The Goodyear Tire & Rubber Co. has reported results for the first quarter of 2018.
“We are pleased with our first quarter results given higher raw material costs and weaker demand than we expected in the quarter,” said Richard Kramer, chairman, CEO and president. “These results were highlighted by our performance in the 17-inch-and-larger segment in consumer replacement, which delivered more than double the industry growth in the U.S. and Europe.”
Goodyear expects to benefit from its recently announced plan to establish TireHub, a leading national tire distribution joint venture in the United States. The new venture will allow the company to work more closely with its customers in the future and deliver an enhanced brand experience for consumers as buying habits continue to evolve.
“TireHub will deliver best-in-class service for our retail and fleet customers and will be the cornerstone of our aligned distribution network, including our company-owned retail stores,” said Kramer. “TireHub will strengthen our ability to promote our premium brands, our industry-leading e-commerce solution and our strategy of targeting the industry’s most profitable, large rim size segments. This agreement increases our confidence in delivering on our long-term targets.”
Goodyear’s first quarter 2018 sales were $3.8 billion, up 4 percent from a year ago. Tire unit volumes totaled 39 million, down 2.5 percent from 2017. OE unit volume was down 4 percent, primarily driven by declines in the less-than-17-inch rim size segment in EMEA. Replacement tire shipments were down 2 percent, largely due to reduced industry demand for consumer tires in the U.S. and Europe.
Goodyear’s first quarter 2018 net income was $75 million (31 cents per share), down from $166 million (65 cents per share) a year ago. First quarter 2018 adjusted net income was $122 million (50 cents per share), compared to $189 million (74 cents per share) in 2017. Per share amounts are diluted.
The company reported first quarter segment operating income of $281 million in 2018, down from $390 million a year ago. The decrease was driven by the impact of higher raw material costs.
On April 16, the company announced an agreement with Bridgestone Americas Inc. to form TireHub LLC, a 50/50 joint venture that will combine Goodyear’s company-owned wholesale distribution business and Bridgestone’s tire wholesale warehouse business. The transaction is expected to close in June 2018, subject to customary closing conditions and regulatory approvals.
In conjunction with this transaction, the company expects to transition volume representing approximately 10 million units of annual sales – primarily to TireHub, but to other aligned distributors as well – beginning during the second quarter of 2018. Given the temporary disruption associated with the start-up of TireHub, the company expects a near-term reduction in volume of up to 1.5 million units in 2018.
The company reaffirmed its 2018 segment operating income guidance of $1.8 billion to $1.9 billion, excluding the TireHub transition, and confirmed its 2020 segment operating income target of $2 billion to $2.4 billion.