Cooper Turns-Out $21 million Net Income in First Quarter
Cooper Tire & Rubber Company has reported net income of $21 million or 33 cents per share for the quarter ended March 31, 2007. The dramatically improved earnings were achieved as total sales increased by 16 per cent to a new first quarter record of $689 million. This compares to a net loss of $5 million generated on sales of $597 million in the first quarter of 2006.
During the quarter the company continued to benefit from the cost reduction and profit improvement initiatives it announced in September 2006 as well as improved price and mix in North America, and increased tyre unit sales in Europe and Asia. As a result, operating profit improved to $30 million in the first quarter of 2007 compared to an operating loss of $4 million in the first quarter of 2006.
The Company’s International Tire Operations reported sales of $183 million in the quarter, an increase of 46 per cent compared to the first quarter of 2006. Cooper Europe had an all-time record quarter as sales increased by 13 per cent. The segment’s sales in Asia increased by more than 100 per cent, driven by having a full quarter’s sales contribution from Cooper Chengshan which was acquired during the first quarter of 2006.
Operating profit for the International segment was $6 million in the first quarter of 2007 compared to $3 million in the first quarter of 2006. The Company’s operations in both Europe and Asia increased operating profit on stronger sales and improved pricing, partially offset by higher raw material costs and the impact of currency exchange rates. In addition, expenses related to the start-up of Cooper Kenda operations increased during the quarter, further offsetting segment profit.
The Company’s North American tyre operations reported sales of $535 million in the quarter, up 8 percent compared to $496 million in the first quarter of 2006. This increase was driven by improved price and mix, partially offset by lower unit sales volume. Cooper’s unit sales of light vehicle replacement tires in the US were down approximately 1 per cent in the quarter, in line with industry trends as reported by the Rubber Manufacturer’s Association (RMA).
The North American Tire operations generated $28 million in operating profit in the quarter or an increase of $34 million compared to the first quarter of 2006. This improvement was the result of favourable price changes, the company’s cost savings and profit improvement initiatives that have been implemented since September 2006 and lower product liability costs. These were partially offset by higher raw material costs and lower unit sales volume, which was due largely to the generally soft replacement tyre market conditions during the quarter.
Commenting on the results, Cooper President and CEO Roy Armes said: “We are pleased with the continuous improvements we are seeing in virtually every aspect of our business. Our team has worked very hard to implement many, many cost savings and profit improvement initiatives and we are seeing the result of those strong efforts. Our European operations had a great quarter with strong sales growth and improvements in efficiency. Asia was solid operationally, but the improvements were somewhat masked by startup costs as we accelerate the ramp up of production at our new Cooper Kenda plant.”
“We will continue the implementation of our profit improvement initiatives and a critical step in this process will be the transition of our Texarkana, AR operations to a flex plant system. This will take place in the second quarter and will result in some restructuring costs and possibly some temporary disruption of production as we go through the implementation. Still, we remain on track to realize more than $100 million from our profit improvement initiatives this year.”