Nexen Tire Corp. reported a 25% drop in third-quarter operating profit as higher shipping costs and rubber prices squeezed margins at the South Korean tiremaker.
Operating profit fell to 52.3 billion won ($39.2 million) from 69.7 billion won a year earlier, the company said Wednesday. Revenue rose 2.3% to 708.5 billion won.
Rising natural rubber prices, driven by heavy rainfall in Southeast Asia, combined with elevated freight rates to pressure profitability. The company’s operating margin contracted to 7.4% from 10.1% a year earlier.
European sales remained resilient at 273 billion won, with high-end tires of 18 inches or larger accounting for 26.9% of regional revenue. The company cited solid demand for premium segments despite increased competition from Chinese electric vehicle makers affecting European automakers’ production.
While freight rates have begun declining after peaking in July, the benefits won’t be reflected until the fourth quarter. The company is also navigating new EU deforestation regulations affecting natural rubber supplies.
Nexen maintained a 36% share in the premium tire segment globally, though U.S. sales were impacted by weaker auto production ahead of presidential elections and distribution channel issues.
The company expects tire demand to improve once major economies begin cutting interest rates, potentially spurring auto sales and tire replacements.
