AKRONGoodyear reported 24-percent higher segment operating income of $373 million in the quarter ended March 31, but the company recorded a net loss of $58 million loss, attributable mostly to an after-tax foreign currency exchange charge related to the firm's business in Venezuela.
Sales revenue fell 7.9-percent to $4.47 billion on the negative effects of currency exchange losses and a lower price/mix ratio along with a $202 million drop in sales in the tire-related businesses, most notably third-party chemical sales in North America, Goodyear said.
Despite the negatives, Goodyear Chairman and CEO Richard Kramer was upbeat, saying: Our segment operating income growth demonstrates our strategy is working and continues to deliver sustainable results. Despite the Venezuelan charge in the quarter, our operating results remained strong and in line with our expectations and we are reaffirming our 2014-2016 financial targets.
Mr. Kramer said the Akron-based tire manufacturer delivered a solid performance in its developed markets led by North America, which reported a 22.8-percent increase in operating earnings.
Growth in North America and Europe offset headwinds in emerging markets where we continue to navigate foreign currency and economic challenges, he said.
Other negative factors influencing sales were $126 million in unfavorable foreign currency translation and $98 million in lower price/mix, principally due to lower raw material costs. Offsetting these partially were $44 million in higher tire unit volumes.
Tire unit volumes totaled 40 million, up 1 percent from 2013. Original equipment unit volume was down 2 percent. Replacement tire shipments were up 3 percent.
We remain confident in our full-year expectation of 2- to 3-percent year-over-year volume growth, despite the negative impact of severe January winter weather in North America and labor and economic disruptions in Venezuela during the quarter, Mr. Kramer said.
Sales in North America fell 13.3 percent from last year to $1.88 billion. The decline reflected a 1.4-percent drop in unit volume, Goodyear said, mainly related to adverse winter weather conditions; lower price/mix; and a $201 million decline in sales in other tire-related businesses, most notably third-party chemical sales.
OE unit volume was down 5 percent. Replacement tire volume remained flat.
The company paid a quarterly dividend of 5 cents per share of common stock on March 3. Directors have declared a quarterly dividend of 5 cents per share payable June 2 to shareholders of record on May 1.
As a part of its previously announced $100 million share repurchase program, Goodyear said it repurchased 850,000 shares of its common stock at an average price of $27.12 per share during the first quarter. The repurchases are intended to offset the dilutive effect of new shares issued under equity compensation programs.
All outstanding shares of the company's 5.875-percent mandatory convertible preferred stock were converted to shares of Goodyear common stock on April 1. Each share of preferred stock was converted into 2.7574 shares of common stock. The shares of preferred stock were previously included as eligible dilutive securities in the company's calculation of diluted earnings per share. After conversion, the newly issued shares of common stock will be included in Goodyear's basic and diluted earnings per share.
Internationally, first quarter sales differed in varying segments:
c Europe, Middle East and Africa's first quarter sales increased 4.3 percent from last year to $1.68 billion, reflecting a 7.3-percent increase in unit volume and favorable foreign currency translation of $20 million, partially offset by lower price/mix.
c Latin America sales decreased 17.7 percent from last year to $422 million, reflecting $93 million in unfavorable foreign currency translation and an 11.1-percent decrease in tire unit volume.
c Asia Pacific sales fell 13.2 percent from last year to $492 million. The drop reflected a 2-percent increase in tire unit volume, which was more than offset by reduced price/mix, $41 million in unfavorable foreign currency translation and $6 million in lower sales in other tire-related businesses.
This story first appeared on www.tirebusiness.com.