Analysis of Bridgestone Tyre's Perspectives - Statistics Project Example

Analyst Report on Bridgestone Tyres Executive Summary Bridgestone Corporation, a Japan-based manufacturing company, is the world’s number one tyre manufacturer for the fifth consecutive year according to the Global Tire Report 2013. Bridgestone Corporation showed a healthy financial performance in fiscal year 2012 as compared to the former years. The net sales of the company climbed up by 1% to 3,039.7 billion in 2012. At the same time, the operating income of the company increased by 49% to 286.0 billion in 2012 due to decreasing prices of the raw materials. The net income Bridgestone Corp performed extraordinarily In Europe where sales increased by 17% followed by Americans where sales increased by 1%. However, the net sales in Japan remain unchanged compared to 2011. The total assets of the company increased by 14% to 3,038.3 billion in 2012; this increase in the assets by financed by a 12% increase in the total liabilities and 3% increased in the total equity. The company returns showed a strong growth as well. The return on stockholders’ equity increased by 4.6 percentage points to 13.7% and return on assets increased by 2.2 percentage points to 6.0% in 2012. The company promises significant returns as well as strong value addition in future. Company Profile Ticker symbol: 5108.T Mission Statement: Serving Society with Superior Quality Corporate headquarters: Tokyo, Japan Date of Incorporation: March 1st, 1931 Public Auditor: Deloitte Touche Tohmatsu Limited Name of CEO: Masaaki Tsuya Name of CFO: Koki Takahashi Stock classifications: Common Stock Authorized: 1,450,000,000 shares Issued: 813,102,321 shares Exchange: Tokyo Stock Exchange Dividends: 21.9 billion Industry Profile Market Sector The company belongs to the Consumer Discretionary Sector. It is a sector of the economy that comprises businesses that sell non-essential products or services. Leaders Toyota Motor Corp Comcast Corp Amazon.com Inc Industry The company belongs to the Auto Components Industry. The industry comprise companies that supply low value to high value component to auto makers around the world. Stock Comparison with Competitors Bridgestone Corporation’s stock has shown a remarkable growth since January 2012 as compared to Pirelli’s and Goodyear’s stock as shown in the figure. The graph notes some of the major events – dividends, earnings and news. The news article states that the company has invested billions of yen into the research and development to produce tyres with maximized durability and value. The company, currently, has invested millions of yen into a new North American desert plant to extract a new form of natural rubber for tyre manufacturing. This stresses that the company continues to strive hard fpr excellence. The graph shows that company has continued to announce dividends and interim dividends at year ends and half year ends respectively. This has strengthened the belief of the investors in the stock value. Likewise, the company announced promising earnings which has allowed the company to maintain number one position in the global tyre market. Both the dividends and earnings have an impact on the stock price – in this case, the company’s stock price has risen par the competitors’ value after continuously posting strong earninsg and dividends. Market Capitalization Company Market Capitalization Bridgestone Corp 20.24B Goodyear 3.9B Continental 27B Michelin 14.4B Market capitalization is basically the market value of the company’s outstanding shares. It determines the size of the company which allows for conclusion on asset allocation and risk factor. The analysis shows Bridgestone Corp has the largest capitalization compared to its three giant competitors – Goodyear, Continental AG and Michelin. With the capitalization of €20.24 billion, it falls in the ‘large cap’ pool of companies with a strong asset allocation and less risk. Global Presence Bridgestone Corporation has a strong global presence. The company has its product distribution in around 120 countries on all six major continents. Likewise, the company has manufacturing plants and technical centers set up in 25 countries around the world - US, Europe, Middle East, Africa, Asia and Japan. In terms of sale, the Americas were responsible for the largest chunk of sales – 43.5% followed by Japan – 22.1%. Three International Elements Exchange Rate The global presence of the Bridgestone Corporation requires daily transactions in different currencies. Fluctuation in the exchange rates around the world poses a continuous risk to the company’s operations and financial