Melksham restructuring hits Cooper with international operating loss

The US tyre manufacturer also recorded strong North American quarter

Cooper Tire has seen sales and profits rise in North America, while international figures have declined considerably. Overall, this amounts to small increases for the company. The company’s international operations (outside the Americas) loss of 1 million dollars is 8 million dollars down on the operating profit of 7 million dollars in the first quarter of 2018, which is largely explained by the 5 million dollars it has spent in ending light tyre production in Melksham, Wiltshire. Cooper expects these charges to amount to between 8 and 11 million dollars in the total year.

Other reasons for the change include 2 million dollars due to lower unit volume, 2 million dollars of unfavourable price and mix, and 1 million dollars of higher manufacturing costs. These were partially offset by 2 million dollars of lower raw material costs. Net sales outside the Americas totalled 144 million dollars, down from 161 million dollars, down 10.8 per cent on Q1 2018.

In the Americas, Cooper saw net sales rise to 515 million dollars, up 6.1 per cent from Q1 2018, while operating profit rose 24.2 per cent to 39 million dollars. The company said these results were based on 31 million dollars of favourable price and mix, partially offset by 1 million dollars of unfavourable foreign currency impact. Segment unit volume was flat overall, with an increase in North America offset by Latin American decline. Cooper’s light vehicle tyre shipments in the US increased 1.1 per cent, which compared to a 2.2 per cent increase among US Tire Manufacturers Association (USTMA) members.

Cooper’s first quarter operating profit was 39 million dollars, or 7.5 percent of net sales, compared with $31 million, (6.4 per cent of net sales) in 2018. It spent 6 million dollars on manufacturing improvements, including better utilisation, and 4 million dollars of lower product liability costs, partially offset by 10 million dollars of additional tariffs on TBR tyres imported into the US from China.

2019 projections

Over the rest of 2019, Cooper’s management expects more modest unit volume growth compared to 2018, improving operating profit margin, 190-210 million dollar capital expenditures (not including its capital contributions to its share of the Sailun Vietnam JV or any other potential manufacturing footprint investments).

“Operating profit in the first quarter was higher than we expected due to stronger than anticipated performance in North America and Asia,” said Cooper president and chief executive officer Brad Hughes.

“For the third consecutive quarter, we achieved unit volume growth in the US. In Asia, our business performed better than expected in what continues to be a challenging economic environment. In fact, third-party sales were up year over year in the region, but this was more than offset by lower intercompany shipments from China to North America.

“Moving forward, we will continue to make progress on our strategic priorities during 2019, and believe underlying macro-conditions will support growth in tire demand, particularly in the US. As a result, we continue to expect modest global unit volume growth for Cooper in 2019 and full year operating profit margin to improve compared with 2018. We are confident that our strategic plan remains the right path to achieve our goals and help drive shareholder value.”