Goodyear doubles Q2 net profit despite decline in sales and volumes

ERJ staff report (DS)

Akron, Ohio - Goodyear's unit sales continued to decline in the three months to June 2012. Tyre segment profits and sales revenues also fell. Net profits, however, doubled

Goodyear said second quarter 2012 tyre unit volumes totaled 39.2 million, down 9 percent from the same period in 2011, primarily reflecting weaker replacement industry volumes, most notably in Europe.

The company said sales in the period fell 8 percent to $5.2 billion (euro 4224 million). Goodyear also suffered a 12 percent decline in tyre segment operating income taking the figure to $336 million in the period.

Goodyear's second quarter 2012 net income  $85 million, up from $40 million in the 2011 quarter.

Segment operating income for the quarter fell 12 percent to $336 million, or 6.5 percent of revenue, dragged down by an 84.5-percent plunge in the Europe/Middle East/Africa business unit. Goodyear also cited the effects of the lower tyre volume and associated unabsorbed overhead, as well as unfavourable foreign currency translation for the lower earnings.

North American Tire, by contrast, reported a 37.2-percent gain in operating income to $188 million; nearly half of the gain, though, was attributed to savings related to the closing in July 2011 of the company's plant in Union City, Tennessee, while an improved price/mix of $176 million more than offset the $114 million in higher raw material costs, Goodyear said.

Excluding the impact of foreign currency, sales reflected a strong price/mix improvement that drove revenue per tyretyre up 8 percent over the 2011 quarter, the tyre maker said. However the strong dollar meant that like-for-like revenue per tyre declined. Improved price/mix of $313 million more than offset $238 million in higher raw material costs, Goodyear said.

For the first six months, Goodyear's net earnings plummeted 41.3 percent to $88 million as net sales revenue slipped 3.1 percent to $10.7 billion and unit sales were off 8.4 percent. Segment operating income fell 11.4 percent to $628 million, or 5.9 percent of sales.

Goodyear said unfavourable unit volume and foreign currency translation reduced sales by $727 million and $423 million, respectively.

The North American, Latin American and Asia Pacific segments increased their operating incomes, compared with the year-ago quarter, while the Europe, Middle East and Africa Tire division's operating income plummeted 84.9 percent, reflecting a drop in unit volume and foreign currency translation.

Sales by North American Tire increased 1.7 percent in the quarter to $2.45 billion, although unit sales slipped 1.9 percent to 15.4 million units. Replacement tyre shipments fell 10 percent while OE unit volume increased 24 percent, Goodyear said.

For the first half, North American Tire's segment operating income surged 51.4 percent to $268 million as sales increased 4.9 percent. tyre unit volume fell 4.9 percent for the half, compared with the year-ago period.

“Three of our businesses increased year-over-year operating income and margins in a difficult economic environment,” said Richard J. Kramer, chairman and CEO. “Our improved ability to remain profitable through economic cycles is evident in our second quarter results and better positions us going forward given ongoing uncertainty in the global economic and policy environment.”

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Press release from Goodyear