Cooper Posts Positive Q3 Results
Citing lower raw material costs, continued manufacturing improvements and a better utilisation of capacity as the key driving factors, Cooper Tire & Rubber has reported a US$41 million net income for the quarter ended September 30, 2009, a $102 million improvement over the same period last year. The company’s net sales for the period were $803 million, a year-on-year increase of $9 million, while operating profit was $71 million for the quarter, a $118 million improvement from the corresponding months in 2008.
“The positive results during the quarter were the outcome of successfully executing on our plan in an environment where a positive price to raw material relationship existed, commented Cooper CEO Roy Armes. “This resulted in extremely positive margin growth and an operating profit during the quarter of nearly nine per cent. Raw material prices have escalated in recent months, but we do not expect a return to the high levels of 2008. In this environment, our operating results will be significantly affected by our ability to hold or increase prices.
North American Tire operations sales were $574 million during the third quarter, down slightly from 2008 net sales of $586 million during the same quarter in 2008. This decrease was the result of increased volumes offset by slightly worse price and mix impacts. Total shipments for the segment in the United States increased by two per cent, similar to the total industry shipment increase of three per cent reported by the Rubber Manufacturers Association. The manufacturer notes that its Cooper brand continued to outpace the industry in the US market, while private label shipments began to improve relative to recent quarters, but still lagged industry comparisons.
Operating profit for the North America region during the third quarter improved to $48 million, compared with operating losses of $51 million from the same period in 2008. Raw material cost improvements during the quarter positively affected results by $135 million compared with the prior year quarter. Manufacturing operations improved by $13 million as a result of the company’s continued focus on improvement in this area. Improvements in market demand resulted in curtailment costs that were lower by $4 million. Offsetting this were net negative price and mix changes of $25 million. Products liability combined with selling, general and administrative costs increased $9 million. Other charges including incentive related costs were increased $5 million. Restructuring charges were $14 million larger than the prior year.
To date, the company has incurred $113 million of restructuring costs related to the closure of its Albany, Georgia, facility. The total restructuring costs are estimated to be $120 to $145 million, of which 60 to 70 per cent are expected to be non-cash. Production ceased at the facility in September and the company is continuing with the process of relocating equipment to its other facilities. For the nine months ended September 30, 2009, the segment had operating profit of $72 million, a $137 million improvement over the first nine months of 2008.
“We will continue to focus on improving our global cost structure, profitably increasing the top line, and enhancing organisational capabilities as the key elements of our strategic plan,” Armes continued. “To deal with the tariffs announced by the United States government, we have implemented selective price increases and are executing tactical sourcing moves to mitigate the impacts while meeting our customers’ needs.
The company’s International Tire Operations reported sales of $297 million in the quarter, a four per cent increase of $12 million from the third quarter of 2008. Asian operations increased sales volumes by 28 percent, while European operations reported decreased unit sales of 13 per cent. Price and mix changes negatively impacted sales. Operating profit for the segment was $30 million compared with operating profit of $7 million during the third quarter of 2008. Driving this improvement were lower raw material costs of $49 million, higher volumes that contributed $6 million and improved manufacturing operations of $6 million. Currency changes added $7 million. These improvements were offset by negative price and mix effects of $39 million. Selling, general, administrative and other costs increased by $6 million. For the nine months ended September 30, 2009, the segment had operating profit of $46 million, a $26 million improvement over the first nine months of 2008.
“Our international operations have continued to grow in importance to our organisation while the North American segment continues to explore profitable opportunities to grow,” stated Armes. “Cooper employees around the globe continue to focus on changes that will make us a stronger organisation. Our greatest concern in the near term is raw material price volatility.
Through the first nine months of 2009, Cooper generated $2 billion in net sales. Operating profit was $96 million during the same period, compared with operating losses of $53 million in 2008. “This is an exciting time as we begin to see the benefits of changing our competitive dynamics,” noted Armes. “However, we are in a very fluid industry and environment. We believe the changes we have made are a great start in positioning us for a more consistent level of profitability, and we continue to develop in a way that will make us even stronger. The progress we have seen gives us optimism about what this team can achieve over the long term.”