Cooper Tire reports 83.% of sales drop in Q2' 2020

Cooper Tire suffered an 83.2% drop in operating income in the quarter that ended June 30 on 29.6% lower sales,

results attributed to the implosion of economic activity due to the global pandemic.

Despite the double-digit dips in sales and earnings and the continuing risks imposed by the COVID-19 pandemic, Cooper is confident its business will improve in the second half and that it can recover longer term.

"As we look further out, given our attractive value proposition, growing awareness of the Cooper brand and the momentum of our strategic initiatives, we are confident in our ability to return to our mid-term target range in the future," Cooper Tire President and CEO Brad Hughes said.

Cooper's second quarter operating income fell to $5.3 million on sales of $496.3 million, for an operating margin of 1.1% (versus 4.7% a year ago).

Global unit volume during the quarter decreased 27.5% from 2019. On a net basis, Cooper posted a net loss of $6.22 million.

Cooper attributed the drop in operating profit to the effects of lower unit volume ($44 million) and higher manufacturing costs ($39 million), deficits that were offset partially by $30 million of favorable raw-materials costs, $15 million of favorable price and mix and $7 million lower selling, general and administrative (SG&A) expenses.

For the half year, Cooper reported an operating loss of $917,000 on 20.8% lower sales of $1.03 billion. The net loss was $17.8 million, versus net income of $15.8 million a year ago.

In his comments on the results, Mr. Hughes noted that Cooper started the year with a strong balance sheet and took "early and decisive actions" to help weather the coronavirus storm and said Cooper "seized opportunities" to continue to build business.

"As a result of these efforts, and the economic recovery that started to emerge later in the quarter, Cooper was able to generate significant free cash flow for the period and grow market share in the U.S.," he said.

"We believe this affirms the strength of the Cooper brand, and the value that our products deliver to consumers who are increasingly looking to buy high quality, affordable tires. We are excited that our strategic initiatives are improving our business even in challenging circumstances, and we are optimistic about the future."

Mr. Hughes noted that Cooper management does not believe the company will have a substantial cash usage in the third quarter. On the contrary, due to the improving financial position and outlook, Cooper paid down in July $200 million of the $270 million it had borrowed on its revolving credit facilities.

In the Americas, operating income fell 53.4% in the quarter to $21.8 million as sales dropped 26.9% to $425.5 million of the effects of 31.5% lower sales volume.

At the same time, though, Cooper is claiming it gained market share in the passenger and light truck tire category, where its shipments fell 24.1% versus the 31.7% drop registered by the industry as a whole.

The drop in operating profit was attributed to lower unit volume ($41 million) and "unfavorable" manufacturing ($37 million), partially offset by $25 million of favorable raw-materials costs, $18 million of price and mix, $6 million lower SG&A expenses and $4 million of lower other costs, Cooper said.

For the six months, Cooper Americas reported a 62.4% drop in operating income to $32.2 million on a 20% drop in sales to $882.6 million.