The economically-teetering country of Venezuela was a recurring theme in Goodyear Tire & Rubber’s 2016 financial report. The tyre maker’s deconsolidation of its subsidiary in that country drove down both sales and unit volumes for the year, however the measure had a more favourable impact upon Goodyear’s bottom line.
Goodyear’s sales in 2016 amounted to US$15.2 billion, eight per cent less than a year earlier. The company states that this result primarily reflects the deconsolidation of its business in Venezuela and unfavourable foreign currency translation. Tyre unit volumes totalled 166.1 million. This figure is essentially unchanged from 2015, however Goodyear notes that excluding the impact of the deconsolidation of Venezuela, unit volumes increased by one per cent. Aftermarket tyre shipments were up two per cent, while original equipment unit volume was down four per cent.
Goodyear’s 2016 net income of $1.3 billion ($4.74 per share) is up year-on-year from $307 million ($1.12 per share). The increase was driven by a charge in 2015 to deconsolidate Venezuela and a decrease in 2016 income tax expense due to the release of foreign tax valuation allowances. Full-year adjusted net income was $1.1 billion ($4.00 per share), up from $906 million ($3.32 per share) in 2015. Per share amounts are diluted.
The company reported 2016 segment operating income of $2.0 billion, down two per cent from a year ago. The decrease was more than explained by the deconsolidation of Venezuela. Core segment operating income, which excludes Venezuela, was $1.9 billion in 2015.
“We delivered solid net income and record core segment operating income in 2016, driven by strong performance in our Americas and Asia Pacific consumer tyre businesses,” said Richard J. Kramer, Goodyear Tire & Rubber’s chairman and chief executive officer. “Our results demonstrate continued sustainable earnings growth and disciplined execution of our strategy.
“While we expect raw material inflation to be a significant headwind in 2017, the combination of Goodyear’s innovation leadership, award-winning products and strong global brand creates an industry-leading value proposition and competitive advantage,” Kramer continued. “We’ve demonstrated that we have been able to successfully offset raw material inflation over time.”
Goodyear’s fourth quarter 2016 sales were $3.7 billion, down from $4.1 billion a year ago, with the decrease driven by the deconsolidation of the company’s subsidiary in Venezuela. Tyre unit volumes totalled 41.1 million, down two per cent from 2015. Aftermarket tyre shipments were down one per cent and original equipment unit volume was down seven per cent, driven in part due to weakness in the US commercial truck market.
Fourth quarter 2016 net income amounted to $561 million ($2.14 per share), compared to a net loss of $380 million ($1.42 per share) in the year-ago quarter. The prior year was negatively impacted by a charge to deconsolidate Venezuela. Fourth quarter 2016 adjusted net income was $249 million (95 cents per share), compared to $257 million (93 cents per share) in 2015. Per share amounts are diluted.
The company reported fourth quarter segment operating income of $479 million in 2016, compared to $480 million a year ago. Segment operating income in 2016 benefited from net cost savings, which was more than offset by lower price/mix net of raw material costs, lower volume and the deconsolidation of Venezuela. Core segment operating income, which excludes Venezuela, was $458 million in the year-ago quarter.
As a result of the continued escalation of raw material costs and the timing of the corresponding contractual adjustments to pricing with certain of its customers, the company expects flat year-over-year segment operating income in 2017 compared to 2016.
The company has confirmed its 2020 financial targets and capital allocation plan, which were announced on 15 September 2016. “We remain confident in our strategy of capturing profitable growth in key segments of the market and in delivering our 2020 targets,” commented Kramer.
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