position. The company tried to minimize this risk through forward contracts and hedging. Macro-economic Stability The company’s revenues are dependent on economic conditions around the world. An economic downturn in any region will have a negative effect on the company’s direct income. Likewise, the revenues are again on national trends. A major shift in policy, such as taxes and interest rate, will affect the company’s financial health. Raw Materials The company’s acquires its raw materials from around the world especially Southeast Asia. Therefore, any major event- natural disaster, war, terrorist attack, civil strikes and political unrest hampers the supply of the materials, which in turn, disrupts the manufacturing cycle of the company. It results in losses of millions of yen at a time. Current Events Bridgestone has developed winter tyres that provide a better performance during the winter seasons when the temperature drops below zero. The article “Bridgestone Launches Conquer the Cold Campaign to Educate Consumers about the Importance of Using Winter Tires” states that the company has launched a massive campaign around the world trying to convince the consumers to the new set of tyres. The company maps the campaign with increased safety on the roads. This article is relevant to my research because it will have a huge impact on the seasonal sales of the Bridgestone tyres in case of a successful campaign. In another article “Bridgestone to supply tires for GM electric vehicle”, Bridgestone and Chevrolet signed a contract where the company will be providing new set of tyres to Chevy for its new electric car – Spark. This will have an huge impact on the sales of the company as well as an increased relationship with Chevy for future models. Future Outlook The global tyre industry was valued at $185.8 billion in 2012; up by 2.5% as compared to 2011. However, analysts state that the industry will only grow by a meager 0.5% in 2013. They believe the industry will regain its former glory in the coming when the economy completely reels out of the financial crisis of 2008. Nonetheless, the corporations within the industry made huge profits in 2012 due to the decreasing raw material costs especially rubber. These corporations, especially Bridgestone, Sumitomo Rubber, Yokohama and Toyo, then made massive investments in Southeast Asia in 2012 to be near to the bases with low material costs. Therefore, The sector promises to make competitive profits in the coming years. Analysis   Bridgestone Goodyear Michelin Ratios ROA 7% 4% 7% ROE 15% 21% 14% Gross Margin 35% 20% 31% Total Asset Turnover 1.1 1.1 1.0 Inventory Turnover 3.8 4.8 3.1 Current Ratio 1.9 1.7 1.9 Quick Ratio 1.0 1.1 0.9 Growths Total Revenues 7% -8% -2% Operating Income 16% 5% 2% All three companies – Bridgestone, Goodyear and Michelin – are industry leaders. Compared to the industry average, all three companies have performed remarkably in terms of growth as well as returns. Bridgestone has the best gross margin among the three competitors. It contributes 35p to the gross profit for every €1 of sale that is made as compared to 21p by Goodyear and 31p by Michelin. Similarly, Bridgestone has the best total asset turnover which implies that the company efficiently and effectively uses the company resources for the revenue generation. The company generated €1.1 for every €1 invested in the assets of the company. Bridgestone maintains a moderate liquidity ratio. The company has €1.9 of current assets and €1.0 of quick assets for every €1 of current liabilities. This signifies that the company has the ability to meet the short term obligations as and when they arise. It also signifies that the company maintains a moderate safety net for its creditors to mitigate risk. Likewise, it has moderate inventory turnover and sells its inventory 4 times in a year. Nonetheless, it lags behind Goodyear who sell it inventory 5 times a year. Bridgestone has shown a remarkable growth in 2012. Its revenues increased by 7% when the revenues of Goodyear and Michelin fell downwards. This resulted in an notable operating margin growth of 16%. (Bloomberg Businessweek, 2013) In February 2013, the company announced its opening of a new plant in Pune, India. The plant is expected to produce 10,000 units of passenger radial tyres a day by the end of 2014. India is a huge market, and the company can make remarkable progress in the coming years. (Bridgestone, 2013) Similarly, Bridgestone signed a contract with Chevy for supply o tyres for its new electric car – Spark. The company has also opened a retail outlet in Costa Rica. (Bridgestone, 2013) Bridgestone Corporation is expected