Cooper Tire: Manufacturing costs, lower volumes hold back Q1 2018 profit

Cooper Tire & Rubber reports achieving net sales of US$601 million in the first quarter of 2018, a 6.5 per cent decrease on a year earlier. The tyre maker states that net sales were negatively impacted by $39 million of lower unit volume and $20 million of unfavourable price and mix, partially offset by $17 million of favourable foreign currency impact.

First quarter net sales in the company’s Americas segment declined 8.7 per cent as a result of $30 million of lower unit volume, $19 million of unfavourable price and mix, and $3 million of favourable foreign currency impact. Segment unit volume decreased 5.6 per cent from the prior year, with unit volume decreases in North America and Latin America.

Within the International segment, first quarter net sales increased 13.6 per cent as a result of $13 million of favourable price and mix and $14 million of favourable foreign currency impact, partially offset by $8 million of lower unit volume. Segment unit volume decreased 5.4 per cent from the prior year, driven by a unit volume decrease in Europe, which was partially offset by a slight increase in Asia unit volume.

First quarter 2018 operating profit was $26 million, 54.4 per cent less than the same period last year, and operating margin decreased 4.6 percentage points to 4.4 per cent. Operating profit for the quarter included $12 million of higher manufacturing costs and $11 million of lower unit volume. This was partially offset by $6 million of lower raw material costs, net of price and mix. Higher manufacturing costs reflect decisions to align production to demand and control inventory levels.

Brad Hughes, the tyre maker’s president and chief executive officer, states an expectation that operating profit margin performance in the second quarter will be similar to that in the first quarter. “However, we expect industry demand to improve in the back half of the year. We expect that this, along with our actions to drive volume and reduce costs, will result in operating profit margin approaching our stated nine per cent to 11 per cent range for the second half of 2018,” he said. “In addition, with growth in the International segment, led by Asia, we expect Cooper to generate full-year unit volume growth on a consolidated basis compared to 2017.”

Full details about Cooper Tire & Rubber’s Q1 2018 financial results can be read here.