Cooper Tire Counts Cost of Production Halt
Cooper Tire & Rubber Co has warned that a production halt at its Texarkana, Arkansas, facility on 12 March will affect first-quarter earnings by 5 cents to 7 cents a share, Market watch has reported.
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Cooper Strike Update
Product News(Texarkana/Tire Review) Roughly 1,000 people turned out for a union-organised rally supporting the 1,600 workers that went on strike nearly a week ago at Cooper Tire & Rubber Co.’s Texarkana, Arkansas plant. David Boone, union president, said the union’s executive committee received a 95 per cent backing in a vote granting the authority to call a strike.
Goodyear Results Contain ‘Surprises’
Product NewsAlthough Goodyear’s earnings were roughly as expected Goodyear’s recent positive results contained some surprises, Deutsche Bank analysts have reported. Despite 4 per cent growth in unit sales and an 8 per cent increase in average transaction prices, Goodyear was only marginally profitable in its North American tyre division in the fourth quarter, say the analysts. “We have doubts about Goodyear Tires’ ability to cut costs, increase volume, or improve variable margins in this region. In fact, there was evidence that cost cutting is losing steam,” they said adding: “Our model suggests that first half EPS will be close to breakeven. Improvement in the second half requires significant ramp up of cost savings.”
Goodyear Results Led By Assurance
Product NewsGoodyear’s Assurance played a key role Goodyear’s recent financial improvements, according to a report in the Akron Beacon journal. Goodyear first rolled out the products a year ago in an effort to generate excitement for its flagship brand.
Conti Outperforms
Product NewsAnalysts, Goldman Sachs, have set Conti’s shares to ‘outperform.’ The “fair value” of the company’s shares is 70 euros, according to analysts, who expect the tyre manufacturer to improve its profit by 45 per cent in the next two years due to improvements in cost structures and its dominance in the fast growing ESC sector (electronic stability control). The analysts also report an improved performance by Conti in its tyre business and say that the manufacturer is not as dependent on raw material prices as its competitors. Profit per share is expected to reach 4.25 euros this year, increasing to 5.45 in 2006
Automotive Suppliers Face Uphill Struggle
Product News(Akron/TR) Cutbacks, fast rising raw material costs and marketshare battles by US automakers have created a crisis among auto part and component suppliers, according to a Detroit News report today.
Car Registrations Down 2.7 per cent?
Product NewsWestern European car registrations for February could be down by as much as 2.7 per cent, according to a Deutsche Bank report. Preliminary figures from Polk Marketing Systems suggest a decline of 3.7 per cent year-on-year (-1.3 per cent year-to-date). The report singles out Renault (-12 per cent) and Fiat (-13 per cent) as having particularly bad months, while VW brand (-8 per cent) stayed inline with the average and Mercedes (-15 per cent) failed to improve from a weak January. On a brighter note, the analysts point new model releases for the from BMW brand (+36 per cent) and Porsche (+15 per cent) as examples of European names that are doing well.
Cooper Tire’s Upbeat Outlook
Product NewsCooper Tire’s management is convinced that it can achieve a dramatic margin improvement. That’ the verdict Deutche Bank analysts gave after meeting with company’s top brass. Having said that, the report says the company is also realistic, not claiming to be able to achieve this overnight. According to the analysts’ report, the company doesn’t expect to achieve its 10 per cent target margin until after 2006, possibly 2007. In the second half of 2005, the analysts predict a “compelling trajectory” culminating in a 6-8 per cent EBIT margin in 2006. Furthermore, up to two margin points could be achieved by reducing scrap and plant inefficiencies. Pricing is likely to continue to rise, and eventually exceed raw material cost increases (potentially responsible for between 1.5 and 3 points of margin). the analysts add.
Goodyear’s Year Ahead in Poland
Product NewsGoodyear is expecting Eastern European business to flourish this year, due to an increase of around 670,000 in Poland’s vehicle numbers, reports the Warsaw Business Journal.
