Cooper Tire & Rubber Co. has reported second quarter 2017 net income of $45 million, or diluted earnings of 85 cents per share, compared with $71 million, or $1.27 per share, last year.
Net sales decreased 2.6 percent to $721 million.
Operating profit was $75 million, or 10.4 percent of net sales, which is a decrease of $35 million from the prior year, reflecting a volatile raw material cost, product pricing and promotional market environment.
The company also repurchased nearly $21 million of its common stock during the quarter at an average price of $36.55 per share. Average shares outstanding have decreased 4.3 percent from the second quarter of 2016.
“Cooper reaffirms our guidance for full year 2017 operating profit margin to be at the high end of our previously projected 8 to 10 percent range. This is based on a better than expected second quarter operating profit margin of 10.4 percent, and a second half that we believe will also come in at the high end of that range,” said Brad Hughes, president and CEO. “The tire industry continues to face turbulence in the U.S. market in the form of raw material cost variability, weak trends in retail sell-out of tires to consumers, elevated inventory in the channels and a fluid pricing and promotional landscape. As we continued to respond to these challenges and remained market facing with pricing and promotions, Cooper improved volumes in the U.S. from the first quarter to the second quarter. Importantly, we ended the quarter on a strong note, growing U.S. volume over the prior year and outperforming the industry in June. Cooper also achieved strong year-over-year second quarter unit volume increases in Latin America and Asia, as well as in truck and bus radial (TBR) tires.”
Second quarter 2017 operating profit was $75 million compared with $110 million for the same period last year. Operating profit decreased as a result of $35 million in unfavorable raw material costs, net of price and mix, $9 million of higher manufacturing costs, and $9 million of lower unit volume. These higher costs were partially offset by $14 million of lower SG&A expense, and $3 million of lower product liability costs. Other costs were $1 million lower, including foreign currency impact and $5.5 million of insurance recoveries for a portion of direct expenses related to damage incurred in a January 2017 tornado at a leased distribution center.
Outlook
“Current industry conditions are likely to persist into the third quarter, and Cooper will continue to manage our inventory levels in line with demand,” said Hughes. “Raw material costs are trending down at present, but may remain volatile, and we expect that uncertain consumer demand may contribute to continued high levels of promotional activity. In this environment, we will remain market facing in our pricing and promotions and expect to deliver year-over-year unit volume increases in both the Americas and International segments in the second half of 2017.”
Raw material costs are forecast to be down sequentially in the third quarter of 2017, and then to stabilize throughout the balance of the year.
