combined annual production capacity of 100 million tires. "The company is working to improve productivity and adjust production volumes at its domestic and U.S. plants due to relatively higher manufacturing costs," a company spokesperson stated.