Goodyear Tire & Rubber Co., helped by the sale of its
engineered products unit, swung to a big profit in the third quarter
from a loss a year ago.
But strong results in Goodyear's international tire markets and
an emphasis on high-margin premium tires in North America helped
drive up Goodyear's operating income in the quarter and send the
company's stock up 7.6 per cent.
Goodyear, the world's third-largest tire maker, said Tuesday that
it earned US$668 million, or $2.75 per share, for the quarter ended
Sept. 30, compared with a loss of $48 million, or 27 cents a share,
a year ago. Sales were $5.06 billion for the quarter, up from $4.9
billion in the year-ago period.
On Aug. 1, Goodyear completed its sale of nearly all of its
engineered products business for $1.48 billion to EPD Inc., part of
Washington-based private equity firm The Carlyle Group. Goodyear
said it expects to use the money to reduce debt, cover obligations
for employee benefits and buyouts, and invest in its core tire
Goodyear recorded an after-tax gain in the quarter of $517
million, $2.12 per share, on the engineered products sale.
Discounting the gain and one-time charges, Goodyear earned 70
cents per share.
Analysts surveyed by Thomson Financial survey expected earnings
of 53 cents a share for quarter.
Goodyear recorded a restructuring charge of $107 million, or 60
cents a share, in the year ago quarter that included the planned
closing a plant in Tyler, Texas.
Through nine months of 2007, Goodyear made $550 million, or $2.44
per share, on sales of $14.9 billion, compared with year-ago
earnings over the same period of $28 million, or 16 cents per share,
on sales of $14.1 billion.
Taking out the engineered products unit, the nine-month period
shows a gain of 39 cents per share from continuing operations in
2007 and a loss on that basis of 36 cents per share in 2006.
Goodyear's North American tire sales in the third quarter were
down six per cent from a year ago, primarily because the company
left some private label tire markets. But Goodyear also gained
market share with its more profitable Goodyear brand tires.
Operating income of $66 million for that key segment was the
highest since the third quarter of 2001 and up substantially from
$19 million in the same 2006 quarter.
``Despite market challenges, our results are among the best ever
achieved by Goodyear,'' said Robert Keegan, chairman and chief
executive. ``We continue to improve, we have momentum in our
markets, we continue to meet or exceed our goals and we continue to
become a tougher competitor.''
Keegan told analysts on a conference call that demand for some of
Goodyear's premium products has been so strong that the company now
is experiencing supply constraints. Keegan said Goodyear is
accelerating planned investments to boost capacity of high
Goodyear is also making the most of international growth.
``We had significant growth in our operations outside the U.S.,
where we enjoyed higher margins,'' Keegan said.
The four segments other than North America _ Asia Pacific Tire;
Latin American Tire; European Union Tire; and Eastern Europe, Middle
East and Africa Tire _ each achieved record sales.
Deutsche bank analyst Rod Lache noted in a report Tuesday
Goodyear's higher margins for North American tires and improvement
in Goodyear's Latin American and Asian markets.
``We continue to believe that Goodyear is on track with our
expectations for significant earnings improvement driven by
price/mix and cost savings,'' Lache said in his report.
Goodyear shares rose $2.05 to $29.16 in trading Tuesday. The
shares have traded between $14.62 and $36.90 the past year.
Goodyear, based in Akron, has about 70,000 employees and makes
tires and chemicals in 26 countries, including Canada.
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