Goodyear Tire Reports Record Sales Despite Lower Volumes

Goodyear Tire & Rubber Company reported sales records for both the fourth quarter and the full year 2007. Goodyear’s fourth quarter 2007 sales totalled $5.2 billion (2.65 billion pounds; an 11 per cent increase on the same quarter in 2006). According to the company, improved pricing and product meant revenue per tyre was up 10 per cent in the quarter. Goodyear’s share price jumped as much as 9.6 per cent on the day the results were published.

“Our fourth quarter results show significant gains as we drive sales of our higher-margin premium product lines,” said Robert J. Keegan, chairman and chief executive officer, adding: “This is especially true in our emerging markets businesses in Eastern Europe, Asia and Latin America. In aggregate, these three businesses grew sales 20 per cent and segment operating income 41 per cent in the quarter.”

Goodyear’s full year 2007 sales came to a record $19.6 billion (10 billion pounds), up 5 per cent over 2006 despite a 6.2 per cent decline in tyre unit volume. All four of the company’s tyre businesses outside of North America, including European Union Tire, achieved all-time record annual sales during 2007. Segment operating income was $1.2 billion (612 million pounds), compared to $712 million (363 million) in 2006. Revenue per tyre increased 8 per cent compared to 2006.

The company’s European Union Tire division sold 59.4 million units in 2007 (down from 63.5 million in 2006), however, as with the company as a whole, sales and margin were both up. Full-year 2007 sales for the division totalled $5.393 billion (2.75 billion pounds), compared with $4.99 billion (2.545 billion pounds) the year before. Segment operating margin rose ten basis points to 5.7 per cent in 2007, compared with 5.6 per cent 12 months earlier.

A ‘good year’

Analysts responded positively to the results, with Forbes magazine saying 2007 was a “good year” for Goodyear. Deutsche Bank analysts said Goodyear’s pre-tax profit total was “light, due to temporary inefficiencies costing ($40 million, roughly 20 million pounds) and volume.” Taking these out of the equation, Goodyear would have beaten predictions by even more, they said.

Observing that global transaction prices increased 12 per cent, the Deutsche Bank analysts commented: “We believe the positives from price/mix and the cost savings should provide a high confidence for the 2008 outlook.” Deutsche Bank predicted Goodyear would make $20.7 billion of revenue 2008, which implies earnings per share (EPS) in the region of $3.10-$3.20. The bank suggested EPS of $2.87 for 2008, saying that figure is a conservative estimate.