Goodyear posts stronger-than-expected profit

Friday, April 26th, 2013 | Finance News

DETROIT (Reuters) - Goodyear Tire & Rubber Co on Friday posted a stronger-than-expected quarterly profit as lower raw material costs and increased sales of higher-priced tires offset weakness in Europe.

Shares of the tire maker rose 3.2 percent to $13.35 in trading before the market opened.

The company also maintained its full-year financial outlook and said it was targeting additional savings of up to $100 million in Europe.

"In Europe, we are taking steps to address weak industry demand brought about by recessionary conditions that continue to impact the auto and tire industries," Chief Executive Officer Richard Kramer said in a statement.

Europe has been a weak spot for the auto industry as demand has slumped in that region. U.S. automaker Ford Motor Co on Wednesday reiterated that it expected to lose $2 billion in Europe this year.

The company reported first-quarter net income available to common shareholders of $26 million, or 10 cents a share, compared with a year-earlier loss of $11 million, or 5 cents a share.

Excluding a 37-cent loss resulting from the devaluation of the Venezuelan currency and other one-time items, Goodyear earned 45 cents a share. That was 15 cents above what analysts polled by Thomson Reuters I/B/E/S had expected.

The results benefited from a $230 million drop in raw material costs.

Goodyear's North American and Asian units reported record first-quarter operating income.

While North America's sales volumes fell by 1 million tires, the segment's operating income jumped almost 59 percent, and operating margin rose to 5.9 percent from 3.2 percent, helped by more sales of higher-priced tires.

Overall sales fell 12 percent to $4.85 billion, below the $5.1 billion analysts had expected. Volume fell 8 percent to 39.5 million tires, mostly due to the weakness in Europe.

The quarter's sales reflected $364 million in lower tire unit volumes, $178 million in lower sales in other related businesses, and $115 million in unfavorable foreign currency translations.

Goodyear affirmed its full-year outlook, saying it expected segment operating income - the combined results of its four business units - to come in at $1.4 billion to $1.5 billion. In February, the Akron, Ohio-based company cut that forecast from $1.6 billion, citing weakness in the Europe automotive market and the currency devaluation in Venezuela.

The company said it was still targeting positive cash flow this year, excluding pension prefunding. It expects 2013 industry tire unit volumes to be essentially flat with last year due to the weakness in Europe.

Goodyear said it was implementing a three-point plan to return its European business to historic profit margin levels, including seeking productivity improvements of $75 million to $100 million, increasing its share in targeted market segments and seeking more growth from emerging markets.

(Reporting by Ben Klayman; Editing by Lisa Von Ahn)

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