Goodyear Q1 earnings up, sales down

Akron, Ohio – Goodyear reported 8-percent higher segment operating profit for the quarter ended March 31 despite lower sales.

The Akron-based tire maker attributed the earnings improvement – to $419 million (€370 million) – to a favourable price/mix net of raw materials and the impact of higher volumes. Sales revenue fell 8.3 percent to $3.69 billion, largely due to unfavourable foreign currency translation and the deconsolidation of the company’s subsidiary in Venezuela.

As a result, the operating ratio jumped nearly two percentage points to 11.4 percent.

Net income of $184 million was 24.3 percent higher than the adjusted net income of $148 in the first quarter of 2015. The 2015 figure excludes a $99 million after-tax, one-time gain on deferred royalties related to the sale of the engineered products business.

Kramer called the first-quarter results a “reflection of our ability to successfully execute on our strategy. We will continue to focus on profitable growth in market segments where our innovation, brand and operational excellence capabilities provide a competitive advantage.”

He noted that demand for the company’s premium products is “robust,” which in turn is driving margin expansion.

Tire unit volumes grew 2 percent to 41.5 million, Goodyear said, reflecting growth in the Asia/Pacific region, primarily in Japan and China. Replacement and OE tire shipments were both up equally. Excluding the impact of the deconsolidation of Venezuela, unit volumes increased 3 percent.

Goodyear reported a 5-percent gain in segment operating income for the Americas business unit to $260 million, driven primarily by a favorable price/mix net of raw materials but partially offset by the deconsolidation of its Venezuelan subsidiary and lower volume.

Sales revenue in the Americas fell 13 percent from last year to $1.95 billion, reflecting a 6-percent decrease in tire unit volume, primarily due to the deconsolidation of the Venezuelan subsidiary ($94 million in sales) and the sale of the former Goodyear Dunlop Tires North America Ltd. business ($64 million).

Replacement tire shipments were down 6 percent while OE unit volume fell 7 percent.

Excluding Venezuela and Goodyear Dunlop – 300,000 and 400,000 units, respectively – tire unit volume was down 2 percent, driven primarily by the weak economic environment in Brazil.

Goodyear’s Europe, Middle East and Africa unit reported a 6-percent drop in sales to $1.25 billion but a 10-percent increase in segment operating income to $80 million.

Asia Pacific’s sales were up 9 percent to $489 million while operating income jumped 18 percent to $79 million.

The company’s acquisition of a controlling interest in Nippon Goodyear Ltd. (NGY) in Japan positively impacted volumes by approximately 900,000 units and sales by $41 million. The net unfavourable impact on segment operating income of the NGY acquisition and the sale of the company’s 25 percent interest in Dunlop Goodyear Tires Ltd. was $3 million.