By LOU WILIN
Selling 10 percent more tires and having lower raw material costs, Cooper Tire & Rubber Co. grew profit by 7.6 percent last quarter to $38.2 million, the company said Thursday.
Earnings amounted to 59 cents per share in the April-June quarter.
Sales increased slightly, by 0.5 percent, to $888.7 million because of price cuts in response to lower costs for rubber, oil-derived materials and steel.
Cooper Tire & Rubber sold 10 percent more replacement tires globally than a year earlier. Competitor Goodyear Tire & Rubber Co. sold 6 percent more replacement tires last quarter.
For the entire tire industry, 3.4 percent more tires were sold in the United States. Cooper sold 6.7 percent more in the United States.
“We continued our strong performance in what is usually a seasonally weak quarter, posting very good volume growth in most geographic regions,” said Roy Armes, chief executive officer of Cooper Tire. “Pricing decreased, mainly driven by lower raw material costs, but the 10 percent global unit growth, along with our focus on cost reductions, helped us exceed last year’s operating (profit) margin.”
In fact, 8.6 cents on every dollar in sales became operating profit last quarter for Cooper. A year earlier, 7.8 cents on every dollar in sales became operating profit.
But don’t look for Cooper Tire to try to wrest more market share by supporting its unionized workers’ push for federal tariffs on Chinese tire imports.
The International Trade Commission and Commerce Department are investigating a complaint by Cooper Tire’s unionized factory workers that Chinese tire makers have unfairly stolen U.S. customers.
United Steelworkers, representing union workers in Findlay and Texarkana, have alleged that Chinese companies have charged less than market value for tires sold in the U.S. The Chinese government gives its companies export subsidies so they can afford the predatory practices, the union said.
“Based on our past experience, we know that tariffs have been disruptive to a normal market and, in fact, if they are imposed again, they are likely to be disruptive again,” Armes said Thursday. “We continue to support free and fair trade in a globally competitive market.”
Besides, Cooper has been producing more higher-priced tires and less of the lower-priced tires that the Chinese manufacturers target.
“We’ve been moving and shifting our mix to higher-end products,” Armes said. “We’re 25 or 30 percent less exposed today than we were before. So we are shifting our mix away from the lower end.”
Cooper’s operating profit in North America grew by 9.5 percent to $65 million last quarter. Just over 10 cents on every dollar of sales became operating profit. A year earlier, 9.5 cents on each dollar of sales became operating profit.
For the first half of 2014, North America operations posted record operating profit of $133 million, or 11.1 percent of sales, Armes said.
“This is especially noteworthy given last year’s first-half outstanding performance in this segment as well as the challenges we faced coming out of 2013,” he said.
Prices for rubber, oil-derived materials and steel fell by about 11 percent from a year earlier.
Sales from North America operations climbed nearly 3 percent last quarter to $639.2 million.
Cooper’s International Tire Operations’ profit declined 9.5 percent in the April-June quarter to $26.5 million.
Sales decreased 7.5 percent to $326.8 million.
“Lower pricing, due to lower raw material costs, offset higher volume in both Europe and Asia,” said Brad Hughes, president of international operations.
Cooper’s Europe and Asia operations sold 5 percent more tires during the quarter. But, 8.1 cents on every dollar in sales became operating profit last quarter. A year earlier, 8.3 cents on every dollar in sales became operating profit.
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