AKRON—Improved sales were unable to counter the effects of expenses and a stubbornly weak European economy for many tire industry companies during the quarter ended March 31.
Several companies blamed administrative expenses, pricing adjustments and/or acquisition costs for negatively impacting earnings for the quarter. Several firms also struggled with weak tire sales, particularly in Europe.
American Tire Distributors Holdings Inc. (ATD) reported operating and net losses for the quarter, despite 5.8-percent higher sales.
ATD's first quarter operating loss of $5.71 million contrasts with operating earnings of $4.92 million in the year-ago quarter.
ATD attributed the earnings decline to higher selling, general and administrative expenses, primarily related to incremental costs associated with the recent acquisitions of Consolidated Tire & Oil and TriCan Tire Distributors.
The company's net loss more than doubled to $16.3 million. Sales increased to $840 million, with revenue from recent acquisitions contributing $65 million in incremental sales. This addition was offset partially by lower net tire pricing of $6.9 million, primarily driven by manufacturer price repositioning.
ATD derived 83.7 percent of sales in the quarter from passenger car and light truck tires, 13.1 percent from other tires, 2.3 percent from custom wheels and the remaining 0.9 percent from tire supplies, tools and other products.
In addition to the Consolidated Tire and TriCan acquisitions, ATD recently completed its $62.5 million purchase of Regional Tire Distributors in Burlington, Ontario.
Amerityre Corp.'s net loss deepened in the quarter despite slightly higher sales.
The quarterly loss of $240,229 was 10.1 percent deeper than the third quarter loss of fiscal 2012, Amerityre reported. It was the Boulder City, Nev.-based polyurethane tire developer's 71st consecutive quarterly loss, bringing the cumulative loss over 17 years to $62.9 million.
Amerityre attributed the larger loss to a moderate increase in operating costs—mostly from higher selling, general and administrative costs—and the negative effect of lower-than-expected revenues.
Sales in the quarter rose 1.7 percent to $1.03 million, although Amerityre said sales “continue to lag forecasts.”
The net loss for the nine months ended March 31 was $862,760 or more than one-third deeper than the fiscal 2012 period, according to the company. Sales of $2.67 million were 21.7 percent lower than in the corresponding fiscal 2012 period.
Amerityre did not offer a forecast for the fourth quarter or fiscal year other than to say that sales have been “robust” so far in the fourth quarter and management expects them to continue in that direction.
Bridgestone Corp. reported an 18.1-percent improvement in operating income in the quarter to $806.9 million on a 9.4-percent rise in sales to $8.62 billion. Net income climbed 2.1 percent to $467.6 million.
In the tire segment, sales grew by 12.1 percent to $7.32 billion, while the company's operating income jumped 19.1 percent to $736.4 million, or 10.1 percent of revenue.
Bridgestone did not elaborate on the reasons for its earnings improvements, but said the sales gains reflected the recovering economies in Japan and the U.S.
In North America, unit sales of tires for passenger cars, light trucks, trucks and buses increased steadily. The company also saw an increase in China for sales of all types of tires, though it noted that there was a slowdown in the Asian economy, particularly in China and India.
Kumho Tire Co. Ltd. posted net income of $116.2 million for fiscal 2012, reversing a net loss from a year ago, and achieved record sales of $3.62 billion, a gain of 4 percent.
The tire maker also registered a near doubling of operating income, to $334 million, or 9.2 percent of sales.
Kumho did not elaborate on the reasons for its turnaround, but said 2013 will be a “very important year” for the company as it tries to complete the conditions of its “workout” program—related to losses associated with parent Kumho Asiana Group—earlier than originally planned.
“In 2013, economic uncertainties from the previous year are expected to continue as a result of the economic crisis which started in Europe; lingering uncertainties about America's solution to deal with this problem; increasing volatility both politically and economically in Korea and overseas; and slow recovery efforts that center around newly developing economies,” the company said.
Kumho said a key goal for growth in 2013 will be its efforts to expand its market share in China.
Pirelli & C. S.p.A. suffered drops in operating and net income for the quarter as the company suffered negative currency exchange rate effects and increased finance charges.
Operating earnings plunged 8.5 percent to $237.5 million while net income was off 41.7 percent to $95.2 millon. Sales fell 1.3 percent to $2.03 billion.
Pirelli chalked up most of the earnings malaise to shrinking demand in Europe, where the replacement market dropped 11 percent. By contrast, Pirelli described the performance of the South American and Chinese markets as positive.
In the premium segment, where Pirelli has put much of its effort in recent years, sales were off in Europe but up in North America and markets in emerging nations. Overall, revenue from the sale of premium products declined 2.8 percent.
Sales revenue in North America was roughly $223 million, Pirelli said.
Pirelli also attributed its earnings slumps to the negative effects of falling selling prices and a worsening product mix (OE made up a greater percentage of business, for example), while lower costs linked to raw materials helped assuage the decline.
Despite the lower earnings and sales recorded in the first quarter, Pirelli management said it still believes the company can reach the financial goals set forth in March: consolidated sales of $8 billion to $8.5 billion; unit sales volume growth of 3 to 4 percent (including growth in the premium segment of 13 to 14 percent); and consolidated pre-tax operating income/sales ratio of about 12 to 13 percent.
Pirelli is committing $528 million to capital investments this year.
Trelleborg Wheels Systems S.p.A. reported lower revenue and earnings in the quarter on lower unit sales of both industrial and ag tires.
Sales dropped 1.7 percent to $170.1 million, while operating profit fell 7.7 percent to $22.1 million, or 13 percent of sales.
The sales decline would have been even greater were it not for the addition of revenue from recent acquisitions and positive exchange rate effects, the business reported.
The recent acquisition of Maine Industrial Tire L.L.C. is “progressing according to schedule,” and the business made a positive contribution to the quarterly operating profit, the company said.
Yokohama Rubber Co. Ltd. (YRC) suffered double-digit drops in operating and net income in the quarter on weakening tire sales, both domestically and in the firm's key overseas markets.
Net income dropped 35.7 percent to $61.2 million. Sales were off 5.6 percent to $1.38 billion. Yokohama management is still projecting nearly 10-percent growth in sales through six months.
Yokohama's tire operations reported a 27.6-percent plunge in operating income, to $61.7 million, whiles sales declined 6.6 percent $1.09 billion.
Yokohama's operations in North America suffered a 67.1-percent plummet in operating income, to $8.2 million, on 0.1-percent better sales of $245.5 million, YRC said.