Bridgestone Corporation (5108.T) Q1 2025 Earnings – Full Coverage

Everyone, thank you very much for gathering on the occasion of the presentation of the financial results for the first quarter 2025 by Bridgestone Corporation. Introducing the members: Global CEO and Representative Executive Officer Shu Ishibashi, Global CAO and Global CSO Yasuhiro Morita, and Global CFO and Global Financial Division Head Naoki Hishinuma. I would like to first call upon Shu Ishibashi, our Global CEO, to take you through the summary of financial results for first quarter 2025 as well as the fiscal 2025 guidance.

Hello everyone, I am Ishibashi, Global CEO at Bridgestone. Today I would like to present a summary of financial results for the first quarter 2025 and the fiscal 2025 guidance. This year, as new management priorities, we include the impact of the US tariffs, and the outlook remains uncertain globally. The impact will differ for each region, country, and market. We will promote business management by turning changes into opportunities. Bridgestone has positioned 2025 as the year of emergency and crisis management. First quarter results: Revenue approximately 1 trillion yen. Adjusted operating profit approximately 110 billion yen. Adjusted operating profit margin 10.5%. Although year-on-year decreasing profit was recorded, it was in line with the plan announced in February 2025. Excluding one-time factors, profit increased slightly from the prior year. On the sales front, sales expansion in high value-added products such as passenger car high rim diameter tires progressed and the sales mix continuously improved. Profit contributions from restructuring and rebuilding under the second stage have started mainly in Europe and the United States. Global business cost reduction created more than expected benefits — about 17 billion yen of contribution in the first quarter. The European business has steadily improved, with both revenue and profit increasing year-on-year. The premium tire business is at the 5% level of adjusted operating margin. We aim to turn the deficit into profitability for the full year. In North America, profitability was secured mainly in the commercial truck and bus business. In consumer tires, the acceleration of business rebuilding has started. In Latin America, Argentina improved its adjusted operating profit margin to the 11% level, while the Brazilian business posted larger than expected losses. In specialty tire solutions, sales remain strong in mining, aircraft, and motorcycle tires, though agricultural tire business saw a significant decrease. For 2025, we are putting the highest priority on defense and pursuing offense activities as two wheels. The significance of the year of emergency and crisis management has been enhanced. In the second stage of business restructuring and rebuilding, we will further strengthen it in 2025. We have initiated closure and capacity reduction actions in the US, Europe, and other regions. In offense activities, we are accelerating premium focus with a strong approach to premium car models, prestige OE, and premium EVs. We expect the global business cost reduction effect to be about 55 billion yen for the full year of 2025 — achieving the target of the 2024 MBP cumulative total of approximately 100 billion yen one year ahead of schedule. By business portfolio: premium tire core business achieved an adjusted operating profit margin of 13%. The solutions business achieved 146% of the previous year's total. On the other hand, the diversified business is in the red and we urgently need to strengthen and accelerate its rebuilding. Fiscal 2025 guidance: Despite the direct impact of the US tariffs, we have not changed our guidance of 55 billion yen of adjusted operating profit. We maintain a dividend forecast of 230 yen per share. Based on assumptions as of May 12th, we expect a direct impact of about 45 billion yen on adjusted operating profit. We will counteract this through a combination of measures. However, as a management risk, we estimate the impact of economic slowdown in the United States to be about 220 billion yen on an adjusted operating profit basis, though we have not incorporated this into our forecast due to large uncertainties. To counter the 45 billion yen impact, we will continue strengthening defensive and offensive activities, streamline global business structure, and leverage competencies as a global company. For US business strengthening, local production for local sales ratio in the US is approximately 60% for passenger tires and about 70% for truck and bus tires. We will make investments to optimize the Aiken and Wilson plants and gradually increase production, establishing a system to increase by approximately 2 million units by 2027. For Firestone brand, we will move forward with revitalization to turn structural market changes into opportunities. As the year of emergency and crisis management in the second half of 2025, we will move towards growth with quality in growing markets such as the US. We will then aim to achieve growth across the entire Bridgestone group in the 2026 and 2027 MBP. I would like to ask for your continued understanding and support. Thank you very much.

