Goodyear posts record sales (again) and $142 million in net income
Goodyear Tire & Rubber Co. posted net income of $142 million on record net sales of $5 billion for the third quarter ended Sept. 30, 2005. That compares to income of $38 million on sales of $4.7 billion for the same period in 2004.
The $5 billion in sales was 0.7% greater than its previous quarterly record, set in the second quarter of this year, and a 7% increase from $4.7 billion recorded during the third quarter of 2004. Net income was the highest quarterly result since the third quarter of 1998.
Goodyear says the growth in sales "reflects improved pricing and product mix in each of the company's businesses, higher volume in its international tire businesses, and the favorable impact of currency translation."
Third-quarter tire unit volume increased to 58.4 million units, compared to 57.4 million units during the same period in 2004, a 1.8% gain. Total segment operating income increased 21.3% to $330 million.
"All six of our business units achieved third-quarter sales records, and all of our tire businesses achieved improvements in segment operating income compared to last year," says Chairman, CEO and President Robert Keegan.
"This improvement... is further evidence that we are executing to our plan. Specifically, we are winning through our strategy of focusing on high margin market segments and bringing higher-margin, differentiated new products to market quickly."
Goodyear introduced two major lines, the Goodyear Fortera featuring TripleTred technology (North America) and the Dunlop Wintersport 3D (Europe) during the third quarter.
Keegan says the strategy to focus on enhancing the company's brand and product mix, together with increased pricing, has enabled Goodyear to offset the impact of higher raw material costs, which increased approximately $148 million compared to the third quarter of 2004.
Goodyear's third-quarter 2005 results include after-tax charges of $10 million related to the effects of hurricanes Katrina and Rita. The effects of these hurricanes in North America "principally have involved temporary reductions in production at its North American Tire facilities due to disruption in the supply of certain key raw materials," according to the company. Its tire plants returned to normal production levels in mid October, and its Beaumont, Texas, chemical plant is operating at near capacity.
(The company warns that continuing impact of the hurricanes could result in future raw material shortages, which could cause intermittent reductions in production, although none are expected at this time.)
In addition to the hurricane-related charge, Goodyear's 3Q results include an after-tax charge of $8 million for rationalizations. The quarter also included after-tax gains of $25 million related to the sale of the company's Wingtack adhesive resins business, and $14 million from an insurance settlement.
Here are the quarterly results by business segment.
North American Tire: Segment operating income, $58 million; sales, $2.37 billion; tire units sold, 26.6 million.
North American Tire's sales were a record for any quarter, increasing 5% compared to the 2004 period. Sales were positively affected by favorable pricing and product mix, and the continued success of Goodyear's strategy to focus on the higher-margin segments of the replacement market.
Third quarter-segment operating income more than doubled compared to the 2004 period due to improved pricing and product mix.
European Union Tire's record sales increased 4.2%, primarily to improved pricing and product mix as well as higher volume in the consumer replacement and commercial original equipment markets. The company estimates currency translation had a negative effect on sales of approximately $11 million.
Segment operating income increased 17.6% to a third-quarter record, primarily due to improved pricing and product mix.
Eastern Europe, Middle East, Africa Tire: Segment operating income, $64 million; sales, $394 million; tire units sold, 5.4 million.
Sales in this business segment were a record for any quarter, and up 14.5% compared to the third quarter of 2004. Segment operating income also was a record for any quarter, and represented a 6.7% improvement over 2004.
Latin American Tire: Segment operating income, $77 million; sales, $372 million; tire units sold, 5 million.
Latin American Tire's sales increased 17.7% to a third quarter record. Segment operating income was a third-quarter record and an increase of 20.3% compared to the same period in 2004.
Asia/Pacific Tire: Segment operating income, $24 million; sales, $356 million; tire units sold, 5.2 million.
Asia/Pacific Tire's sales increased 11.6%, while segment operating income increased 26.3%. Both were third-quarter records.
Engineered Products: Segment operating income, $27 million; sales, $407 million.
Engineered Products' sales in the third quarter of 2005 increased 7.4% to set a third-quarter record. The quarter was marked by growing demand in the industrial products and automotive replacement markets, which more than offset weakness in the military businesses.
Segment operating income decreased 20.6% due to higher manufacturing costs, increasing raw material costs, and higher expense related to bad debt and freight costs. These factors more than offset higher volume and improvements in pricing and product mix.