Reasonable First Half Growth for Goodyear in EMEA, North America
Goodyear has experienced a reasonable second quarter of this financial year in the Europe, Middle East and Africa segment, where second quarter sales increased 5 per cent to $1.5 billion. This was primarily due to a 6 per cent increase in tyre unit volume and strong price/mix performance, according to the company. In worldwide results, the company’s sales were $4.5 billion, up 15 per cent from 2009. Second quarter sales reflect the $304 million impact of a 10 per cent increase in tyre unit volume in response to improved global demand.
Sales were also positively impacted by $161 million from higher sales in other tyre-related businesses, primarily third-party chemical sales in North America, and by improved price/mix, said the company statement. Unfavorable foreign currency translation reduced sales by $37 million. The company had segment operating income of $219 million in the second quarter of 2010, up from $24 million in the year-ago quarter. Compared to last year, second quarter segment operating income reflects higher global demand, strong price/mix performance and cost reduction actions.
The improved price/mix of $121 million in 2010’s second quarter did more than just offset $54 million in net higher raw material costs ($89 million before raw material cost reduction actions). Unfavourable foreign currency translation reduced the segment operating income by $14 million. The 2010 second quarter included charges of $8 million (3 cents per share) due to rationalizations, asset write-offs and accelerated depreciation, and $3 million (1 cent per share) for a one-time importation cost adjustment, and a gain of $8 million (3 cents per share) on asset sales (all amounts are after taxes and minority interest).
In North America – Goodyear’s most important market – second quarter 2010 sales increased 21 per cent from last year to $2 billion, reflecting a 13 per cent increase in tyre unit volume, improved price/mix and branded share gains in the consumer replacement business. Original equipment unit volume increased 69 per cent, primarily in the consumer business. Replacement tyre shipments were up 2 per cent. Sales were positively impacted by $179 million from higher sales in other tyre related businesses, primarily third-party chemical sales.
Second quarter 2010 segment operating income of $16 million was a $107 million improvement over the prior year. Compared to the prior year, price/mix improved $36 million, while raw material costs were essentially unchanged. The 2010 quarter also benefitted from higher volume, increased production levels, decreased pension expense and actions to reduce costs. General and product liability expense increased in the quarter.
In EMEA, original equipment unit volume increased 27 per cent, while replacement tyre shipments were up 1 percent. Unfavourable foreign currency translation reduced sales by $83 million. Second quarter 2010 segment operating income of $73 million was an $88 million improvement over the prior year. The price/mix improved by $23 million, which more than offset $3 million in higher raw material costs. The 2010 quarter was also positively impacted by higher volume, increased production levels and actions to reduce costs. In Latin America and Asia Pacific, the company experienced sales increases, though segment operating income dropped in the former. Asia Pacific continued to grow in terms of operating income, but both segments had reduced operating margins.
“We are very pleased with our strong performance in the second quarter and first half of the year,” said Richard J. Kramer, president and chief executive officer. “Our businesses continue to perform better than a year ago as they capture the benefits of recovering industry demand, strong new product performance and solid productivity improvements. We are clearly on the right path as our strategies position us to grow profitably as markets continue to improve.”
Kramer noted that improved results in the company’s North American Tire business unit made a significant contribution to Goodyear’s second quarter success. “These results are further evidence of the effectiveness of our strategy to drive innovation, improved mix and operational efficiency in the business,” he said.