Several tire and automotive aftermarket companies reported growth in sales and income despite challenging economic conditions.
Bridgestone Corp.'s net income soared during the first three quarters of the year due to a gain arising from the return of an employee pension plan. Continental A.G.'s sales and operating income both jumped, while Monro Muffler Brake Inc. reported record sales and earnings for its fiscal half-year results.
Yokohama Rubber Co. Ltd.'s operating income rose as increased tire sales and cost-reduction programs more than offset raw material costs.
Meanwhile, Pep Boys-Manny, Moe & Jack saw a net loss during the third quarter.
Bridgestone's net income for the first three quarters of 2005 nearly doubled to $1.41 billion due to a $722 million gain arising from the return of a substantial portion of an employee pension plan.
The plan covered the Tokyo-based firm and some Japanese subsidiaries to the Japanese government. At the same time, Bridgestone/Firestone North American Tire L.L.C. recorded a $240 million loss in the third quarter-the amount the subsidiary agreed to pay to Ford Motor Co. to settle all outstanding financial issues associated with Bridgestone/Firestone's tire recall in 2000 and Ford's May 2001 tire replacement program.
Bridgestone's net sales for the nine-month period jumped 9.2 percent to $17 billion while operating income rose 10.9 percent to $1.4 billion. Ordinary income climbed 12.4 percent to $1.28 billion. Bridgestone attributed the increases to appealing new products, increased marketing efforts, strong demand overseas, enhanced productivity and improved logistics efficiencies.
In the tire segment, the company's operating income in the nine-month period rose 7.9 percent to $1.04 billion on a 9.3-percent sales increase to $13.5 billion. Bridgestone said the earnings contribution from this sales growth offset rising raw materials costs.
The tire maker said performance in the Americas is on a recovery track despite concerns about the devastating impact of hurricanes Katrina and Rita during the third quarter. Operating income in the Americas surged 57.1 percent during the nine-month period to $362 million on a 10.5-percent increase in sales to $7.4 billion.
In North America, tire unit sales of passenger car and light truck tires declined from the same period in 2004 in the original equipment sector but increased in the replacement sector, Bridgestone said.
Continental said it remains on the road to success despite rather weak economic conditions in the automotive industry, particularly in the U.S.
In the first nine months, Conti reported consolidated sales ahead by 11.1 percent to $12.3 billion from $11.1 billion a year earlier. The company said Phoenix A.G.-a former German rubber products maker Conti acquired in 2004 and integrated into its ContiTech unit-contributed $881.9 million in sales.
Before consolidation changes and exchange rate effects, consolidated sales increased by 4.2 percent. The consolidated operating result (EBIT) was up 35.9 percent to $1.37 billion from $1 billion, with a return on sales of 11.1 percent.
Consolidated earnings jumped 54.9 percent to $881.9 million from $569.2 million.
``In addition to the excellent operational performance, this is also a result of one-off effects,'' said Conti Chairman Manfred Wennemer.
``There is no indication that this trend will change in the fourth quarter, so we will top our record figures from last year, even when the one-off effects are not taken into consideration.''
The Passenger and Light Truck Tires division increased sales 8.5 percent in the first nine months over 2004 to $3.86 billion; pre-tax earnings grew by 59.7 percent to $577.1 million, increasing the earnings/sales ratio to 15 percent.
Sales by the Commercial Vehicle Tires division fell 8.6 percent during the period to $1.2 billion, but the pre-tax earnings were up 50 percent to $136.4 million, Conti reported.
A double-digit increase in tire sales during its fiscal year's second quarter helped Monro Muffler Brake Inc. report record sales and earnings for the quarter and half.
Monro Muffler, which operates 625 stores in 18 states, reported net earnings of $7.6 million and sales of $95.6 million for the quarter (up 16.4 and 8.2 percent, respectively) and $15.4 million and $190.3 million for the six months (up 14.8 and 8.2 percent, respectively).
Monro reported that comparable tire sales-discounting sales from new stores-were up about 12 percent for the three-months ended Sept. 24. Comparable store maintenance service revenue rose 6 percent, the firm said, but sales of higher profit margin activities like brakes and exhaust were off somewhat.
Despite the higher percentage of sales revenue from lower margin tire and maintentance business, Monro was able to maintain its gross operating margin, according to Robert G. Gross, president and CEO.
``We are particularly pleased with our progress in the tire category,'' Mr. Gross said, ``where our expertise and ability to serve our customers have been greatly enhanced by the learning gained from our most recent acquisitions.''
Monro's tire-related acquisitions in the past few years include more than 40 Mr. Tire outlets in Maryland and nearly 50 Tread Quarters stores in Virginia and the metro D.C. area.
Mr. Gross went on to say that Monro continues to seek ``similar acquisition candidates'' to expand and improve its existing business. He did not elaborate.
Looking ahead, Mr. Gross said he expects Monro to continue to gain market share and outperform the industry based on the firm's ``dedicated customer service, efficient operating model and proven growth strategy'' and regardless of external market conditions.
Pep Boys-Manny, Moe & Jack suffered a net loss in the third quarter due to a number of non-operating expenses while posting a 2.4-percent decline in sales, including an 11.6-percent drop in tire sales.
The net loss of $11.4 million contrasted with net earnings of $6.67 million a year ago; included in the loss was an increase of $1.9 million in the reserve for road hazard warranty coverage. Sales fell to $545.2 million.
Comparable retail sales, which include do-it-yourself and commercial, increased 2.1 percent. Comparable service center revenue, including labor plus installed merchandise and tires, fell 7.6 percent. For the nine months, comparable retail sales were up 0.6 percent while comparable service sales fell 4.8 percent.
For the year-to-date, Pep Boys posted a net loss of $13.1 million compared with a profit of $35.2 million in 2004, while sales fell 1.8 percent to $1.69 billion.
``It was again a very difficult quarter for our service center operations, with comparable sales down 7.6 percent, which includes an 11.6-percent decrease in tire sales,'' said Larry Stevenson, chairman and CEO. He noted that revenues were soft for the quarter but were especially so after Hurricane Katrina and the subsequent high fuel prices.
Pep Boys continues to remodel its retail stores. The company expects 200 of its 593 stores to be re-opened by the end of the fiscal year in January.
Yokohama Rubber Co. Ltd. posted a 10.7-percent gain in operating income during the six months ended Sept. 30, as unit tire sales growth and cost reduction programs more than offset increases in raw material costs.
Yokohama management predicts the trend will continue, forecasting an improvement in fiscal 2006 operating income of 9.8 percent over 2005.
Led by tire sales growth in North America and Europe, Yokohama reported a 6.1-percent improvement in overall sales during the period to $1.78 billion.
Operating earnings for the six months increased to $42.5 million, pushing the profits/sales ratio to 2.3 percent. Net income grew exponentially on a decline in net income to $118.2 million.
Tire group sales grew 7.6 percent to $1.29 billion, while operating income increased 5.7 percent to $32.8 million.
Sales in North America grew 11.4 percent during the period to $338.4 million, while operating earnings surged 34.3 percent to $9.45 million.
Management has proposed raising the year-end dividend 50 percent to 6 yen (about 5.3 cents) per share.