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Goodyear's Earnings Double in 2018

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Goodyear Tire and Rubber Co. doubled its earnings in 2018, despite year-over-year declines in sales and volumes of 5% and 3%, respectively, in the fourth quarter.

For 2018, Goodyear posted net income of $693 million on net sales of $15.5 billion. That compares to income of $346 million on sales of $15.4 billion in 2017.

Goodyear said its net income in 2018 included a net gain after-tax and minority interest of $207 million resulting from the TireHub transaction, net of transaction costs.

The company’s income-to-sales ratio in 2018 was 4.4%.

Full-year 2018 adjusted net income was $555 million ($2.32 per share), down from $790 million ($3.12 per share) a year ago.

Overall tire unit volumes were 159.2 million, unchanged from the prior year. Replacement tire shipments were up 1% in 2018 while original equipment unit volume was down 4% compared to 2017.

The company said the increase in 2018’s sales was driven by driven by improvements in price/mix, partially offset by unfavorable foreign currency translation.

Goodyear reported 2018 segment operating income of $1.3 billion in 2018, down 18% from $1.6 billion a year ago. The decrease was primarily attributable to increased raw material costs, weaker results from other tire-related businesses and unfavorable foreign currency translation, which were partially offset by net cost savings and improved overhead absorption.

Fourth quarter results

The company attributed fourth quarter 2018 sales of $3.9 billion, which were 5% versus $4.1 billion in the year-ago quarter, to unfavorable currency translation and lower volume. These effects were partially offset by improvements in price/mix.

Tire unit volumes totaled 40.7 million, down 3% from 42.0 million in 2017’s fourth quarter.  Replacement tire shipments were nearly flat compared with a year ago, as growth in Europe was offset by weakness in Brazil and China. Original equipment unit volume was down 10%, primarily due to lower automotive production in China and India.

Goodyear’s net income was $110 million in the fourth quarter of 2018 compared to a net loss of $96 million a year ago. Fourth quarter 2018 adjusted net income was $120 million compared to $245 million in 2017.

Americas business segment 4Q results

Sales in the Americas business segment in the fourth quarter 2018 decreased 3% from last year to $2.1 billion. The company said sales reflect the negative effect of foreign currency translation and lower volume, partially offset by improved price/mix.

Replacement tire shipments were down 2%, driven by a decrease of 14% in commercial replacement. U.S. consumer replacement volume was flat. Original equipment unit volume was down 4%.

Fourth quarter 2018 segment operating income of $179 million was down 18% from the prior year. The decrease reflects higher raw material costs, increased product liability costs, reduced earnings from third-party chemical sales, the unfavorable effect of foreign currency translation and reduced volume, partially offset by a favorable indirect tax settlement in Brazil and improved overhead absorption.

The ocmpany said U.S. retail sell-out volume was up 2% in the fourth quarter, and TireHub distribution capabilites and levels were on plan.

Americas business segment comparisons

(in millions) 4Q 2018 4Q 2017 2018 2017
Tire units 19.1 19.5 70.9 70.9
Sales $2,114 $2,184 $8,168 $8,212
Segment operating income 179 217 654 847
Segment operating margin 8.5% 9.9% 8.0% 10.3%

Shareholder Return Program

The company paid a quarterly dividend of 16 cents per share of common stock on Dec. 3, 2018. The board of directors declared a quarterly dividend of 16 cents per share payable March 1, 2019, to shareholders of record on Feb. 1, 2019. The payout represents an annual rate of 64 cents per share.

As a part of its previously announced $2.1 billion share repurchase program, the company repurchased 897 thousand shares of its common stock for $20 million during the fourth quarter. For the full year, the company repurchased 8.9 million shares for $220 million. Since 2013, purchases under the program total 52.9 million shares for $1.5 billion. Goodyear says it does not expect to make a significant amount of share repurchases in 2019.

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