Goodyear’s Third-Quarter 2019 Earnings Drop 75%
Goodyear Tire & Rubber Co.’s third-quarter 2019 earnings dropped 75% to $88 million versus the year-ago period. Global sales and tire volumes likewise decreased, by 3.2% and 1% respectively.
Goodyear posted net income of $88 million on net sales of $3.8 billion for the third quarter ended September 30, 2019. That compares to income of $351 million on sales of $3.9 billion for the same period in fiscal 2019.
The company's income-to-sales ratio was 2.3%
Goodyear said the decrease in net income was driven by a $287 million net gain recorded during the third quarter of 2018 resulting from the company’s TireHub transaction. Third quarter 2019 adjusted net income was $105 million, compared to $163 million in 2018.
The company attributed the 3% drop in sales to unfavorable foreign currency translation and lower third-party chemical sales.
Tire unit volumes totaled 40.3 million, down 1% from 2018. Original equipment unit volume decreased 5%, driven by lower global vehicle production. Replacement tire shipments increased 1%.
“In the Americas, we saw continued strength in our U.S. consumer replacement business and solid growth in Brazil, giving us positive momentum in these important markets as we head into the final months of the year,” said Richard Kramer, chairman, chief executive officer and president.
“Our Asia Pacific business improved in the quarter as we benefitted from the launch of several new OE fitments in China, which helped mitigate the impact of lower auto production. This is a testament to the strength of our technology and our success winning fitments on the right platforms,” he added.
“Industry conditions were softer than we anticipated in Europe and we continued to see an adverse impact from lack of alignment in our distribution channels. In response, we expect to accelerate our plans to rationalize distribution in the region. These actions, which will begin early next year, should improve the focus on our brands and ensure that we capture the full benefits of the investments we are making to increase the supply of premium, high margin tires over the next few years,” said Kramer.
Segment operating income was down 19% from $362 million to $294 million. The decrease primarily reflects increased raw material costs, the impacts of lower volume, and the non-recurrence of a favorable indirect tax settlement in Brazil. These factors were partially offset by improved price/mix.
Americas Business Segment
Tire units (up 1%): 17.8 million in 3Q 2018 to 17.9 million in 3Q 2019
Sales (down 3%): from $2,107 billion to $2,049 billion
Segment operating income (down 10%): from $194 million to $175 million
Segment operating margin: from 9.2% to 8.5%
In the Americas Business Segment, third quarter 2019 sales of $2.0 billion were 3% lower than in the previous year, driven by lower third-party chemical sales. Replacement tire shipments increased 3%, led by growth in the U.S. and Brazil. Original equipment unit volume declined 7%. The reduction was driven by our U.S. business, reflecting lower vehicle production, including the impact of a strike at a major OE customer, and strategic fitment choices.
Goodyear said the 10% decline in Americas segment operating income was due to a favorable indirect tax settlement in Brazil in 2018.