AKRON — Goodyear reported solid operating income for the quarter and half year ended June 30 on markedly higher sales, which the company attributed to "above-market" growth in many sectors and the addition of three weeks of sales from Cooper Tire & Rubber Co.
Goodyear's "merger-adjusted" segment operating income of $349 million contrasts with an operating loss of $431 in the corresponding 2020 quarter and was nearly 60% higher than the second quarter of fiscal 2019, according to Richard Kramer, president, chairman and CEO.
Second-quarter sales jumped 85.3% to $3.98 billion, driven by higher volume, the addition of Cooper Tire results, increased sales from other tire-related businesses and favorable foreign currency translation. The company returned to the black on a net basis with income of $67 million, which contrasts with a net loss of $696 million a year ago.
Goodyear cited the positive effects 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, for the improved segment operating earnings.
These factors were partially offset by higher selling, administrative and general expenses (SAG), reflecting the impact of payroll and advertising expenses returning to more normal levels after last year's COVID-19 response actions, and higher raw material costs.
"Broad economic recovery remains robust, particularly in the U.S. and China," Mr. Kramer said. "Our second-quarter results demonstrate our ability to capture value in the marketplace with innovative products and services while overcoming inflationary cost pressure."
The addition of Cooper Tire also contributed to the merger-adjusted earnings growth, Mr. Kramer said, noting that the combined staffs "are now focused on integrating our businesses and leveraging the combination to provide enhanced service for our customers and consumers."
Goodyear did not provide specific sales or earnings guidance for the rest of fiscal 2021.
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 carryover effects of a winter storm in the U.S., which are estimated at $24 million.
The reported results also include a Cooper Tire operating loss of $16 million, which includes $40 million of amortization of Cooper Tire inventory step-up, $6 million of other transaction-related items, and $4 million incremental amortization of Cooper Tire intangible assets.
Tire unit volumes in the quarter totaled 37.5 million, up 84% from the prior year's period. The impact of the COVID-19 pandemic on industry demand moderated significantly relative to the prior year.
Replacement tire volume increased 78%, reflecting both continuing industry recovery and market-share gains, Goodyear said. Original equipment unit volume more than doubled, driven by higher vehicle production and increased market share.
Goodyear reported segment operating income of $525 million for the first half of fiscal 2021 on 44% higher sales revenue of $7.5 billion. Net income was $79 million for the first six months, compared with a net loss of $1.3 billion.
Goodyear cited higher tire volume, the Cooper Tire merger, increased sales from other tire-related businesses and favorable foreign currency translation for the improvement.
Tire unit volumes totaled 72.5 million, up 40% from 2020. Replacement tire shipments increased 41%, reflecting stronger industry demand and market share gains. Original equipment volume increased 39%, driven by higher global vehicle production and increased market share.
Goodyear's North American business unit reported operating income for the quarter of $233 million, versus an operating loss of $287 million a year ago. Sales revenue nearly doubled to $2.26 billion, driven by 125% higher volume, the Cooper Tire merger, and increased sales from other tire-related businesses.
Replacement tire volume increased 120%, Goodyear said, reflecting stronger industry demand, U.S. consumer replacement market share gains and the addition of Cooper Tire. OE unit volume increased 155%, reflecting higher industry demand and market share gains in Latin America.