Cooper's sales drop, but profits rise in 1Q
Cooper Tire & Rubber Co. posted net income of $56 million on net sales of $862 million for the first quarter ended March 31, 2013. That compares to income of $22 million on sales of $985 million for the same period in 2011.
Operating profit rose 102%, from $48 million to a first-quarter record of $97 million. The company's net income-to-sales ratio was 6.5%.
”We carried the momentum of record financial results from 2012 into the first quarter of 2013 by achieving record operating profit of $97 million despite a decline in volumes,” says Chairman, CEO and President Roy Armes.
"We previously guided to lower volumes for the first quarter anticipating the deployment of a major phase of our ERP (Enterprise Resource Planning) system and inventory adjustments being made by certain key customers. On top of these two expected impacts, which were specific to Cooper, the global tire market was extremely soft and world economies continued to be weak, which constrained consumer spending.
"Even with these combined factors negatively impacting volumes, we struck a balance between pricing discipline and volumes to achieve record results on the bottom line," he says. "That’s a testament to the strength of our brands and products in the marketplace.
"While a major phase of ERP deployment is largely behind us and key customer inventory adjustments are beginning to mitigate, we envision a second quarter that will remain challenging due to continued softness in global tire demand and weakness in the economy. Our long-term focus will remain on executing our strategic plan and continuing to deliver shareholder value across a wide range of conditions.”
The company’s first-quarter operating profit was positively impacted by:
* $90 million in lower raw material costs, and
* $19 million in lower manufacturing costs.
Operating profit was negatively impacted by:
* $44 million of unfavorable pricing and mix, and
* $15 million in lower volumes.
Cooper's North America Tire Operations achieved net sales of $602 million during the first quarter, down 14% from net sales in the first quarter of 2012. In contrast, operating profit was up 208%, from $23 million to $71 million.
North American sales represent 70% of Cooper's total sales.
Light vehicle unit shipments for the North American segment decreased 14.4% compared to the same period last year.
Light vehicle shipments, 1Q 2013 vs. 1Q 2012
Cooper Tire RMA members RMA + non-members
Down 14.4% Down 6.2% Down 1%
Raw material prices remained approximately flat from the fourth quarter of 2012 to the first quarter of 2013. Management anticipates second-quarter raw material prices will decline approximately 1% sequentially compared to the first quarter. The long-term raw material outlook is for prices to generally trend higher with periods of volatility.
Capital expenditures for 2013 are expected to be between $195 million and $215 million.
“Looking ahead to the second quarter, we continue to be cautious about volumes as the weak global economy and sluggish tire demand look to continue,” says Armes. “In addition, we expect that the impact of first-quarter inventory adjustments by key customers may extend into the second quarter, but to a lesser degree.
"Beyond the second quarter, we expect volumes to continue to be challenged by industry and economic conditions. Yet, we are hopeful that the economy and industry will improve and we are confident that Cooper’s transformed business model and continued solid execution of our strategic plan will position us well to deliver value to our customers and shareholders."