Hankook Tire reports it has exceeded market expectations by announcing global sales of $938.9 million in the second quarter of 2007, a year-on-year increase of 11.4 percent. Although the cost of goods sold increased by 9.8 percent, reflecting increased costs for raw materials and higher labor costs, this was offset by higher prices and increased sales in both the Replacement Equipment (RE) and Original Equipment (OE) sectors of the business. Regional growth remained strong, especially in China where sales increased by 23 percent (1.78 billion yuan), enabling Hankook Tire to maintain its position as the number one tire manufacturer in China. Exports for RE tires to Europe increased by 11 percent and North American exports grew 13 percent. The increases reflected greater downstream diversification of the customer base in both markets as well as a 19 percent increase in local OE sales. "Our increased profitability is benefiting from a strategic focus on driving retail sales with more intensive marketing activities," Chief Strategy and Financial Officer Hyun Bum Cho says. "Hankook Tire's reputation for providing high quality, high performance tires continues to grow both within the OE market, where we are partnering with some of the world's leading automakers, and also within the retail market." The increase in cost of sales was driven by a 4.5 percent increase in raw material costs, including an increase in price of natural rubber from $1,733 per ton in April 2007 to $1,967 per ton in June 2007, a total increase of $234 per ton within the quarter. Consolidated operating profits increased by 9.9 percent year-on-year to $87.2 million. Sales, general and administrative expenses increased by 23.4 percent reflecting continued facility investment including the development of Hankook Tire's first European factory in Hungary, which began production in June, according to the company. "Hankook Tire remains on track to meet our targets this year. Our expanding global presence, especially in China and Europe, provides us with a strong base for expanding both sales and the reputation of the brand," Cho states. "Investment in R&D remains a key driver of long term competitive advantage, but it is our ability to effectively manage increased costs through internal efficiencies and solid pricing strategies that enables to maintain profitability in the short to mid term." | 
