Goodyear 3rd quarter sales affected by Venezuela deconsolidation

Crain News Service report

AKRON — Goodyear's net income increased 17 percent on 9.5 percent lower sales for the third quarter of 2016, the company disclosed on Oct. 28.

Sales for the quarter came in at $3.8 billion compared to $4.2 billion from 2015 thanks largely to the deconsolidation of Goodyear's subsidiary in Venezuela. The firm's net income increased to $317 million, compared to $271 million in 2015. The firm cited an income tax benefit resulting from various discrete tax adjustments, partially offset by increased rationalization charges.

“We delivered solid results this quarter,” Richard Kramer, chairman, president and CEO, said in a statement.

“Our strategy is built to take advantage of the trends shaping our industry. Global demand for high-value-added, large rim-diameter tires is increasing. We are confident that our portfolio of these products and our distribution advantages position us to sustained growth and achievement of the 2020 targets that we recently announced.”

For the nine-month period, Goodyear's sales dropped 8 percent to $11.4 billion compared to 2015. In addition to the deconsolidation in Venezuela, the firm cited unfavorable foreign currency exchange rates. Net income however increased 2 percent to $703 million.

Year-to-date, tire unit volumes have increased 1 percent to 125 million thanks to growth in the Asia-Pacific region — primarily in China and Japan — following the acquisition of a controlling interest in Nippon Goodyear Ltd. Replacement shipments are up 2 percent and original equipment unit volume decreased 3 percent overall; but when excluding the impact of the deconsolidation of Venezuela OE, volumes increased 2 percent.

Regionally, the firm reported decreased shipments and sales in its Americas region. Sales declined 14 percent to $2.1 billion and an 8 percent decrease in unit volume to 18.6 million units. For the nine months, sales dropped to $6.11 billion (from $7.06 billion) and unit volumes decreased by 5.1 million to 55.4 million.

Original equipment unit volume was down 15 percent. Excluding the impact of the deconsolidation of Venezuela and the sale of the former Goodyear Dunlop Tires North America Ltd. business (GDTNA), unit volume decreased 5 percent, “driven primarily by consumer original equipment and replacement in Brazil and Canada,” the tire maker said, adding that meanwhile its total U.S. consumer shipments were essentially flat and U.S. commercial shipments were down 12 percent.

Goodyear said its third-quarter 2016 segment operating income of $305 million was down 19 percent from the prior year, with the decrease driven primarily by the deconsolidation of Venezuela and the impact of lower volume. The Venezuela deconsolidation negatively impacted volumes by 0.4 million units, sales by $155 million and segment operating income by $39 million, the company added.

The sale of GDTNA negatively impacted volumes by 0.2 million units, sales by $60 million and segment operating income by $16 million, according to the tire maker.

In Europe, the Middle East and Africa, sales rose 7 percent to $1.24 billion while unit volumes dropped 5 percent to 15.4 million. Unit volumes for the nine-month period have increased slightly —  by 100,000 units to 47 million —  but sales have slipped to $3.75 billion compared to $3.92 billion the previous year.

Goodyear's Asia-Pacific region saw tire unit volumes increase by 25 percent to 8 million and sales increase to $541 million compared to $458 million in 2015. The firm experienced growth for the nine-month period as well, with sales increasing to $1.56 billion and unit volumes up to 22.6 million. Goodyear said its Nippon Goodyear acquisition positively impacted volumes by 1.3 million units and sales by $48 million.

This story first appeared in Rubber & Plastics News, an Akron-based sister publication of Tire Business.