High raw material prices in 2004 ate away at several tire manufacturers' year-end profits even though many of them posted higher sales than in 2003.
Bridgestone/Firestone did not make a profit in North America despite a jump in sales. Group Michelin, impacted by a weak U.S. dollar, saw a slight increase in sales. Cooper Tire & Rubber Co.'s North American operations suffered a huge drop in segment operating profit.
Meanwhile, TBC Corp. rebounded from lost sales during hurricane season to report record sales and profits for the fourth quarter and year-end.
Bridgestone/Firestone's net sales in the Americas jumped 12 percent in 2004 in part on higher passenger and light truck tire unit sales, though the tire maker did not make a profit in North America.
Nevertheless, the company expects its North American unit to be profitable before tax this year. Parent Bridgestone Corp., based in Tokyo, reported consolidated net income of $1.1 billion for fiscal 2004-an increase of about 29 percent from the previous year. Sales in 2004 grew 5 percent to $23.2 billion, while operating income rose 8 percent to $1.9 billion.
Nashville, Tenn.-based Bridgestone Americas Holding (BSAH) Inc. posted net sales of $9.15 billion and net income of $183 million. Besides the higher replacement units, the sales increase was attributed to a strong performance in unit sales of truck and bus tires plus strong growth in the diversified products and Latin American businesses.
``Our sales growth and overall performance this past year showed the strength of our Americas operations,'' said John Vispo, BSAH controller. ``While our North American tire business did not post a profit in 2004, our other business segments continued their impressive performances, contributing significantly to Bridgestone Americas' overall profitability. This year marks Bridgestone Americas' third consecutive profitable year, a clear sign that our company is well on the road to financial stability.''
Mr. Vispo, also CFO and vice president of BFS's North American operation, cited rising raw material, pension and health care costs as challenges to Bridgestone/Firestone's North American Tire unit.
BSAH sales in 2005 are forecast to grow 4 percent to $9.5 billion, the company said.
Despite 4-percent higher sales during the fourth quarter, Findlay, Ohio-based Cooper Tire & Rubber Co.'s North American tire operations suffered a 40.1-percent drop in segment operating profit on 6.5-percent lower unit volumes, 16 percent higher raw materials costs and other factors.
Overall, Cooper reported net sales in the quarter of $541 million, up 5.1 percent from last year. Net income from continuing operations fell 58.4 percent to $3.2 million. Including income from discontinued operations and the gain from the sale of Cooper-Standard Automotive, the tire maker posted net income of $133.2 million vs. $28.2 million in 2003.
For the full year, sales rose 12.4 percent to $2.08 billion and net income surged 173 percent to $201.4 million.
Cooper said quarterly net sales in its tire unit grew based on improved pricing and product mix, though it was offset partially by lower overall unit volumes.
Cooper said its shipments of premium sport-utility vehicle and light truck tires outpaced the industry, growing at more than 3 percent. Unit shipments were down overall, primarily from lower shipments of economy and broadline tires.
Profit in the segment also was hampered by lower volume, the company said. High raw material costs, product liability expenses and increased production complexity were somewhat offset by improved price and mix. The production complexity is largely the result of Cooper's schedule for new product introductions, namely 1,200 new SKUs introduced in 2004.
``Significant'' plant expansions will continue in 2005 at the Albany, Ga., facility, the company said.
For the full year, North American tire operations' net sales grew 11.3 percent to $1.87 billion, while segment operating profit fell slightly to $76 million.
``We are excited about our opportunities in 2005 as a whole,'' said Thomas Dattilo, chairman, CEO and president. ``We will continue to pursue strategic investments in the tire business and advance our Asian strategy, including the development of our relationship with Kumho following our recently announced acquisition of 11 percent of them.''
The most complicated problem this year, Mr. Dattilo said in a conference call with investors, will be to produce all the tires needed. In fact, fill rates are lingering around mid-80 percent while Cooper traditionally is in the 90s, Mr. Dattilo said. 2004 saw a ``dramatic'' increase in new products at the same time the tire maker was adding equipment and expanding plants.
The fruits of that labor should be noticeable in 2005, he said, adding that at least 15 percent of revenue in 2005 should come from new products. In addition, about 2 million more units should be coming from Asia.
Goodyear expects all seven of its business units to report positive segment operating income for 2004's fourth quarter with overall quarterly income for the tire maker of about 55 to 65 cents per share on record sales of about $4.8 billion.
North American Tire (NAT)-Goodyear's largest business unit and the one that has struggled the most the past few years-is expected to report segment operating results about in line with the third quarter, when the unit posted segment operating income of $13.5 million. A fourth quarter profit would be the unit's third consecutive quarter in the black. But Goodyear did not say whether NAT would be profitable for the full year.
