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October 29, 2017 01:00 AM

Third quarter woes blow Goodyear off target

Patrick Raleigh
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    For the three months to 30 Sept, Goodyear posted a 36% decline in operating income of $357 million in 2017, down from $556 million a year ago. on sales about 3% higher at $3.9 billion.

    The Akron tire maker linked the earnings decrease to higher raw material costs and the impact of lower volume, which were only partially offset by improved price/mix and net cost savings.

    The increase in sales, was largely due to improved price/mix, which drove revenue per tire up 5% over the 2016 quarter, excluding the impact of foreign currency translation, Goodyear reported 27 Oct.

    Third quarter tire unit volumes fell 5% year-on-year to 39.8 million, with replacement tire shipments down 4% and OE unit volume 9% lower than a year ago.

    To cap it all, Goodyear also reported some significant costs incurred as a result of the hurricanes that impacted a number of its US facilities.  (See separate ERJ report)

    “Despite these headwinds, which we expect to moderate over the coming quarters, we continue to execute against our long-term strategy,” commented Kramer, who also expressed high hopes for the company’s ’connected business model’.

    Regional results

    In Goodyear’s Europe, Middle East and Africa (EMEA) region, third quarter sales increased 6% to $1.3 billion. Sales reflect improved price/mix and favorable foreign currency translation, partially offset by a 4% decrease in tire unit volume, primarily in the consumer OE tire business.

    EMEA replacement tire shipments were down 1%, while OE unit volume was down 12%. Third quarter revenue per tire increased 5% in 2017 compared to 2016, excluding the impact of foreign currency translation.

    Third quarter 2017 segment operating income of $87 million was down from $152 million in the prior year, driven by higher raw material costs and the impact of lower volume, partially offset by improved price/mix and net cost savings.

    In the Americas, third quarter sales fell 1% from last year to $2.0 billion, reflecting an 8% decrease in tire unit volume, primarily in the consumer tire business.

    Replacement tire shipments were down 6%, on increased competition and weak demand. OE unit volume was down 11% on reduced automotive production in the US.

    Third quarter operating income of $189 million slumped 38% from a year ago, as higher raw material costs and lower volumes cancelled out improved price/mix.

    Asia Pacific’s third quarter sales increased 5% from last year to $569 million, reflecting improved price/mix. Replacement tire shipments were down 2%, while OE unit volume fell 1%.

    Third quarter 2017 segment operating income of $81 million was down from $99 million in the prior year, on higher raw material costs, partially offset by improved price/mix.

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    European Rubber Journal is published bi-monthly by NUERJ Ltd.

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