Goodyear Tire & Rubber Co. reported second quarter 2010 sales were $4.5 billion, up 15% from the 2009 quarter. Segment operating income was $219 million, up from $24 million in the year-ago quarter.
Goodyear’s second quarter 2010 net income was $28 million, compared with a loss of $221 million in the 2009 quarter.
Second quarter sales reflect the $304 million impact of a 10% increase in tire unit volume due to improved global demand, the company says. Sales were also positively impacted by $161 million from higher sales in other tire-related businesses, primarily third-party chemical sales in North America, and by improved price/mix. Unfavorable foreign currency translation reduced sales by $37 million.
Compared to last year, second quarter segment operating income reflects higher global demand, strong price/mix performance and cost reduction actions.
“We are very pleased with our strong performance in the second quarter and first half of the year,” said Richard Kramer, president and chief executive officer. “Our businesses continue to perform better than a year ago as they capture the benefits of recovering industry demand, strong new product performance and solid productivity improvements. We are clearly on the right path as our strategies position us to grow profitably as markets continue to improve.”
Kramer noted that improved results in the company’s North American Tire business unit made a significant contribution to Goodyear’s second quarter success. “These results are further evidence of the effectiveness of our strategy to drive innovation, improved mix and operational efficiency in the business,” he said.
Improved price/mix of $121 million in 2010’s second quarter more than offset $54 million in net higher raw material costs ($89 million before raw material cost reduction actions). Unfavorable foreign currency translation reduced segment operating income by $14 million.
The 2010 second quarter included charges of $8 million due to rationalizations, asset write-offs and accelerated depreciation, and $3 million for a one-time importation cost adjustment, and a gain of $8 million on asset sales. All amounts are after taxes and minority interest.
“Raw material costs remain a challenge and we continue to see an uncertain economy, but we remain focused on the proven strategies that have enabled us to address these headwinds over time,” Kramer said.
Business segment results:
North America Tire: North American Tire’s second quarter 2010 sales increased 21% from last year to $2 billion, reflecting a 13% increase in tire unit volume, improved price/mix and branded share gains in the consumer replacement business. Original equipment unit volume increased
69%, primarily in the consumer business. Replacement tire shipments were up 2% from last year. Sales were positively impacted by $179 million from higher sales in other tire-related businesses, primarily third-party chemical sales.
Second quarter 2010 segment operating income of $16 million was a $107 million improvement over the prior year. Compared to the prior year, price/mix improved $36 million, while raw material costs were essentially unchanged. The 2010 quarter also benefitted from higher volume, increased production levels, decreased pension expense and actions to reduce costs. General and product liability expense increased in the quarter.
Europe, Middle East and Africa Tire: Second quarter sales increased 5% from last year to $1.5 billion primarily due to a 6% increase in tire unit volume and strong price/mix performance. Original equipment unit volume increased 27%. Replacement tire shipments were up 1%. Unfavorable foreign currency translation reduced sales by $83 million.
Second quarter 2010 segment operating income of $73 million was an $88 million improvement over the prior year. Improved price/mix of $23 million in 2010’s second quarter more than offset $3 million in higher raw material costs, the company notes. The 2010 quarter was also positively impacted by higher volume, increased production levels and actions to reduce costs.
Latin America Tire: Second quarter sales increased 21% from last year to $529 million primarily due to a 13% increase in tire unit volume and strong price/mix performance. Original equipment unit volume increased 16%, resulting from higher vehicle production. Replacement tire shipments were up 11%.
Second quarter segment operating income of $66 million was $7 million lower than in 2009 primarily due to a $32 million decline related to events in Venezuela, including the currency devaluation. Improved price/mix of $33 million in 2010’s second quarter more than offset
$24 million in higher raw material costs, Goodyear says. The 2010 quarter was also positively impacted by higher volume and increased production levels.
Reflecting a weaker demand environment, events in Venezuela, including the currency devaluation, may adversely impact Latin American Tire’s full-year 2010 segment operating income by more than $75 million as compared to 2009.
Asia Pacific Tire: Second quarter sales increased 16% from last year to $495 million due to a 9% increase in tire unit volume with strong replacement market volumes in China and India and favorable foreign currency translation. Original equipment unit volume increased
22%, resulting from higher vehicle production. Replacement tire shipments were up
2%.
Segment operating income of $64 million increased $7 million over last year and was a second quarter record. Improved price/mix of $29 million in 2010’s second quarter offset
$28 million in higher raw material costs. The increase in segment operating income was also due to higher volume and actions to reduce costs.
Year-to-date results: Goodyear’s sales for the first six months of 2010 were $8.8 billion, up 18% from $7.5 billion in the 2009 period. Sales reflect the $703 million impact of a 12% improvement in tire unit volume due to higher global industry demand, as well as a $286 million increase in sales in other tire-related businesses, primarily third-party chemical sales by North American Tire, and by improved price/mix. In addition, favorable currency translation increased sales by $187 million.
The company’s year-to-date segment operating income of $459 million compares to a segment operating loss of $152 million last year. Compared to the prior year, year-to-date segment operating income reflects higher sales and improved profitability in all four of the company’s business units and actions that reduced costs by $281 million.
The 2010 period also benefitted from $122 million in improved price/mix and $229 million in lower raw material costs compared to the first six months of 2009. Raw material costs reflect $73 million in actions taken to reduce their impact.
Goodyear’s year-to-date net loss of $19 million compares to a net loss of $554 million in 2009’s first half.
A taped replay of the company's financial conference call will be available by calling (706) 645-9291. The replay will also remain available on the Web site http://investor.goodyear.com
