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Bridgestone aims for 80 pct profit boost in 5 years

Bridgestone, which vies with Michelin for the title of global industry leader, said it would boost investment by 16 percent to expand tyre production and its distribution network.

The company’s aggressive new mid-term plan comes as many emerging economies like China, India and Russia rapidly modernise, spurring demand for both vehicles and construction and mining machinery.

It is aiming for an operating profit of 400 billion yen ($3.5 billion) by 2012, up from a forecast 215 billion yen this year.

Sales, led by high-end tyres, are expected to climb to 4 trillion yen by 2012 from 3.4 trillion yen this year. That represents an operating margin target of 10 percent compared with an estimated 6.4 percent in 2007.

‘Tyres are internationally recognised products, and unlike industries where regional differences matter, this industry is one where scale matters,’ Chief Executive Shoshi Arakawa told a news conference.

The company had just over 18 percent of the global tyre sales in 2006, edging out Michelin with 17.7 percent and Goodyear Tire & Rubber Co with 17.3 percent, according to trade magazine Tire Business.

Bridgestone, which also announced new spending of 32 billion yen in two Japanese plants to expand output of large and ultra-large off-the-road tyres used in dump trucks and other mining machinery, has ratcheted up its capital investment in recent years.

It said it planned to spend an average of 250 billion yen annually until 2012, which compares with an average of 216 billion yen a year in the previous five-year period.

‘That will include upgrading of existing plants and additional building at existing plants, and we may also explore various types of alliances,’ Arakawa said. ‘New plants are also very possible.’

Bridgestone is looking at building a plant in Russia, but Arakawa declined to comment on other potential sites.

This year it has also announced production capacity expansion plans in India and Indonesia.

‘In the past, we’ve generally gone by the principle of building plants where the demand is, but that might not necessarily hold in the future,’ he added.

Arakawa also said that he expected Bridgestone’s free cash flow to turn positive in 2009 and that the company was aiming for return on assets of 6 percent by 2012.

But he acknowledged soaring prices for rubber and oil have put industry profits under pressure, and the immediate outlook for raw material prices was difficult to gauge.

Last year Bridgestone bought Bandag, the largest US supplier of retread tyres, becoming a major a presence in the global retread market that seeks to attract cost-conscious trucking firms.

Retread tyres are made by removing the used tyre tread and adding new rubber so that the tyres can be reused.

Bridgestone shares ended down 1.5 percent at 2,385 yen, regaining some ground after the announcement. Earlier it had fallen as low as 2,330 yen. The Nikkei benchmark average ended down 2.2 percent.