Goodyear reports record Q2 income

ERJ staff report (TB)

by Tire Business Staff

Akron, Ohio — Goodyear's net income more than doubled during the second quarter, while segment operating earnings reached record levels despite lower sales.

Net income was $188 million (€142 million) for the three-month period, compared with $92 million during the 2012 period, the company reported.

Goodyear said its record segment operating income of $428 million for the second quarter was up 27 percent from a year earlier. It said the improvement reflected favorable price/mix net of raw materials of $92 million, cost savings net of inflation of $38 million and $11 million in higher tire unit volumes, partially offset by unabsorbed overhead of $47 million from lower production and $12 million in unfavorable foreign currency translation.

Sales, though, dropped 5 percent to $4.89 billion. The firm said sales were boosted by $35 million in higher tire unit volumes, but that was more than offset by $141 million in lower revenue in tire-related business, $75 million in lower price/mix and $60 million in unfavorable foreign currency translation. Tire unit volumes rose 1 percent to 39.5 million units.

Commenting on Goodyear’s performance in Europe, Kramer said the company is seeing signs of volumes stabilising and is “achieving success.” In the summer tire market with its label-graded tires that have won numerous magazine tests versus competitors.

Europe, Middle East and Africa sales decreased 1% from last year to $1.7 billion. Sales reflect 2% increase in tire unit volume, which was more than offset by lower price, Goodyear said. Second-quarter operating income of $51 million was $32 million higher than the previous year, thanks to favourable prices from materials and higher tire unit volumes.

Goodyear said it had record operating income in North America and Asia-Pacific but North American sales dropped 10.2 percent to $2.2 billion. Unit sales in North America slipped 3.9 percent to 14.8 million.

"Our objective remains to focus on profitable targeted market segments where we can capture the value of our brands and prepare ourselves to take advantage of the market recovery when it comes," said Chairman and CEO Richard Kramer.

For the first six months, sales dropped 8.8 percent to $9.75 billion, net income more than doubled to $221 million from $88 million, and segment operating income gained 16 percent to $730 million.

Though he would not discuss the details of the firm's recently negotiated tentative master contract agreement with the United Steelworkers union, Kramer said in a conference call with analysts that "we will be able to sustain our competitive position and be ready to take advantage of opportunities when demand begins to accelerate."

The company said its full-year outlook forecasts segment operating income of about $1.5 billion, at the high end of its previously announced range of $1.4 billion to $1.5 billion..

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