F12/26 3Q Results Preview: High Material Prices Likely to Push F12/27 1H Costs Up

3Q volumes were somewhat weak, but the sales environment (increased weighting of high-inch tires) is unchanged. Earnings momentum may weaken as higher raw material costs, driven by the spring surge in oil prices, start to tell. High natural rubber prices could also weigh on F12/27 1H; we expect investors to wait and see for now. In 3Q, JPY weakened nearly 10% YoY against USD (Y159/$) and EUR (Y183/E), WTI crude rose 33% YoY to $87/bbl and natural rubber (TSR20) rose 34% to $2.30/kg. PSR/LTR replacement demand was flat with OE demand down, while TBR replacement demand was soft in North America but up in South America;