Cooper Tire & Rubber Co. has reported first quarter 2019 net income of $7 million, or diluted earnings per share of 14 cents, compared with $8 million, or 16 cents per share, last year.
“Operating profit in the first quarter was higher than we expected due to stronger than anticipated performance in North America and Asia,” said Cooper President and CEO Brad Hughes. “Our Americas segment delivered an operating profit of $39 million, up $8 million from year ago, despite the $10 million impact of new TBR tariffs in the period this year. For the third consecutive quarter, we achieved unit volume growth in the U.S. In Asia, our business performed better than expected in what continues to be a challenging economic environment. In fact, third-party sales were up year-over-year in the region, but this was more than offset by lower intercompany shipments from China to North America.
“Moving forward, we will continue to make progress on our strategic priorities during 2019, and believe underlying macro-conditions will support growth in tire demand, particularly in the U.S. As a result, we continue to expect modest global unit volume growth for Cooper in 2019 and full year operating profit margin to improve compared with 2018. We are confident that our strategic plan remains the right path to achieve our goals and help drive shareholder value.”
Consolidated Results
First quarter net sales were $619 million, an increase of 2.9 percent, compared with $601 million in the first quarter of 2018. Net sales included $24 million of favorable price and mix, which was partially offset by $4 million of lower unit volume and $2 million of unfavorable foreign currency impact.
Operating profit was $26 million, unchanged compared with the first quarter of 2018. The quarter included $14 million favorable price and mix, which was partially offset by $3 million of unfavorable raw material costs, $3 million of higher other costs and unfavorable volume of $2 million. Operating profit benefited from manufacturing improvements, including better utilization, of $5 million and reduced product liability costs of $4 million. Negatively affecting the quarter were $10 million of tariffs enacted in the first quarter of 2019 on TBR tires imported into the U.S. from China and $5 million of restructuring costs related to Cooper Tire Europe’s decision to cease light vehicle tire production at its Melksham, England, facility.
Outlook
“We are pleased that our first quarter results have helped position us well for the remainder of the year,” said Hughes. “We expect to continue to improve results, building on our strategic initiatives as we continue to make tangible progress on the milestones communicated at our May 2018 Investor Day. Importantly, we remain focused on building our team’s capabilities to advance our strategic initiatives and win in the marketplace.”
For 2019, management continues to expect:
• Modest unit volume growth compared to 2018;
• Improving operating profit margin throughout the year, with the full year exceeding 2018; and
• Capital expenditures to range between $190 and $210 million. This does not include capital contributions related to Cooper’s pro rata share of the previously announced joint venture with Sailun Vietnam or other potential manufacturing footprint investments.
For 2019, management now expects:
• Charges related to the Melksham, England, restructuring to be in a range of $8 to $11 million, including $5 million already incurred in the first quarter; and
• Effective tax rate in a range between 23 and 26 percent.
The 2019 expectations include tariffs already in place, but do not include rate changes or additional tariffs that continue to be considered, but have not yet been imposed, Cooper stated.
