Cooper Tire & Rubber
Higher prices coupled with more volume helped revenue zoom 19% to $1.05 billion, crossing the billion-dollar mark for the first time in the company's history. Demand for the company's ultra high performance, light-truck, and commercial tire product lines helped boost the top line.
The tire industry has been plagued with high input costs primarily because of an increase in synthetic and natural rubber prices. Higher input costs affected the company's margins, with gross margin declining to 9% from 15% a year earlier. Net income buckled 61% to $17.3 million.
Higher costs have forced tire makers to push up prices of their products. Cooper plans to hike prices a further 5% in the U.S. It increased prices in March by 8%-9%, but that wasn't enough to offset costs. Cooper must be careful with its price hikes and keep in mind that it needs to both capture the tire market and remain on an even keel with its competitors in a coalescing industry.
Mergers and acquisitions have brought about a wave of consolidation in the tire industry, tilting the competition in favor of certain companies. Titan International's
The road ahead
Following rave reviews for the Cooper Zeon RS3-A ultra high performance tire, the company has launched the Discoverer A/T3 tire. The product is already generating a positive response. Cooper has been reinventing itself, trying to improve its product portfolio at every step, and believes that there is pent-up demand in the market just waiting to explode. If and when that happens, Cooper can expect higher top-line growth.
The company is also hoping that its operations in China and Mexico will help drive growth in the long run. To that effect, Cooper has put in $134 million to increase ownership levels in the two countries.
These efforts should pay off in the long run, but for now, Cooper must find a way to effectively pass on the pressures of high input costs to its consumers. It expects raw material costs to stabilize going ahead. If that happens, the company might witness better numbers. To keep a close eye on Cooper as it battles high synthetic rubber prices, click here to add it to your own stock Watchlist.
Fool contributor Shubh Datta doesn't own any shares in the companies mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.