to grow and expand in the coming years. The company has remarkable progress, despite a sluggish performance by the global tyre industry in 2012. Recommendation: BUY Works Cited Americas, Bridgestone. "Bridgestone Launches Conquer the Cold Campaign to Educate Consumers about the Importance... -- NASHVILLE, Tenn., Oct. 24, 2013 /PRNewswire/ --." Prnewswire, 2013. Web. 7 Nov 2013. . Bloomberg Businessweek "BRIDGESTONE CORP (5108:Tokyo)." Businessweek, 2013. Web. 6 Nov 2013. . Bloomberg Businessweek "GOODYEAR TIRE & RUBBER CO (GT:Frankfurt)." Businessweek, 2013. Web. 6 Nov 2013. . Bloomberg Businessweek "CONTINENTAL AG (CON:Xetra)." Businessweek, 2013. Web. 6 Nov 2013. . Bloomberg Businessweek "MICHELIN (CGDE) (ML:EN Paris)." Businessweek, 2013. Web. 6 Nov 2013. . Bridgestone "Bridgestone Hosts the Opening Ceremony for the New Tire Plant in India | Corporate | Bridgestone Corporation." Bridgestone, 2013. Web. 7 Nov 2013. . Bridgestone "Annual Reports." Bridgestone, 2013. Web. 7 Nov 2013. . Davis, Bruce. "Global Tire: Bridgestone No. 1; Sumitomo, Hankook go up." 2013. Web. 7 Nov 2013. . Investopedia "Market Capitalization." Investopedia, 2013. Web. 7 Nov 2013. . Research Ltd. "Global and Chinese Tire Industry Report, 2012-2013." Research and Markets, 2013. Web. 7 Nov 2013. . Article 1 Bridgestone Launches Conquer the Cold Campaign to Educate Consumers about the Importance of Using Winter Tires Consumers to win their free winter tires, NHL gear, Stanley Cup tickets and more NASHVILLE, Tenn., Oct. 24, 2013 /PRNewswire/ -- This winter Bridgestone Americas is challenging consumers to "Conquer the Cold," by launching a campaign and promotion that underscore the benefits of changing to winter tires when temperatures drop below freezing and road conditions can be wet, dry, snowy or ice covered. Many drivers rely on their all-season tires year-round. Although all-season tires are designed with both winter and summer performance in mind, they do not offer maximum performance in either season. Cold temperatures decrease the elasticity of the rubber compound in tires, contributing to a reduction in traction. Winter tires are specially designed to remain flexible in cold weather, allowing the tire to conform to the road surface and maintain its grip on snowy, icy, wet and dry surfaces. "Winter tires provide increased traction, braking and handling in wintry conditions, all of which are important for safe driving during the winter season. Think about it this way – a snowplow can't clear the cold. If it's cold enough to see your breath, you should consider changing to winter tires," said Philip Dobbs, Chief Marketing Officer for Bridgestone Americas. "In order to engage our customers with the Conquer the Cold message in a fun and innovative manner, we are pleased to announce an exciting promotion in conjunction with the 2014 Bridgestone NHL Winter Classic ®." Consumers who buy a set of four Bridgestone Blizzak winter tires between Oct. 15 and Nov. 30 will have the chance to receive reimbursement for their tires (up to $720 US) if they visit ConquerTheCold.com and correctly guess the temperature when the puck drops to start the first period of the 2014 Bridgestone NHL Winter Classic on New Year's Day at Michigan Stadium in Ann Arbor, Mich. Consumers who have not yet purchased their winter tires also can participate and win a set of tires if they correctly guess the temperature. Up to 2,000 guaranteed winners will be selected by drawing. At ConquerTheCold.com, consumers also can enter a separate sweepstakes in which, if they correctly guess the temperature at puck drop, they will be entered in a drawing to win prizes including a trip for two to a game of the 2014 Stanley Cup Final or a trip for two to the Bridgestone Winter Driving School in Steamboat Springs, Colo. Article 2 Bridgestone to supply tires for GM electric vehicle TOKYO—Bridgestone Corp. said its Ecopia EP150 tires will be original equipment on the 2014 Chevy Spark electric vehicle. The company will make the tires—sizes 185/55R15 82T for the front and 195/55R15 85T for rear fitment—at its factory in Hikone, Japan. Chevrolet claims the Spark is one of the quickest electric vehicles, delivering 140hp and 400 lb per ft of torque. The range of the rechargeable lithium-ion battery is estimated at 82 miles on a single charge, with a 119 combined miles-per-gallon equivalent. Ecopia EP150 tires were designed exclusively for the Spark EV fitment. The vehicle was launched in the U.S. in June 2013 in California and Oregon, and will be sold in Europe and South Korea. The vehicle sells for approximately $13,000-$14,000, according to published figures. Read More