Strike, Raw Materials Drop Cooper Earnings for the Half
(Akron/Tire Review) Cooper Tire & Rubber Co posted a net loss of $7 million in its second quarter of 2005, a downturn fuelled by the strike at its Texarkana, Arkansas, tyre plant earlier this year and rising raw material costs. Cooper also lost $2 million overall for the first half of 2005.
Net sales for the second quarter reached $511 million, up slightly from sales of $509 for the same period last year. For the first six months, Cooper racked up net sales of $1 billion, up 4 per cent versus the first half of 2004.
Cooper’s North American tyre operations saw net sales for the quarter grow 1 per cent to $460 million, while its unit sales dropped due to lower than expected demand, the impact of the strike and inventory issues. First half sales, though, were up 5 per cent to $924 million. First half unit sales were down 5 per cent while industry unit volumes were up some 2 per cent, said Cooper.
North American tyre operating profit was $2 million for the second quarter, down from 2004’s $22 million profit for the same period, and its first half profit of $10 million was down substantially year-over-year from 2004’s $35 million profit.
“We have worked hard to overcome some very difficult operating conditions during the quarter and the first half of the year,” said Tom Dattilo, Cooper chairman, president and CEO. “We made good progress once the strike was behind us and that progress was clearly evident in June, but it was not enough to offset the broad impact on sales and disruption of our manufacturing operations in the first two months of the quarter.”
While Dattilo heralded many improvements Cooper has made over the first half, he warned that the second half of the year will not be easy. “Increasing raw material costs will continue to be a major challenge for our company and our industry through at least the end of 2005. Natural rubber prices jumped significantly in the latter part of the second quarter and we see them remaining fairly steady for the next quarter. Stubbornly high oil prices and strong demand are driving most other materials higher as well, which is a direct contrast to the modest improvement we had anticipated. The higher cost of raw materials, compared to the same period last year, could impact our operating profit by as much as $35 to $40 million in the third quarter alone.
“We will likely experience some lingering impact from the Texarkana strike in the rest of the year in the form of imbalanced inventory and lost sales of our premium light truck and sport truck products. But the new, more efficient equipment we have been installing and our plant expansions overall will put us in a better position to supply our customers with the products they need, when they need them. So we expect our sales in the third and fourth quarters should improve over last year.”