Kumho Tire’s Q2 OP soars 72% on improved profitability

[Courtesy of Kumho Tire Co.]

South Korea’s Kumho Tire Co. saw its operating profit soar 72 percent to an all-time high in the second quarter from the same period a year ago, thanks to strong sales of high-margin items.

Kumho Tire announced in a regulatory filing on Tuesday that its preliminary sales reached 1.13 trillion won ($817 million) for the second quarter, up 12.7 percent from the same period last year. It is the second-highest sales figure for the cited quarter.

Operating profit soared 72 percent to a record high of 151.5 billion won.

For the first half of the year, Kumho Tire’s sales reached 2.18 trillion won, up 8.7 percent from the same period last year, while operating profit increased 108.3 percent to 297.1 billion won.

Key factors in Kumho Tire’s improved performance include a greater proportion of high-margin products.

High-inch tires, 18 inches and larger, accounted for 40.8 percent of sales in the first half of this year, approaching the company‘s target of 42 percent.

High-inch tires are approximately 20-30 percent more expensive than standard ones, contributing to higher profitability.

The continued increase in sales of sport utility vehicles (SUVs) in recent years has also supported Kumho Tire’s performance improvement.

As SUVs reach their tire replacement point, Kumho Tire has seen an increase in sales of high-margin replacement tires.

For tire manufacturers, replacement tire sales to individual consumers are about three times more profitable than original equipment (OE) tire sales to automakers.

The share of electric vehicle (EV) tires within OE tire sales also increased to 12 percent in the first half of this year, up 3 percentage points from the same period last year. EV tires are sold at a 20-30 percent higher price than standard tires of the same size.