Cooper sets quarterly sales record, posts $5.1 million loss
Cooper Tire & Rubber Co. recorded a net loss of $5.1 million on net sales of $597 million for the first quarter ended March 31, 2006. That compares to income of $5.2 million on sales of $514 million for the same period a year ago.
The 16% increase in net sales was a quarterly record for the company. Cooper Chengshan (Shandong) Passenger Tire Co. Ltd. and Cooper Chengshan (Shandong) Tire Co. Ltd. increased sales by $48 million. Higher prices, improved product mix and higher unit sales volumes in North America and Europe accounted for another $39 million.
The company's North American tire operations reported sales of $496 million in the quarter, up 7% compared to 1Q 2005. Passenger and light truck tire unit sales were up 1%; industrywide, replacement consumer tires were down 4%, according to the Rubber Manufacturers Association.
Operating results in North America declined year over year as a result of several key operating factors, including a $29 million increase in raw material costs and $5 million increase in utility costs. Cooper says these costs "were partially offset by $20 million in improved pricing."
Excluding the impact of adjustments made to product liability reserves after the quarter ended (the company tentatively resolved "a certain product liability claim after March 31), Cooper's North American tire operations generated an operating loss of $2 million for the quarter. That compares to an operating profit of $6 million in the first quarter of 2005.
"We had good momentum in terms of sales for the quarter as we outpaced the industry, increased market share and improved our overall product mix in North America," says Tom Dattilo, chairman, CEO and president.
"We had strong, record-setting sales in Europe with improved product offering, availability and expanded distribution. We were pleased with the addition of Cooper Chengshan in China and the solid contribution it is already making to our company. We were also pleased with the dividend on our investment in Kumho.
"However, the North American replacement market remains very competitive, and raw material prices continue to impact our results. The price increases we have instituted in the past several months have fallen short of covering rising material costs. (Cooper's last price increase went into effect April 1).
"If natural rubber and oil prices remain elevated, more price increases will be necessary."
During January and February, the company reduced mold and production levels in its Texarkana, Ark., plant in response to weak market conditions. In late February, Cooper's Findlay, Ohio, plant was converted from a five-day operation to a seven-day operation.