USA: Goodyear Tyre swings from profit to loss in second quarter, first half loss deepens
The Goodyear Tyre & Rubber Company on Wednesday reported a net loss of $US73.6 million (42 cents per share) for the second quarter of 2003, compared with net profit of $28.9 million (18 cents per share) in the second quarter of 2002.
The company reported second quarter sales of $3.8 billion for 2003, up 8% from $3.5 billion during the prior-year period. Tyre unit volume in the second quarter of 2003 was 52.8 million units, compared to 53.3 million units in the 2002 period.
"We are disappointed in our financial results for the second quarter, but we are encouraged by the numerous positive trends in our company and we are optimistic about our turnaround," said Goodyear chairman and chief executive officer Robert Keegan.
The 2003 second quarter included an after-tax rationalisation charge of $13.4 million (8 cents per share) for salaried staff reductions and manufacturing consolidations in North America, Europe, Latin America and Asia, and an after-tax loss of $7 million (4 cents per share) on asset sales.
The single most important factor in the deterioration of operating performance was an increase in raw material costs of approximately $124 million, offset in part by cost reduction actions, improved price and mix and an estimated currency translation benefit of approximately $9 million.
Second quarter sales were favourably impacted by the effects of currency translation, estimated at $169 million, and improved brand, customer and product mix.
Depreciation and amortisation expense was $153.8 million in the second quarter of 2003, versus $155.4 million in 2002. Capital expenditures were $87.2 million in the second quarter of 2003 and $97.1 million for the second quarter of 2002.
Goodyear increased its reserve for general and product liability- discontinued products by $90 million during the second quarter. The company also recorded a receivable of $101.8 million, primarily from its excess liability insurance carriers, related to general and product liability claims. These items resulted in a net gain for the period of $11.8 million.
Goodyear and the United Steelworkers of America have agreed to resume negotiations next week in Cincinnati on a master contract agreement covering approximately 16,000 associates at 14 facilities.
The company's net loss for the first six months of 2003 was $236.9 million ($1.35 per share). For the first six months of 2002, the company recorded a net loss of $34.3 million (21 cents per share).
First half 2003 results include an after-tax rationalisation charge of $78.6 million (45 cents per share) as a result of salaried staff reductions and manufacturing consolidations in North America, Europe, Latin America and Asia.
First half 2002 results included a segment operating income benefit of approximately $10 million resulting from the company's participation in the Ford tyre replacement programme. The results also included a charge of $10 million principally related to the return of inventory resulting from the April 2002 closure of Penske Automotive Centres in the United States.
Sales for the first six months of 2003 were $7.3 billion, an increase of 7.6% compared to $6.8 billion in 2002. Tyre unit volume was 105.4 million units, compared to 106.3 million units in the 2002 period.
Tyre price improvements had a favourable impact on sales for the first six months.
The company estimates the effects of currency movements had a positive impact on sales of approximately $308 million during the first half, and a negligible impact on first-half losses.
Higher raw material costs of approximately $186 million had a significant impact on the operating loss for the first half.
Global capital expenditures for the six months were $177.3 million, compared to $172.9 million in 2002. Depreciation and amortisation expense was $301.7 million in the first half of 2003 and $302.2 million in 2002.