Fukoku reports profit drop amid rising costs and geopolitical uncertainty

Japanese industrial rubber and parts supplier Fukoku Co. Ltd has posted lower profits for the fiscal year ended 31 March, blaming soaring raw material, labour and energy costs for eroding gains from productivity improvements and pricing strategies. Full-year sales edged up just 0.4% year-on-year to Yen90 billion (€487 million), driven by steady demand in its ‘functional parts’, ‘life science’ and ‘hose’ divisions. Operating profit, however, slumped 19.4% to Yen3.8 billion as cost inflation outpaced every attempt to offset it, the company said in a 15 May statement. Fukoku’s ‘functional parts’ business—covering heavy-duty industrial rubber components, weatherstrips and office-automation rubber goods—saw sales climb 3.7% to Yen42.9 billion. Growth was powered by strong orders for thermally conductive gap fillers and products supplied to local wiper manufacturers in China, yet segment income still fell 7.2% to Yen4.6 billion because higher raw material and labour costs overwhelmed the benefits of higher volumes, productivity gains and price hikes. The ‘anti-vibration parts’ division posted a 0.8% sales decline to Yen37.8 billion as domestic and overseas orders stayed soft. Segment income dropped 6.0% to Yen2.7 billion, with Fukoku admitting that “productivity improvements, streamlining, and price increases proved unable to fully mitigate” rising metal-parts and labour expenses; the unit was also hit by a prior-year accounting reversal tied to subsidiary misconduct. The ‘hose’ business was the standout performer, with sales up 10.4% to Yen5.3 billion on strong orders for commercial-vehicle applications. Segment income more than doubled, jumping 104.6% to Yen420 million thanks to higher volumes, automation-driven productivity gains and price increases. On a non-consolidated basis, Fukoku’s net sales rose 0.8% to Yen35.735 billion, but the company swung to an operating loss of Yen701 million versus a Yen89 million profit a year earlier, citing higher raw-material and labour costs plus increased SG&A spend linked to “strategic DX investments.” Looking ahead, Fukoku warned that “rising geopolitical risks and fluctuations in the cost of energy and raw materials associated with rising tensions and instability in the Middle East” continue to darken the outlook. It also flagged “downside economic risks of US trade policies and continuing inflation” as well as divergent automotive trends globally. While vehicle output expanded in China and remained stable in Japan, “there are signs of slowing in certain Southeast Asian markets,” the supplier noted. Demand for electric vehicles, it added, has entered “a readjustment phase due to policy changes and other factors,” despite long-term growth expectations.