AKRON (April 27, 2016) — Goodyear reported 8-percent higher segment operating profit for the quarter ended March 31 despite lower sales.
The Akron-based tire maker attributed the earnings improvement — to $419 million — to a favorable price/mix net of raw materials and the impact of higher volumes. Sales revenue fell 8.3 percent to $3.69 billion, largely due to unfavorable foreign currency translation and the deconsolidation of the company's subsidiary in Venezuela.
As a result, the operating ratio jumped nearly two percentage points to 11.4 percent.
Net income of $184 million was 24.3 percent higher than the adjusted net income of $148 in the first quarter of 2015. The 2015 figure excludes a $99 million after-tax, one-time gain on deferred royalties related to the sale of the engineered products business.
“Our results are a reflection of our ability to successfully execute on our strategy,” said Goodyear Chairman, CEO and President Richard Kramer. “We will continue to focus on profitable growth in market segments where our innovation, brand and operational excellence capabilities provide a competitive advantage.”
Mr. Kramer called the first-quarter results a “reflection of our ability to successfully execute on our strategy. We will continue to focus on profitable growth in market segments where our innovation, brand and operational excellence capabilities provide a competitive advantage.”
He noted that demand for the company's premium products is “robust,” which in turn is driving margin expansion.
Tire unit volumes grew 2 percent to 41.5 million, Goodyear said, reflecting growth in the Asia/Pacific region, primarily in Japan and China. Replacement and OE tire shipments were both up equally. Excluding the impact of the deconsolidation of Venezuela, unit volumes increased 3 percent.
Goodyear reported a 5-percent gain in segment operating income for the Americas business unit to $260 million, driven primarily by a favorable price/mix net of raw materials but partially offset by the deconsolidation of its Venezuelan subsidiary and lower volume.
Sales revenue in the Americas fell 13 percent from last year to $1.95 billion, reflecting a 6-percent decrease in tire unit volume, primarily due to the deconsolidation of the Venezuelan subsidiary ($94 million in sales) and the sale of the former Goodyear Dunlop Tires North America Ltd. business ($64 million).
Replacement tire shipments were down 6 percent while OE unit volume fell 7 percent.
Excluding Venezuela and Goodyear Dunlop — 300,000 and 400,000 units, respectively — tire unit volume was down 2 percent, driven primarily by the weak economic environment in Brazil.
Goodyear's Europe, Middle East and Africa unit reported a 6-percent drop in sales to $1.25 billion but a 10-percent increase in segment operating income to $80 million.
Asia Pacific's sales were up 9 percent to $489 million while operating income jumped 18 percent to $79 million.
The company's acquisition of a controlling interest in Nippon Goodyear Ltd. (NGY) in Japan positively impacted volumes by approximately 900,000 units and sales by $41 million. The net unfavorable impact on segment operating income of the NGY acquisition and the sale of the company's 25 percent interest in Dunlop Goodyear Tires Ltd. was $3 million.