FINDLAY, Ohio (March 2, 2006) — Standard & Poor's Rating Services has put Cooper Tire & Rubber Co.'s corporate credit rating on CreditWatch with negative implications.
In October the rating group downgraded Cooper to “junk” status—a rating that can make borrowing more expensive for a company. With the latest action, Cooper's rating remains BB+ but with the CreditWatch.
In the action, S&P cited the tire maker's weak operating earnings and cash flow generation as well as the “likelihood that future financial results will fall short of previous expectations.” S&P also noted that sales in the fourth quarter grew 6 percent, but operating income fell 18 percent. For the year, sales increased 4 percent yet operating income dropped 58 percent.
“We expect Cooper to see some benefits from improved manufacturing efficiencies and increased sales of its high-margin products,” said S&P analyst Martin King. “But it is unclear whether the improvements will be sufficient to strengthen operating results so that the company's credit protection measures are consistent with the current rating.”
Cooper did not provide guidance for 2006 because of the many challenges and uncertainties it expects to face this year, S&P said in a news release.