Cooper Tire: Income Down, Sales Flat, Unit Sales Up in 3Q
Cooper Tire & Rubber Co. posted net income of $54 million on net sales of $738 million for its third quarter ended Sept. 30, 2018. That compares to income $62 million on sales of $734 million for the same period last year.
Operating income decreased 26.7%, from $111 million to $81 million (operating profit for the third quarter of 2017 was restated to reclassify $9 million of other pension and postretirement benefit costs out of operating profit). Cooper says operating profit for 3Q 2018 was impacted by the following:
- $15 million of unfavorable raw material costs;
- $1 million of favorable price and mix;
- $12 million of higher manufacturing costs;
- $3 million of higher product liability costs;
- $4 million of lower SG&A costs;
- $5 million of lower “other costs.”
Consolidated tire unit volume increased 0.1 percent overall, led by a 1.5% increase in consumer tire sales in the U.S.
“Unit volume in the U.S. improved in the third quarter and outpaced the U.S Tire Manufacturers Association (USTMA),” says Brad Hughes, Cooper’s CEO and president. “We ended the quarter on an encouraging note, with U.S. unit volume that outperformed both the USTMA and total industry in the month of September." Hughes says Cooper also achieved year-over-year improvement in its truck and bus radial tire business.
Americas Tire Operations
Third quarter net sales in the Americas segment increased 0.5% as a result of $8 million of favorable price and mix, partially offset by $2 million of lower unit volume and $2 million of unfavorable foreign currency impact. Segment unit volume decreased 0.3% from the prior year, with a unit volume increase in North America offset by a decrease in Latin America, a region that continues to experience economic and political challenges.
Cooper’s third-quarter total light vehicle tire shipments in the U.S. increased 1.5%. USTMA reported that its member shipments of light vehicle tires in the U.S. were up 0.4%. Total industry shipments (including an estimate for non-USTMA members) increased 4.9% for the period.
“We continue to make good progress on our strategic priorities and are seeing some benefits as our initiatives begin to take hold,” says Hughes. “We expect unit volume growth in the U.S. in the fourth quarter, which is expected to be offset by continued volume declines in our other regions, driven by economic and political challenges.
“We continue to expect an impact from higher raw material costs. In the fourth quarter, our raw material index is projected to be flat sequentially, but up more than 10% on a year-over-year basis. Tariffs have been enacted on certain materials and tire imports from China, and there are proposed tariffs that represent further potential risk. We have implemented price increases to partially offset some of these higher costs. As a result, we would expect fourth quarter operating margin to be close to what we achieved in the third quarter, excluding the benefit from lower product liability costs.”
In addition, management expects capital expenditures in a range between $200 and $220 million for 2018.
Cooper Tire Europe recently announced its decision to enter an employee consultation period to explore ceasing light vehicle tire production at its Melksham, England, facility and obtaining such tires from other locations in the broader, global Cooper production network.
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