Global Goodyear revenue stable, net income down on higher prices, lower volume

The Goodyear Tire & Rubber Company has reported sales of $3.9 billion in the third quarter of 2017. This figure is up from $3.8 billion year-on-year, largely attributable to improved price/mix, which saw revenue per tyre rise five per cent over the 2016 quarter, excluding the impact of foreign currency translation. Tyre unit sales were down five per cent in total, with original equipment down nine per cent and replacement down four per cent. Net income in the quarter was $129 million (50 cents per share), down from $317 million ($1.19 per share) in Q3 2016. Its segment operating income was $357 million, down from $556 million a year ago, which the manufacturer attributed to higher raw material costs in addition to lower volume. Goodyear now expects its full-year 2017 segment operating income to be approximately $1.5 billion.

“During the third quarter, we saw a continuation of the challenging industry conditions we experienced in the second quarter including lower consumer replacement volumes, production cuts by automakers and an increase of more than 30 percent in our raw material input costs,” said Richard J. Kramer, chairman, chief executive officer and president.

“Despite these headwinds, which we expect to moderate over the coming quarters, we continue to execute against our long-term strategy. We remain focused on the opportunities for driving profitable growth including our connected business model, which aligns all of our assets from our manufacturing plants to consumers who choose Goodyear online and at retail.”

The latest quarter is largely in line with figures for the first nine months. Goodyear’s sales in this period were $11.3 billion, down one per cent from the 2016 period. Tyre unit volumes were 117.2 million, down six per cent from 2016.

Year-to-date net income stands at $442 million ($1.73 per share), down from $703 million ($2.62 per share) in 2016’s first nine months. Its segment operating income is $1.1 billion, down from $1.5 billion a year ago. The company has attributed this to higher raw material costs and the impact of lower volume, partially offset by improved price/mix and net cost savings.

EMEA results

In Europe, Middle East and Africa, Goodyear has seen sales increase six per cent from last year to $1.3 billion in the third quarter, though the company’s tyre unit volume in the region has decreased by four per cent, primarily in the consumer OE tyre business, which is down 12 per cent. Third quarter revenue per tire increased 5 percent in 2017 compared to 2016, excluding the impact of foreign currency translation.

Third quarter 2017 segment operating income of $87 million was down from $152 million in the prior year, driven by higher raw material costs and the impact of lower volume, partially offset by improved price/mix and net cost savings.

Hurricane Impact

Goodyear said its Americas business was impacted by hurricanes during the third quarter. Goodyear operates three chemical plants in Texas and has tyre distribution and retail operations in the affected areas that were damaged or experienced shutdowns.

Sales were negatively impacted during the quarter in company-owned locations by approximately $23 million, resulting in lost profits of about $5 million in segment operating income. In addition, approximately $12 million in hurricane-related costs were incurred during the quarter representing fixed costs during chemical plant shutdowns as well as incremental clean-up and repair expenses. These items have been excluded from operating earnings per share in the quarter. The company estimates that the negative impact of the hurricanes on the United States consumer replacement industry overall was approximately one per cent in the third quarter.