The FINANCIAL -- The Goodyear Tire & Rubber Company on April 25 reported results for the first quarter of 2018.
“We are pleased with our first quarter results given higher raw material costs and weaker demand than we expected in the quarter,” said Richard J. Kramer, chairman, chief executive officer and president. “These results were highlighted by our performance in the 17-inch-and-larger segment in consumer replacement, which delivered more than double the industry growth in the U.S. and Europe,” he added.
Goodyear expects to benefit from its recently announced plan to establish TireHub, a leading national tire distribution joint venture in the United States. The new venture will allow the company to work more closely with its customers in the future and deliver an enhanced brand experience for consumers as buying habits continue to evolve.
“TireHub will deliver best-in-class service for our retail and fleet customers and will be the cornerstone of our aligned distribution network, including our company-owned retail stores,” said Kramer. “TireHub will strengthen our ability to promote our premium brands, our industry-leading e-commerce solution and our strategy of targeting the industry’s most profitable, large rim size segments. This agreement increases our confidence in delivering on our long-term targets.
Goodyear’s first quarter 2018 sales were $3.8 billion, up 4 percent from a year ago. Tire unit volumes totaled 39 million, down 2.5 percent from 2017. Original equipment unit volume was down 4 percent, primarily driven by declines in the less-than-17-inch rim size segment in EMEA. Replacement tire shipments were down 2 percent, largely due to reduced industry demand for consumer tires in the U.S. and Europe, according to Goodyear.
Goodyear’s first quarter 2018 net income was $75 million (31 cents per share), down from $166 million (65 cents per share) a year ago. First quarter 2018 adjusted net income was $122 million (50 cents per share), compared to $189 million (74 cents per share) in 2017. Per share amounts are diluted.
The company reported first quarter segment operating income of $281 million in 2018, down from $390 million a year ago. The decrease was driven by the impact of higher raw material costs.
Americas’ first quarter 2018 tire unit volume was down 3 percent. Sales of $1.9 billion were down 2 percent primarily due to lower unit volume. Original equipment unit volume was down 3 percent driven by production declines in the U.S. Consumer replacement tire shipments in the U.S. were down 3 percent which outperformed USTMA industry members, who were down 5 percent.
First quarter 2018 segment operating income of $127 million was down 41 percent from the prior year. The decline was driven by increased raw material costs, lower price/mix and the effect of lower volume.
Europe, Middle East and Africa
Europe, Middle East and Africa’s first quarter 2018 sales increased 7 percent from last year to $1.3 billion, due to favorable foreign currency translation and improved price/mix, partially offset by reduced tire volume. Original equipment unit volume was down 14 percent, primarily driven by declines in the less-than-17-inch rim size segment. Replacement tire shipments were down 2 percent, driven by decreased industry demand in the consumer business.
First quarter 2018 segment operating income of $78 million was down 23 percent from the prior year because of higher raw material costs, which more than offset improvements in price/mix, and lower volume.
Asia Pacific’s first quarter 2018 sales increased 14 percent from last year to $571 million primarily because of improved price/mix, favorable foreign currency translation and higher tire volumes. Tire unit volumes were up 4 percent. Original equipment unit volume was up 11 percent. Replacement tire shipments were flat.
First quarter 2018 segment operating income of $76 million was up 4 percent from last year reflecting higher volume and reduced conversion costs, which were partially offset by higher raw material costs, net of price/mix improvements.
On April 16, 2018, the company announced an agreement with Bridgestone Americas, Inc. to form TireHub, LLC, a 50/50 joint venture that will combine Goodyear’s company-owned wholesale distribution business and Bridgestone’s tire wholesale warehouse business. The transaction is expected to close in June 2018, subject to customary closing conditions and regulatory approvals. In conjunction with this transaction, the Company expects to transition volume representing approximately 10 million units of annual sales – primarily to TireHub, but to other aligned distributors as well – beginning during the second quarter of 2018. Given the temporary disruption associated with the start-up of TireHub, the Company expects a near-term reduction in volume of up to 1.5 million units in 2018.
The company reaffirmed its 2018 segment operating income guidance of $1.8 to $1.9 billion, excluding the TireHub transition, and confirmed its 2020 segment operating income target of $2.0 to $2.4 billion.
The company paid a quarterly dividend of 14 cents per share of common stock on March 1, 2018. The Board of Directors has declared a quarterly dividend of 14 cents per share payable June 1, 2018, to shareholders of record on May 1, 2018.
As a part of its previously announced $2.1 billion share repurchase program, the company repurchased approximately 875 thousand shares of its common stock for $25 million during the first quarter. Since its inception, purchases under the program total 45 million shares for $1.3 billion.