Cooper Tire: Sales, income lower in Q2 2018
The results reported by Cooper Tire & Rubber for the second quarter of 2018 were, says the company’s president and chief executive officer, “in line with our stated expectations.” It therefore came as no great surprise that net sales, operating income and net income were all lower year-on-year in the three months to 30 June 2018.
Second quarter net sales were US$698.7 million, a decrease of 3.1 per cent compared with $720.8 million in the second quarter of 2017. Second quarter net sales were negatively impacted by $16 million of lower unit volume, $13 million of unfavourable price and mix and $6 million of favourable foreign currency impact.
Second quarter 2018 operating profit was $33 million compared with $84 million for the same period last year. Operating profit for the second quarter of 2017 has been restated to reclassify $9 million of other pension and postretirement benefit costs out of operating profit.
Operating profit for the second quarter of this year included $21 million of higher manufacturing costs and $20 million of unfavourable price and mix, net of raw material costs. Higher manufacturing costs reflect the alignment of production to demand in order to control inventory levels. In addition, operating profit decreased $4 million related to lower unit volume. SG&A increased $6 million in the quarter due to higher professional fees related to strategic initiatives and mark-to-market cost of stock-based liabilities.
Net income in in the second quarter was $15 million, or diluted earnings per share of $0.30, compared with $45 million, or $0.85 per share, for the same period last year.
“Cooper delivered second quarter results in line with our stated expectations, including operating profit margin of 4.7 per cent of net sales, up slightly from the previous quarter,” said Brad Hughes. “While challenging industry conditions have continued longer than expected, we are confident in our strategic plan, as detailed at our recent investor event. We continue to make solid progress in our strategic initiatives, including expanding into new sales channels and driving sell-in with exciting new products, such as our new AT3 line. Cooper’s brand strength and attractive value proposition, combined with our strategic initiatives, provide a solid foundation for volume and profit growth.”
Hughes adds that Cooper Tire is revising its expectations for the remainder of 2018 as a result of “continuing industry challenges and, in particular, rising raw material costs.” The company now anticipates unit volume to be flat in 2018 compared to 2017, with a modest sequential improvement in operating profit margin in the second half of this year. “We continue to believe that we have the right strategic plan in place and remain confident in our five-year financial targets, which include operating profit of 10 to 14 per cent, as well as annual unit volume growth in the low- to mid-single digits and return on invested capital of 14 to 16 per cent.”
Further information about Cooper Tire & Rubber’s Q2 2018 financial results can be read here.