Goodyear Profits Higher than Estimates

Goodyear ProfitsGoodyear Tire & Rubber Company reported profit of $97 million or 39 cents a share in the fourth quarter of 2012. It was above the $6 million or 3 cents per share in the same period of 2011. The company beat the Zacks Consensus Estimate of 21 cents a share. If special items were included, Goodyear had a breakeven fourth quarter compared to the profit of $18 million or 7 cents a share in the same quarter of 2011.

Revenues of Goodyear dropped 11.2 percent to $5 billion due to the $338 million in lower tire unit volumes, $221 million in lower sales in other tire-related divisions, and $85 million in foreign currency translation. It was below Zacks Consensus Estimate of $5.4 billion. Tire unit volumes dropped 7 percent to 40 million due to lower volumes in Europe.

Operating income increased 39 percent to $272 million. The increase was caused by the $191 million in lower raw material costs, improved price/mix of $20 million and positive impact from cost-reduction measures. It offset the $57 million in lower tire volume and overhead costs of $119 million.

Sales in the North American Tire market declined 10 percent to $2.3 billion caused by a 5 percent drop in tire unit volume, 10 percent decrease in replacement tire shipments, and lower third party chemical sales. On the positive side, the company saw a 9 percent increase in original equipment volumes.

Operating income improved by $95 million to $116 million due to a $150 million of positive impact of lower raw materials costs as well as $20 million in savings from the closure of a tire plant in Union City, Tennessee. It offset the lower volume and unabsorbed overhead costs from production cuts of $77 million.

Sales in Africa, Europe and the Middle East declined 16 percent to $1.6 billion because of the 15 percent drop in tire unit volumes, 17 percent fall in replacement tire shipments, 9 percent drop in original equipment unit volume and unfavorable currency translation of $48 million.

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