Goodyear: Q1 2017 income restrained by higher costs, lower demand

The Goodyear Tire & Rubber Company has reported its results for the first quarter of 2017, and these show unit volumes and income to be slightly down compared with the same quarter a year ago. Richard Kramer describes the latest results as “a great outcome given an environment of rising raw material costs and weaker demand.” The chairman, chief executive officer and president adds that Goodyear’s Q1 performance “is a result of the disciplined execution of our strategy.”

Goodyear’s first quarter 2017 sales amounted to US$3.7 billion, about even with a year ago. The tyre maker says it was able to maintain sales largely due to improvements in price/mix and due to higher pricing of third-party chemical sales; these two factors partially offset by lower tyre unit volumes, which were down four per cent year-on-year to 40.0 million pieces. Original equipment unit volume was down eight per cent, primarily driven by lower vehicle production in the US as well as very strong volumes in the US and China during the first quarter of 2016. Replacement tyre shipments were down two per cent.

The company reported first quarter segment operating income of $385 million in 2017, down eight per cent from $419 million a year ago. The decrease was driven by the impact of lower volume and unabsorbed overhead, which were partially offset by favourable price/mix net of raw material costs and net cost saving actions.

Goodyear’s first quarter 2017 net income was $166 million, or $0.65 per share, down almost ten per cent from $184 million a year ago. First quarter 2017 adjusted net income was $189 million, or $0.74 cents per share, compared to $195 million in 2016. Per share amounts are diluted.

The Americas

Tyre unit volumes for the Americas business segment were down five per cent year-on-year in the first quarter of 2017. Sales of $2.0 billion were flat as higher chemical and tyre pricing as well as favourable foreign currency translation were partially offset by lower tyre unit volume. Replacement tyre shipments were down two per cent. Original equipment unit volume was down 12 per cent.

First quarter 2017 segment operating income of $214 million was down 18 per cent from the prior year. The decline was driven by the impact of unabsorbed overhead and lower volume, which were partially offset by favourable price/mix and lower raw material costs.

Europe, Middle East and Africa

Europe, Middle East and Africa’s first quarter 2017 sales decreased one per cent from last year to $1.2 billion, which reflects a four per cent decrease in tyre unit volume and unfavourable foreign currency translation partially, offset by improved price/mix. Replacement tyre shipments were down five per cent. Original equipment unit volume was down one per cent.

First quarter 2017 segment operating income of $98 million was 23 per cent above the prior year due to favourable price/mix net of raw material costs and lower selling, administrative and general expense partially offset by the impact of lower volume.

Asia Pacific

First quarter 2017 sales in the Asia Pacific region increased three per cent from last year to $502 million primarily due to improved price/mix. Tyre unit volumes were flat. Replacement tyre shipments were up seven percent, while original equipment unit volume was down nine per cent.

First quarter 2017 segment operating income of $73 million was down eight per cent from last year as lower income in other tyre-related businesses and unfavourable foreign currency translation offset favourable price/mix net of raw materials.

Financial targets

Goodyear has confirmed its 2017 segment operating income guidance of approximately $2.0 billion and its 2020 financial targets and capital allocation plan.

“While raw material inflation has moderated in recent weeks, we continue to expect a significant year-over-year headwind in 2017,” commented Kramer. “We remain confident in our ability to offset raw material cost inflation over time.”

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