Tire manufacturer Goodyear Tire & Rubber Co. (GT) on Friday reported a turnaround to profit in the first quarter as lower costs and expenses helped offset a decline in sales. Looking ahead, the company maintained its segment operating income outlook for fiscal 2013. Shares of the company are up 2.7 percent in pre-market trades.
Goodyear noted that three of the company's four regional businesses posted higher earnings, with North America and Asia Pacific posting record first-quarter operating income. Asia Pacific and Latin America achieved both increased tire unit volume and higher operating income.
Richard Kramer, chairman and chief executive officer of Goodyear Tire said, "Despite a tough economic environment, we continue to achieve solid earnings improvement. Our first quarter earnings demonstrate that our strategic focus on improving productivity and selling innovative products in targeted market segments where our brands add value is working, especially in North America, where our business continues to outperform expectations."
Goodyear's segment operating income for the quarter rose 3 percent from the year-ago period to $302 million, reflecting $230 million in lower raw material costs and cost-reduction activities that exceeded inflation. These were partially offset by $138 million in lower tire volume and associated unabsorbed overhead costs, lower price/mix of $71 million and $17 million in unfavorable foreign currency translation.
North American Tire sales for the first quarter declined 13 percent from last year to $2.2 billion, with a 6 percent decline in tire unit volume and lower price/mix. Europe, Middle East and Africa Tire sales declined 17 percent to $1.6 billion, on a 16 percent decrease in tire unit volume.
Latin American Tire sales declined 2 percent to $513 million and was negatively impacted by $62 million in unfavorable foreign currency translation and $33 million related to the sale of the bias truck tire business. These were offset by a 5 percent increase in tire unit volume and improved price/mix.
Asia Pacific Tire sales decreased 2 percent from last year to $567 million. Sales were negatively impacted by $15 million in lower sales in other tire-related businesses and $14 million in unfavorable foreign currency translation. Original equipment unit volume was up 5 percent. Replacement tire shipments were up 4 percent.
Akron, Ohio-based Goodyear Tire's net income for the first quarter was $26 million or $0.10 per share, compared to net loss of $11 million or $0.05 per share in the year-ago period.
The latest quarter's results were impacted by significant items, including net foreign currency remeasurement loss of $0.37 per share resulting from the devaluation of the Venezuelan bolivar fuerte. The year-ago quarter's results include charges of $0.35 per share resulting from the early redemption of senior notes.
On average, 8 analysts polled by Thomson Reuters expected the company to report earnings per share of $0.31 for the quarter. Analysts' estimates typically exclude one-time items.
Net sales for the quarter declined 12 percent to $4.85 billion from $5.53 billion in the year-ago period. Analysts had a consensus revenue estimate of $5.10 billion.
The decline in sales reflect $364 million in lower tire unit volumes; $178 million in lower sales in other tire related businesses, most notably third party chemical sales in North America, and $115 million in unfavorable foreign currency translation, according to the company.
Global tire unit volumes for the quarter were 39.5 million, down 8 percent year-on-year, chiefly reflecting lower volumes in Europe.
Looking ahead to fiscal 2013, Goodyear maintained its outlook for global segment operating income in a range of $1.4 billion to $1.5 billion.
Goodyear now forecasts tire unit volumes for the year to be essentially at 2012 levels as a result of weak industry conditions, especially in Europe. Earlier, the company projected full-year tire unit volume to reflect a low single digit percentage growth rate compared to 2012.
GT closed Thursday's trading at $12.94. In Friday's pre-market, the stock is up $0.27 or 2.09 percent to $13.21.
by RTT Staff Writer
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