FINDLAY, Ohio - Cooper Tire & Rubber Co., the second-largest U.S. tiremaker, on Thursday reported higher fourth-quarter earnings, helped by its restructuring of a unit that makes hoses, seals and other automotive components.
The Findlay, Ohio, company also said it expects lower earnings for the first quarter of 2003, although it sees higher full-year results if the U.S. economy picks up in the latter half of the year.
Analysts noted that profitability in the company's tire business declined in the fourth quarter and that the company said first-quarter demand appears to be soft.
"Investors will likely remain concerned about raw material costs in the near term," said Deutsche Bank Securities analyst Rod Lache in a research note.
Net income at the company increased to $23 million, or 32 cents a share, from $15.7 million, or 22 cents, a year ago.
Results were at the top end of Cooper's Oct. 16 forecast of 27 cents to 32 cents. The company warned at that point that earnings would be below analysts' estimates due to the slow U.S. economy.
Analysts' estimates ranged from 25 cents to 31 cents, with an average forecast of 29 cents, according to market tracker Thomson First Call.
Revenue rose to $842 million from $777 million.
AUTO UNIT SALES STRONG
Net sales at its Cooper-Standard Automotive unit, which makes hoses, sealing systems and other products for automakers, increased nearly 8 percent in the fourth quarter to $389 million. The company credited strong car production in North America and new business in both North America and Europe.
Operating profit at the unit jumped to $25 million from $5 million a year ago due to operating improvements and cost savings from restructuring, efficiency initiatives and increased production volume. Restructuring alone generated savings of $8 million in the quarter.
Its tire unit reported weaker results. Sales rose nearly 9 percent to $458 million, although its unit sales increased 10 percent. Operating profit fell to $30 million from $40 million a year ago.
Cooper Tire blamed the profit shortfall on "difficult operating conditions" including less favorable product and customer mix, increasing raw material costs and operating inefficiencies related to its efforts to reduce inventories.
It expects higher costs for raw materials, which have hit competitor Goodyear Tire & Rubber Co. and other tiremakers, to continue in the first half of 2003.
Unlike Goodyear, however, Cooper Tire doesn't sell tires to the carmakers. Such sales generally carry lower margins than the consumer replacement tires sold by Cooper.
The company said it postponed a previously announced tire price increase from December to January, possibly shifting some orders to the fourth quarter as a result.
As a result, Cooper Tire told analysts it expects first quarter earnings of 26 cents to 31 cents a share, down from 36 cents in the year-ago quarter.
Cooper Tire said it hopes to offset earnings pressures in 2003 with new products and increasing demand for replacement tires as well as new automotive business launches.
"We are confident that over the course of the year improving economic conditions and improvements in our own performance will allow us to achieve results even better than in 2002," said Chairman, President and Chief Executive Thomas Dattilo in a release.
Analysts' 2003 estimates have ranged from $1.40 to $1.60 a share, with an average forecast of $1.55, according to market tracker Thomson First Call.
Cooper Tire earned $112 million, or $1.51 a share, in 2002.