The FINANCIAL — The Goodyear Tire & Rubber Company on July 28 reported results for the second quarter and first half of 2017.
“Our second quarter results reflect the impact of volatile raw material costs and an increasingly challenging competitive environment, particularly in the United States and Europe,” said Richard J. Kramer, chairman and chief executive officer.
“In addition to higher raw material costs, we have seen a weakening in OE and consumer replacement demand across many of our key markets during the first half, despite strong underlying industry fundamentals,” he said.
“The combination of these factors has led to a highly unusual first half environment, particularly given the favorable trends in miles driven, gasoline prices and unemployment that are generally supportive of our industry,” Kramer added.
“In light of the challenging global marketplace in the first half of 2017, we have lowered our segment operating income expectations for the remainder of the year,” he said. “Despite the near-term challenges, I am no less optimistic about our ability to drive our strategic priorities against the favorable industry megatrends.”
Goodyear’s second quarter 2017 sales were $3.7 billion, down from $3.9 billion a year ago, with the decrease largely attributable to lower tire unit volume, partially offset by improved price/mix.
Tire unit volumes totaled 37.4 million, down 10 percent from 2016, primarily in Europe, Middle East and Africa and the Americas. Replacement tire shipments were down 11 percent. Original equipment unit volume was down 8 percent, according to Goodyear.
Goodyear’s second quarter 2017 net income was $147 million (58 cents per share), down from $202 million (75 cents per share) in the year-ago quarter. Second quarter 2017 adjusted net income was $177 million (70 cents per share), down from $314 million ($1.16 per share) in 2016. Per share amounts are diluted.
The company reported second quarter segment operating income of $361 million in 2017, down from $531 million a year ago. The decrease reflects higher raw material costs and the impact of lower volume, which were partially offset by improved price/mix and cost savings.
Year-to-Date Results
Goodyear’s sales for the first six months of 2017 were $7.4 billion, down 2 percent from the 2016 period, reflecting lower tire unit volume, partially offset by improved price/mix.
Tire unit volumes totaled 77.4 million, down 7 percent from 2016. Replacement tire shipments were down 6 percent, reflecting increased competition. Original equipment unit volume was down 8 percent, driven by lower auto production.
Goodyear’s year-to-date net income of $313 million ($1.23 per share) is down from $386 million ($1.43 per share) in 2016’s first half. All per share amounts are diluted.
The company reported first half segment operating income of $746 million in 2017, down from $950 million a year ago. The decrease was driven by higher raw material costs and the impact of lower volume, partially offset by improved price/mix and cost savings.
Americas’ second quarter 2017 sales decreased 3 percent from last year to $2.0 billion. Sales reflect a 9 percent decrease in tire unit volume, primarily in the consumer tire business. Replacement tire shipments were down 8 percent, driven by lower volumes in 16-inch-and-below rim diameter tires in the United States due to increased competition. Original equipment unit volume was down 12 percent, driven by lower auto production.
Second quarter 2017 segment operating income of $213 million was down 27 percent from the prior year. The decrease was driven by higher raw material costs and the impact of lower volume, partially offset by improved price/mix.
Europe, Middle East and Africa’s second quarter sales decreased 12 percent from last year to $1.1 billion. Sales reflect a 16 percent decrease in tire unit volume, primarily in the consumer tire business, partially offset by improved price/mix. Replacement tire shipments were down 18 percent, driven by increased competition and lower summer tire industry demand. Original equipment unit volume was down 11 percent.
Second quarter 2017 segment operating income of $77 million was 48 percent below the prior year driven by the impact of lower volume and higher raw material costs, partially offset by improved price/mix and cost savings.
Asia Pacific’s second quarter 2017 sales increased 3 percent from last year to $543 million, reflecting improved price/mix. Tire unit volumes were flat. Replacement tire shipments were down 3 percent. Original equipment unit volume was up 2 percent.
Second quarter 2017 segment operating income of $71 million was down 23 percent from last year, driven by higher raw material costs, partially offset by improved price/mix.
Germany Plant Closure
The company, on July 14, closed its tire manufacturing facility in Philippsburg, Germany. As previously announced, the action is part of Goodyear’s global strategy to focus on premium, larger-rim diameter tires.
This closure eliminates approximately 6 million units of capacity and is expected to provide savings of about $45 million on an annualized basis beginning in 2018.
2017 Outlook
The company now expects its 2017 segment operating income to total between $1.6 billion and $1.65 billion.
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