Sluggish sales in the domestic car market have led to a poor first-quarter performance of the nation's three tiremakers, analysts said Monday.
According to analysts, Hankook Tire, Kumho Tire and Nexen Tire have also suffered from rising prices of synthetic rubber following the global oil price hike, as well as another unfavorable factor ― low capacity utilization of their new factories in China and the United States.
Given that domestic carmakers are still facing a murky outlook, analysts say the tiremakers' sales globally will significantly affect their performance in upcoming quarters.
Nexen Tire, which showed the most rapid decline in operating profit in the first quarter, is waiting to start operations of its manufacturing plant to be built in the Czech Republic in September this year.
The smallest tiremaker in Korea posted 32 billion won ($29 million) in operating profit and 474 billion won in sales in the first quarter, respectively down 34.3 percent and 1.6 percent from a year earlier, due to the strong Korean won and declining sales in the North American market.
"Nexen's domestic factory's capacity utilization rate has surpassed 93 percent, so it needs to increase its manufacturing capacity," eBEST Investment & Securities analyst Yoo Ji-woong said. "The company's performance may gradually become better in the second and third quarters, but its growth rate will not be big enough before the Czech factory goes into operation."
The business bellwether, Hankook Tire, posted 1.61 trillion won in sales and 184.4 billion won in operating profit in the first quarter, down 1.7 percent and 20.6 percent year-on-year, respectively.
It showed the worst operating profit since it spun off into a holding firm and operating company in 2012.
The poor performance has been attributed to a slump in GM Korea's sales, following the February announcement on the closure of the carmaker's factory in Gunsan, North Jeolla Province.
Hankook supplied tires for the Chevrolet Cruze and six other models manufactured at the Gunsan factory.
According to industry officials, the key partner of GM Korea is the largest tire supplier for GM Korea.
HMC Investment Securities analyst Jang Moon-soo said the tiremaker will show significant recovery in the second quarter, citing the normalization of input costs and operations at its factory in Tennessee.
Kumho Tire, which will be acquired by the Chinese-based Doublestar Tire, posted a 17.1 billion won operating loss in the first quarter.
Although the tiremaker reduced the loss by 11 billion won from the first quarter last year, it has posted losses for five consecutive quarters.
The nation's No. 2 tiremaker could not fully operate its factories, due to strikes against the sell-off.
Domestic carmakers' declining production also affected Kumho's performance, according to analysts.
Kumho said it is seeking to normalize its management and improve profitability.
Against this backdrop, the three tiremakers have been trying to expand their presences in the European market.
Kumho and Nexen said they will display their tires at an international exhibition this week in Cologne, Germany.
On Friday in the same city, Hankook signed a memorandum of understanding with Arlanxeo, the world's leading synthetic rubber company.
