Goodyear Tire & Rubber Co. today reported record third quarter sales of $5.2 billion, an increase of 2%, which was driven by growth in international markets.
The company credits improved pricing, a richer product mix and strength in international markets which "more than offset lower volume, most notably in North America and Europe."
North American Tire's third quarter sales were down $100 million compared to the 2007 period.
Impacting sales was the 2007 divestiture of the company's T&WA tire mounting business, which contributed sales of $145 million in the third quarter of 2007.
Also, tire volume declined 12.4% reflecting significantly weaker market demand in both the original equipment and consumer replacement markets, the company reports. Sales in the 2008 quarter were positively impacted by improved pricing and product mix and market share gains for Goodyear-branded consumer replacement tires.
Third quarter 2008 income from continuing operations was $31 million. This compares to $159 million last year.
Goodyear had net income of $668 million in the 2007 third quarter, including a gain of $517 million on the sale of its former Engineered Products business.
Revenue per tire, excluding the impact of foreign currency translation, increased 8% over the 2007 quarter, reflecting worldwide gains in pricing and product mix generated by the company's strategy to focus on high-value-added tires, Goodyear reports.
"Goodyear's solid third quarter concludes a strong nine months of performance, reflecting the successful execution of our business strategies and continued strength in our international businesses," says Robert Keegan, chairman and chief executive officer.
The 2008 quarter was impacted by net rationalization charges and accelerated depreciation of $46 million, a loss on settlement of post-retirement health care obligations in connection with the establishment of a Voluntary Employees' Beneficiary Association (VEBA) of $13 million, expenses related to Hurricanes Gustav and Ike of $7 million, discrete net tax charges related primarily to German operations of $6 million, charges related to the exit of its Moroccan business of $5 million and a gain on asset sales of $2 million. All amounts are after taxes and minority interest, Goodyear reports.
The 2007 quarter was impacted by net rationalization charges and accelerated depreciation of $6 million, tax expense related primarily to a German tax law change of $12 million and a gain on asset sales of $10 million. All amounts are after taxes and minority interest.
The company reports it made significant progress during the third quarter on its four-point plan to achieve more than $2 billion in cost savings from 2006 through 2009. "We have now achieved $1.6 billion in savings and are clearly on a path to significantly surpass $2 billion," Keegan says.
Total segment operating income was $266 million in the third quarter of 2008, down $116 million from the 2007 period. Reductions in tire production due to weak industry demand and the resulting impact on overhead absorption, along with inflationary cost increases, were the primary drivers of higher conversion costs of $150 million during the third quarter of 2008.
Improved pricing and product mix of $280 million in the third quarter of 2008 more than offset increased raw material costs of $238 million.
Foreign currency translation positively impacted sales by $113 million and segment operating income by $8 million in the quarter.
Asia Pacific Tire and Europe, Middle East and Africa Tire achieved record third quarter sales. Latin American Tire's sales were a record for any quarter.
Asia Pacific Tire and Latin American Tire had third quarter record segment operating income.
Europe, Middle East and Africa Tire third quarter sales increased 4% over last year as a result of improved pricing and product mix and the favorable impact of currency translation, which more than offset lower volume, particularly in the consumer replacement market. Sales in the 2008 third quarter were positively impacted by market share gains for Goodyear- and Dunlop-branded consumer replacement tires.
Third quarter segment operating income decreased $42 million from 2007 due to lower production levels, which resulted in unabsorbed overhead. Pricing and product mix improvements of $71 million more than offset $59 million in higher raw material costs.
Latin American Tire sales increased 18% from the third quarter of 2007 due to improved pricing and product mix and the favorable impact of currency translation. Lower volume was a partial offset.
Third quarter 2008 segment operating income increased 2% from last year due to improved pricing and product mix of $61 million, which more than offset higher raw material costs of $40 million. Results were also favorably impacted by currency translation.
Asia Pacific Tire third quarter sales were 11% higher than the 2007 period primarily due to improved pricing and product mix. Sales in the 2008 quarter were positively impacted by strong volume growth for Goodyear-branded high-value-added tires in the consumer replacement market, most notably in Australia and China.
Segment operating income increased 22% in the 2008 third quarter, primarily due to improved pricing and product mix of $39 million, which more than offset higher raw material costs of $30 million.
First nine months
Goodyear's sales for the first nine months of 2008 were a record $15.4 billion, a 6% increase over 2007 despite a 5% decline in tire unit volume. Impacting sales was the 2007 divestiture of the company's T&WA tire mounting business, which contributed sales of $481 million in the first nine months of 2007.
Segment operating income was $963 million in the first nine months of 2008, up $45 million from the 2007 period.
Income from continuing operations for the first nine months of 2008 was $253 million. This compares to $78 million last year. Goodyear had net income of $550 million in the first nine months of 2007, including the gain on the sale of the Engineered Products business.
Improved pricing and product mix of $682 million in the first nine months of 2008 more than offset increased raw material costs of $361 million.
Revenue per tire, excluding the impact of foreign currency translation, was up 8% over 2007's first nine months.
"Our performance under challenging conditions this year demonstrates the capabilities of the business model we have put in place and the operating leverage we expect to harness once industry conditions improve," says Keegan.
Goodyear will hold an investor conference call at 10 a.m. today. Interested persons may access the conference call on the Web site or via telephone by calling (706) 634-5954 before 9:45 a.m. A taped replay will be available later today by calling (706) 645-9291. The replay will remain available on the Web site.
