Copper Tires Raises Mexican Stake - Analyst Blog

Cooper Tire & Rubber Company (CTB) revealed that it will increase its ownership in two of its affiliated Mexico operations.

Firstly, Cooper Tire will raise its ownership stake in Corporacion de Occidente SA de CV., to 58% from 38%. Upon completion of the deal in January 1, 2011, the Mexican entity will be fully consolidated in the company's financial results starting in 2011.

Secondly, Cooper Tire will fully acquire Cooper Tire & Rubber Company de Mexico SA de CV by purchasing the remaining 50% stake in the entity. This entity conducts sales and marketing in Mexico and will also be fully consolidated in the company's results.

Cooper Tire is constantly working to increase its capacity in order to meet the rising demand for replacement tires in the high performance and ultra-high performance categories. To meet this purpose, the company has outsourced the production of economy tires (medium truck and certain light vehicle tire products) to low-cost manufacturers of the  Asian countries such as China, India as well as Mexico.

In the third quarter of 2010, Cooper Tire showed an 18% fall in profit to $49.4 million from $60.2 million in the same quarter of prior year (all excluding the restructuring charges related to the closure of the Albany, Georgia facility).

On earnings per share basis, profits declined 20% to 79 cents from 99 cents in the third quarter of 2009. The lower profit was attributable to higher raw material prices, reflecting a 14% rise in cost of sales to $754.7 million. Despite this, it was higher than the Zacks Consensus Estimate of 62 cents per share.

Sales in the quarter grew 10% to $883 million. Operating profit declined to $67.1 million from $70.7 million in the year-ago quarter due to the above-explained factor.

Cooper Tire & Rubber Company, a Zacks #1 Rank (Strong Buy) stock, expects to enhance its production volume by 10% in 2011 compared with 2010. The company has implemented worldwide increase in prices as it anticipates raw material costs to continue to increase in the near term.