Goodyear makes money in 3Q, just not as much
Goodyear Tire & Rubber Company recorded net income of $110 million on net sales of $5.3 billion for the third quarted ended Sept. 30, 2012. That compares to income of $161 million on sales of $6 billion for the same period last year.
The 13% drop in sales reflected $592 million in lower tire unit volumes and $258 million in unfavorable foreign currency translation, as well as lower sales in other tire-related businesses, most notably third party chemical sales in North America.
Operating income for the quarter was $348 million, down nearly 25% from a year ago. The company's income-to-sales ratio was 2%.
"We achieved solid segment operating income in the third quarter, driven by our performance in North America," says Richard Kramer, chairman, CEO and president. "While we were impacted by the macroeconomic challenges we face in Europe, we continue to see the benefits of our actions to sustain profit margins in a weak volume environment."
According to Kramer, Goodyear "essentially achieved" its target of $1 billion in cost savings ahead of plan. Goodyear will take additional cost reduction actions because of ongoing economic uncertainty, and expects to exceed its three-year cost savings goal.
"The structural improvements we made in our North American business are producing results that now put it on track to not only meet, but exceed, its 2013 operating income target a year early," he says.
"Our 2012 results demonstrate strong progress toward delivering profit throughout the economic cycle and generating sustainable value for shareholders. We continue to target $1.6 billion of segment operating income and positive cash flow in 2013."
Goodyear's third-quarter 2012 tire unit volume totaled 41.8 million, down 12% from 2011, primarily reflecting weaker volumes in Europe.
Sales benefitted from price/mix improvements, which drove revenue per tire up 5% percent over the 2011 quarter, excluding the impact of foreign currency translation.
Goodyear posted $183 million on net sales of $16 billion for the first nine months of 2012. That compares to income of $303 million on sales of $17 billion last year.
Sales reflect strong price/mix performance, which drove revenue per tire up 10% year-over-year, excluding the impact of foreign currency translation. Unfavorable unit volume and foreign currency translation reduced sales by $1.3 billion and $681 million, respectively.
The company's year-to-date segment operating income of $976 million was down $196 million from last year. Compared to the prior year, the decline in year-to-date segment operating income "primarily reflects lower tire volumes and higher manufacturing costs primarily resulting from lower production."
Goodyear expects its fourth quarter 2012 tire unit volume to be 3% to 5% below what it was in fiscal 2011. It also anticipates its raw material costs will be down about 10%.