Cooper Tire Q1 2016 operating profit up almost 30%
Cooper Tire & Rubber is, says chairman, chief executive officer and president Roy Armes, “off to a strong start in 2016” after reporting a 29.5 per cent increase in operating profit despite net sales being down 2.0 per cent in the first three months of the year. Operating margin rose from 10.6 per cent in Q1 2015 to 14.0 per cent in the quarter to 31 March 2016.
Although unit volumes increased 1.9 per cent year-on-year in Q1 2016, net sales were lower at US$650 million. The rise in unit volume was more than offset by unfavourable price and mix to the tune of $17 million, mainly due to net price reductions related to lower raw material costs, as well as $8 million of negative currency impact.
Operating profit jumped from $70 million a year ago to $91 million. This increase reflected $23 million of favourable raw material costs, net of price and mix, $6 million of lower product liability costs, $2 million of favourable selling, general and administrative expenses and $1 million of higher unit volume. These improvements were partially offset by $6 million of higher manufacturing costs, $3 million of negative currency impact, and $2 million of other costs.
“Our first quarter operating margin performance was excellent, and continued the positive results we delivered in 2015,” noted Armes in regards to the 3.4 point rise in margin during the quarter. “The Americas segment posted another outstanding quarter, with operating margin of over 18 per cent. Unit volumes grew nearly two per cent year-over-year, with strong growth in the International segment, which was partially offset by a slight decrease in the Americas segment.
“We continue to execute against our strategic plan, investing in operations around the globe to improve our competitive position and accelerating the development of new products,” the Cooper Tire boss continued. “In North America, new products – those launched in the last two years – represent approximately 30 per cent of sales. Of course, our overarching goal is to deliver shareholder value, and we continued to return cash to shareholders through our ongoing quarterly dividend and nearly $25 million in share repurchases in the first quarter.”
Cooper Tire & Rubber management anticipates unit volume growth in each of the company’s segments, with operating margin “modestly” above last year’s levels for full-year 2016. “Our new products, expectations for unit volume growth in both segments, and the improving mix of sales to more high value, high margin tyres, position Cooper well in an extremely competitive market,” commented Armes.
“We continued to see very strong results in our Americas segment in the first quarter of 2016, with significant benefit coming from lower raw material costs during the quarter. As we look ahead to the balance of 2016, we expect that the benefit of lower raw material costs will moderate and global markets will become more competitive. In the International segment, our successful unit volume growth and improving operating results in the first quarter of 2016 give us encouragement for future performance in the segment.”
Further details on Cooper Tire & Rubber’s Q1 2016 results can be found in the Tyrepress.com company profiles & reports section.