Goodyear Records Low Earnings In First Half Of 2017

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Due to the negative effects of higher raw materials cost together with lower unit volumes, Goodyear’s operating income fell to 32 percent and 21.3 percent for the quarter and six months respectively which ended on June 30. Increased competition and lesser summer tyre industry demand, especially in Europe, reduced the sales.

Commenting on the results, Richard Kramer, Goodyear Chairman and CEO stated that the down sales reflect the impact of inconsistent raw material costs and an increasingly challenging competitive environment, particularly in the US and European markets. He also called the first half a “highly unusual” environment, where the OE weakened and there was a dip in replacement demand despite having favourable environments in terms of miles driven, unemployment and gasoline prices.

With segment operating income down by $361 million in the quarter and by $ 746 million in the first half, the sales were down with 5 percent in the quarter to $3.69 billion and 2.4 percent to $7.39 billion by the half. Also, the company’s operating margin reduced by nearly 4 to 9.8 percent for the quarter and 2.5 to 10 percent for the first half of year.

However, Goodyear is expecting that for the entire year, the segment operating income would fall between $1.6 billion and $1.65 billion and the sales volumes would be down by around 3.5 percent compared to 2016.

In Europe, the Middle East and Africa segment, Goodyear Tyres suffered a 12 percent drop in sales to $1.11 billion with a 16 percent fall in unit volume, primarily in consumer business segment. The American operating income reduced by 26.8 and 22.5 percent in the quarter and in the first half of the year respectively, due to 2.9 percent and 1.3 percent decline in sales during the same period. The reduced volume was driven by the decreased consumer demand for tyres in 16-inch rim diameters and below, especially in the USA. Also, the OE volumes were down thus reflecting lower auto production.

However, the Asia Pacific segment reported a 3 percent gain in sales which reflects improved price/mix, while the tyre volumes were flat.

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