AKRON (July 25, 2000) — Goodyear´s net income in the second quarter fell 9.1 percent to $59.7 million, despite higher sales and increased tire shipments provided by its recently acquired Dunlop operations.
The Akron-based tire maker said sales rose 14 percent to $3.47 billion, during the period ended June 30, compared with $3.05 billion last year.
The addition of the Dunlop business, which Goodyear acquired from Japan´s Sumitomo Rubber Industries Ltd. last year, contributed significantly to the higher sales and shipment totals.
The Dunlop operations in North America and Europe provided $564 million in sales during the period and were a prime factor in Goodyear´s 20-percent improvement tire unit volume, the company said.
"Second quarter 2000 earnings reflect the positive impact of the company´s Dunlop tire operations, cost containment initiatives and improved manufacturing efficiency, offset by higher raw material costs and increasingly competitive market conditions around the would," said Goodyear Samir G. Gibara, chairman, CEO and president.``These results were further impacted by currency movements, particularly in continental Europe and the United Kingdom."
Quarterly earnings also were negatively affected by net rationalization charges of $4.7 million the tire maker took during the quarter, related primarily to the closure of a tire plant in Italy and sales office consolidation in Europe.
In the 1999 quarter, earnings were boosted $9.6 million by the reversal of rationalization charges previously recorded that turned out to be less than had been anticipated.
In North America, Goodyear´s sales grew 6.1 percent to $1.68 billion in the 2000 quarter, bolstered by a 5.2-percent increase in tire unit volume to 28.9 million units.
The Dunlop business sold 3.1 million units during the quarter and 6 million units in the first half, the company said.
Sales increased in both periods because of the higher volume, but were negatively impacted by volume shortfalls in some segments due to competitive pricing pressures, a change in product mix to lower-priced tires and a shift towards less-profitable channels of distribution, Goodyear said.
Operating income for the North American unit grew to $69 million in the quarter from $24.3 million a year ago, which Goodyear said "reflects the addition of the Dunlop business, cost reductions and increased manufacturing efficiencies, as well as increased raw material costs and less favorable product and channel mix."
For the first half, net income rose 35.2 percent to $123.3 million, compared with $91.2 million last year. The 1999 results included net rationalization charges of $157.8 million.
Sales for the six months improved 16 percent to $7.01 billion from $6.04 billion in 1999, with the Dunlop operations contributing $1.14 billion to the 2000 figures.
Goodyear noted that interest expense rose 77 percent in the 2000 quarter and 71 percent in the six months due to higher debt levels incurred primarily to fund the acquisition of the Dunlop operations, as well as higher interest rates.