Goodyear Posts Loss on RMs despite Highest Sales in 2 Years
The Goodyear Tire & Rubber Company today posted its highest third quarter 2010 sales and tyre unit volumes since the third quarter of 2008. Yet under pressure from spiralling raw materials cuts, alongside charges for refinancing debt, the manufacturer ended up with a $20 million loss largely due to consistently high costs throughout the quarter, especially in raw materials. The company made a net profit of $72 million in the same period in 2009.
“We are pleased with our continued strong operating results and made significant progress in all of our strategic focus areas during the third quarter,” said Richard J Kramer, chairman and chief executive officer. “We are encouraged by the strength and breadth of the industry recovery. The bottom line is that as we look to the future we feel good about the direction of the tyre industry, and we feel even better about our direction as a company.”
Goodyear’s third quarter 2010 sales were $5 billion, up 13 per cent from the 2009 quarter. Tyre unit volumes totalled 47.7 million, up 6 percent from last year. Third quarter sales reflect the $211 million impact of the increase in volume. Sales benefited from price/mix improvements, which drove revenue per tyre, excluding the impact of foreign currency translation, up 8 percent over the 2009 quarter despite higher original equipment sales. Sales were also impacted positively by higher sales in other tyre-related businesses, primarily third-party chemical sales in North America. Unfavorable foreign currency translation reduced sales by $88 million.
“Goodyear’s innovation engine and resulting new products continue to win awards and third-party recognitions that drive differentiation in the marketplace and ultimately translate into consumer demand for our premium branded products,” Kramer said.
During the third quarter, Goodyear’s Assurance Fuel Max tyre exceeded three million units sold in North America since its introduction in 2009. Fuel Max tyres were recently introduced in Latin America and Asia Pacific markets.
The company had segment operating income of $234 million in the third quarter of 2010, down $41 million from the year-ago quarter. Segment operating income reflected improved price/mix of $252 million and the benefits of higher volume (including unabsorbed overhead recovery) of $125 million, which were more than offset by $381 million in net higher raw material costs ($412 million before raw material cost reduction actions). Unfavourable foreign currency translation reduced segment operating income by $20 million.
The 2010 third quarter included charges of $56 million (23 cents per share) for cash premiums and write-offs of deferred financing fees related to the early redemption of debt, $10 million (4 cents per share) due to rationalizations, asset write-offs and accelerated depreciation, $4 million (2 cents per share) related to a supply disruption, and $3 million (1 cent per share) resulting from a strike in South Africa; and gains of $13 million (6 cents per share) due to tax benefits, and $8 million (3 cents per share) on an insurance recovery. All amounts are after taxes and minority interest.