CCT divestment hampers Cooper's Q1 results
FINDLAY, Ohio (May 1, 2015) — Cooper Tire & Rubber Co. suffered double-digit drops in sales, operating and net income in the quarter ended March 31, declines the company attributed principally to absence of revenue from the former Cooper Chengshan Tire (CCT) joint venture in China.
Operating and net income fell 13 and 18.5 percent, respectively, to $64.6 million and $42.2 million, while sales were off 16.7 percent to $663.2 million.
CCT contributed $157 million to net sales, net of intercompany eliminations, in the first quarter of 2014, Cooper said. Excluding CCT — which Cooper divested in the fourth quarter — first quarter 2015 sales rose 4 percent as a result of higher unit volume of $35 million, which was partially offset by negative foreign exchange of $7 million.
“Our first quarter performance continued the positive trends we saw last year,” said Roy Armes, Cooper's Chairman, CEO and president.
“The Americas segment posted outstanding results, with solid unit volume growth and an operating margin of 15 percent, well above our target. With the strong Americas performance, we came close to last year's earnings per share despite the absence of CCT in the quarter.”
Raw material costs declined roughly 14 percent in the quarter from the fourth quarter last year. The company said it anticipates second quarter raw material costs will be down slightly from the first quarter, but that they will generally trend slightly higher during the second half of 2015.
“We expect global tire markets will remain highly competitive. Our focus on innovation and new products positions us well in such an environment,” Mr. Armes said.
The Americas segment volume growth has been solid thus far in 2015, he noted, and raw material costs have continued to decline. In the U.S., it appears the inventory purchased ahead of the tariff announcements largely has been worked through.
The Americas unit's operating income jumped 31.1 percent to $90 million on 6.2-percent higher sales of $598.5 million, yielding an operating ratio of 15 percent, up three full points. Cooper's light vehicle tire shipments rose 2.4 percent in the quarter, matching the performance of other Rubber Manufacturers Association members.
“We anticipate seeing more normal order patterns and will build inventory in our seasonally weak second quarter for sell through in our typically stronger third and fourth quarters.” he said.
“For the full year, we continue to expect to meet or exceed industry unit volume growth in the U.S,”
In the European market, the economies remain sluggish, Mr. Armes added. While the outlook for tire growth in China is strong longer term, he said the domestic market currently has been impacted by oversupply due to fewer exports to the U.S. because of the tariffs.
“For the full year, we anticipate operating profit in our International businesses will be approximately breakeven. For the company overall, we expect to deliver full year operating margin in a range of 8 percent to 10 percent,” he concluded.
At quarter's end, Cooper had $449 million in cash and cash equivalents, compared with $336 million at March 31, 2014.
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