AKRON — Despite a slight increase in sales in the quarter ended Sept. 30, Goodyear suffered double-digit drops in operating and net income for the quarter and nine-month period.
Goodyear Chairman, CEO and President Richard Kramer cited "challenging industry conditions" in the quarter as reasons for the earnings declines.
Operating income dropped 35.8 percent to $357 million thanks largely to higher raw materials costs and the impact of lower volume. Net income sank 59.3 percent came to $129 million.
Sales increased 1.9 percent to $3.85 billion.
Goodyear reported similar results for the nine months — operating income down 26.7 percent to $1.1 billon and net income dropping 37.1 percent to $442 million. Sales decreased 0.9 percent to $11.3 billion.
Tire volumes dropped 5 percent in the quarter to 39.8 million units and 6 percent to 117.2 million for the first nine months, Goodyear said.
Among the challenging conditions Mr. Kramer cited were lower consumer replacement volumes, production cuts by auto makers and an increase of more than 30 percent in raw-materials costs.
"Despite these headwinds, which we expect to moderate over the coming quarters, we continue to execute against our long-term strategy," he said. "We remain focused on the opportunities for driving profitable growth including our connected business model, which aligns all of our assets from our manufacturing plants to consumers who choose Goodyear online and at retail."
Sales in the company's Americas business unit dropped 1.4 percent percent in the third quarter and nine months to $2.04 billion and $6.03 billion, respectively. Tire volumes decreased 8.1 percent to 17.1 million units in the quarter and 7.2 percent to 51.4 units in the first nine months.
Goodyear said its Americas business was impacted by hurricanes during the third quarter. It operates three chemical plants in Texas and has tire distribution and retail operations in the affected areas that were damaged or experienced shutdowns.
Sales were negatively impacted during the quarter in company-owned locations by about $23 million, resulting in lost profits of about $5 million in segment operating income. In addition, about $12 million in hurricane-related costs were incurred during the quarter representing fixed costs during chemical plant shutdowns as well as incremental clean-up and repair expenses. These items have been excluded from operating earnings per share in the quarter.
The company estimates that the negative impact of the hurricanes on the U.S. consumer replacement industry overall was about 1 percent in the third quarter.
Internationally, its Asia-Pacific operations experienced decrease in tire units for both the quarter — 7.8 million units from 8 million— and nine-month period — 22.4 million units from 22.6 million. However sales increased on both fronts, to $569 million from $541 million in the quarter and $1.61 billion from $1.56 billion in the nine-month period.
In Europe, volumes decreased to 14.9 million units in the quarter compared to 15.4 million last year and 43.4 million units year to date compared to 47 million in the same period last year. Sales in the quarter increased to $1.31 billion against $1.24 billion in 2016, but decreased to $3.66 billion compared to $3.75 billion in the first nine months.