Goodyear Tire & Rubber Co. reported a net loss of $58 million on net sales of $4.5 billion for its first quarter ended March 31, 2014. That compares to income of $26 million on sales of $4.9 billion for the same period last year.
Goodyear attributed the net loss to a Venezuelan foreign currency charge. "Despite the Venezuelan charge in the quarter, our operating results remained strong and in line with our expectations and we are reaffirming our 2014-2016 financial targets," says Richard Kramer, chairman and chief executive officer.
Segment operating income was up 24% quarter to quarter, from $302 million to a record $373 million. Goodyear says the growth in segment operating income shows its strategy is working.
The company says first-quarter 2014 sales reflect $202 million in lower sales in other tire related businesses, most notably third-party chemical sales in North America; $126 million in unfavorable foreign currency translation; and $98 million in lower price/mix, principally due to lower raw material costs, partially offset by $44 million in higher tire unit volumes.
Here are the first-quarter 2014 results for the North American Tire business unit (with the comparison to 1Q 2013 in parentheses).
Tire units: 14.6 million (down 1.3%)
Sales: $1.9 billion (down 13.2%)
Segment operating income: $156 (up 22.8%)
Segment operating margin: 8.3% (versus 5.9%)
Goodyear says the 13% decrease in North America's first-quarter 2014 sales reflect a 1% decrease in tire unit volume, mainly related to adverse winter weather conditions; lower price/mix; and a $201 million decline in sales in other tire-related businesses, most notably third-party chemical sales. Original equipment unit volume was down 5%. Replacement tire volume remained flat.
North America's first-quarter operating income of $156 million was a 23% improvement over the prior year and a first-quarter record. Operating income was positively impacted by lower conversion costs of $47 million and favorable price/mix net of raw materials of $3 million.
"While our global presence exposes us to significant foreign currency fluctuation along with other economic volatility, the strength of our North American and European businesses more than offset several headwinds in our emerging markets, including the impact of Venezuela on our Latin American business," Kramer said in an investor conference call.
Kramer told investors that the extreme cold weather in North America affected sales of some of the company's biggest OE and replacement customers and reduced volumes by 9% in the month of January. The situation improved throughout the quarter with March volumes increasing 5%. The momentum carried into April with Goodyear seeing volume strength similar to the latter part of 2013, according to Kramer.
"As we assess volumes in North America, we believe the first quarter was simply a pause in what we see as improving tire demands in 2014. Not only did we see strong shipments in March, but we also saw Goodyear brand share growth in the quarter."
The company reaffirmed its 2014-2016 financial targets, which include segment operating income growth of between 10% and 15% per year. Additionally, the company expects a 2% to 3% increase in unit volumes for 2014 over 2013.