Morgan Stanley Raises Conti Share Target Twice in Four Weeks
Product NewsMorgan Stanley has raised its price target for Continental shares from 60 to 69 Euros, up 15 per cent. The announcement marks the second time that Morgan Stanley has increased the share target in four weeks. In February, the first increase saw the bank raise the goal from 52 to 60 euros. The analysts believe that this positive run will continue over the coming months and years. They expect earnings per share (EPS) to increase to 5.60 euros (14 per cent more than originally expected) in 2005, and up to 5.90 euros in 2006.
Conti’s Discusses Building New Factory
Product NewsContinental is currently considering plans to build a new tyre factory in Europe, according to Dr Alan Hippe, chief financial officer. If demands continue to be as strong as they are today, it would be the next logical step, said Dr Hippe speaking at the Geneva Motor Show. Such a new facility would have to be built in Eastern Europe, possibly in Lithuania, writes the Berliner Morgenpost. Recently Continental invested a considerable amount of money in Eastern Europe in order to cut production costs.
Deutsche Bank analysts reported that Continental’s presentation was both “bullish“ and “striking.” In his presentation, Dr Hippe explained that Continental had revised its ESP penetration expectations for the US market to about 18 per cent in 2006, lifting the volume target to 1 million units. The CFO also suggested that the German manufacturer could be in a net cash position as early as the end of 2005. According to the analysts, “the bottom line is the growth and free cash story continues (at least 600-700 million euros per year).”
Michelin Denies Trenco Interest
Product NewsMichelin will not buy the whole Trenco Egyptian conglomerate, as some new sources had reported. According to an article in French newspaper, Les Echos, Michelin was likely to buy the conglomerate for $10 million, despite its daily losses of $40,000 and debts of $200 million. Deutsche Bank analysts contacted Michelin and report that the company denied being interested in the whole conglomerate, but only in the Nisr tyre brand. Nisr is much smaller in comparison, producing only 30,000 tyres each year. Egypt is the 5th largest North African market with an annual volume of 3 million passenger tyres and 700,000 truck tyres. This is an attractive market for Michelin which aims to expand its production capacity in this region, the analysts believe.
Goodyear/Titan – Update
Product NewsIn the aftermath of yesterday’s not-too-surprising announcement that Goodyear will sell its agricultural tyre operations to Titan International, more details have come to light, reports Tire Review.
Goodyear agreed to sell the assets of its agricultural group, including its farm tyre plant in Freeport, Illinois, to Titan for approximately $100 million. The deal also gives Titan the right to produce and market agricultural tyres under the Goodyear brand name. However, under Goodyear’s current master contract with the United Steelworkers of America (USWA), any facility sale is contingent on the union and the prospective new owner reaching agreement on a new contract for the plant in question.
Datillo: Cooper Paid $107 million for Kumho Share
Product NewsIn an exclusive interview with Tire Review last week, Tom Dattilo, chairman, president and CEO of Cooper Tire & Rubber, said the tyre manufacturer ended up paying “about $107 million” for its 11 per cent stake in Kumho Tire Co.
Cooper purchased the stock during Kumho’s dual initial public offerings on the London and Seoul exchanges earlier this year. “That was our 11 per cent stake. I saw a set of figures last week that put it at about $110 million, and we had expected it to come in at the low to mid $140s. A couple of analysts were speculating $140, 150, $160 million, but that was all part of the process of trying to get as high a price as they could,” Mr Dattilo told the magazine.
Kwik-Fit to be Floated or Sold
Product NewsPrivate equity group CVC Capital Partners, the owner of Kwik Fit, has appointed Deutsche Bank to advise on a possible sale or floatation of the retail business. CVC said it and the German bank would work together on determining the best course for Kwik-Fit, according to a BBC report. Kwik-Fit is expected to be valued at more than £700 million with some estimates reaching £1 billion. Analysts report the company has strong cash flows and would make an attractive takeover target.
“Deutsche and CVC are going to evaluate the strategic options for Kwik-Fit, but no decision has been taken yet in terms of whether it will be a trade sale or an IPO (initial public offering) or in terms of timing,” said a spokesman for CVC. Famous in the UK for its “You can’t get better than a Kwik-Fit fitter” advertising slogan, Kwik-Fit is Europe’s largest independent auto parts, repair and replacement specialist. It has some 2,300 outlets including its mainland Europe subsidiaries – Speedy in France and Pit Stop in Germany.
