Q2 Net Loss For Goodyear, But Sales Rise

Goodyear’s second quarter (Q2) figures reveal that the company lost $73.6 million, compared to a net income in Q2 last year of $28.9 m. Sales were up nearly 8 per cent at $3.8 billion (3.5 bn), but volumes were down half a million units to 52.8 million pieces. The single most important factor in the deterioration of operating performance was an increase in raw material costs of around, $124 million, said Goodyear, even though this was offset in part by cost reductions, improved price and mix and a positive currency translation benefit of some $9 million.




The net loss for the first six months of the year was $236.9 million (1H 2002 : $34.3 million loss). The 2003 figures included a rationalisation charge of $78.6 million to cater for staff reductions, while the 2002 figures were boosted by an income benefit of around ?10 million as a result of the Ford tyre replacement programme. Sales for the first six months of 2003 reached $7.3 billion; 7.6 per cent up on the 1H 2002 figure of $6.8 billion. Tyre unit volume was down at 105.4 million units (106.3 m). Brief details of the performances of Goodyear’s various business segments are given below.




North American Tire




Unit volume: Q2: 25.3 million units (down 4.1 per cent)
1H: 50.1 million units (down 4.7 per cent)
Sales totalled $1.692 bn, compared to $1.698 bn in Q2 last year, with replacement volumes down 2.4 per cent and OE shipments down 7.2 per cent.




European Union Tire




Unit volume in Q2 was slightly up at 14.9 million tyres (Q2 2002: 14.8 m) and the six month figure of 30.7 million tyres was 0.8 million units higher than last year. In Dollar terms, the situation improved too, with Q2 sales worth $965.5 million (806.9 m) and six monthly sales reaching $1.896 billion (1.551 bn). The gains were made in the replacement market (+ 5.1 per cent for Q2 and +8.4 per cent for the six months), while OE sales slipped 6.3 per cent (Q2) and 7 per cent (1H). The effect of currency translation had a positive impact on sales of $149 million (Q2) and $320 million (1H). The effects on operating income were estimated to be positive, at $10 million in Q2 and $19 million for 1H.




Eastern Europe, Africa, Middle East Tire




There was a sharp increase in Q2 volumes of 25.7 per cent, up to 4.7 million units in Q2 (from 3.7 m in Q2 last year). First half volume stood at 8.7 million units, as opposed to &.5 m in 1H last year. Again, this was reflected in revenue, with sales in Q2 reaching $268. 6 million ($193.2 m) and, for 1H, $496.0 million (367.7 m). Both replacement and OE sales were up and the impact of currency translations was positive, at $36 million for the quarter and $71 million for the half year. Price increases also contributed to the positive result.




Latin America Tire




Unit sales here decreased 14.6 per cent in Q2 (4.4 million units against Q2 2002 5.2 m) and, for the half year, were one million units less, at 9.1 million tyres. Both replacement and OE sales were down. Despite the lower volume, sales for Q2 were worth $258.3 million, slightly up on the Q2 figure of $254 m), although they were down for the half year ($490.0 million, against $499.6 m). Much of this was due to improved prices and product mix, but the effect of currency translations on sales was negative (-$25 million for Q2 and -$94 m for 1H) and also had a negative effect on operating income (-$2 m in Q2 and -$29 m in 1H).




Asia Tire




Volume was up 7.9 per cent in Q2 and up 8.4 per cent for 1H. The respective figures were Q2: 3.5 million units (3.2 m) and 1H: 6.8 million units (6.2 m). sales rose too, at $148.9 m (134.8 m) in Q2 and $289.4 m ($256.5 m) in 1H. While replacement market shipments were flat, sales to OE customers were up sharply (+25.8 per cent for Q2 and +30.4 per cent for 1H). Currency translations had a positive effect on sales of $3 m (Q2) and $6 m (1H).




These are brief highlights of Goodyear’s various tyre-related business segments and, of the other two divisions, Engineered Products showed a decrease in sales, while Chemical Products posted an increase in turnover.




Goodyear’s chairman and CEO Robert J. Keegan said that he was „disappointed in our financial results for the second quarter“, but he then went on to outline a number of positive trends that he believed the results showed, saying: „we are optimistic about our turnaround“.




So, what is there to be optimistic about? „Our international tyre business, as well as our Engineered Products and Chemicals units, continue to perform well, and five of our businesses have recorded improved year-over-year segment operating income for five consecutive quarters,“ said Keegan, adding: „In North America, our Goodyear brand gained market share in both the consumer and commercial replacement tyre markets during the quarter, and we continue to implement our cost-cutting and turnaround strategies. We have numerous obstacles to overcome, including continued weakness in the US economy, but we remain confident that our strategies are solid.“