Cooper Tire & Rubber Co. suffered through a fourth quarter highlighted by a net loss of $42.1 million, but still recorded a profit for fiscal 2017.
Cooper posted net income of $95.4 million on net sales of more than $2.8 billion for its fiscal year ended Dec. 31, 2017. That compares to income of nearly $248.4 million on sales of $2.9 billion for fiscal 2016.
The company's income-to-sales ratio for fiscal 2017 was 3.3%.
Operating income for the year was down 29.3%, from $384.4 million to $271.7 million.
“We are pleased to have ended 2017 with operating profit margin of 9.5%, which is near the high end of our previously issued 8 to 10% guidance range," says CEO and President Brad Hughes. "This is noteworthy given the pricing and volume challenges within the industry throughout the year, and the significant impact of higher raw material costs.
“Unit volume declines in the U.S. were caused by industry-wide conditions and our continued exit from some non-strategic private brand business, a process which is largely behind us now. We are pleased with the performance of our Asia operations, which generated a unit volume increase that nearly offset the U.S. decline. We also congratulate the Asia team for the rapid integration and production ramp of our GRT joint venture in China, which produces truck and bus radial tires. Our prior projections called for GRT to be accretive early in 2018, but it was actually accretive to 2017 earnings.
“We have already launched several initiatives to improve unit volume in the U.S., such as expanding on our early inroads in the global original equipment business outside of Asia, where we already have a strong OE presence, entering into new channels, and speeding the cadence of new product introductions to drive growth," says Hughes. "In addition to the volume opportunity, we are working to improve profit margin through company-wide efforts to enhance efficiencies and reduce costs, including continued balancing of production capacity within our network, automation in our plants, and a recent corporate reorganization that eliminated about 5% of U.S. salaried positions. Our efforts will take some time to fully manifest in our results, but we are encouraged with the early progress."
Hughes expects results to improve as the company's initiatives begin to take hold, "and as underlying macro-conditions that favor tire industry growth have a positive impact. For 2018, we expect unit volume growth compared to 2017. Due to the reclassification of certain pension costs, we have restated upwards our mid-term operating profit margin target to be in the range of 9 to 11%. For full year 2018, we expect to be near the low end of this range.
"We will provide more detail on our strategic plans, capital allocation and updated guidance when Cooper hosts an investor event planned for the middle of this year.”
Cooper's fourth-quarter results were down in three major areas:
Income: down from a net gain of $69.3 million in 4Q 2016 to a net loss of $42.1 in 4Q 2017.
Sales: down 3.4%, from $783.9 million to $757 million.
Operating profit: down 55.4%, from $105.1 million to $46.8 million.
In addition, consolidated unit volume decreased 1.9% for the quarter compared to the prior year. Unit volume in the Americas segment was down 6.2%. The decline in unit volume shipments in the Americas led to the company's decision to lower production volume in an attempt to control inventory levels. The result was higher manufacturing costs.
Cooper also reported that discrete tax items, including the impact of provisional amounts related to U.S. tax reform (the 2017 Tax Act), resulted in additional income tax expense of $68 million in the fourth quarter.
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