FINDLAY, Ohio — Cooper Tire & Rubber Co. suffered a 46.6-percent drop in fiscal 2018 operating income on 1.6-perent lower sales.
Operating income fell to $165.2 million on sales of $2.81 billion, cutting the operating ratio five full points to 5.9 percent.
The drop in operating income included a $34 million goodwill impairment charge associated with the company's proposed joint-venture truck-and- bus tire plant in Vietnam. Cooper said the capacity created by this planned facility will reduce expected production requirements for Cooper's Qingdao Ge Rui Da Rubber Co. Ltd. joint venture in China, resulting in the goodwill impairment charge.
Net income fell 19.7 percent to $76.6 million.
Cooper management is forecasting improving operating profit margin throughout 2019, with full year exceeding 2018, on "modest" unit volume growth. In the first quarter, however, management expects a lower operating margin due to "typical seasonality" and some one-time items that will impact the first part of the year, including:
- $10 million to $15 million in restructuring charges related to ceasing light vehicle tire production in England;
- Recently enacted tariffs on tires and raw materials imported into the U.S. from China, and
- Economic conditions in China that continue to be challenging.
Fourth quarter fiscal 2018 operating income fell 56 percent to $24.8 million on 1.8 percent higher sales of $770.5 million. The firm reported a net loss of $419,000, but that was an increase compared with a $42.2 million loss reported in the fourth quarter of 2017
Unit volume decreased 2.4 percent for the year and 1.8 percent in the fourth quarter.
"Our fourth quarter operating margin, excluding the goodwill impairment charge, exceeded what we achieved in the third quarter, excluding the benefit from an adjustment of our product liability reserve model in that quarter," Brad Hughes, Cooper Tire CEO and president, said.
"As stated at the beginning of 2018, we expected operating margin improvement throughout the year, and we delivered on this expectation as our strategic initiatives took hold."
The firm's Americas Tire Operations segment reported a 2.2-percent drop in fiscal year revenue to $2.36 billion despite a 3-percent increase in the fourth quarter to $664 million. Fourth quarter light vehicle tire shipments in the U.S. increased 0.4 percent.
Segment operating income fell 35.4 percent to $230 million for the year, but rose 3.1 percent for the quarter to $70 million.
The International Tire Operations segment's sales fell 7.8 percent in the fourth quarter to $149 million, but rose for the year by 3.6 percent to $641 million.
The segment fell $33 million into the red on an operating basis compared with an operating profit of $7 million in the fourth quarter of 2017. The unit reported a $14 million operating loss for the full year, versus earnings of $15 million a year ago.
