ERJ staff report (TB)
Findlay, Ohio -- Despite reaching quarterly net sales of more than $1 billion for the first time in its history, Cooper Tire & Rubber Co. reported a 56-percent decrease in net income for the quarter ended Sept. 30, resulting primarily from higher raw materials costs.
Total net income for the quarter slipped to about $22 million from $50.3 million for the same period in 2010, while net income attributable to Cooper Tire decreased to $17.3 million from $44.6 million. Operating profit dipped about 30 percent to $47.2 million from $67.1 million.
Results for the nine-month period ending Sept. 30 were similar, with operating profit dropping about 23 percent to $103.6 million from $133.7 million and net income decreasing more than 53 percent to $54.9 million from $117.7 million.
Findlay-based Cooper said sales volumes in both the North American and international markets were higher than the prior year, helping to improve profits by about $5 million. Net sales for the third quarter hit an all-time high for the tyre maker of $1.05 billion, an increase of $171 million from the same period in 2010. Improvements in price and mix, however, were more than offset by the $194 million increase in raw material costs.
â€œWe were able to show improvement in our margins during the third quarter even with the persistent challenges of high raw material costs and sluggish demand in key markets and product lines where we have significant exposure,â€ Cooper CEO Roy Armes said.
In North America, broadline and value tyre lines-where Cooper has a strong presence-were relatively weaker than other lines for both the company and the industry as a whole, the company said. This was offset somewhat through better performance in ultra-high performance, light truck and SUV tyre sales.
The company said it will focus on the growth of its premium product segment but still believes pent-up demand for its broadline tyres exists. Cooper also anticipates a slight decrease in raw materials costs over the next few months.
â€œRaw materials have shown signs of stabilising, but these costs remain at elevated levels and are inherently volatile,â€ Armes said. â€œWe believe the company's raw material index will decline sequentially by less than 5 percent from the third quarter to the fourth quarter.â€
Cooper's manufacturing costs for the quarter increased about $6 million as the company decreased production to balance its inventory levels with projected demand, while manufacturing more premium products.
â€œWhile we are never pleased with an increase in manufacturing costs, we have demonstrated in recent years an ability to reduce these costs while delivering high quality products,â€ Armes said. â€œWe continue to believe meaningful results will be yielded from our focus in this important area over the next couple of years.â€
Higher manufacturing costs were offset by $12 million in reduced selling, general and administrative costs and another $5 million in lower restructuring costs, Cooper added.
From Tire Business (A Crain publication)
Cooper Tire & Rubber CEO Discusses Q3 2011 Results - Earnings Call Transcript from Seeking Alpha (US