Cooper Tire & Rubber Co. posted solid financial results in the quarter ended Sept. 30, with strong demand in North America and Asia leading the way to an 8.6% increase in sales versus the 2019 period.
"Following a first half that was significantly impacted by the global pandemic, our third quarter performance reflected a strong rebound for Cooper, validating our strategic initiatives and our team's ability to execute and react quickly to market opportunities," Cooper President and CEO Bradley Hughes said, noting that Cooper's U.S. sales volume increase of 9% "significantly outperformed" the domestic industry.
Aided by a one-time gain related to product-liability costs, Cooper's operating income during the period more than tripled to $171.5 million on global sales of $764.9 million. The 2020 number includes a $49 million benefit from lower product-liability costs related to an adjustment of the company's product-liability reserves.In addition, the bottom line was buoyed by lower raw-materials costs and favorable price, mix and volume components, Mr. Hughes said. The end result is a nearly 15-point gain in the operating ratio to 22.4%.Net income quadrupled to $123.3 million.
Looking at the rest of the year, Mr. Hughes said: "The strength of our third quarter performance and the pandemic-related temporary plant closures earlier in the year have reduced our inventory levels, which will affect our ability to meet global demand for our tires in the fourth quarter. This will result in modestly lower global unit volume for the second half of 2020 compared to 2019."
Company management expects Cooper to achieve operating profit margin of 10% to 14% for the second half 2020, excluding the one-time $49 million benefit.
"Our strategic initiatives are unlocking the relevance of our brand with our customers and consumers, creating additional growth opportunities. We are on the right strategic path and our team will continue to drive our initiatives to achieve our long-term goals," Mr. Hughes said.
The positive quarter was even strong enough to offset the company's struggles in the first half, as operating income for the nine-month period was up nearly 54% to $171.5 million.
Sales for the nine months, however, are still lagging behind last year by 10.5% — $1.79 billion versus $2.02 billion. Net income, at $106.1 million, is more than double the 2019 number.
In the Americas segment, Cooper's sales revenue rose 9.6% to $659.5 million on just 0.1% higher unit sales. Revenue was aided by $59 million of favorable price/mix.
In the U.S., Cooper said its light vehicle tire shipments in the quarter increased 9%, a stark contrast to the domestic industry's 1.2% shipment decline, as reported by the U.S. Tire Manufacturers Association (USTMA).Total industry shipments — including an estimate for non-USTMA members — increased 8.1% for the period, Cooper said.
Segment operating profit was $175.7 million, or 26.6% of sales, compared with $67.9 million, or 11.3% of sales, for the same period in 2019. Cooper said this represents an all-time quarterly earnings record for the segment, even after excluding the $49 million benefit from the product liability adjustment.
Segment operating profit for the nine months ended Sept. 30 was up 35.5% to $208 million on 9.2% lower sales of $1.54 million.
The international segment posted operating earnings of $8.77 million on sales of $142.1 million for the quarter. For the nine months, the international segment was $67,000 in the red on 16.7% lower sales of $345.5 million.
