Operating profit up in Q2 as Cooper Tire benefits from raw material prices
Cooper Tire & Rubber blames the absence of Cooper Chengshan Tire (CCT) from the company’s books for the 15.4 per cent year-on-year drop in sales experienced during the second quarter of 2015.
The company’s share in the Chinese joint venture tyre maker was sold in the final quarter of last year. Second quarter 2015 sales amounted to US$752 million, compared with $889 million a year earlier, and in reporting this figure Cooper notes that CCT contributed sales of $172 million, net of intercompany eliminations, in the second quarter of 2014. Excluding the impact of CCT, Cooper Tire & Rubber’s second quarter 2015 sales rose five per cent year-on-year as a result of $64 million worth of higher unit volume gained both in the Americas and International business units. This unit volume increase was partially offset by unfavourable price and mix of $20 million, related to lower raw material costs, and negative foreign exchange of $8 million.
Second quarter 2015 operating profit rose 28.6 per cent to $99 million, with operating margin going up from 8.6 per cent a year ago to 13.2 per cent. When CCT is taken out of the equation, operating profit increased more than 90 per cent as a result of favourable raw material costs to the tune of $76 million, $14 million in higher volume, and $5 million less product liability and selling, general and administrative (SG&A) costs. Partially offsetting these benefits were unfavourable price and mix of $27 million, $13 million of higher manufacturing costs and $7 million of other costs and foreign exchange impact. The higher manufacturing costs were primarily in the Americas segment, where Cooper incurred costs related to the reconfiguration of its facilities in order to meet the demand for higher value tyres, as well as investments in technical capabilities and increased pension expenses.
“Our second quarter performance was very strong as the positive trends from the first quarter continued, giving Cooper a strong first half of 2015,” said company chairman, chief executive officer and president Roy Armes. “This was a record second quarter operating profit for the company. The Americas segment posted another quarter of outstanding results, with continued unit volume growth and an operating margin of 16 per cent, which is well above our long-term total company target. Unit volumes increased in both the Americas and International segments, with double-digit increases in unit volumes in China, excluding CCT, and Latin America. This demonstrates that our efforts to grow in these rapidly expanding markets are working as we continue to execute our global strategic growth plan.”