FINDLAY, Ohio—Cooper Tire & Rubber Co. reported 10.5 percent higher operating income for the quarter ended June 30 primarily on the positive effects of “favorable” raw materials costs.
Sales, by contrast, fell 1.5 percent, to $740.3 million, with revenue in the Americas down 2.7 percent. Cooper attributed the sales decline mostly to negative exchange-rate changes although unit volume in the Americas dropped 3.4 percent, primarily in private-brand business.
Cooper Chairman, President and CEO Roy Armes called the quarterly performance “outstanding,” noting that the international segment reversed an operating loss a year ago to earnings of $3.1 million this year.
Operating earnings rose to $109.9 million, raising the quarterly operating margin to a record 17.7 percent. Net income of $70.7 million was 18.7 percent better than the 2015 quarter.
The company experienced higher manufacturing costs in the quarter, primarily in the Americas segment due to the greater complexity of manufacturing more higher-value, higher-margin tires.
In the Americas unit, operating profit rose 6.8 percent to $116.1 million, or 17.7 percent of net sales. The higher operating profit primarily reflected $23 million of favorable raw material costs, net of price and mix. Sales fell to $116.1 million.
Cooper's U.S. truck tire shipments were up 23.7 percent during the second quarter, outperforming the industry.
Cooper management expects its operating margin for the full fiscal year to be modestly above the 2015 level, with unit volume growth expected in each of the company's segments in the second half.
The International segment is expected to perform better than originally anticipated for the full year and deliver a small profit.
The company continues to make progress on its planned acquisition of a majority interest in GRT, a joint venture in China to produce truck and bus radial tires for global markets. The transaction is expected to close by year-end, pending certain permits and approvals by the Chinese government.
Cooper reported that it has repurchased $40.7 million worth of its shares under the $200 repurchase plan approved in February. The remaining repurchase authorization expires on Dec. 31, 2017.
Armes retires Aug. 31. Brad Hughes will take over as president and CEO on Sept. 1.