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Goodyear, Titan earnings slip in 3rd quarter

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AKRON—Both Goodyear and Titan International Inc. reported declines in operating and net income for the quarter ended Sept. 30.

Goodyear suffered double-digit declines in both areas for the quarter as earnings gains in North America did not offset profit drops in Europe and Latin America.

Meanwhile, Titan's income from operations and net income fell despite slightly higher sales, while earnings and sales for the nine months both recorded double-digit gains.

Goodyear reported $348 million in segment operating income for the quarter, a 24.8-percent drop from a year ago, as sales dropped 13.2 percent to $5.26 billion on lower unit volumes and $258 million in “unfavorable foreign currency translations.”

By contrast, the company's North American Tire unit reported a 66.7-percent gain in operating income, to $130 million, although sales fell 6 percent to $2.4 billion as units sold dropped 6 percent and the unit's chemical business experience lower pricing for its products.

Replacement market shipments dropped 10 percent while OE demand was up 8 percent.

For the nine months ended Sept. 30, Goodyear's segment operating income dropped 16.7 percent to $976 million on 7-percent lower sales of $15.9 billion. Its North American Tire unit reported 56.1-percent higher operating income of $398 million on 1.1-percent lower sales of $7.35 billion.

Despite the earnings and sales declines, Chairman and CEO Richard Kramer said Goodyear continues to “see the benefits of our actions to sustain profit margins in a weak volume environment.”

Akron-based Goodyear has achieved its target of $1 billion in cost savings ahead of plan, he said, but will continue to take additional actions to reduce costs “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,” Mr. Kramer said.

“Our 2012 results demonstrate strong progress toward delivering profit throughout the economic cycle and generating sustainable value for shareholders,” he added.

Elsewhere, Goodyear reported lower segment operating income in Europe and Latin America, while Asia Pacific Tire's income was up just 1.6 percent in part because of start-up costs for the firm's new plant in China. Sales were down in all three regions.

Goodyear said it expects that its fourth quarter unit volume will be 3 to 5 percent below the 2011 period. The tire maker also anticipates raw material costs for the fourth quarter will be down about 10 percent, while they likely will be up 7 percent over 2011.

Titan attributed its lower third quarter earnings to higher selling, general and administrative costs, particularly a $13 million charge to adjust the value of the CEO “special performance” award.

Income from operations in the quarter fell 12.6 percent to $36.2 million while sales rose 1.5 percent to $404.7 million. Net income fell 7.5 percent to $19.6 million.

For the nine months, income from operations jumped 56 percent to $175.8 million and net income more than doubled to $99.1 million. Sales were up 22.4 percent to $1.33 billion.

Titan attributed the higher sales to strong market conditions in agricultural and earthmoving/construction segments. Sales increased approximately 10 percent from the inclusion of recently acquired entities and approximately 12 percent from price/mix improvements which resulted largely from increased raw material prices that were passed on to customers.

The increase in net sales was partially offset by unfavorable foreign currency translation, which decreased sales by approximately 4 percent, Titan said.

In related news, Titan has completed its $107.6 million takeover of Titan Europe P.L.C. and begun preparations to restructure the company, Titan Chairman and CEO Maurice Taylor told analysts Oct. 25 in a conference call.

Titan's bid to take control of Titan Europe closed Oct. 19, and the level of acceptance coupled with Titan International's previous 21.7-percent shareholding increases its ownership stake to 97.1 percent, Titan said.

To complete the transaction, Titan International issued 5.6 million shares of common stock—valued at $107.6 million—for distribution to Titan Europe shareholders who tendered their shares in exchange; Titan International offered to exchange one share of Titan International stock for 11 shares of Titan Europe stock.

In disclosing the completion of the deal, Mr. Taylor said: “The increased global footprint creates strong opportunities for the future.”

Previously, Titan said acquiring Titan Europe would create a “truly global wheel, tire and track industrial group servicing customers across the agricultural, construction, earthmoving and mining industries.”

Titan International said the acquisition will cement the existing cooperation between Titan International Mining Services—established in 2011 to offer complete tire, wheel and track services near large mines worldwide—and Titan Europe's own Mining Service Centres expertise.
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