FINDLAY, Ohio (Oct. 16, 2003) — Despite reporting lower earnings in the third quarter, Cooper Tire & Rubber Co. is bullish on the rest of 2003 and on 2004 based on rebounding market demand, above-market growth by a number of new customers and new automotive component supply contracts coming on stream.
“We expect the improving economy and consumer confidence to spur increasing replacement tire demand,” said Thomas A. Dattilo, Cooper chairman and CEO, in a prepared statement. “As the market comes back,” he added, “we are finding ways to outpace our competitors and our industries.”
Mr. Dattilo said Cooper's “outstanding relationships” with some of the leading tire distributors in North America should yield 4 million to 5 million units of new business next year as these customers expand their businesses.
“Continued market share gains will push us to near or beyond our existing tire production capacity in several product lines,” he said, noting that the company is pursuing outsourcing options in Asia to supplement its domestic capacity. Cooper recently disclosed it is moving production of medium truck tires to China from its plant in Albany, Ga.
The rebounding economy should also benefit Cooper's automotive products business, which accounts for 47 percent of sales. “In our automotive components business,” Mr. Dattilo said, “we will continue to benefit from new business and our restructuring and lean initiatives.”
In general, Mr. Dattilo said Cooper's above-market growth should yield fourth quarter earnings of 40 to 45 cents a share – vs. 24 cents a share in the third quarter – despite “stubbornly” high raw material prices.
For the third quarter and nine-month periods ended Sept. 30, Cooper saw operating and net earnings slide despite sales gains in both reporting periods. The decreased earnings resulted primarily from lower results in the automotive products sector.
For the quarter, net earnings slipped 23.7 percent, to $17.8 million, and operating profit was down 20.6 percent, to $43.5 million. On an operating basis, tire segment earnings rose 22.7 percent on record sales, higher production volumes and improved product mix, while those for automotive products plunged 60.9 percent because of lower production volume on existing platforms, pricing concessions to customers and higher scrap rates in sealing operations.
Overall sales for the quarter were up 8.8 percent to $913.2 million. Tire segment sales were up 13.2 percent, to $525.8 million, as Cooper said it gained market share in nearly every light vehicle category: to more than 20 percent in broad line passenger tires; to more than 15 percent in P-metric sport-utility vehicle tires; and to more than 5 percent in high-performance tires.
Net sales of house brand tires increased by 16 percent, with overall unit sales up 13 percent.
For the nine months, operating profits fell 39.1 percent, to $118.8 million, and net earnings slid 48.4 percent, to $45.7 million. Sales edged up 2.4 percent to $2.55 billion.