Cooper struggles with sluggish earnings, unit sales

Cooper struggles with sluggish earnings, unit sales
04 August 2011

Findlay, Ohio -- Cooper Tire & Rubber Co.’s net income nosedived 71.2 percent to $14.4 million despite a 14.7-percent surge in sales to $922.2 million for the second quarter, ended June 30, compared with the year-ago period. Cooper attributed the slump in profits to lower sales volumes and raw material costs, among other factors.

For the first half, net income plummeted 51.1 percent to $32.9 million as sales increased 17.3 percent to $1.83 billion.

Cooper’s North America Tire Operations’ sales rose 16 percent in the quarter to $666.8 million due to stronger price and mix, but was partially offset by decreased unit sales, the company said. Segment profit fell 81.3 percent to 19.6 million.

Light vehicle tyre shipments for Cooper’s North America segment in the U.S. decreased by 11.9 percent, compared with total industry shipment decreases of 6.8 percent reported by the Rubber Manufacturers Association. Unit sales for Cooper’s North American segment fell 8.2 percent.

“This decrease was a result of the company performing below weak industry conditions in April and May. Consumer sentiment was negatively impacted by high gas prices and consumers’ reduced tyre purchases. Combined with destocking in the supply chain, the result was weak tyre shipments for tyre manufacturers,” the company said in a statement.

“The impact was greatest in the broadline and value tyre segments, where the company has a substantial presence,” the Findlay-based tyre maker added. “Tyre shipments during June for the company were stronger relative to the industry as the company reacted to April and May sales results. Year-to-date, the company’s shipments of light vehicle tyres decreased 1.9 percent, compared with a decrease of 0.8 percent for the industry.”

For the six-month period, the North America unit boosted sales 18.8 percent to $1.31 billion while segment profit fell 24.3 percent to $25.2 million.

“The progress we are making was camouflaged in part by tough industry conditions,” Cooper CEO Roy Armes said. “Replacement tyre demand is usually resilient and pullbacks in demand are typically temporary in nature. With our current inventory levels and projected demand, it is likely we will reduce our prior goal of producing 10 percent more tyres in 2011 than in 2010. We are confident that our continued focus on reducing costs while delivering quality products places us in a great position to compete when demand improves.”

“We expect raw material costs to remain at elevated levels and to be sequentially higher by less than 5 percent during the third quarter from the second quarter of 2011,” Mr. Armes said. “We believe our raw material index will be relatively flat during the fourth quarter.”