Goodyear Q3 growth driven by large-rim diameter demand

AKRON — Goodyear saw net sales growth 42% third quarter compared with 2020; 16% growth excluding the Cooper Tire transaction, the company announced in its third quarter earnings statement.

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

"We continued to capitalize on favorable industry trends in our key replacement markets," Richard Kramer, chairman, chief executive officer and president, said. "Overall consumer replacement demand remains robust, and our business continues to have momentum. We delivered our strongest price/mix in nearly a decade, more than offsetting inflationary pressures and driving strong earnings performance."

Goodyear's third quarter 2021 sales were $4.9 billion, up 42% from a year ago. The increase was driven by the Cooper Tire merger, improvements in price/mix, increased sales from other tire-related businesses and higher volume.

"With the transportation industry moving record freight volume, we also saw robust demand from our largest commercial customers. As a result, our commercial business delivered another strong quarter, with fleet tire volume well above pre-pandemic levels," Mr. Kramer said.

Tire unit volumes totaled 48.2 million, up 32% from the prior year's period. Replacement tire unit volume increased 44%, reflecting the addition of Cooper Tire unit volume, continuing industry recovery and market share gains. Original equipment unit volume decreased 7%, reflecting lower vehicle production, which continued to be affected by shortages of components and materials.

"In addition to positive trends in our business, we also expect to benefit from increased synergies as a result of our combination with Cooper Tire, which include added international initiatives and manufacturing and sales opportunities," said Kramer.

Goodyear's third quarter 2021 net income was $132 million compared to a net loss of $2 million a year ago. The 2021 period included several significant items, Goodyear said, including, on a pre-tax basis, amortization related to Cooper Tire inventory step-up adjustments of $72 million. Third quarter 2021 adjusted net income was $206 million compared to adjusted net income of $24 million in the prior year's quarter.

The company reported segment operating income of $372 million in the third quarter of 2021, up $210 million from a year ago.

The company also reported merger-adjusted segment operating income of $449 million, which excludes certain costs triggered by the Cooper Tire merger. The 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.

The reported results also include Cooper Tire operating income of $48 million, which includes $70 million of amortization of Cooper Tire inventory step-up adjustments and $7 million incremental amortization of Cooper Tire intangible assets.

Goodyear's sales for the first nine months of 2021 were $12.4 billion, a 43% increase from the 2020 period, primarily due to higher volume, the Cooper Tire merger, increased sales from other tire-related businesses and improvements in price/mix, the company said.

Tire unit volumes totaled 120.7 million, up 37% from 2020. Replacement tire shipments increased 42%, which included additional tire unit volume related to the Cooper Tire merger, which closed on June 7, 2021, and both industry recovery and market share gains. Original equipment volume increased 19%, driven by higher global vehicle production in the second quarter and increased market share.

Goodyear's net income was $211 million for the first nine months of 2021 compared to a net loss of $1.3 billion in the prior year's period.

The first nine months of 2021 included several significant items, including, on a pre-tax basis, amortization of Cooper Tire inventory step-up adjustments of $110 million and transaction and other costs of $55 million, both in connection with the Cooper Tire merger, rationalizations, asset write-offs and accelerated depreciation of $82 million, primarily associated with the modernization of two manufacturing facilities in Germany, the permanent closure of a manufacturing facility in Gadsden, Ala., and a plan to reduce selling, administrative and general expense in Europe, Middle East and Africa, a negative impact of $52 million related to a severe winter storm in the U.S. and a $114 million benefit related to a Brazilian Supreme Court ruling with respect to indirect taxes, the company said.

Goodyear's net income for the comparable period in 2020 included, on a pre-tax basis, a non-cash charge of $295 million related to a valuation allowance on certain deferred tax assets for foreign tax credits, rationalizations, asset write-offs and accelerated depreciation of $227 million, primarily associated with the closure of a manufacturing facility in Gadsden, Alabama, a non-cash impairment charge of $182 million to reduce the carrying value of goodwill in the Europe, Middle East and Africa business, and a non-cash asset impairment charge of $148 million to reduce the carrying value of an equity interest in TireHub. Goodyear's adjusted net income for the first nine months of 2021 was $390 million, compared to a net loss of $550 million in 2020.

The company reported segment operating income of $897 million for the first nine months of 2021, up $1.2 billion from a year ago. The company also reported merger-adjusted segment operating income of $1 billion, which excludes certain costs triggered by the Cooper Tire merger. The increase in segment operating income primarily reflects the impacts of higher volume, including increased factory utilization, improvements in price/mix, higher earnings from other tire-related businesses, and the benefits of cost saving actions. These factors were partially offset by higher raw material costs, the nonrecurrence of benefits related to temporary cost reductions during last year's pandemic shutdown, and inflationary cost pressures in wages, benefits, transportation and energy. Segment operating income also benefited from $69 million related to a Brazilian Supreme Court ruling with respect to indirect taxes, which was partly offset by the adverse effects of a severe winter storm in the U.S., which are estimated at $42 million. The reported results also include Cooper Tire operating income of $32 million, which includes $110 million of amortization of Cooper Tire inventory