Goodyear said the fourth quarter results would include pre-tax gains of of approximately $157 million from an insurance settlement and $22 million from a lawsuit settlement.
Among its other business units, Goodyear said segment operating income is expected to double in the European Union, rise about 50 percent in Latin America and increase about 15 percent in Chemical Products. The remaining businesses-Engineered Products, Asia and Eastern Europe, Middle East and Africa-will be about equal to fourth quarter 2003 levels.
``Our fourth quarter business unit results will reflect the ongoing progress of our turnaround efforts, including the benefits of new product introductions in all of our businesses,'' said Robert Keegan, chairman and CEO. ``We are building on the momentum of our first nine months of 2004 in which we achieved record sales and segment operating income that more than doubled compared to the previous year.''
Goodyear said raw materials prices grew more than expected in the quarter but were offset by a variety of factors, including higher selling prices and acceptance of new products.
Also, Goodyear said it will refinance about $3.3 billion of its credit facilities, replacing those lines with $3.35 billion in five-year facilities due in 2010. The tire maker said the new facilities should close in early April and carry lower interest rates than those they replace.
A spokeswoman said the company's financial report likely would be released in March after an accounting issue is resolved.
Group Michelin's sales edged up 2.1 percent last year to $19.5 billion as volume grew 2.7 percent, but the firm said the strengthening euro-to-dollar exchange rate held the sales gain down by as much as $625 million.
Michelin did not disclose earnings at this time but said it expects to report a ``visible improvement'' over 2003 in its operating performance when it releases an earnings statement on March 15.
Michelin said it offset recurring external inflationary pressures-including extraordinary raw material price hikes-through a firm pricing policy and an improved product mix. The firm said it gained market share in emerging markets and its targeted segments of high-performance and winter passenger, SUV, truck and earthmover tires.
In North America, Michelin said overall sales were stable compared with 2003 but that its Michelin and BFGoodrich brands strengthened their positions in the more profitable segments. Overall, Michelin said, ``qualitative growth'' was recorded, with mass market tires down 4 percent, performance tires up 13.3 percent and SUV/recreational tires up 11.3 percent.
Original equipment sales were down as part of the firm's ``focused growth'' strategy.
On the truck side, Michelin outpaced North American aftermarket growth of 2.7 percent, but it trailed the market on the OE side, choosing not to keep pace with 32-percent market growth with OE customers in order to help satisfy replacement market demand.
Nokian Tyres P.L.C. expects sales and earnings in 2005 to eclipse those of fiscal 2004, which were 13.9 and 40 percent ahead of 2003 respectively, despite continuing increases in raw materials prices and unfavorable currency exchanges.
Nokian said it expects ``healthy demand'' for winter passenger tires, high-performance summer tires and heavy specialty tires in 2005.
For fiscal 2004, Nokian reported net income of $85.5 million on sales of $748 million, for an earnings/sales ratio of 11.4 percent. Sales were strong in all sectors, Nokian said, notably car tires, where sales were up by over 20 percent.
Export sales to Russia (up 53 percent), North America (up 43 percent) and the Nordic countries (up 8 percent) also were strong.
Sales in the fourth quarter rose 12.5 percent to $261.5 million, led by a 21.6-percent jump in tire manufacturing-related business. Operating profit for the period increased 17.9 percent to $59.6 million.
TBC Corp. reported record results for the fourth quarter and full-year of 2004 mainly based on the full quarter performance of its National Tire & Battery (NTB) stores and the return of business lost during the hurricane season.
Net income for the fourth quarter jumped 26 percent to $12.1 million despite an after-tax charge of $900,000 on the final disposition of discontinued inventories acquired with NTB. Net sales in the fourth quarter surged 31.6 percent to $487.8 million. Total tire unit sales rose 21.1 percent compared with a preliminary report of a 3.3-percent increase in industry unit shipments in the fourth quarter.
``Fourth quarter results demonstrate positive momentum in both our retail and wholesale units,'' said TBC President and CEO Larry Day. ``Within our retail segment, sales were driven by an increase in tire demand and continued expansion in mechanical services....
``Within our wholesale business, we experienced revenue growth in the fourth quarter as our private brands division performed well, and we continued to focus on higher margin niche products and delivering superior fill rates to our customers.''
Fiscal year sales soared 40.7 percent to $1.85 billion. Net income in 2004 rose to $37.6 million from $32.2 million the previous year.
Tire unit sales rose 19.6 percent during the year. Same store sales for TBC's retail segment increased 2 percent in 2004.