Tire companies saw mixed financial results during the third quarter as varying market conditions helped some gain sales and profits while others were negatively impacted.
Currency declines drove Group Michelin's sales down, while Myers Industries Inc. saw a rebound in net earnings from the previous year. Meanwhile, Titan posted another net loss as economic instability overseas and plant shutdowns affected its business.
Despite continuing losses by Continental Tire North America Inc. (CTNA), Continental A.G. reported improved operating and net earnings for the nine months ended Sept. 30.
For fiscal 2002, Continental anticipates a slight increase in sales, and based on the nine-month results, expects full-year earnings will be considerably above the 2000 level.
Conti did not elaborate on its losses in North America, other than to say the ``unsatisfactory'' tire business earnings in North America will force the company to amortize CTNA's remaining goodwill of $47 million. However, a report by Morgan Stanley Equity Research stated that CTNA's loss was $27.4 million for the third quarter and $80.4 million for the nine months. The loss includes costs of $19.6 million related to the recall.
It will be shown as an expenditure in the fourth quarter operating earnings of both the passenger and commercial tire divisions, Conti said.
Cont's operating earnings for the nine months jumped 77 percent to $536.7 million, while net profit was up 49 percent to $213 million after accounting for one-time restructuring charges.
Sales in the January-September period rose 3 percent over the 2001 period to $8.3 billion, although nearly all the gain was due to the first-time inclusion of sales from the automotive systems supplier Conti Temic.
The passenger tires division reported a 5.2-percent drop in sales to $2.71 billion, although unit sales were on par with 2001, Conti said. Sales in the third quarter fell 15 percent.
Despite the sales drop, the division boosted operating earnings by more than 70 percent to $155.8 million.
In commercial vehicle tires, Conti reported a slight drop in sales, to $960 million, despite improved sales in North America. The division moved back into the black, reporting an operating profit of $80.3 million for the nine months.
Group Michelin reported a 3.2-percent drop in third quarter sales, to $3.58 billion, but the company insists it still is on track to achieve its targeted operating margin of 7.0-7.4 percent for 2002.
Market conditions during the period were difficult but in line with forecasts, the company said.
Sales for the nine months ended Sept. 30 were up 2.7 percent, to $10.8 billion. Earnings were not disclosed at this time.
Declining U.S. and South American currency values diluted sales by 2.7 percent, offsetting a 2.1-percent rise in sales volumes, the company said. Michelin added that its efforts to increase the level of higher-value products in its sales mix were offset by growth in the lower value original equipment market.
This effect was most marked in North America where the OE market for passenger car/light truck tires grew by 7.1, while replacement tire sales fell 2.9 percent.
In North America, the company's sales fell 4.8 percent in the quarter but still outperformed the market overall, Michelin said.
The sales decline was magnified, Michelin said, because of the effects of the Ford Motor Co. recall of 13 million Firestone sport-utility vehicle tires a year ago.
This market anomaly resulted in a 21.7-percent industrywide drop in replacement SUV tire shipments in the quarter, and 11.6-percent for the nine months.
Michelin said it supplied more than 30 percent of the tires replaced in Ford's action-higher than its normal market share in this segment-meaning the effect on its sales was amplified even more.
Michelin's truck tire business in North America grew 4.3 percent in the quarter, but the growth must be viewed in perspective, as Michelin is still recapturing the ``significant market share drop'' it incurred in the first quarter of 2001, when it tried to hold the line on falling prices.
On the cost side, Michelin downplayed the impact of rises in raw materials costs, which represent 21.4 percent of its net sales. Despite a 75-percent rise in natural rubber prices-expressed in Singaporean dollars-Michelin said it paid only 15 percent more for the commodity over the first nine months of 2002.
Natural rubber represents 19 percent of the group's raw materials costs compared to synthetic rubber, 26 percent; and carbon black, 19 percent, Michelin noted.
Price rises for the latter two materials will impact most on the group's results in the first half of 2003, it added.
Akron-based Myers Industries Inc., parent of Myers Tire Supply and Patch Rubber Co., reported an 81.4-percent surge in net income to $3.07 million for the third quarter. Net sales for the quarter rose 3.7 percent to $146.6 million.
For the nine-month period, Myers' net income soared 54.9 percent to $19.9 million. Net sales, however, dipped 2.3 percent to $448.7 million due mainly to uneven market conditions that heightened competitive circumstances and product pricing pressures, according to Myers.
The company said foreign currency translation increased total sales and manufacturing segment sales by $3 million for the third quarter and $2.5 million for the nine-month period.
Continued weakness in the industrial markets squeezed volume and margins in the manufacturing segment, according to Stephen Myers, president and CEO.
SmarTire Systems Inc., a Richmond, British Columbia-based developer of tire pressure and temperature monitoring technology, fell deeper into the red in the fiscal year ended July 31, but reiterated its position that it is ``well-positioned'' to take advantage of the market opportunities created by the Transportation Recall Efficiency, Accountability and Documentation (TREAD) Act.
SmarTire's net loss increased to $6.8 million (U.S.) from $5.5 million a year ago, as sales rose 29.9 percent to $1 million.
The company blamed its fiscal 2002 financial performance on the stock market's downturn and on the delays affecting the implementation of National Highway Traffic Safety Administration rulemaking that requires the installation of tire pressure monitoring systems in all passenger vehicles and light trucks beginning Nov. 1, 2003.
Quincy, Ill.-based Titan International Inc. posted a net loss of $17.7 million for the third quarter, largely due to Titan tapping a $9.6 million cash reserve related to its investment in Fabrica Uruguaya de Neumaticos S. A. (FUNSA) in Uruguay.
Uruguay's temporary closure of its banking system and economic instability jeopardized Titan's reorganization plans for FUNSA, according to the company.
Net sales for the quarter rose 4.1 percent to $104.7 million. For the nine-month period, Titan's net loss totaled $20.2 million compared with a net loss of $13.3 million in 2001. Year-to-date net sales fell to $354.2 million from last year's $356.9 million. Extended summer shutdowns of Titan's original equipment customers and escalated material costs prevented the company from further reducing the loss incurred.
Titan CEO Maurice Taylor Jr. said the third quarter historically is tough for Titan because of customer plant shutdowns and a month-long holiday break observed by European manufacturers.
``Sales are the key to Titan's profitability, tire production is increasing and we are aggressively attacking costs,'' Mr. Taylor said. ``The added steel and natural rubber costs should be recovered over the next two quarters. While the FUNSA situation is regrettable, Titan has determined it is necessary to write-off this investment, and if conditions improve in Uruguay, Titan will attempt to salvage this business.''