China costs reduce Hankook profit

Hankook Tire Co., Korea’s biggest tiremaker, said first-quarter profit fell 13 percent as it built a factory in Hungary and spent on Chinese marketing.
Net income was 48.9 billion won ($55 million) in the first quarter, from 56.5 billion won a year earlier, Hankook said in a Korea Exchange statement yesterday. Sales rose 9 percent to 530 billion won.
The tiremaker, 6.2 percent owned by Michelin & Cie, spent more on advertising in China because of increasing competition. The company plans to open its first European factory later this year as it aims to boost sales on the continent, where it generates about 35 percent of its exports.
“Mounting competition in China and investment in Hungary are expected to continue to undermine Hankook Tire’s profit this year,” said Kim Jae-woo at Mirae Asset Securities Co. in Seoul. “We will have to see how effectively it recovers those losses by increasing tire prices.”
Operating profit, or sales minus the cost of goods sold and administrative expenses, rose 41 percent to 70.5 billion won, helped by increased exports to Europe and other regions. The tiremaker’s domestic operation will likely post a full-year net income up 36 percent to 226.9 billion won, while sales will grow 10 percent to 2.27 trillion won, it said.