Nexen Tire posts 61.1 percent drop in third-quarter operating profit

Nexen Tire said Wednesday its third-quarter operating profit fell 61.1 percent from a year earlier to 18.1 billion won ($13.5 million), as higher raw material and shipping costs squeezed margins.

Revenue for the July-September period rose 4.4 percent to 815 billion won ($608 million) from 781 billion won a year earlier, the first time the company has exceeded 800 billion won in third-quarter sales. Net income swung to a loss of 46.6 billion won ($34.7 million) from a profit a year earlier, which the company blamed on the stronger won during the quarter reducing the value of its overseas earnings when translated into the local currency.

The profit decline came as the company's cost ratio worsened to 74.0 percent from 71.4 percent a year earlier and 72.4 percent in the preceding quarter, reflecting higher rubber prices and elevated sea freight rates. Its operating margin fell 3.7 percentage points to 2.2 percent. Nexen Tire attributed the cost pressure to broad gains in rubber prices amid Middle East uncertainty and severe weather, while strong oil prices and higher shipment volumes kept freight rates rising.

Europe remained a bright spot, with sales there rising 8.8 percent on-year to 349 billion won ($260 million). The company cited solid demand for models it supplies to major customers including Volkswagen and Stellantis, the effect of a June price increase, and an improved product mix from higher winter and all-weather tire sales. Sales of high-inch tires, those 18 inches and larger, accounted for 41.5 percent of revenue, up 3.4 percentage points from a year earlier. Europe accounted for 43 percent of quarterly revenue, followed by North America at 21 percent, Korea at 18 percent and other markets at 18 percent.