Goodyear income 39% above consensus

Goodyear Tire & Rubber has announced what it says are record second quarter earnings, and even its European business showed signs of improvement. Net income more than doubled year-on-year from $85 million in Q2 2012 to $181 million, or $0.67 per share. This exceeded the average analyst estimate by $0.19, and company chairman and CEO Richard J. Kramer said the result demonstrates “the disciplined execution of our strategies by Goodyear associates around the globe as our operations become more efficient, reliable and integrated.”

Second quarter sales amounted to US$4.9 billion, down from $5.2 billion a year earlier. These sales reflect $35 million in higher tyre unit volumes, which Goodyear says was more than offset by $131 million in lower sales in other tyre-related businesses, most notably third party chemical sales in North America, along with negative $75 million in lower price/mix and $60 million in unfavourable foreign currency translation. Tyre unit volumes totalled 39.5 million, up one per cent from 2012. 

Operating income, at $428 million, was up 27 per cent year-on-year in the second quarter of 2013 and another record. Operating income rose in all four regions, including Europe, Middle East and Africa, where unit sales of tyres, favourable raw materials price/mix and lower selling/admin costs helped drive operating income up from $19 million in Q2 2012 to $51 million in the second quarter of this year. European operating margin increased from 1.2 per cent to 3.2 per cent. Commenting on Goodyear’s performance in Europe, Kramer said the company is seeing signs of volumes stabilising and is achieving success in the summer tyre market.

“We achieved significantly higher earnings, with record operating income in North America and Asia Pacific,” he continued, referring to respective operating incomes of $204 million (9.3 per cent) and $91 million (15.6 per cent). Operating income for Latin America also rose to $82 million, a margin of 15.4 per cent “Our objective remains to focus on profitable targeted market segments where we can capture the value of our brands and prepare ourselves to take advantage of the market recovery when it comes,” added Kramer.

Year to date results

Goodyear’s sales for the first six months of 2013 were $9.7 billion, down nine per cent year-on-year. Tire unit volumes totalled 79 million, down four per cent from 2012. The company’s first-half segment operating income of $730 million was up 16 per cent from last year and a record, while year-to-date net income available to common shareholders of $206 million, or $0.79 cents per share, is up from $73 million ($0.30 per share) in the first half of 2012. All per share amounts are diluted.

Outlook

For the full year, Goodyear doesn’t expect its tyre unit volumes to rise significantly above 2012 levels. “We anticipate volume growth in the second half of 2013 compared to last year, with a three per cent to five per cent increase in the third quarter driven by continued improvement in emerging markets and slow but steady recovery in mature markets,” said Kramer. As for operating income, the chairman and CEO commented that Goodyear now expects this to be about $1.5 billion, or “at the high end of our previously announced range…and the highest ever achieved by the company.”