Cooper quarter operating profit down, despite record sales
Reporting financial results for the quarter ending 31 December, 2010, Cooper Tire & Rubber Co saw its operating profit diminish to $55 million, $5 million down on the same quarter in 2009, though it also achieved record net sales of $920 million, $147 million, or 19 per cent, up on 2009. Roy Armes, CEO, commented that while demand for the company’s products was strong and manufacturing facilities were run “efficiently”, raw materials prices and the available inventory had limited progress in terms of operating profit. Operating profit was $55 million, or 5.9 percent of net sales.
“We were able to deliver positive results during the fourth quarter despite the beginnings of rapid increases in raw material costs, particularly natural rubber,” Ames’s statement continued. “Demand for our products continued to be very strong and we were able to run the manufacturing facilities efficiently to deliver improved manufacturing results. Our ability to ship more tyres was limited by the inventory we had available for sale during the quarter.”
Results during the quarter included restructuring charges of $1 million, related primarily to the closure of the Albany, Georgia facility. This compares with charges of $12 million during the fourth quarter of 2009. According to Cooper’s figures, raw material prices ($138 million) were partially offset by better price and mix ($115 million), while improved manufacturing ($8 million), increased volumes ($10 million), and lower restructuring costs ($11 million) contributed favourably. Prior-year operating results benefited by approximately $16 million from the sale of units that were valued at lower historical costs, in accordance with the last-in-first-out cost-flow methodology, Cooper’s statement continues. Products liability charges during the quarter were $10 million higher than the year-ago fourth quarter.
Looking forward, Ames outlined increased production plans and the price rises already implemented. “In 2011, we intend to produce 10 per cent more units than we did in 2010 to help meet this strong demand. The largest challenge currently facing the Company is the increase in natural rubber prices, which increased more than 75 per cent during the last four months. Raw material costs have increased between 15 per cent and 20 percent sequentially from the fourth quarter of 2010 to the first quarter of 2011. We expect raw material costs to remain at elevated levels after the first quarter; however, the rate of increase should begin to slow during the second quarter.
“We continue aggressively taking every action possible to internally offset these cost increases, but it was necessary to announce a price increase in the United States effective 15 March, 2011, by a weighted average of 8 to 9 per cent with the amount of increases varying by product. This follows a 1 February, 2011 price increase of 2.5 per cent on nearly all light vehicle products. We have also been steadily increasing prices in other regions where we participate. We are excited and optimistic about our opportunities to further improve results in 2011 despite the challenges that face the industry.”