AKRON — Goodyear has lowered its expectations for fiscal 2018 operating income slightly "to reflect the increasingly challenging industry environment," the company said in releasing its third quarter financial results.
For the quarter ended Sept.30, segment operating income was down 1.3 percent to $362 million, while revenue inched up slightly to $3.93 billion, leaving the operating ratio unchanged at 9.2 percent.
Goodyear revised its operating income outlook to about $1.3 billion from the $1.45 billtion to $1.5 billion estimate it made in the second quarter, which was down from previous forecasts of $1.8 billion to $1.9 billion.
The new outlook reflects the impact of higher raw-materials costs, Goodyear said, including "the negative impact of transactional currency headwinds, further industry weakness in China and economic volatility in Brazil.
For the quarter ended Sept. 30, Goodyear cited higher volume, improved price/mix and higher sales in other tire-related businesses for its sales increase. Goodyear said the increases were offset substantially by unfavorable foreign currency translation.
The company credited double-digit increases in sales of larger rim-diameter in the U.S. and Europe for increases in those segments' revenues.
"We continued to improve the operating performance in our key mature markets, driven by strong volume growth, ... " Chairman President and CEO Richard Kramer said.
"These gains contributed to the improving momentum in our two largest segments, as EMEA (Europe, Middle East, Africa) delivered operating income growth of more than 20 percent and Americas turned in its best year-over-year performance since 2016."
Goodyear's third quarter 2018 net income was $351 million, a substantial increase over $129 million in 2017. Goodyear attributed the gain to a $287 million net increase resulting from conclusion of its TireHub L.L.C., transaction, the tire distributor joint venture that was completed during the quarter.
Third quarter 2018 adjusted net income fell to $163 million, compared with $177 million in 2017.
Operating income for the nine months ended Sept. 30 was off 14.1 percent to $967 million, a decline Goodyear attributed to the effects of higher raw-materials costs and reduced price/mix, partially offset by net cost savings and the impact of higher volumes.
Sales for the nine months grew 2.6 percent to $11.6 billion, which Gooyear attributed to improvements in price/mix and higher unit volumes.
Tire unit volumes of 40.5 million in the quarter were up 2 percent over 2017, with replacement shipments up 4 percent, driven by strong results in the Americas and EMEA. Original equipment unit volume fell 4 percent, led by lower consumer demand in China.
Tire unit volumes for the nine months were up 1 percent to 118.5 million, while replacement tire shipments increased 2 percent, led by strong consumer replacement shipments in the EMEA and Americas. OE tire volume decreased 1 percent, as declines in EMEA and the Americas partially offset by increases in Asia Pacific during the first half of the year.
Net income increased to $583 million, or $2.42 per share, compared with $442 million, or $1.73 per share, in the prior year.
Adjusted net income for the first nine months, however, dropped to $434 million, or $1.80 per share, compared with $543 million, or $2.13 per share.
In the Americas segment, operating income was flat in the quarter compared to 2017 ($194 million versus $196 million) and down 24 percent ($465 million versus $630 million in the nine-month period.
Sales in the Americas had moderate increases, $2.11 billion in the quarter compared with $2.04 billion in 2017. For the nine months, sales were up 8.5 percent to $6.54 billion.
Operating income in EMEA jumped to 23 percent in the quarter to $111 million, and 6.6 percent in the first nine months to $289 million.
Sales in the region dropped 2 percent, Goodyear said, to $1.29 billion, attributing it to unfavorable foreign currency translation partially offset by increased volume and favorable price/mix.
Tire units increased 3 percent and replacement tire shipments increased 4 percent, while OE units fell 1 percent.
In Asia-Pacific, operating income fell 30 percent to $57 million in the quarter due to higher selling, administrative and general expenses, partially driven by higher bad debt expense, lower volume and reduced price/mix, Goodyear said. The nine-month period also dropped, to $203 million from $225 million.
Asia Pacific's third quarter sales fell 7 percent to $531 million, compared to $569 million in 2017, primarily reflecting lower tire volumes and unfavorable foreign currency translation, Goodyear said.
Tire units were down 4 percent, while replacement tire shipments were stable. Goodyear said OE units were down 11 percent, primarily due to expected declines in our consumer tire business in China.