Tire maker Q3 earnings paint (mostly) positive picture

AKRON — Major tire makers enjoyed a surge in sales during the third quarter, ended Sept. 30, although earnings performance was mixed.

Bridgestone Corp., Goodyear, Pirelli & C. S.p.A., Sumitomo Rubber Industries Ltd. (SRI) and Yokohama Rubber Co. Ltd. (YRC) reported strong results for both sales and operating profit in the third quarter, helped by increasing demand in the replacement passenger car tire segment. Michelin Group also reported higher sales but didn't disclose earnings.

However, Continental A.G. and Toyo Tire Corp. suffered drops in operating income despite experiencing higher sales for the period.

Bridgestone reported strong results for both the third quarter and the first nine months of the year, helped by increasing demand in the replacement passenger car tire segment.

Bridgestone said sales of original equipment passenger car and light truck tires slowed down in the third quarter due to a decline in automotive production caused by continued microchip shortages. Replacement sales, however, were strong "resulting in significant increase in sales and profit compared to the previous year," the group added.

Truck/bus tire sales were strong, particularly in North America, while off-road tires witnessed a strong recovery sequentially, due to demand from construction and mining sectors.

Continental's tire sector suffered a 17.6% drop in operating income for the quarter on 2.5% higher sales, as higher costs for raw materials, energy and logistics ate into margins.

The revenue increase was based entirely on higher selling prices, as unit sales dropped 5.5% from the third quarter of 2020, Conti reported, led by "significant" drops in OE volumes. By contrast, replacement sales in North America and China were ahead of 2019 levels, while replacement market sales in the Europe/Middle Asia/Africa region were slightly below 2019 levels, Conti said, without providing specifics.

Looking ahead, Conti said both pricing and product mix continue to develop "favorably," especially in the Americas and EMEA, while earnings headwinds are expected to be "even stronger" in the fourth quarter.

Goodyear saw net sales grow 42% in the third quarter, compared with 2020; 16% growth when excluding the Cooper Tire & Rubber Co. acquisition.

The company said its global consumer replacement volume continued to exceed industry average, driven by large-rim diameter tires.

An increase in segment operating income primarily reflects improvements in price/mix, the impacts of higher volume, including increased factory utilization and higher earnings from other tire-related businesses, the company said.

These factors were partially offset by higher raw material costs, the non-recurrence of benefits related to temporary cost reductions during last year's pandemic shutdown, and inflationary cost pressures in wages, benefits, transportation and energy.

Hankook Tire & Technology Co. Ltd. suffered drops in operating income and sales for the quarter ended Sept. 30, dragged down in part by the global decline in car production.
Hankook linked the decline to a slowdown in the global production of cars “in the midst of key parts shortage, including semiconductors.” Challenges, it said, were further escalated by the global supply chain crisis and increased raw materials costs. 
However, Hankook said it delivered “a meaningful quarter”, showing further recovery from the previous quarter.
 

Michelin reported solid results for the three- and nine-month periods, prompting the company to reaffirm its previous guidance for fiscal 2021 sales and earnings.

Helped by "robust mix and disciplined price management," revenue for the quarter grew 8.6% to $7 billion, Michelin said. Sales were helped by a 0.3% positive currency impact and non-tire revenues of $26 million.

By category, Michelin reported double-digit sales gains in the consumer and commercial sectors — up 18.9% and 16.4%, respectively — along with 8.4% growth in the industrial (OTR, aircraft, motorcycle, etc.) business.

Nokian Tyres P.L.C. reported strong growth in both sales and profits over the three months and nine months ended Sept. 30, helped by higher volumes and price adjustments.

Nokian President and CEO Jukka Moisio linked the company's "significant" profit growth to "early timing of deliveries" and higher sales volume. As anticipated, increased raw-materials and logistics costs, including the shortage of container capacity, were visible in the third quarter, he added.

To meet demand, Nokian operated its factory in Vsevolozhsk, Russia, and heavy tires factory in Finland at full capacity during the third quarter.

Pirelli has adjusted upward its full-year revenue and cash-generation targets as tire sales volumes through the first nine months continue to increase, supported by improvements in the price/mix component.

Pirelli said it expects to report revenue this year of approximately $6 billion, up about 2% from earlier targets reported in August, based in part on expected volume increase of 14% to 15% over 2020 and "marked improvements" in price/mix.

Pirelli's sales in North America for the first nine months increased 35.9% over the 2020 period to nearly $996 million.

SRI returned to the black for the quarter on 8.4% higher revenue as the company reported sales improvements in all of its geographic regions. The company reported operating income of $11.8 million for the period on sales revenue of $1.97 billion.

SRI has revised downward its earnings forecast for fiscal 2021 to a 20% drop in operating income and a 0.5% decline in sales.

Sell-out was strong in North America, SRI said, especially in terms of SUV tires and other high-performance products.

Toyo reported a 9.8% drop in operating income for the quarter on marginally higher sales.

Operating income for the third quarter fell to $115.6 million on 0.2% higher sales of $876.5 million. Net earnings surged 15-fold to $74.5 million, despite a $7.75 million extraordinary loss to cover expenses related to 2015-era product-compensation costs for seismic building bearings.

For the nine-month period, Toyo reported 10.4% higher operating income of $360.6 million on 14.6% higher sales of $3.48 billion. Net income stood at $262.4 million.

YRC has raised its fiscal 2021 financial outlook on the back of strong third-quarter and nine-month performances.

YRC's tire segment posted a 136% gain in operating income for the third quarter on 6.6% higher sales of $966.4 million.

Tire segment sales in North American grew 10.7% in the quarter and 16.2% in the nine-month period to $309 million and $841.8 million, respectively.

Yokohama said it experienced a revenue increase in original equipment tires and in replacement tires, helped by "high-value-added" products.