Bandag 2Q sales up 9 pc, earnings down 17 pc

Muscatine, Iowa - Bandag, Inc. reported a nine percent rise in second quarter net sales to $247.3 million (€193.1 million) despite seeing a decrease in volume in Europe and North America.

Bandag, which manufactures tyre retreading materials and equipment, posted a 17 percent drop in second quarter net earnings to $10.5 million and a $200 000 net loss for the first six months due to a $16.4 million loss incurred in the first quarter from the sale of its South African business.

Net sales for the first half of 2006 grew by 10 percent to $459.7 million.

In Europe, however, the tyre company suffered a four percent drop in volume and a 10 percent fall in sales for the quarter due to ''intense competitive pressures''.

Its international business suffered a 19 percent drop in volume and a 12 percent decrease in sales, although that was partly impacted by the sale of the South African concern.

While quarterly volume fell by five percent in North America, Bandag reported a seven percent rise in sales, helped by a $1.6 million gain from a favourable US dollar exchange rate.

''In Bandag's traditional business, unit volume came in below 2005 levels, reflecting intense pressures from competitive retread tyres and low-priced new tyres,'' Bandag chairman and chief executive Martin Carver said.

''Also, margin pressure from continued increases in raw material prices again outpaced the effect of product price increases.

''To address these and other fundamental changes we initiated several programs globally to simplify our operations and reduce costs.

''These programs include closing our Shawinigan, Quebec, production facility; freezing our US and Canadian pension plans and announcing a workforce reduction program to eliminate approximately 175 jobs in North America.

''Several of the actions initiated during the second quarter will negatively impact [on] the last half of 2006, particularly the third quarter.

''Though we don't anticipate any relief from rising raw material costs globally, we're hopeful that our simplified operations and slimmer cost structure will begin to offset the impact of the rising raw material costs in 2007.''