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Title 3/13/2008 - Hankook Tire Sustains Double Digit Sales Growth and Industry Leading Profit Margin in 2007
Date 05/15/2008 Count 9379

Hankook Tire Sustains Double Digit Sales Growth and Industry Leading Profit Margin in 2007

Korean Tire Manufacturer Retains Spot as World’s Fastest Growing

  • Global sales increased 11.8%; Operating profit margin remains over 8%
  • Hankook Tire targets global sales approaching $4.2 billion for 2008 (19.6% increase from 2007)
  • Profitable ultra-high performance tire sales increased 10.5% year on year
  • Ongoing investment in new European factory and in UHP capacity to provide supply platform for long term growth

WAYNE, NEW JERSEY, March 13, 2008 - They just can’t make enough tires . . . for now.

Hankook Tire (www.hankooktire.com) remains the fastest growing tire manufacturer in the world, posting global sales of $3.4 billion USD*** in 2007.

Hankook Tire also announced a profit margin of 8.1 percent, with consolidated operating profit increasing 5.1 percent to $283.6 million USD*** (2006’s operating profit margin of 8.7 percent was the highest among all major tire makers outstripping the nearest competitor by over 2 points*).

The company’s consistent investment of approximately 5 percent of revenue in research and development continued to pay dividends toward its reputation for quality and high-performance tires. Growth factors included a 9 percent increase in European sales in the 4th quarter, 2007, and a 10.5 percent year-on-year increase in global ultra-high performance tire sales. Sales in North America topped $751 million in 2007 for an increase of more than 9.5 percent over 2006.

Chief Executive Officer, Mr. Seung Hwa Suh said, “We’ve been able to balance increasing global sales with industry-leading profit margins by focusing on improving global management structures and processes in recent years. Despite a challenging year for the industry as a whole, improving the quality and reputation of our products has allowed us to build margins without adversely affecting our sales growth in both new and established markets for the Hankook brand.”

Cost of sales increased by 12.4 percent in 2007. Raw material costs supplied to Korea production facilities - including the cost of rubber and oil products - increased by 2.5 percent year-on-year. Costs remained high with the average quarterly cost of raw materials at $1,721 per ton.

Hankook Tire remains positive about 2008 growth prospects**. The company is aggressively targeting global sales approaching approximately $4.2 billion representing potential growth of 19.6 percent. This target reflects increasing demand for Hankook’s high-performance tires, increased capacity through its recently opened €500 million European production facility in Hungary and investment in ultra-high performance tire production at its fully-automated, flagship Geumsan facility in Korea.

The company produced almost a million tires in Hungary in its first 6 months and expects an additional 4 million tires to be produced in 2008. The continuous investment at Geumsan will increase production capacity for profitable ultra-high performance tires; by the end of 2009, capacity will have increased by 50 percent or 5 million units annually. The company remains in a strong position to invest further in overseas production facilities, with EBITDA increasing from $538 million to $582 million in 2007, alongside low debt and strong cash flow.

Suh, discussing Hankook’s investment activities, said, “The new facility in Europe is increasing our ability to meet the rising demand for our products and also helping the company spread risk and reduce logistics costs. The final completion of the Hungarian facility will reduce delivery times from over one month to within five days to all locations in Europe. We estimate that by the end of this year, our total annual capacity will exceed 73 million tires.”

Hankook Tire expects to target profit margins to 9 percent in 2008 but predicts an increase in cost of sales of 18.3 percent this year driven by ongoing investments and high raw materials costs.

Suh continued, “Hankook Tire will maintain its long term growth strategy of focusing on four key business drivers: ongoing improvement of management and leadership processes and structures; increased production and distribution capabilities; consistent investment in technological innovation; and building the Hankook Tire brand by leveraging OEM reputation and conducting ‘smart marketing’ activities.”

According to Greg Pae, president of Hankook Tire America Corp , “As we become a more and more important player in the marketplace in North America, our growth will continue to be based on balance between Original Equipment and the replacement market segments.”

Hankook Tire has global fitments with Ford, General Motors, Hyundai, Kia, Volkswagen, Audi, International Truck and Chrysler.

* According to Modern Tire Dealer (Jan. 2008)
** Subject to current market outlook and industry environment February 2008

2007 Consolidated Profit (KRW)

(billion KRW) 06 07 YoY% 08 Target**
Global Sales 2,899 3,241 11.8% 3,877
Cost of Sales 2,030 2,281 12.4% 2,699
Operating Profit 250.8 263.6 5.1% 348.5
Profit Margin 8.7% 8.1% n/a 9.0%
EBITDA 500.2 540.5 n/a 710.1

US-$ Exchange Rate: Percentage changes differ because of exchange fluctuations

(million USD) 06 07 YoY%
Global Sales 3,120 3,488 11.8%
Cost of Sales 2,185 2,455 12.4%
Operating Profit 269.9 283.6 5.1%
Profit Margin 8.7% 8.1% n/a
EBITDA 528.3 581.6 n/a

***2007 year annual average

    2007 average KRW
  USD/KRW   929.18
  Euro/KRW   1273.12
  CYN/KRW   122.20

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