Cooper reports domestic, international sales increase in Q1, 2011

Cooper Tire & Rubber has reported a net income of US$16 million attributable to Cooper Tire for the quarter ended March 31, 2011, an increase of $4 million from the same period in 2010. Net sales during the quarter amounted to $906 million, an increase of $152 million, or 20 per cent, from the prior year. Operating profit was $32 million for the quarter, a decrease of $1 million from the prior year same quarter. Results during the quarter included an after-tax gain of $3 million related to the acquisition of a controlling interest in Corporacion de Occidente SA de CV. The Company also incurred costs of $4 million during the quarter. The prior year first quarter included restructuring charges of $8 million, and $22 million of increased charges for an adverse verdict in a single products liability case.

While the company states it was successful in improving price and mix ($128 million) during the quarter, this was more than offset by higher raw material costs ($164 million). Lower products liability expenses ($19 million), increased volumes ($11 million), lower restructuring costs ($8 million), and improved manufacturing ($5 million) contributed favourably to results. Selling, general and administrative and other costs were $8 million higher year-on-year. The net impact of these changes was a $1 million decrease in operating profit.

The company ended the quarter with cash and cash equivalents of $188 million, a decrease of $225 million during the quarter compared with a 2010 year-end balance of $413 million; the company used approximately $134 million during the quarter to acquire additional ownership in Mexican and Asian operations. Increases driven by the typical seasonal building of working capital balances, ahead of the peak selling season in the second half of the year, were also a significant use of cash during the quarter. The company reports that it did not find it necessary to access its available credit lines to support these activities during the quarter.

North America Tire Operations

Cooper’s North America Tire Operations achieved net sales of $648 million during the first quarter, up 22 per cent from 2010 net sales of $532 million. The increased sales were the result of both stronger price and mix and increased unit sales, the tyre maker reports. Total light vehicle tyre shipments for Cooper’s North America segment in the United States increased by 9.2 per cent, compared with a total industry shipment increase of 8.8 per cent as reported by the Rubber Manufacturers Association. Unit sales for the North American segment increased 8.6 per cent compared with the prior year first quarter. The segment’s operating profit was $22 million for the first quarter, or 3.3 per cent of net sales. This is an increase of $8 million compared with the same period in 2010.

International Tire Operations

The company’s International Tire Operations reported a new record high of $363 million in net sales, an increase of $69 million, or 24 per cent, compared with the prior year same quarter. The increase reflected positive price and mix partially offset by slightly lower volumes. The segment shipped 4.2 per cent fewer units than during the same quarter in 2010. Asian operations decreased sales volumes by two per cent including intercompany shipments, while European operations decreased sales volumes by ten per cent. The segment’s operating profit decreased by $3 million, to $20 million or 5.5 per cent of net sales in the first quarter of 2011, from $23 million or 7.7 per cent in the first quarter of 2010.

“Despite elevated raw material costs, we continued making improvements to our underlying operations and delivered solid operating profits during the quarter,” said Roy Armes, Cooper Tire & Rubber’s CEO. “In addition to the work we have done to improve costs, we have implemented price increases in a variety of ways around the globe to address these pressures.

“We still intend to produce ten per cent more units in 2011 than we did in 2010 to help meet the continued strong demand for our products,” Armes continued. “We expect raw material costs to remain at elevated levels after the first quarter, but persistent volatility can make it difficult to accurately predict movements in raw material prices. We have forecasted that our raw material index is likely to be sequentially higher, by between ten per cent and 15 per cent, during the second quarter. We believe increases to the raw material index should begin to decelerate during the third quarter.

“The investments we made during the quarter to increase ownership at the Mexican and Asian operations are great examples of our dedication to increasing our presence in these fast-growing markets and one of the ways we will continue making forward progress as a company. Our focus is on efforts that will continue to better position the company to improve shareholder returns, and we remain optimistic about our opportunities to further improve results by successfully implementing tactics that will profitably grow the top line, improve our global cost structure and improve organisational capabilities.”