Cooper Tire & Rubber Co. posted net income of $47.7 million on net sales of $920.1 million for the third quarter ended Sept. 30, 2014. That compares to a net loss of $168 million on sales of 832.4 million for the same period last year.
Operating income for the quarter was up 220%, from $27.9 million to more than $89.3 million. The company's net income-to-sales ratio was nearly 5.2%.
"Our third-quarter performance continued the solid trends we saw during the first half," says Roy Armes, chairman, CEO and president. "Even after adjusting for the unusual issues last year, we had strong unit volume growth, particularly in the Americas segment.
"The 14% overall unit growth, along with declining raw material costs, allowed us to post an operating margin of 9.7%, which is at the high end of our target range."
Last year’s third quarter was impacted by a number of unusual circumstances, including:
* labor actions at Cooper Chengshan (Shandong) Tire Co. Ltd. (CCT), the company’s joint venture in China, which resulted in lower production and shipments;
* higher costs;
* lower volume associated with shipping inefficiencies related to ERP system implementations; and
* costs related to a then-pending merger, which subsequently was terminated.
As a result, many of the year-over-year comparisons are not representative of the business under normal conditions.
For the nine-month period of fiscal 2014, Cooper was up 1% in net sales, 43.6% in net income and 27.4% in operating income compared to the first nine months of 2013.
According to Armes, positive momentum and favorable raw material costs (down 2% from the second quarter) bode well for Cooper.
"We expect global tire markets will remain highly competitive, with economies in varying stages of recovery or growth," he says. "Our focus on innovation and new products positions us well to take advantage of growth opportunities worldwide. We continue to expect to meet or exceed industry unit volume increases in our largest markets this year.
"We recently received notice and related documentation from the Chengshan Group that it intends to exercise its option to acquire Cooper's 65% ownership in our CCT joint venture in Rongcheng, China. After reviewing this documentation and working with the Chengshan Group to confirm the necessary steps to move forward, we are proceeding with the proposed sale of Cooper’s interest in CCT to Chengshan in accordance with the process set forth earlier this year.
"Should Chengshan purchase our stake in the joint venture, we will continue to have offtake rights, with CCT agreeing to produce Cooper-branded products until mid-2018. As I have stated in the past, China will continue to be an important part of Cooper’s long-term growth strategy whether or not we own the joint venture."
