Goodyear’s EMEA results impacted by raw material costs, competition

Akron, Ohio – Goodyear Tire & Rubber’s half-year results in Europe, Middle East and Africa (EMEA) have seen significant decline reflecting the impact of higher cost of raw materials’ costs and increased competition in the replacement tire segment.

Year-on-year sales in EMEA fell 6.3% to $2.35 billion (€2 billion) in the first six months of the year, region’s operating income declined sharply at 23.2% to $175 million.

In second quarter alone, EMEA operating income of $77 million was 48% below the prior year driven by the impact of lower volume and higher raw material costs.

Volumes in the region declined 3.5% to 28.5 million during the six months to end of June, reflecting a 16% fall in the second quarter.

Unit sales decline, according to Goodyear, was primarily in the consumer tire business but was partially offset by improved price/mix.

EMEA replacement tire shipments in the second quarter were down 18%, driven by increased competition and lower summer tire industry demand. Original equipment unit volume was down 11%.

Goodyear's consolidated operating income fell 32% and 21.3% for the quarter and six months ended June 30 due to the negative effects of higher raw materials costs and lower unit volumes.

Goodyear Chairman and CEO Richard Kramer said the results "reflect the impact of volatile raw material costs and an increasingly challenging competitive environment, particularly in the US and Europe."

Kramer called the first half a "highly unusual" environment, with weakening OE and replacement demand despite strong underlying industry fundamentals, such as favourable trends in miles driven, petrol prices and unemployment.

In light of the first half results and the "challenging global marketplace," Goodyear has lowered its segment operating income expectations for the remainder of 2017.

"Despite the near-term challenges, I am no less optimistic about our ability to drive our strategic priorities against the favourable industry megatrends," Kramer said.

Segment operating income fell to $361 million in the quarter and to $746 million in the first half, whiles sales were off 5% in the quarter to $3.69 billion and 2.4% to $7.39 billion in the half. Unit volume fell 10% to 37.4 million units worldwide.

As a result, the firm's operating margin fell nearly four points to 9.8 percent for the quarter and two and a half points to 10% for the half year.

For the full year, Goodyear expects sales volumes to be down about 3.5 percent from 2016 and segment operating income to fall between $1.6 billion and $1.65 billion, down from $2 billion last year.

Net income fell 27% to $147 million and about 19% to $313 million.

In the Americas, operating income fell 26.8 and 22.5 percent in the quarter and half year on 2.9- and 1.3-percent lower sales.

Second quarter sales fell to $2.03 billion on 9% lower volume, Goodyear said, driven primarily by lower consumer demand, especially in the US for tires in 16-inch rim diameters and below, due to increased competition. OE unit volume was down 12%, reflecting lower auto production.

The Asia Pacific segment reported a 3% sales gain, to $543 million, reflecting improved price/mix. Tire unit volumes were flat.

ERJ sister publication Tire Business contributed to this report