AKRON-Raw materials prices have been the bane of the industry during the past year, prompting a number of tire price increases and, as recent second-quarter financial results indicate, dampening the net earnings of some firms. A notable exception is Goodyear, which managed to garner record sales and earnings for the second quarter, ended June 30.
TBC Corp. also managed to bolster its earnings while Cooper Tire & Rubber Co. and Treadco Inc. each sustained a drop in net income, despite increased sales.
But Cooper Chairman Patrick W. Rooney foresees an end to the raw materials price escalation.
``Recently, we have seen indications of a general stabilization in some of these costs although at high levels, and natural rubber costs have begun to decline. The effects of the declining costs of natural rubber, however, will be realized gradually,'' he said in a statement accompanying the firm's financial results.
Citing productivity improvements, aggressive cost cutting, strong overseas tire sales and lower foreign currency exchange expenses, the Akron-based tire maker said its net income rose 6.5 percent to a record $173.8 million compared with $163.2 million in the same quarter a year ago.
Worldwide sales climbed 9.8 percent to a record $3.35 billion from $3.05 billion in 1994. The tire segment accounted for $2.86 billion in sales, compared with $2.59 billion in the '94 quarter.
The favorable financial results came despite lower domestic tire unit sales in North America and higher raw material costs worldwide, company Chairman Stan Gault said. He attributed the company's success to the positive effects of Goodyear's global diversity.
For the first half of 1995, Goodyear's sales jumped 10.6 percent to a record $6.59 billion, compared with the year-earlier period, as net income bounded 10 percent to $307.1 million.
Cooper blamed the high raw material prices for hampering its net income, which dropped 10.2 percent to $24.7 million, compared with the second quarter of 1994, despite a 12.8-percent gain in sales to $371.4 million.
Cooper said it instituted an average 3-percent tire price increase at the end of June, its second hike this year, to offset raw material costs, but the latest hike didn't influence second quarter margins.
For the first half, Cooper's net income slipped 3.9 percent to $51.9 million on sales of $736.7 million, an 11.9-percent gain.
``In response to leveling industry demand and the apparent end of rising raw material costs, renewed competitive forces could be a factor in the marketplace during the second half of the year,'' noted Cooper's Mr. Rooney.
The private-brand tire marketer ended the second quarter with a 12 percent surge in net income to $4.04 million, yet sales slipped to $132.2 million, from $132.9 million in the year-earlier quarter.
Results for the first half were less favorable as income dipped 4.4 percent to $8.31 million and sales fell 1.6 percent to $262.6 million.
``Industry reports indicate that retail sales of tires throughout the first half have been generally lackluster. That backdrop has clearly affected our business,'' said CEO Louis DiPasqua. ``Our unit shipments of tires were down 2.2 percent from a year ago for the second quarter, but the period ended on a constructive note with a sharp improvement in shipments during June from a year ago.''
A soft economy and the difficulty of passing along supplier price increases resulted in a 36.4 percent plunge in earnings for the second quarter, despite a modest increase in sales of new and retreaded tires.
President J.J. Seiter said ``the slowing economy has made it even more difficult to pass along price increases on tread rubber and supplies. Bandag Inc., our tread rubber supplier, has implemented three price increases, totaling 9.6 percent since the first quarter of 1994, which continue to place pressure on Treadco's margins.''
The start-up costs of opening two plants, in Las Vegas and St. Louis, and two sales locations in Fontana, Calif., and Nashville, Tenn., negatively impacted second quarter results, he added.
Treadco ended the period with $1.1 million in earnings, down from $1.70 million a year-ago, on sales of $38.1 million, a 5.9 percent hike.
For the first half, Treadco suffered a 23.9-percent drop in income to $1.98 million, but netted a 9.1-percent sales jump to $71.9 million.