Nexen Tire's second-quarter operating profit fell by nearly 20% from a year earlier, missing market expectations. The increase in costs due to the Middle East war and the reflection of expenses from U.S. anti-dumping tariffs both weighed on results.
Nexen Tire said on the 29th that its second-quarter operating profit on a consolidation basis totaled 34.3 billion won. That was down 19.5% from the same period a year earlier (42.6 billion won). It also came in well below the securities consensus compiled by FnGuide, which averaged 46.6 billion won. Net profit for the period was only 200 million won, plunging 98.9%. However, second-quarter revenue was 891.3 billion won, up 10.8% from a year earlier.
Explaining the decline in operating profit, Nexen Tire said, "Since the Middle East war, material and transportation costs have risen, driving up cost of goods sold, and one-off expenses from the higher U.S. anti-dumping tariff rate were reflected." Softer results in regions with higher selling prices and a mix shift due to a greater share of original equipment (OE) tires also pulled down profitability.
The sharp drop in net profit was due to a decrease in non-operating gains, including gains and losses on valuation of financial assets. A deferred corporate tax at the European subsidiary was recognized as a liability, increasing one-off corporate tax expenses.
By region, Europe generated 407.2 billion won in revenue, accounting for nearly half of total revenue. This was also the first time quarterly revenue in Europe exceeded 400 billion won. OE sales were strong for key supply models such as Stellantis and Audi, and the replacement tire (RE) market was diversified to the United Kingdom and Türkiye. In particular, the share of European revenue from high-inch tires of 18 inches and above, a high value-added product, rose 6.4 percentage points year over year to 30.9%, strengthening the revenue structure.
In the domestic market, despite production disruptions at automakers, solid sales were achieved centered on electric vehicles and sport utility vehicles (SUVs). Revenue rose 20.3% from 124.3 billion won in the second quarter of last year to 149.5 billion won in the second quarter of this year. A Nexen Tire official said, "Based on a broad domestic EV OE portfolio from the Ioniq 6 and EV3 to the EV9, OE revenue and the share of high-inch products rose together."
In China, revenue in other regions rose 6.0% year over year to 156.5 billion won, aided by the start of new supplies to BYD. However, North American revenue fell 8.7% from 194.9 billion won to 178.0 billion won. Demand slowed for both OE and RE.
To respond to rising costs and tariff imposition, Nexen Tire plans to further strengthen its preemptive response strategy tailored to global trade issues and changes in market conditions. A Nexen Tire official said, "In preparation for the European Union (EU) executive body's move to impose anti-dumping tariffs on Chinese tires, we preemptively realigned our global production bases," adding, "As a result, we significantly reduced the share of European sales sourced from our China plant from 15% last year to around 4% this year, minimizing risk."
To strengthen responsiveness to the global electrification market, the company expanded OE supply not only to new electrified models such as BYD and the Hyundai Staria EV but also to core models of premium brands. Leveraging research and development (R&D) capabilities, including AI-based tire performance prediction, it is increasing supply for premium finished vehicles. In North America, it plans to accelerate distribution structure improvements by expanding large retail channels such as Walmart and ramping up high-inch supply.
A Nexen Tire official said, "Even in an environment where expense burdens expanded due to external variables, we continued top-line growth on the back of strong sales in key markets," adding, "We will deliver visible performance improvement based on the stable operation of the phase-two expansion volumes at the European plant and the results of North American distribution reorganization."