Cooper Tire acquisition, large-rim tires drive Goodyear growth

Akron, Ohio – The Goodyear Tire & Rubber Co. has seen its net sales and earnings increase significantly, boosted by the €2.1-billion acquisition of Cooper Tire earlier in the year.

Third quarter net sales rose 42% to $4.9 billion (€4.2 billion), driven by the merger and a 16% increase in organic sales, the tire maker announced 5 Nov.

Tire unit volumes were up 32% at 48.2 million units, reflecting a 44% volume increase in replacement tires, which was driven by 'large-rim diameter tires'.

Goodyear linked the strong performance by replacement tires to the addition of Cooper Tire unit volume, continuing industry recovery and market share gains. 

In particular, the company saw strong demand from its ‘largest commercial customers’, as transportation industry continued to move “record freight volume.”

Original equipment volumes decreased 7%, reflecting lower vehicle production due to the continued shortages of components and materials.

Goodyear reported a 130% year-on-year increase in segment operating income at $372 million and a merger-adjusted segment operating income of $449 million, which it said excluded certain costs triggered by the Cooper Tire merger.

The tire maker attributed the increase in segment operating income primarily to improvements in price/mix, the impacts of higher volume, increased factory utilisation, and higher earnings from “other tire-related businesses.” 

The earnings growth came despite a 15% increase in raw material costs in the quarter, explained chairman, president and CEO Richard Kramer.

“For context, this compares with an increase of about 1% in our raw material costs during the first half of the year,” he said during a 5 Nov conference call. 

“Like most companies, we're also experiencing significantly higher inflationary cost pressures,” he added.

According to Kramer, Goodyear earnings was also impacted by higher transportation and energy costs.

Breaking down the results, Goodyear said its sales in Americas was up 63% year-on-year at $3.0 billion, driven by the Cooper Tire merger, improvements in price/mix and higher volume. 

Tire unit volume increased 59% in Americas, reflecting an 83% increase in replacement tire unit volume and a 16% drop in OE sales.

Third quarter segment operating income of $259 million was up from $106 million reported last year.

In Europe, Middle East and Africa, third quarter sales increased 21% to $1.4 billion, primarily due to improvements in price/mix and the Cooper Tire merger. Tire unit volume increased 8%.

Segment operating income rose 268% to $81, driven by improvements in price/mix, higher volume and increased factory utilisation. 

In Asia Pacific, sales grew 17% to $570 million, due mainly to the Cooper Tire merger and improvements in price/mix. Tire unit volume rose 13%, reflecting a 10% increase in replacement tires and an 18% increase in OE sales.

Segment operating income, however, fell nearly 6% to $32 million, due to higher raw material costs.

Comments in transcript sourced from Seeking Alpha.