AKRON—Goodyear reported an 8.3 drop in sales, but a 24.3 percent increase in net income for the first quarter of 2016.
Sales revenue fell 8.3 percent to $3.69 billion, largely because of unfavorable foreign currency translation and the deconsolidation of the company's subsidiary in Venezuela.
Net income of $184 million was 24.3 percent higher than the adjusted net income of $148 in the first quarter of 2015. The 2015 figure excludes a $99 million after-tax, one-time gain on deferred royalties related to the sale of the engineered products business.
The firm reported 8 percent higher segment operating profit, to $419 million, which Goodyear attributed to a favorable price/mix net of raw materials and the impact of higher volumes.
As a result, the operating ratio jumped nearly 2 percentage points to 11.4 percent.
“Our results are a reflection of our ability to successfully execute on our strategy,” Richard Kramer, chairman, CEO and president, said in a statement. “We will continue to focus on profitable growth in market segments where our innovation, brand and operational excellence capabilities provide a competitive advantage.”
Kramer noted that demand for the company's premium products is robust, which in turn is driving margin expansion.
Tire unit volumes grew 2 percent to 41.5 million, Goodyear said, reflecting growth in the Asia-Pacific region, primarily in Japan and China. Replacement and original equipment tire shipments were both up equally. Excluding the impact of the deconsolidation of Venezuela, unit volumes increased 3 percent.
Goodyear reported a 5 percent gain in segment operating income for the Americas business unit to $260 million, driven primarily by favorable price/mix net of raw materials but partially offset by the deconsolidation of the Venezuelan subsidiary and lower volume.
Sales revenue in the Americas fell 13 percent from last year to $1.95 billion, reflecting a 6 percent decrease in tire unit volume, primarily due to the deconsolidation of the Venezuelan subsidiary ($94 million in sales) and the sale of the former Goodyear Dunlop Tires North America Ltd. business ($64 million).
Replacement tire shipments were down 6 percent while original equipment unit volume fell 7 percent.
Excluding Venezuela and Goodyear Dunlop—300,000 and 400,000 units, respectively—tire unit volume was down 2 percent, driven primarily by the weak economic environment in Brazil.
Goodyear's Europe, Middle East and Africa unit reported a 6 percent drop in sales to $1.25 billion but a 10 percent increase in segment operating income to $80 million.
Asia Pacific's sales were up 9 percent to $489 million, while operating income jumped 18 percent to $79 million.
The acquisition of a controlling interest in Nippon Goodyear Ltd. in Japan positively impacted volumes by approximately 900,000 units and sales by $41 million. The net unfavorable impact on segment operating income of the NGY acquisition and the sale of the company's 25 percent interest in Dunlop Goodyear Tires Ltd. was $3 million.