Cooper Tire has reported second-quarter net income of US$15m, down from US$45m last year.

Net sales also fell 3% to US$698m, while operating profit was US$33m.

"Cooper delivered second quarter results in line with our stated expectations, including operating profit margin of 4.7% of net sales, up slightly from the previous quarter," said Cooper Tire president & CEO, Brad Hughes.

"While challenging industry conditions have continued longer than expected, we are confident in our strategic plan, as detailed at our recent investor event.

"We continue to make solid progress in our initiatives, including expanding into new sales channels and driving sell-in with exciting new products, such as our new AT3 line."

Second quarter 2018 operating profit was US$33m compared with US$84m for the same period last year. Operating profit for the second quarter of 2017 has been restated to reclassify US$9m of other pension and post-retirement benefit costs out of operating profit.

Operating profit for the second quarter included US$21m of higher manufacturing costs and US$20m of unfavourable price and mix, net of raw material costs. Higher manufacturing costs reflect the alignment of production to demand in order to control inventory levels.

In addition, operating profit decreased US$4m related to lower unit volume.

Show the press release

FINDLAY, Ohio, August 6, 2018 – Cooper Tire & Rubber Company (NYSE: CTB) today reported second quarter 2018 net income of $15 million, or diluted earnings per share of $0.30, compared with $45 million, or $0.85 per share, for the same period last year.

Second Quarter Highlights:

Consolidated unit volume decreased 2.1 percent compared to the prior year, with a decrease in the Americas segment, partially offset by an increase in the International segment.

Net sales decreased 3.1 percent to $698 million.

Operating profit was $33 million, or 4.7 percent of net sales.

Cooper repurchased $14 million of common stock at an average price of $26.66 per share.

The company began shipping the new Discoverer AT3™ all-terrain product line in mid-June.

"Cooper delivered second quarter results in line with our stated expectations, including operating profit margin of 4.7 percent of net sales, up slightly from the previous quarter," said Brad Hughes, President & Chief Executive Officer. "While challenging industry conditions have continued longer than expected, we are confident in our strategic plan, as detailed at our recent investor event. We continue to make solid progress in our strategic initiatives, including expanding into new sales channels and driving sell-in with exciting new products, such as our new AT3 line. Cooper's brand strength and attractive value proposition, combined with our strategic initiatives, provide a solid foundation for volume and profit growth."

Consolidated Results:

Cooper TireQ2 2018 ($M)Q2 2017 ($M)% Change

Net Sales$698$721(3.1)%

Operating Profit$33$84(61.1)%

Operating Margin4.7%11.7%(7.0) ppts

Second quarter net sales were $698 million, a decrease of 3.1 percent compared with $721 million in the second quarter of 2017. Second quarter net sales were negatively impacted by $16 million of lower unit volume, $13 million of unfavorable price and mix and $6 million of favorable foreign currency impact.

Second quarter 2018 operating profit was $33 million compared with $84 million for the same period last year. Operating profit for the second quarter of 2017 has been restated to reclassify $9 million of other pension and postretirement benefit costs out of operating profit.

Operating profit for the second quarter included $21 million of higher manufacturing costs and $20 million of unfavorable price and mix, net of raw material costs. Higher manufacturing costs reflect the alignment of production to demand in order to control inventory levels. In addition, operating profit decreased $4 million related to lower unit volume. SG&A increased $6 million in the quarter due to higher professional fees related to strategic initiatives and mark-to-market cost of stock based liabilities.

Cooper's second quarter raw material index increased slightly from the second quarter of 2017. The raw material index increased 4.6 percent sequentially from 156.6 in the first quarter of 2018 to 163.8 in the second quarter of 2018.

The effective tax rate for the second quarter was 12.6 percent, compared to 32.7 percent in the prior year. The second quarter 2018 tax rate includes the benefit of a lower blended U.S. statutory tax rate as a result of U.S. income tax reform and approximately $1 million of net discrete items recorded in the quarter. The rate is based on forecasted annual earnings and tax rates for the various jurisdictions in which the company operates.

At quarter end, Cooper had $180 million in cash and cash equivalents compared with $302 million at the end of the same period last year. Capital expenditures in the second quarter were $38 million compared with $45 million in the same period of last year.

Cooper generated a return on invested capital, excluding the impact of discrete tax items in the fourth quarter of 2017, of 10.3 percent for the trailing four quarters.

During the second quarter, 517,354 shares were repurchased for $14 million at an average price of $26.66 per share. Since share repurchases began in August 2014, the company has repurchased a total of 15.7 million shares at an average price of $34.12 per share.

Americas Tire Operations:

Cooper TireQ2 2018 ($M)Q2 2017 ($M)% Change

Net Sales$584$615(5.0)%

Operating Profit$40$91(55.5)%

Operating Margin6.9%14.8%(7.9) ppts

Second quarter net sales in the Americas segment declined 5.0 percent as a result of $23 million of lower unit volume, $6 million of unfavorable price and mix and $2 million of unfavorable foreign currency impact. Segment unit volume decreased 3.7 percent from the prior year, with unit volume decreases in North America and Latin America.

Cooper's second quarter total light vehicle tire shipments in the U.S. decreased 3.3 percent. The U.S. Tire Manufacturers Association (USTMA) reported that its member shipments of light vehicle tires in the U.S. were down 0.6 percent. Total industry shipments (including an estimate for non-USTMA members) increased 4.2 percent for the period.

Second quarter operating profit was $40 million, or 6.9 percent of net sales, compared with $91 million, or 14.8 percent of net sales, a year ago. Operating profit for the second quarter was impacted by $25 million of unfavorable price and mix, as well as $2 million of higher raw materials cost. Operating profit was also impacted by higher manufacturing costs of $17 million, as production was adjusted to align with demand in order to control inventory levels. Additionally, the segment incurred $4 million of lower unit volume and other costs increased $3 million in the quarter, including increased SG&A.

International Tire Operations:

Cooper TireQ2 2018 ($M)Q2 2017 ($M)% Change

Net Sales$168$15110.9%

Operating Profit$6$3110.1%

Operating Margin3.4%1.8%1.6 ppts

Second quarter net sales in the International segment increased 10.9 percent as a result of $5 million of favorable price and mix, $1 million of higher unit volume and $11 million of favorable foreign currency impact. Segment unit volume increased 0.7 percent from the prior year, driven by an increase in unit volume in Asia, which was partially offset by a slight unit volume decline in Europe.

Second quarter operating profit was $6 million, or 3.4 percent of net sales, compared with $3 million, or 1.8 percent of net sales, a year ago. The increase was driven by $6 million of lower raw material costs, net of price and mix. Manufacturing costs were $4 million unfavorable, while other costs decreased $1 million in the quarter.

Outlook

"Due to continuing industry challenges and, in particular, rising raw material costs, we are revising our expectations for the balance of the year. Cooper now anticipates unit volume to be flat in 2018 compared to 2017, with a modest sequential improvement in operating profit margin in the second half of this year," Hughes said. "We continue to believe that we have the right strategic plan in place and remain confident in our five-year financial targets, which include operating profit of 10 to 14 percent, as well as annual unit volume growth in the low- to mid-single digits and return on invested capital of 14 to 16 percent."

Additional management expectations for 2018 include:

Effective tax rate in a range between 23 and 26 percent, and

Capital expenditures in a range between $200 and $220 million.

Original source: http://coopertire.com/News/Corporate-News-Releases/Cooper-Tire-Rubber-Company-Reports-Second-Quar-(3).aspx