FINDLAY, Ohio (Feb. 25, 2011)—Cooper Tire & Rubber Co. is targeting 10-percent volume growth in 2011 after reporting nearly 21-percent higher sales of $3.36 billion in fiscal 2010 on 8-percent higher unit shipments and improved pricing.
Cooper reported 20.5-percent higher operating income of $186.3 million, while net earnings surged 171 percent to $140.5 million, thanks in large part to a $56 million surplus from discontinued operations.
Cooper's North America Tire Operations boosted annual operating profit 17.8 percent to $130.7 million as sales climbed 20.8 percent to $2.42 billion.
“We were able to deliver positive results during the fourth quarter despite the beginnings of rapid increases in raw material costs, particularly natural rubber,” said CEO Roy Armes. “Demand for our products continued to be very strong and we were able to run the manufacturing facilities efficiently to deliver improved manufacturing results. Our ability to ship more tires was limited by the inventory we had available for sale during the quarter.”
For the fourth quarter, Cooper's net income edged up 2.6 percent to $40.2 million as net sales jumped 19 percent to $919.6 million. The quarterly results included restructuring charges of $1 million related primarily to the closure of the Albany, Ga., tire plant, compared with charges of $12 million during the fourth quarter of 2009.
Operating profits fell 9.5 percent to $54.6 million for the quarter, largely because of higher raw material prices ($138 million) that were partially offset by better price and mix ($115 million), according to the company. Improved manufacturing ($8 million), increased volumes ($10 million), and lower restructuring costs ($11 million) contributed favorably to the results, Cooper said.
The North America segment's fourth quarter operating income rose 8.8 percent to $42.4 million on an 18.3-percent jump in net sales to $669.3 million. Cooper attributed the sales increase to stronger price and mix and increased unit sales.
Cooper reported that favorable pricing and mix of $76 million were more than offset by $86 million of higher raw material costs. Improved manufacturing operations increased results by $9 million. Product liability charges increased $10 million primarily as a result of increased charges on existing reserves.
Total light vehicle tire shipments for Cooper's North America segment in the U.S. edged up 0.4 percent, compared with a total industry shipment increase of 7.5 percent as reported by the Rubber Manufacturers Association. Cooper said its ability to meet strong demand for its products was constrained during the fourth quarter by the inventory it had available for sale. However, the tire maker said the segment gained market share for the full year.
“In 2011, we intend to produce 10 percent more units than we did in 2010 to help meet this strong demand,” Armes said, noting a portion of the increase will be used to restock depleted inventories and help imporove fill rates. Cooper is counting on incremental production increases at its plants in the U.S., China, Mexico and England to meet the expanded goal, he said.
“The largest challenge facing the company is the increase in natural rubber prices, which increased more than 75 percent during the last four months. Raw material costs have increased between 15 percent and 20 percent sequentially from the fourth quarter of 2010 to the first quarter of 2011.
“We expect raw material costs to remain at elevated levels after the first quarter; however, the rate of increase should begin to slow during the second quarter,” he added.