AKRON, Ohio — The Goodyear Tire & Rubber Company (NASDAQ: GT) reported results on October 25 for the third quarter of 2019.
“In the Americas, we saw continued strength in our U.S. consumer replacement business and solid growth in Brazil, giving us positive momentum in these important markets as we head into the final months of the year,” said Richard J. Kramer, chairman, chief executive officer and president.
Kramer said, “Our Asia Pacific business improved in the quarter as we benefitted from the launch of several new OE fitments in China, which helped mitigate the impact of lower auto production. This is a testament to the strength of our technology and our success winning fitments on the right platforms,” he added.
“Industry conditions were softer than we anticipated in Europe and we continued to see an adverse impact from lack of alignment in our distribution channels. In response, we expect to accelerate our plans to rationalize distribution in the region. These actions, which will begin early next year, should improve the focus on our brands and ensure that we capture the full benefits of the investments we are making to increase the supply of premium, high margin tires over the next few years,” said Kramer.
Goodyear’s third quarter 2019 sales were $3.8 billion, down 3 percent from a year ago, driven by unfavorable foreign currency translation and lower third-party chemical sales.
Tire unit volumes totaled 40.3 million, down 1 percent from 2018. Original equipment unit volume decreased 5 percent, driven by lower global vehicle production. Replacement tire shipments increased 1 percent.
Goodyear’s third quarter 2019 net income was $88 million (38 cents per share), down from $351 million ($1.48 per share) a year ago. The decrease was driven by a $287 million net gain recorded during the third quarter of 2018 resulting from the company’s TireHub transaction.
Third-quarter 2019 adjusted net income was $105 million (45 cents per share), compared to $163 million (68 cents per share) in 2018. Per-share amounts are diluted.
The company reported segment operating income of $294 million in 2019, down from $362 million a year ago. The decrease primarily reflects increased raw material costs, the impacts of lower volume, and the non-recurrence of a favorable indirect tax settlement in Brazil. These factors were partially offset by improved price/mix.
Year-to-Date Results
Goodyear’s net sales for the first nine months of 2019 were $11.0 billion, a 5 percent decrease from the 2018 period due to unfavorable foreign currency translation, lower volume and lower third-party chemical sales. These factors were partially offset by improved price/mix.
Tire unit volumes totaled 115.7 million, down 2 percent from 2018. Original equipment volume decreased 8 percent, primarily due to lower global vehicle production. Replacement tire shipments were effectively unchanged.
Goodyear’s net income for the first nine months of 2019 was $81 million (35 cents per share), down from $583 million ($2.42 per share) in the prior year’s period. The 2019 period included several significant items, most notably $128 million in rationalization charges, primarily related to the previously announced plan to modernize two tire manufacturing facilities in Germany. Goodyear’s net income for the comparable period in 2018 included a $273 million net gain resulting from the company’s TireHub transaction.
Adjusted net income for the first nine months was $208 million (89 cents per share), compared to $434 million ($1.80 per share) in the prior year’s period. Per-share amounts are diluted.
The company reported segment operating income of $703 million for the first nine months of 2019, down from $967 million a year ago. The decrease primarily reflects higher raw material costs, lower volume and reduced earnings from other tire-related businesses, partially offset by improved price/mix.
Reconciliation of Non-GAAP Financial Measures
Americas’ third-quarter 2019 sales of $2.0 billion were 3 percent lower than in the previous year, driven by lower third-party chemical sales. The tire unit volume rose by 1 percent. Replacement tire shipments increased 3 percent, led by growth in the U.S. and Brazil.
Original equipment unit volume declined 7 percent. The reduction was driven by our U.S. business, reflecting lower vehicle production, including the impact of a strike at a major OE customer, and strategic fitment choices.
The third-quarter 2019 segment operating income of $175 million was down 10 percent compared to the prior year. The decline was more than explained by a favorable indirect tax settlement in Brazil in 2018.
Europe, Middle East and Africa
Europe, Middle East and Africa’s third quarter 2019 sales decreased 7 percent from last year to $1.2 billion, primarily attributable to lower volume and unfavorable foreign currency translation, partially offset by improved price/mix.
Tire unit volume decreased by 6 percent. Replacement tire shipments fell 5 percent, reflecting decreased industry demand and distribution challenges. Original equipment unit volume decreased 9 percent, attributable to lower vehicle production and strategic fitment choices.
Third-quarter 2019 segment operating income of $66 million was 41 percent lower than the prior year’s quarter, driven by higher conversion costs, including the impact of lower factory utilization, and lower volume.
Asia Pacific
Asia Pacific’s third-quarter 2019 sales increased 3 percent to $548 million, primarily reflecting the higher volume and improved price/mix, partially offset by unfavorable foreign currency translation. Tire unit volume increased 5 percent, driven by growth in China. Replacement tire shipments increased 7 percent. Original equipment unit volume rose 2 percent.
The third-quarter 2019 segment operating income of $53 million was down 7 percent from last year, driven by higher conversion costs, reflecting lower factory utilization.
Common Stock Dividend
The company declared a quarterly dividend of 16 cents per share of common stock on Oct. 7, 2019, payable on Dec. 2, 2019, to shareholders of record on Nov. 1, 2019. The payout represents an annual rate of 64 cents per share.
Conference Call
Goodyear will hold an investor conference call at 9:30 a.m. today. Prior to the commencement of the call, the company will post the financial and other related information that will be presented on its investor relations website: http://investor.goodyear.com.
Participating in the conference call will be Richard J. Kramer, chairman, chief executive officer and president; and Darren R. Wells, executive vice president and CFO.
Investors, members of the media and other interested persons can access the conference call on the website or via telephone by calling either 800-895-3361 or 785-424-1062 before 9:30 a.m. and providing the Conference ID “Goodyear.” A taped replay will be available by calling 800-839-5244 or 402-220-2699. The replay will also remain available on the website.
About Goodyear
Goodyear is one of the world’s largest tire companies. It employs about 64,000 people and manufactures its products in 47 facilities in 21 countries around the world. Its two Innovation Centers in Akron, Ohio, and Colmar-Berg, Luxembourg, strive to develop state-of-the-art products and services that set the technology and performance standard for the industry. www.goodyear.com/corporate