That was the Global CEO's summary of the Q1 results as well as the guidance for fiscal 2025. Now to call on our Global CFO and Executive Director in charge of Global Finance. Here is Naoki Hishinuma to take you through the financial results for the first quarter fiscal 2025.

That was Mr. Hishinuma, our Global CFO. We now move on to the Q&A session. We would like to first take questions from media representatives to be followed by analyst questions.

Inajima from Bloomberg. You talked about the Aken plant investment — the timing, magnitude, and details you can share?

To have better balance among processes, it is a modest size investment — less than 1 billion yen — so that we can have better balance among processes and benefit from better productivity and workforce optimization. Over the three years, at Wilson, the production improvement calls for full utilization of existing capacity so that we can accomplish the additional production of 2 million tires. Already in the current fiscal year, more than 500,000 tires we will enjoy as benefit.

Sasaki from Robert W. Baird. Thank you for the explanations about diversified business operations. On page 12, the revenue is 37.6 billion yen with adjusted OP at 300 million yen, margin minus 0.7%. What is the overall prospect for chemical and industrial products and the whole of diversified products for the full year?

For the chemical and industrial products, what has been the overall trend in the Q1 period?

Mahashi from Nikkan Kogyo Shimbun. I have a question regarding the tariff in the US. You are intending to enhance your production — are you thinking of a potential review and change in the sales price of your tires?

As I mentioned earlier, there would be a long-term impact of 45 billion yen. In order to overcome that, we will be taking various measures — rebuilding, strengthening our capabilities, and improving our supply chain. As for the price, at this point of time we have not made any decision. Price is going to be an important area for consideration, but for the time being, not yet.

Missa from Nikkan Jidosha Shimbun. On page 16, regarding the global impact and the second stage of rebuilding — do you have anything new to add to what was already announced in February?

As for the second stage, there are various activities globally which are being disclosed. As for the details, we only announce them as decisions are made. For the first quarter, we announced the two Spanish plants in Europe, the Lavon plant closure in North America, and reduction in production capacity at the Mo plant. Under this very challenging environment, there are many other plans being considered. Some are under discussion as additional measures, but they are very sensitive items. When decisions are made, we will make announcements. There are many things becoming more concrete, and we will be taking actions as determined.

OT from Nikkan Shimbun. My question regards the US tariffs as they relate to aircraft — the US administration is contemplating tariffs leaving their own aircraft and various components. You have aircraft tires and other components. What possible impact would you feel on your aircraft tire business?

Aircraft — at present we are scrutinizing the details. When we say 45 billion yen magnitude of impact, this is still abstract. We need to make it much more exact with higher accuracy, and that is what we are doing precisely right now.

Thank you. We would like to move on to questions from analysts who have been chosen by the company. Only one question per analyst, please. Let us start with Mr. Sakaguchi from Mizuho Securities.

Sakaguchi from Mizuho Securities. You mentioned how you will counter the tariff impact, but also said nothing is decided about possible price increases. However, some automobiles are starting to announce price changes. What is your sense of the changing business environment? When you say you will turn challenges into opportunities, what about the possibility of enhancing your presence in the US marketplace?

