Cooper Tire reports 1Q2020 net loss of US$12 million, Europe and International segment bears the brunt
Cooper Tire & Rubber Company has reported a first quarter 2020 net loss of $12 million, compared with net income of $7 million in same period last year. Unit volume decreased 15.8 per cent compared to the first quarter of 2019. Net sales decreased 14.1 per cent to $532 million. Operating loss was $6 million, or 1.2 per cent of net sales, compared to operating profit of $26 million, or 4.3 per cent of net sales, in 2019.
Operating results include approximately $11 million of restructuring charges related to the transition at the company’s now wholly owned Mexico manufacturing facility.
“Cooper’s priorities during this unprecedented time have continued to be the health and safety of our employees, responsibilities to our broader communities, and commitments to our customers as well as all other key stakeholders. I am exceedingly proud of how Cooper employees around the globe, driven by our purpose, mission and values, have risen to the challenges,” said Cooper President & Chief Executive Officer Brad Hughes.
“We entered this challenging period caused by the global pandemic with a strong team and strategic plan, a solid cash position and borrowing capacity, appropriate inventory levels and a flexible global manufacturing footprint. Cooper was tracking well against our strategic initiatives and previously stated financial goals and had considerable momentum.
“In response to the coronavirus, we temporarily shut down our manufacturing plants for various periods of time while we continued to operate our distribution centres around the world. At the same time, we took several actions to improve liquidity. As we have communicated over recent weeks, our China, US and Serbia manufacturing plants are back in operation. These facilities will continue to ramp up as conditions improve. Meanwhile, our UK and Mexico facilities remain temporarily closed.
“Overall, we believe Cooper is in a good position to benefit when the economy recovers. Over the past two years, we have transformed our company into a consumer driven organization with Cooper products now more available where consumers want to buy tyres. We believe that our value proposition — high quality tyres at an affordable price — will be even more compelling for consumers in the future economy, and our heritage of manufacturing tyres in the US for US drivers will become even more important coming out of this period of uncertainty. Our research suggests consumer confidence in the Cooper brand is growing, and we believe that we stand to be a consumer tyre partner of choice.”
Cooper’s International segment bears the brunt of loss
However, the Cooper Tire sales in the International segment decreased 28.8 per cent as a result of $46 million of lower unit volume and $4 million of unfavourable foreign currency impact. For the quarter, segment unit volume was down 31.8 per cent compared to the same period a year ago.
The segment’s first quarter operating loss was $10 million compared with an operating loss of $1 million in the first quarter of 2019. The quarter included $11 million of higher manufacturing costs, $4 million of lower unit volume and $1 million of higher other costs. The first quarter of 2019 also included $5 million of restructuring costs related to Cooper Tire Europe’s decision to cease light vehicle tire production at its Melksham, England facility, positively impacting the year-over-year comparison.
Across the Atlantic, Cooper’s first quarter total light vehicle tyre shipments in the US decreased 11.9 per cent. The US Tire Manufacturers Association (USTMA) reported that its member shipments of light vehicle tyres in the US decreased 12.3 per cent. Total industry shipments (including an estimate for non-USTMA members) decreased 10.4 per cent for the period.
2020 outlook withdrawn
Due to the rapidly evolving environment and continued uncertainties resulting from the coronavirus pandemic, Cooper withdraws its previously announced full year 2020 outlook, which was issued on February 24.
“We cannot at this time predict the extent or duration of the pandemic and its impacts on our financial and operating results for the full year. Given that the coronavirus will likely have a significant impact on the second quarter, we believe it will be the most challenging quarter of our year for operating profit. We have dramatically scaled back our capital expenditure plans, and now expect full year 2020 capital expenditures to be between $140 and $160 million, but this is dependent on the duration and severity of the pandemic. With this and other actions, we do not currently believe we will have a substantial cash usage in the second quarter. Overall, we are confident in our ability to weather the storm,” said Hughes.
“Prior to the pandemic, we were on pace relative to our original outlook, validating that our strategic plan remains the right path for our future. We entered this challenging period with a strong balance sheet and financial flexibility. While we will face uncertainty and many challenges, we believe Cooper will overcome the impacts of the coronavirus and we look forward to the opportunities ahead. We expect the economy to improve as the year progresses, and that our results will reflect this. For now, we will continue to focus on doing what is right for employee health and safety, our communities, customers and other key stakeholders.”