Goodyear reports double-digit sales, earnings growth for Q2

AKRON—Goodyear reported 21.7-percent higher segment operating income for the quarter ended June 30 on 31-percent higher sales revenue, based on solid business results by both Goodyear's "legacy" business and the contribution of results from Cooper Tire & Rubber.

Second quarter segment operating income rose to $364 million during the period on sales of $5.21 billion. Goodyear attributed the revenue increase to sales related to the acquisition of Cooper Tire, improvements in the price/mix component, higher volume and increased sales from other tire-related businesses.

Net income rose 148 percent to $166 million, aided by a number of extraordinary items, including a one-time pre-tax gain of $95 million on a sale and leaseback transaction related to retail properties in Americas and a gain of $14 million related to a tariff-rate change. The gains were offset partially by rationalization charges of $26 million and pension settlement charges of $18 million.

The company did not issue a detailed forecast for the full fiscal year but did indicate it expects the current positive price/mix benefit over rising materials costs to continue in the third quarter. At the same time, Goodyear said it expects to encounter continued inflationary pressures and an adverse effect on international earnings.

The operations of Cooper Tire & Rubber—which Goodyear acquired in June 2021—contributed $134 million to the segment operating income gain, Goodyear said.

Noting his firm's ability to grow earnings in the current economic climate, Richard Kramer, chairman, CEO and president, cited the "agility and execution" of Goodyear employees in dealing with issues such as elevated inflation and COVID-related business interruptions in China.

"Our second quarter and first half sales were the highest in a decade," Kramer said, "reflecting the recent addition of Cooper Tire, the benefit of strong pricing actions across many of our key markets, and volume growth."

Tire unit volumes during the quarter totaled 45.6 million, up 21 percent from the prior year's period. Replacement and original equipment tire unit volume increased 23 percent and 17 percent, respectively, reflecting the addition of Cooper Tire unit volume and the growth of Goodyear's "legacy" business.

Goodyear reported double-digit growth in the quarter in all of its geographic operating units.

In the Americas, segment operating income rose 25.8 percent over a year ago on 39.5-percent higher sales of $3.15 billion, driven by 22 percent higher unit volume, including a gain of 24 percent in replacement-market sales. Original equipment unit volume increased almost 13 percent, reflecting an improvement in vehicle production.

The Europe/Middle East/Africa unit reported 20.9-percent better segment operating income on 21.7-percent higher sales of $1.5 billion. Tire unit volume increased 21 percent, including a 25-percent rise in replacement market volume due to ongoing industry recovery from the pandemic.

The Asia/Pacific business unit suffered a 17.4-percent drop in operating income due to higher raw material costs and inflationary cost pressures, partly offset by improvements in price/mix, higher volume and the Cooper Tire merger.

Sales revenue in the region increased 15.2 percent to $568 million on 20-percent higher volume, the Cooper Tire merger and improvements in price/mix. Replacement tire unit volume increased 10 percent. Original equipment unit volume increased 38 percent due to new fitments.

Segment operating income for the first six months of the year grew 26.2 percent to $667 million on 35.1-percent higher sales of $10.1 billion.

During the quarter, the company approved a plan to close "redundant" Cooper Tire warehouse locations in Americas. The plan will result in approximately 490 job reductions.

Goodyear did not elaborate on the how many or which warehouses will close, but said the the program is in line with previously announced planned synergies, costs to achieve, and cash rationalization payment estimates.