For the consumer business, we will enhance the business and reconstruct the operations. Tier one — Bridgestone brand companies. Tier two — companies producing locally but more reliant on imports. Tier three and tier four — most products are imported. Tier three and tier four companies' demand has been getting stronger. Even if tariffs are applied, it will not be as severe for some. However, tier three and tier two companies will find it more difficult to preserve their position. Since 1900 in the Americas, we have the Firestone brand, and gearing towards tier two is very promising. We have company-owned distributors trading Firestone branded products, and we have been trying to enhance the recognition of the Firestone brand. For tier one, that is the suite of Bridgestone Dantos products — we have no reason to change our approach, always being mindful of market possibilities and capturing business opportunities through OEM fitting and recurring demand. At our plants in Aiken and Wilson, we will utilize the full available capacity, making modest investments to boost strong output. This will leave us with a position where premium-focused high-diameter tires only — the Bridgestone brand — are exported from Japan. It is a combination of all these tactics to enhance our market share in the new environment. For truck and bus tires, Canada and Mexico — until June, we expect they will continue to be free of tariff. After July, tariffs may start to be levied, becoming part of the 45 billion yen annual impact. On the first tier, we have very strong position with the Bridgestone brand, supplemented with Firestone in tier two and tier three. That is our business strategy in the US.

Maki from SBC Nikko Securities. Regarding the first quarter results, how much of a gap is there from what you had anticipated? You talk about countermeasures against tariffs and fighting against the challenging environment. When you consider expanded sales of Firestone, potential sales price increases, cost reductions, and potentially lower raw material costs — what do you think may be the quantitative opportunities ahead of you?

When I looked at the bottom line, the structural change cost is not reflected enough in the first quarter. I believe there may be a higher figure — maybe 100 billion per year. Is that going to be changing?

We have actually used all of the amount that was allotted for the year. As decisions are clear, we will actually disclose them. There is a possibility that it may go up compared to what you see here.

Yoshida from Citigroup Global Markets. Regarding the footprint of manufacturing plants, what is the significance of the 25% tariff rate? Production costs locally have been going up, particularly in freight costs. If 25% tariff is levied and you are not making large-scale investments but using available capacity to the brim, how would you position the impact of the 25% import tariff?

For truck and bus tires, we have the Lever plant which has already been announced to be closed — it is an old and expensive plant. Now the plan is to ship or import products from Brazil to North America. Even with a 25% import tariff, the Brazilian plant and importing into the US from Brazil will be cheaper than continuing to produce at the Lever plant. Wilson is the leading-edge plant with high productivity in consumer tires for OEM customers with demanding specifications, and we are trying to boost their strengths even further. Per plant and per country, we have to analyze and identify what is the maximum potential for each site and what will be the magnitude of impact. We are constantly running those analyses.

Sakamaki from BA Securities. A similar kind of question. Regarding profitability, you talked about the 45 billion impact of the tariff. When you looked at last year's sales, 45 billion is about 2 to 3%. And you talked about the 4% and 6% in Canada and Mexico. If you had similar price increases, you might have a similar impact. You said you are trying to rebuild in advance of your plan and maybe the annual cost of 100 billion may be used in advance with a higher impact of rebuilding earlier. To what extent are you expecting from these rebuilding efforts?

In the figures for February, we talked about 40 billion impact for 2025. We are now scrutinizing the impact and starting to see, with the rebuilding improvement, maybe a 5 to 6 billion increment to what we had announced earlier. For next year, we will increase further. We do have about 100 billion under plan, but only part has been announced externally. When we make decisions, announcements will be made. In addition, we will implement certain things and in 2026 we will try to further improve the quality of our business. While we improve the quality, we will strengthen ourselves and aim to move towards growth in America and India — growth with quality. We will start with America. In January I made a business trip to America and visited all our customers and looked at various developments underway. I believe in the second half of this year, results will actually be realized. The same is true for India. Europe still needs to improve quality significantly, and in the latter half of 2026 we may start to see some growth. Depending on each area, there will be differences and different emphasis. We need to strengthen our quality and expand our sales. Those approaches will never change regardless of what kind of tariff may be implemented. We need to make these changes into opportunities to improve quality and expand sales in the United States. That is very important, and I hope you understand our position. Thank you very much.

Thank you very much, Mr. Sakamaki. Now everyone, this is the time for us to close the Q&A. With that, we are to close the Q1 results presentation hosted by Bridgestone. Thank you very much for your attendance today.