Akron, Ohio – Goodyear has lowered its expectations for fiscal 2018 operating income slightly "to reflect the increasingly challenging industry environment," the company said in a third quarter financial statement.
For the quarter ended 30 Sept, segment operating income was down 1.3% to $362 million, while revenue inched up slightly to $3.93 billion, leaving the operating ratio unchanged at 9.2%.
Goodyear revised its operating income outlook to about $1.3 billion from the $1.45 billion to $1.5 billion estimate it made in the second quarter.
The prior-quarter outlook was, in turn, down from a previous forecast of $1.8 billion to $1.9 billion, by the Goodyear management team.
The latest outlook reflects the impact of higher raw-materials costs, Goodyear said, including "the negative impact of currency headwinds, further industry weakness in China and economic volatility in Brazil.
For the quarter ended 30 Sept, Goodyear cited higher volume, improved price/mix and higher sales in other tire-related businesses for its sales increase. But the increases were offset substantially by negative currency factors.
The company credited double-digit increases in sales of larger rim-diameter in the US and Europe for increases in those segments' revenues.
"We continued to improve the operating performance in our key mature markets, driven by strong volume growth... ", said Richard Kramer, chairman, president and CEO.
"These gains contributed to the improving momentum in our two largest segments, as EMEA delivered operating income growth of more than 20% and Americas turned in its best year-over-year performance since 2016."
Goodyear's third quarter 2018 net income was $351 million, a substantial increase over $129 million in 2017.
Goodyear attributed the gain to a $287 million net increase resulting from conclusion of its TireHub LLC, transaction, the tire distributor joint venture that was completed during the quarter.
Third quarter 2018 adjusted net income fell to $163 million, compared with $177 million in 2017.
Tire unit volumes of 40.5 million in the quarter were up 2% over 2017, with replacement shipments up 4%, driven by strong results in the Americas and EMEA. OE unit volume fell 4%, led by lower consumer demand in China.
In the Americas segment, operating income was flat in the quarter compared to 2017 ($194 million versus $196 million) and down 24% ($465 million versus $630 million in the nine-month period.
Sales in the Americas had moderate increases, $2.11 billion in the quarter compared with $2.04 billion in 2017. Operating income in EMEA jumped to 23% in the quarter to $111 million.
Sales in the region dropped 2%, Goodyear said, to $1.29 billion, attributing it to unfavourable foreign currency translation partially offset by increased volume and favourable price/mix.
Tire units increased 3% and replacement tire shipments increased 4%, while OE units fell 1%.
In Asia-Pacific, operating income fell 30% to $57 million in the quarter due to higher selling, administrative and general expenses, partially driven by higher bad debt expense, lower volume and reduced price/mix, Goodyear said.
Asia Pacific's third quarter sales fell 7% to $531 million, compared to $569 million in 2017, primarily reflecting lower tire volumes and negative currency effects, Goodyear said.
Tire units were down 4%, while replacement tire shipments were stable. Goodyear said OE units were down 11%, primarily due to expected declines in our consumer tire business in China.