Goodyear – net income up 5% in Q2 2016

While unit volumes of tyres produced by Goodyear Tire & Rubber grew two per cent year-on-year in the second quarter of 2016, net sales for the three-month period were, at US$3.8 billion, down 7.0 per cent on a year earlier. The company nevertheless reported a 5.2 per cent rise in net income to $208 million, thanks largely to a decrease in income tax expense.

Tyre unit volumes totalled 41.5 million, with global replacement market tyre shipments were up four per cent and original equipment unit volume down four per cent. The number of tyres sold increased everywhere outside of the Americas in the second quarter of 2016. A total of 15.4 million units were sold in Europe, the Middle East and Africa, a year-on-year increase of 4.1 per cent, and the 6.0 million tyres sold in Asia represented growth of 21.7 per cent; this positive development was driven by the acquisition of Japanese replacement market business Nippon Goodyear Ltd. last year, which brought an additional 1.1 million or so extra units into the equation. Unit sales in the Americas declined 6.0 per cent to 18.8 million pieces, a reduction amplified by the sale of Goodyear Dunlop Tires North America Ltd and the deconsolidation of Goodyear’s subsidiary in Venezuela.

Goodyear Tire & Rubber’s top line was affected by the abovementioned deconsolidation of Goodyear’s subsidiary in Venezuela, the sale of its North American motorcycle tyre business and unfavourable exchange rates. Sales in the Americas decreased 13.5 per cent in the second quarter to $2.1 billion, while Europe, Middle East and Africa’s second quarter sales of $1.3 billion were roughly equal to the prior year result and Asia Pacific’s second quarter 2016 sales increased 7.5 per cent from last year to $528 million.

The company reported second quarter segment operating income of $531 million, down from $550 million a year ago. Goodyear Tire & Rubber states that operating income was negatively impacted by a $24 million out-of-period adjustment primarily attributable to 2012 and related to the elimination of intracompany profit in the Americas region. This amount is included as a significant item in adjusted net income. The decrease in segment operating income also reflects a $36 million reduction resulting from the deconsolidation of Venezuela partially offset by cost reduction actions. Core segment operating income, which excludes Venezuela, was $514 million in the year-ago quarter.

“We delivered higher volumes and solid earnings in the quarter, achieving operating margins above 11 per cent in all three business units,” said Richard J. Kramer, chairman and chief executive officer of Goodyear Tire & Rubber. “Industry fundamentals remain favourable across many of our key markets and demand for our premium, high-value-added tyres is strong. Our focus remains on the disciplined execution of our strategy and delivering on our financial targets.”

The company has reaffirmed its existing financial targets for 2016.

Further details about Goodyear’s results can be found in the Tyrepress.com company profiles and reports section.