TOKYO -- Bridgestone Corp. is expected on Friday to confirm its comeback from a massive tire recall at its Firestone unit with solid 2002 results on brisk exports and a surprising rebound by the scandal-plagued U.S. arm.
And while Japan's largest tire maker could face an uphill battle in 2003 due to a strong yen, high rubber prices and sluggish economic conditions, analysts say restructuring and technical advances have put it on a solid long-term track.
Seven analysts polled by research firm Multex produced an average forecast for Bridgestone's group net profit to more than double year-on-year in 2002 to $336 million, on the back of $19 billion in sales.
Those numbers largely mirror revised company forecasts released in December, when Bridgestone raised its outlook for sales and recurring profit, but cut its net projection to $336 million from $586 million after taking a one-off charge to strengthen its European operations.
The expected results would offer further evidence that Bridgestone -- battered for two years by the fallout from deadly accidents involving its U.S. unit's tires -- had largely put the Firestone mess behind it after settling more than 700 cases related to the accidents and aggressively restructuring.
But with the expected 2002 results already largely factored into Bridgestone's share price, market attention will be focused on its outlook for 2003 when it announces its earnings results at 3 p.m. Friday.
Bridgestone's shares already have fallen more than 18 percent since a Dec. 27 newspaper report said its recurring profit -- which is pretax and excludes extraordinary items -- would fall 11 percent year-on-year in 2003, while sales would be flat.
And while analysts polled by Multex did not have quite as gloomy an outlook for 2003, many warned that Bridgestone was likely to be facing a bumpy road, at least for the next several months.
"With risks like the stronger yen and high raw material prices ... the external environment may be too tough for strong profit growth," said Morgan Stanley analyst Shinji Kakiuchi.
Bridgestone also is expected to face weaker demand in the United States and take a hit on its pension expenses, while domestic prices are likely to stay on a deflationary path.
The seven analysts polled by Multex produced an average 2003 group net profit forecast of $625 million, an 86.3 percent jump from Bridgestone's revised 2002 forecast, but only a small rise from its 2002 forecast before the special charges.
Sales are projected to inch up only 1.3 percent from Bridgestone's 2002 forecast to $19 billion, while operating profit is expected to fall from analysts' forecasts for 2002.
BACK TO MUNDANE ISSUES?
Still, a situation in which the tire giant's biggest concerns were unfavorable exchange rates, rising rubber prices and the effect of a potential war in Iraq on the U.S. economy would likely have been welcomed little more than a year ago.
Bridgestone and its U.S. unit spent 2001 battling a sea of lawsuits after U.S. federal regulators linked Firestone tires mostly installed on Ford Motor Co. Explorers to 271 deaths and more than 800 injuries from rollover accidents.
Millions of tires were recalled, and Firestone's nearly centurylong relationship with Ford came undone as the U.S. unit sank to a $1.68 billion loss.
Bridgestone also saw its shares plunge on worries over a massive liability settlement and the future viability of the Firestone brand, and few expected a quick bounceback in 2002.
But a new holding company structure and a $1.3 billion capital infusion for Firestone, as well as the closing of an Illinois plant, helped steady the ship in 2002.
Bridgestone also is believed to have enough resources to settle Firestone's remaining lawsuits.
A decision to focus more on Bridgestone tires in North America as the Japanese company worked to rebuild the Firestone brand has boosted revenues there, and the drop in sales of Firestone-brand tires has not been as great as many once feared.
TEMPORARY SPEED BUMP?
While Bridgestone is expected to face a tougher U.S. market in 2003 and the domestic market will likely remain sluggish, it is expected to get a boost from price increases in North America and Europe and the restructuring of its European operations.
The company said in December it would boost capacity at plants in Poland and Spain, while giving its European unit a capital injection and strengthening its technologies for producing high-performance tires that are drawing increased demand.
The plan underscores Bridgestone's aggressive expansion stance after the recall scandal as it battles Michelin and Goodyear Tire & Rubber Co for supremacy in the global tire market.
"Internally, Bridgestone is pointed in the right direction with the strategic measures it has been taking," said Morgan Stanley's Kakiuchi.
"The issues for 2003 are something being faced by the whole industry...afterward Bridgestone should once again return to the path of strong profit growth."