Updated: Goodyear nets $20.8 billion in 2022 sales as inflationary headwinds continue

AKRON—A weak fourth quarter market driven by soft demand in the Americas and Europe, high energy costs and continuing inflation dampened Goodyear's year-end numbers, which saw net sales increase 16 percent over 2021 results.

The world's third-largest tire manufacturer saw net sales of $20.8 billion in 2022 against $17.5 billion in net sales in 2021, according to the company's fourth quarter 2022 and year-end financial report, issued to investors Feb. 8.

Year-end EBIT, or earnings before taxes, registered at $399 million for Goodyear in 2022, against $513 million in 2021.

And year-end net income decreased to $202 million in 2022 against 2021's $764 million.

"While we anticipated weaker industry conditions in Europe, the magnitude of the volume softness was greater than expected," Goodyear Chairman and CEO Rich Kramer said during a Feb. 9 call with the media. "Weaker industry volume in the quarter magnified already challenging conditions, given the Ukraine conflict and elevated inflation."

"But our business made significant progress in a very challenging environment in 2022."

The headwinds of the fourth quarter mimicked those of the third quarter of last year, and similar challenges are expected in the first quarter of this year, according to Goodyear officials.

"In Europe and the Americas," Kramer said, "it was a weaker market in the fourth quarter and we expect slowdowns into quarter one. We reacted in the Americas and Europe by taking production down, as we do not want a high inventory in a slower market."

The third and fourth quarter slowdowns resulted in the loss of 500 jobs, cuts announced by Goodyear Jan. 23. The job cuts represent about 5 percent of Goodyear's work force and are set to take place "globally," according to Goodyear.

The actions will result in a quarterly run-rate benefit of approximately $15 million beginning in the second quarter. Savings in the first quarter are expected to be $5 million.

These actions are in addition to Goodyear’s plans to close the Cooper Tire Melksham, England, tire plant and exit the TrenTyre retail operations in South Africa to support EMEA’s overall competitiveness.

In the fourth quarter of 2022, Goodyear saw net sales increase by 6 percent to $5.37 billion (over the last quarter of 2021), driven mainly by a strong price/mix, according to Christina Zamarro, executive vice president and chief financial officer for Goodyear.

However, net income showed a loss of $104 million in the fourth quarter of 2022, a decrease of $657 million against $553 million in net income in the last quarter of 2021.

Segment operating income was down $155 million, or about 40 percent, to $236 million in the fourth quarter of 2022 against $391 million in segment operating income in 2021.

“Our fourth-quarter results fell short of our expectations given a significantly weaker industry backdrop, particularly in Europe,” Kramer said.

“While our businesses have performed at a high level through the volatility of the past several years, the uncertain near-term macroeconomic outlook and continuing impacts of inflation make these difficult actions necessary to position our business for future success.”

The decrease was led by an $80 million loss in operating income in EMEA.

Net sales in the Americas increased about 12 percent to $3.4 billion in the last three months of 2022 over the last quarter of 2021, according to Goodyear. This was driven by a 13-percent increase in revenue per tire, Goodyear said.

Segment operating income for the Americas came in at $279 million in the last quarter of 2022, a 10-percent drop against $308 million in the final quarter of 2021.

"As I think about the Americas going forward—up 10 percent in the consumer replacement channel by volume, that is pretty healthy— our distributors are building inventory," Kramer said. "There is no anticipation of price reductions, and we are aligned with where the market is going in 2023.

"It will be a slow start but we see a strong second half coming."

Overall volume in the Americas was similar to the fourth quarter of 2021, at 25.4 million units (OE and replacement combined) in the last quarter of 2022 against 25.5 million units in 2021.

Europe, Kramer said, presents more difficult challenges.

"It is a bit tougher there," he said. "Initiatives were put in place and we were able to get volume and price mix ahead of raw material (costs) again. So things are working in Europe.

"Obviously we have seen energy inflation driven by the war, and the anticipation of high energy costs can reduce consumer demand, something we noticed particularly in November and December."

Kramer noted that the EMEA operating income loss of $80 million was due to higher raw material costs of $252 million and inflation and other cost increases of $118 million (including $50 million in higher energy costs).

These costs more than offset the price/mix in EMEA of $264 million in the fourth quarter, Kramer said.

“The escalating raw material environment is true for Goodyear and true for the industry,” Kramer said. “We need to recover that. And there is the potential for a decrease in raw materials, and we need to capture those benefits when it happens, dropping those benefits into earnings. 

“The OE business is coming back, we see that. This is good for the supply-demand equation as well.”

EMEA saw net sales of $1.36 billion for the fourth quarter of 2022, a 1.5-percent drop against the fourth quarter of 2021.

Overall volume in EMEA was down 1 million units for the quarter (12.8 million total), or 7.3 percent below 2021 levels (13.8 million total). Replacement volume was down 1.5 million units in EMEA, while OE fitments were up 500,000 units.

"We expect segment operating income to improve during 2023," Kramer said. "As pricing continues to catch up to the impact of higher costs, our goal is for EMEA to break even for the first quarter and return to ... historical run-rates by the middle of the year."

Asia-Pacific netted sales of $610 million in the fourth quarter, a 2.9-percent decrease over the fourth quarter of 2021; and segment operating income of $37 million, a 12-percent decrease against the final quarter of 2021.

Zamarro noted that tire volumes in each business segment began stabilizing toward the end of 2022, and high raw material costs—which also saw some abatement toward the end of 2022—were offset by higher revenues per tire (a 28 percent increase in revenue per tire in the EMEA, thanks to price/mix adjustments).

"We see benefits in the second half of this year with higher volume and strong growth in the Asia-Pacific region, mainly in China," Zamarro said. "And we expect some tail winds in lower raw material costs. Historically, this (second half of a fiscal year) is the time for growth in earnings and growth in margins."

Goodyear's non-tire rubber product segment "was driven by the chemical business" in 2022, Zamarro said.

"We were buying butadiene at higher prices, then prices dropped precipitously," she said. "I think it is more of a timing issue.

"We've had good growth driven by aviation, with a strength in volume, pricing and mix. Across the portfolio has been good growth."

Zamarro cited the opening of a non-tire rubber goods plant in China that should assist 2023 financial numbers.

Goodyear employs about 72,000 people and manufactures its products in 57 facilities in 23 countries.