Goodyear Earnings Double
Goodyear Tire & Rubber has reported second quarter results which show net income more than doubled to $69 million. The company explained that price increases and an improved product mix helped to offset raw material prices. In addition the favourable impact of currency translation is said to have added about $108 million to the sales total.
Total sales rose 10.5 per cent to $4.99 billion, while sales in Goodyear’s North American Tire unit rose 5.8 per cent to $2.3 billion. European Union tyre sales rose 11 per cent to $1.18 billion.
“Five of our businesses had record second quarter sales, and margins improved in our North American and European Union tyre businesses,” said Robert J. Keegan, Goodyear chairman and chief executive officer. “This success is further evidence that our strategies are working, and that our unwavering focus on key products, customers and markets is paying off. We continue to gain share in targeted markets,” he said.
“We have been successful in offsetting the impact of record high raw material costs through strategic pricing actions and by driving product mix enhancement. We will continue to concentrate on these areas to address the inevitable raw material cost increases that we expect in the second half of 2005,” Mr Keegan added.
Raw material costs were said to have increased by approximately $133 million during the quarter, compared to a year ago. The company said it expects raw material costs to grow by approximately 10 per cent for the full year of 2005 compared to 2004. Goodyear said it anticipates continued year-over-year gains in operating performance during the second half of 2005, however the rate of those gains is expected to be less than they were in the first half.
Goodyear Tire’s total segment operating income was $316 million, an increase of 24 per cent compared to $254 million in the 2004 period. All of Goodyear’s tire businesses reported higher segment operating income compared to the year-ago period.
Sales in the company’s European Union Tire division were also said to be record breaking, this time setting a new level for sales in the second quarter. Goodyear explained that the figures were the result of “strong price and product mix,” volume increases driven by the consumer replacement and commercial OE markets and a favourable currency translation effects to the tune of $26 million.
North American Tire sales nearly 6 per cent (compared to the 2004 period) was a recording for any quarter, according to the company. These increases were offset by an 8 per cent decrease in shipments to consumer OE customers, reflecting a slowdown in the US automotive industry and Goodyear’s selective fitment strategy in this market.
Eastern Europe, Middle East and Africa Tire’s sales were up 14 per cent – again a second quarter record. Amongst other things, the improvement was put down to $12 million dollars of favourable currency translation, price increases in emerging markets and continued growth in premium brands.
Segment operating income improved 9 per cent, reaching a second-quarter record due to improved pricing and product mix, foreign currency translation of approximately $7 million, and strong volume. Higher raw material costs of approximately $7 million had a negative impact on results.
One of the company’s most impressive results came from its Latin American business unit. Latin American Tire reported a 31 per cent sales increase in the second quarter of 2004 to the highest level for seven years. In addition, segment operating income rise to 22.5 per cent in the first half of 2005.
The Asia/Pacific division could boast as impressive operating margins (5.4 per cent and 5.5 per cent for the second quarter and the first half respectively), but still reported 12 per cent higher sales than in 2004. This was said to be primarily due to $21 million dollars of currency translation and higher volumes, particularly in the OE markets.