The Goodyear Tyre & Rubber Company on Friday reported second quarter operating income of $267m, down from $316m a year ago.
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Divestitures in 2005 reduced second quarter 2006 segment operating income by $14m, it said.
Q2 net income was $2m (1 cent per share), which included $63m (36 cents per share) in after-tax rationalisation and accelerated depreciation costs primarily related to plant closings. Q2 2005 net income was $69m (34 cents per share).
Second quarter sales reached a quarterly record of $5.1bn, however, up 3% year on year. Excluding the impact of businesses divested in 2005, sales increased 5%.
Goodyear said the sales growth was due to improved pricing and product mix driven by demand for its branded tyres in replacement markets, and favourable currency exchange. Revenue per tyre increased 7%.
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By GlobalDataFour of the company’s six businesses achieved higher segment operating income year on year, with three setting records.
Goodyear said second quarter 2006 results were hit by higher raw material costs of $210m, up 16% year on year, and weak tyre demand, particularly in North America.
Tyre unit volume in the second quarter of 2006 was 54m units, compared to 56.4m units, reflecting primarily the weakness in the North American consumer replacement market.
“Results remained strong in four of our businesses, and while we are making good progress in reducing our global cost structure against our previously announced plan of $750m to $1bn by 2008, we know more needs to be done,” said Goodyear chairman and CEO Robert Keegan.
“We have raised the bar to more than $1bn and will continue to intensify our initiatives to reduce our costs.”
Keegan added: “Our strategy to focus on high-value-added products and key market segments resulted in market share gains for our Goodyear and Dunlop brands during the quarter. However, we were not able to offset the impact of weakness in the lower-value segments of the North American consumer replacement tyre market.”
In the second quarter, Goodyear closed a tyre plant in the United Kingdom, announced the proposed closure of a tyre plant in New Zealand and took cost reduction actions in Europe and North America.
The company reduced selling, administrative and general expenses by 7% compared to the second quarter of 2005.
Keegan said the company’s plans announced during the second quarter to exit segments of the private label tyre business in North America and expand its network of commercial truck service centres at Pilot Travel Centre locations represent positive business model changes for Goodyear in North America.
