“I’m very pleased with our outstanding second quarter results, which represent another step on the path toward our 2013 targets,” says Richard J. Kramer, chairman and CEO. “They present confirmation that our strategies are right and that they are working,” he adds.
“Earnings growth in North America is a key outcome of our strategies. North American Tire’s second quarter results show the type of performance we should be able to sustain once we reach our 2013 targets,” says Kramer.
The company’s sales were $5.6 billion, up 24 percent from a year ago and the highest ever achieved by the company in any quarter. Tire unit volumes totaled 42.9 million, down 2 percent from 2010, primarily reflecting weaker industry volumes, particularly in the North American consumer tire business, according to Kramer.
Second quarter sales also reflect strong price/mix improvements, which drove revenue per tire up 18 percent over last year’s spring, excluding the impact of foreign currency translation.
“All of our businesses continued to make solid progress in driving improved price/mix through innovative product offerings in targeted market segments,” Kramer says.
Second quarter sales were also impacted by a $221 million increase in sales in other tire- related businesses, primarily in North America, and a favorable foreign currency translation of $348 million.
The company expects the global tire industry will continue to grow in 2011. In recognition of second quarter volume levels and a reduced outlook for the U.S. consumer replacement industry, it now expects that unit volumes for the year will increase at the lower end of its previously stated range of 3 percent to 5 percent.
“A sluggish economic recovery in our developed markets and higher inflation in emerging markets have resulted in uneven growth in the tire industry,” Kramer says. “We are confident, however, that Goodyear is well positioned to address the volatile demand environment with our strategy of focusing on targeted market segments and ongoing focus on cost reduction and productivity.”
In North America, the consumer replacement industry is expected to be flat to up 2 percent, consumer original equipment up between 5 percent and 10 percent, commercial replacement up between 10 percent and 15 percent and commercial original equipment up between 40 percent and 50 percent.
North American Tire’s sales increased 18 percent from last year to $2.4 billion, a second quarter record. Sales reflect improved price/mix, which drove a 20 percent increase in revenue per tire, excluding the impact of foreign currency translation, compared to 2010’s second quarter. Original equipment unit volume decreased 9 percent.
Replacement tire shipments were down 5 percent. Sales were positively impacted by $178 million from higher sales in other tire-related businesses, primarily third-party chemical sales.
The second quarter segment operating income of $137 million was $121 million above last year and the highest achieved in any quarter since 1998. An improved price/mix of $216 million more than offset $131 million of higher raw material costs, according to Kramer.
“North American Tire’s results benefitted from proactive pricing for the value of our products in the face of rising raw material costs,” he says. “These results will be difficult to repeat in the second half because of increasing raw material cost challenges and uncertain economic conditions.”
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