Decline in Chinese new vehicle market and EU tire replacement sales affects Cooper’s Q2 results

Cooper Tire & Rubber Company has reported a second-quarter 2019 net income of US$9m, or diluted earnings per share of US$0.18, compared with US$15m, or US$0.30 per share, last year.

“Our second-quarter operating profit margin improved sequentially from the first-quarter, and the Americas segment delivered improved operating profit despite new and incremental tariffs this year,” commented Cooper president and chief executive officer, Brad Hughes.

“Our international segment was challenged by the ongoing decline within the new vehicle market in China and a weak replacement tire market in Europe. While we are not satisfied with the lower unit volume in the second-quarter, our strategic initiatives are taking hold, and we are confident that they will contribute more meaningfully to unit volume growth in 2020.”

Second-quarter net sales were US$679m compared with US$698m in the second-quarter of 2018 – a decrease of 2.8%. Net sales included US$34m of lower unit volume and US$6m of unfavorable foreign currency impact, which were partially offset by US$21m of favorable price and mix.

Operating profit was US$32m compared with US$33m in the second-quarter of 2018. Negatively affecting the quarter was US$13m in costs related to new tariffs on products imported into the USA from China compared with the same period a year ago, as well as US$2m of restructuring costs related to Cooper Tire Europe’s decision to cease light vehicle tire production at its Melksham, England facility.

In addition, the quarter included US$17m of favorable price and mix, and US$15m of favorable raw material costs (excluding the new tariffs). The quarter also included unfavorable volume of US$6m, higher SG&A of US$4m, and increased product liability costs of US$1m. Other costs increased US$7m, primarily due to higher distribution costs, including the non-recurrence of the Albany tornado insurance recovery in 2018.

Cooper’s second-quarter raw material index decreased 1.2% compared with the second-quarter of 2018. The raw material index increased sequentially from 160.4 in the first quarter of 2019 to 161.8 in the second-quarter of 2019.