AKRON—Goodyear's net income fell 9.9 percent to $192 million for the second quarter that ended June 30, as sales dropped 10.4 percent to $4.17 billion, compared with the year previous period.
However, the tire maker reported a record segment operating income of $556 million—a 20.9 percent increase over previous year—due to what it called a favorable price-mix net of raw materials and cost reduction actions.
Akron-based Goodyear said the sales slump was largely attributable to unfavorable foreign currency translation of $401 million.
Tire unit volumes totaled 40.8 million for the second quarter, up 1 percent over last year. Original equipment unit volume jumped 4 percent, while replacement tire shipments slid 1 percent.
For the first six months, Goodyear more than doubled its net income to $416 million, from $155 million in the 2014 period, despite a drop in net sales.
Sales fell 10.2 percent to $8.2 billion, reflecting unfavorable foreign currency translation of $794 million, the company said. Tire unit volumes totaled 81.6 million for the first half, up 1 percent from 2014. Replacement tire shipments edged up 1 percent while original equipment unit volume rose 3 percent.
The company's record first-half segment operating income of $947 million was a 13.7 percent increase from the year-ago period, due to favorable price/mix net of raw materials and cost reduction actions, which Goodyear said exceeded the impact of inflation and unfavorable foreign currency translation.
“We delivered outstanding segment operating income growth and achieved a segment operating margin of more than 13 percent, despite significant foreign currency and global economic headwinds,” Goodyear Chairman and CEO Richard J. Kramer said in a statement.
“North America continued to lead the way with a 54 percent increase in segment operating income and a 16 percent segment operating margin driven by strong demand for our products,” he continued. “Additionally, three of our four businesses posted segment operating margins in excess of 10 percent.”
Goodyear's operating income in North America surged 54.3 percent to a record $321 million for the quarter, despite a 0.9 percent dip in sales to $2.03 billion. The earnings improvement was driven by favorable price/mix net of raw materials and higher tire volume, the tire maker said.
The North America segment boosted second-quarter tire unit sales 3.3 percent to 15.8 million, which was more than offset by a decrease in third-party chemical sales. Replacement tire shipments rose 1 percent while OE unit volume climbed 9 percent.
Meanwhile the Europe, Middle East and Africa segment struggled as second-quarter sales dropped 19.9 percent to $1.27 billion, primarily due to unfavorable foreign currency translation. Sales also reflect a 2 percent decrease in tire unit volume, due to lower consumer tire sales and the company's exit from the farm tire business. Replacement tire shipments fell 2 percent while OE unit volume dropped 2 percent.
The segment's operating income decreased 7.7 percent to $108 million due to unfavorable foreign currency translation, which more than offset favorable price/mix net of raw materials, the company said.
The firm's Latin America segment also struggled during the second quarter, generating $390 million in sales—a 20.2-percent drop from the 2014 period—as unit sales slid 4.5 percent to 4.2 million. Goodyear attributed the sales drop primarily to unfavorable foreign currency translation as well as a weak economy in Brazil and Venezuela. Replacement tire shipments were down 2 percent. Original equipment unit volume fell 11 percent in the region.
Latin America's segment operating income plummeted 27.1 percent to $43 million, primarily due to the impact of inflation on both raw material and conversion costs, according to Goodyear, as well as lower volume, partially offset by favorable price/mix.
The Asia Pacific segment boosted its operating income 10.5 percent to $84 million for the quarter despite a 9.6 percent drop in sales to $491 million.
Tire unit volumes increased 3.4 percent to 6 million, the company said. Replacement tire shipments rose 1 percent while OE unit volume jumped 11 percent, primarily in China and India.
Goodyear said it has reaffirmed its 2015-16 financial targets, which include segment operating income growth of between 10 percent and 15 percent per year.