Goodyear loses $20M in 3Q amid rubber price hikes

AP News
Posted: Oct 28, 2010 4:36 PM
Goodyear loses $20M in 3Q amid rubber price hikes

Goodyear Tire & Rubber Co., hurt by spiraling rubber expenses, reported a $20 million third-quarter loss Thursday despite solid sales increases.

Shares dropped 9 percent as Goodyear warned that it would face more raw-material pricing issues in the fourth quarter.

The Akron, Ohio-based company, the biggest U.S. tire maker and third largest globally, said the loss amounted to 8 cents per share. In last year's July-September period, Goodyear earned $72 million, or 30 cents per share.

Excluding write-offs and other charges, the company said it would have earned 13 cents a share. Analysts expected a 10-cent a share profit, excluding charges.

Revenue rose 13 percent to $5 billion, and the number of tires sold rose 6 percent.

The bright sales picture was blunted by raw material costs, up $381 million for the quarter. Goodyear said natural rubber costs have skyrocketed threefold since early 2009. About half its rubber supply is natural, and half synthetic.

Goodyear shares closed down $1.05, or 9 percent, at $10.56.

Richard J. Kramer, chairman and CEO, said improving sales pointed to continued industry recovery from the recession.

Kramer said in a conference call with analysts that the company is benefiting from a global economic recovery.

"Our industry, and industry in general, is on an upward tick," he said. "We're seeing evidence of investments in essentially every region of the globe in tire unit volumes, even in truck, are turning back to higher levels at a faster pace than anyone had anticipated."

Sales in Goodyear's key North American market rose 17 percent to $2.2 billion, the highest in two years, with the number of tires sold up 5 percent. New-vehicle tire volume rose 12 percent.

Elsewhere, sales increased 7 percent in Goodyear's Europe-Middle East-Africa region, 17 percent in Latin America and 14 percent in Asia-Pacific.

"As we look to the future we feel good about the direction of the tire industry, and we feel even better about our direction as a company," Kramer said.

Analysts with KeyBanc Capital Markets said investors would view the results negatively, in part because margins were weaker than expected.

In addition, segment profits in North America, Europe-Middle East-Africa and Asia-Pacific fell short of expectations, KeyBanc said in a research note.

For the first nine months of 2010, Goodyear lost $39 million, or 16 cents per share, on sales of $13.8 billion. That compared with a loss of $482 million, or $2 per share, on sales of $11.9 billion in the nine-month 2009 period.