AKRON—Sales and earnings increased for several tire companies during the second quarter, ended June 30, bolstered in part by lower raw material prices. Most of the tire makers expect modest growth to continue through the remainder of the year.
Continental
Continental A.G. reported slightly lower operating earnings and sales in the first half, but management is sticking with its earlier forecasts for the full year of an adjusted pre-tax operating margin of more than 10 percent on slightly higher sales. Conti's tire business unit reported similar results—pre-tax operating income down 0.7 percent and sales off 1.6 percent—although the figures show business picked up in the second quarter, rising 2.9 percent, and operating income improved slightly. For the half year, Conti's tire business reported operating earnings of $1.37 billion on sales of $6.39 billion, for a 21.4-percent operating ratio. Conti reported passenger and light truck tire OE sales were up over 2012, especially in Asia/Pacific and the Americas, while replacement market sales fell short of last year's levels. Commercial vehicle tire sales grew about 2 percent during the period, Conti said. For the second quarter, the tire business reported a 2.9-percent sales gain to $3.33 billion, while earnings plateaued at $734.4 million. Corporate-wide, Conti reported pre-tax operating income of $2.2 billion on sales of $21.7 billion. Net income rose 13.8 percent to $1.44 billion. Due to Conti's global positioning and the continued increase in the number of vehicles equipped with Conti products, the company expects consolidated sales will be stable in the third quarter. Conti is expecting positive effects from the downward trend in natural and synthetic rubber prices, chiefly attributable to restrained demand on the tire markets. This could result in an earnings benefit on the rubber group of $400 milllion or more in the current year, the company said. Despite the lackluster sales performance, Conti said it continues to invest in its infrastructure and research and development, boosting spending in these areas by 4.4 and 9.7 percent, respectively, in the six-month period.
Goodyear
Goodyear's net income more than doubled during the second quarter, while segment operating earnings reached record levels despite lower sales. Net income was $188 million for the three-month period, compared with $92 million during the year-ago period. Goodyear said its record segment operating income of $428 million for the second quarter was up 27 percent from a year earlier. It said the improvement reflected favorable price/mix net of raw materials of $92 million, cost savings net of inflation of $38 million and $11 million in higher tire unit volumes, partially offset by unabsorbed overhead of $47 million from lower production and $12 million in unfavorable foreign currency translation. Sales, though, dropped 5 percent to $4.89 billion. The firm said sales were boosted by $35 million in higher tire unit volumes, but that was more than offset by $141 million in lower revenue in tire-related business, $75 million in lower price/mix and $60 million in unfavorable foreign currency trans- lation. Tire unit volumes rose 1 percent to 39.5 million units. Goodyear said it had record operating income in North America and Asia-Pacific but North American sales dropped 10.2 percent to $2.2 billion. Unit sales in North America slipped 3.9 percent to 14.8 million. For the first six months, sales dropped 8.8 percent to $9.75 billion, net income more than doubled to $221 million from $88 million, and segment operating in- come gained 16 percent to $730 million. The company said its full-year outlook forecasts segment operating income of about $1.5 billion, at the high end of its previously announced range of $1.4 billion to $1.5 billion.
Hankook
Hankook Tire Co. Ltd. reported 11.3-percent increase in operating income to $237.7 million on 1.4-percent higher sales to $1.64 billion, yielding an earnings/sales ratio of 14.5 percent. The tire maker did not elaborate on the reasons for its improved earnings performance, but Hankook Vice Chairman and CEO Seung Hwa Suh noted the firm's growth is predicated on “our foresight into the future to solidify our foundation for growth based on balanced global production portfolio and advanced R&D capabilities.” Hankook also is looking forward to the second half and beyond as its new plants in Chongqing, China, and Cikarang, Indonesia, ramp up production, providing a more “flexible global supply network.” It did not, though, offer specific sales forecasts. The company pointed out demand for its UHP tires continues to grow exponentially, particularly in China and North America, where UHP tire sales rose 32 and 15 percent, respectively. Hankook's operating income for the first half of fiscal 2013 rose 11.3 percent to $467.2 million on slightly lower sales of $3.11 billion.
Michelin
Group Michelin's operating income dropped 12.7 percent in the first half on 1.5-percent lower sales, but the company is expecting “modest growth” in market demand in the second half along with more benefits from lower raw materials costs. Michelin's operating income fell to $1.52 billion on revenue of $13.4 billion, for an earnings ratio of 11.3 percent or one full percentage point lower. Net income plunged 44.5 percent to $654 million. Michelin attributed the sales drop to lower volumes, a less advantageous price/mix and currency effects. The tire maker noted that demand picked up in the second quarter, although not enough to offset weak results from the first quarter. On the earnings front, Michelin said it expects lower materials costs to yield roughly $460 million in benefits, which should offset the price-mix effect. Michelin also continues to expand its production capacities, with $2.6 billion budgeted for capital improvements. Michelin said consumer replacement demand in North America ended the first half unchanged from the first half of 2012, with improved second quarter shipments offsetting a 2-percent drop in the first quarter. North American OE demand was up 4 percent in the half, bouyed by the launch of new models and continued strong new car sales. Truck tire demand in North America was off 2 percent for the period, with the first quarter malaise overwhelming a 2-percent upturn in the second quarter, led by an improving freight market.
Titan
Titan International Inc.'s net earnings plummeted 47.3 percent to $23.2 million for the quarter, despite a 29.2-percent surge in sales to $593.3 million. Sales were bolstered about 38 percent from recently acquired entities, including $154.4 million at Titan Europe. Net earning for the first half dropped 46.3 percent to $42.7 million while sales rose 27 percent to $1.17 billion, compared with the year-ago period. The Titan Europe acquisition helped boost first-half sales about 36 percent, but the increase was offset by a price/mix reduction resulting largely from lower raw material prices that were primarily passed on to customers, decreasing sales by about 8 percent, and unfavorable currency translation which decreased sales by about 1 percent, the company said. There is also excess supply of product, according to Titan. As a result of acquisitions, Titan expects record revenue in the second half of 2013. Titan's capital expenditures tallied $14.9 million for the second quarter compared with $10.9 million for the second quarter of 2012. For the first half, the tire maker's expenditures totaled $36.1 million, compared with $19 million for the 2012 period.
Trelleborg
Trelleborg A.B.'s Wheel Systems business unit reported its operating income rose 3 percent to $21.1 million despite “currency headwinds,” and revenue was up 5.6 percent to $171.2 million despite a 1-percent drop in shipments. The company described agricultural tire sales as level with the year-ago period and industrial tire sales as “weak.” The unit's operating income was impacted by inventory adjustments in the U.S. related to Trelleborg's acquisition of Maine Industrial Tire. For the half year the unit's operating income slipped 2.8 percent to $43.3 million on 1.8-percent better sales of $342.1 million. Parent Trelleborg A.B. reported operating profit in the quarter of $111.4 million as sales edged up 0.3 percent to $869.9 million. Net profit for the quarter was $59.3 million and $135 million for the half. Operating income for the half year was essentially unchanged from a year ago at $210 million, while sales fell 2.8 percent.