Cooper reports $6 million 2Q loss, international business beat 2019 result
Cooper Tire & Rubber Company reported a second quarter 2020 net loss of US$6 million on 3 August 2020 compared with net income of $9 million in the same period last year. Net sales decreased 26.9 per cent to $496 million. Operating profit was $5 million, or 1.1 per cent of net sales, compared to operating profit of $32 million (4.7 per cent of net sales) in 2019.
Cooper puts the loss down to the coronavirus-related lockdown demand slump. According to the Findlay, Ohio-based tyremaker, global tyre unit volume decreased 27.5 per cent compared to the second quarter of 2019. However, Cooper reports that it increased market share in the United States despite the slowdown.
This was because although the firm’s US tyre sales decreased 24.1 per cent, Cooper’s result outperformed the market. The US Tire Manufacturers Association (USTMA) reported that its member shipments of light vehicle tyres in the US decreased 31.0 per cent. Total industry shipments (including an estimate for non-USTMA members) decreased 31.7 percent for the period.
“As anticipated, the global pandemic significantly impacted our results in the second quarter. However, our performance materially exceeded our expectations, and I want to thank our employees around the globe for stepping up during this challenging and unprecedented time,” said Cooper President & Chief Executive Officer Brad Hughes.
“As you know, Cooper came into this situation with a strong balance sheet and with momentum building from our strategic initiatives. We took early and decisive actions to help weather the coronavirus storm, and our teams seized opportunities to continue to build our business. As a result of their efforts, and the economic recovery that started to emerge later in the quarter, Cooper was able to generate significant free cash flow for the period and grow market share in the US We believe this affirms the strength of the Cooper brand…”
International Tire Operations outperformed 2Q 2019 result
Second quarter net sales in the International segment, which includes Cooper Tire Europe, decreased 27.1 per cent as a result of $23 million of lower unit volume, $11 million of unfavourable price and mix and $4 million of unfavourable foreign currency impact. For the quarter, segment unit volume was down 16.4 per cent compared to the same period a year ago, primarily driven by lower unit volume in Europe. However, in Asia, third-party unit sales were up 4.5 per cent.
The segment’s second quarter operating profit was $1 million compared with an operating loss of $1 million in the second quarter of 2019. The quarter included $5 million of lower raw materials and $4 million lower SG&A expenses. And we must remember that the 2Q 2019 result included $2 million of restructuring costs related to Cooper Tire Europe’s decision to cease light vehicle tyre production in Melksham.
“While the coronavirus presents a level of risk going forward, we expect our business to improve in the second half of 2020,” Hughes said commenting on Cooper’s outlook: “In addition, other than discretionary debt pay-down, we do not currently believe we will have a substantial cash usage in the third quarter. In fact, due to our improving financial position and outlook, as of July 31, we have paid down $200 million of the $270 million we borrowed on our revolving credit facilities. We now expect full year 2020 capital expenditures to be at the high end of our previously stated range between $140 and $160 million…As we look further out, given our attractive value proposition, growing awareness of the Cooper brand and the momentum of our strategic initiatives, we are confident in our ability to return to our mid-term target range in the future.”