DETROIT (Reuters) - Goodyear Tire and Rubber Co GT.N posted better-than-expected quarterly results on Wednesday as demand rose in all regions from a deeply pressured quarter last year.
Goodyear, the largest U.S. tire maker, reported a net loss because of charges from Venezuela’s currency devaluation in January, but said its operating loss in the key North American tire unit narrowed sharply from the first quarter of 2009.
Its shares were up 1.6 percent in morning trading.
Goodyear said it was optimistic that global growth and recovery trends would continue, but the pace of the recovery was unclear. It also raised its expectations for commercial tire demand in North America overall in 2010.
Still, the tire maker said raw materials costs will be a challenge in the second half of 2010 and it did not see any obvious relief from increases that are expected to be more than 35 percent from a year earlier.
Over the long term, Goodyear has been able to offset raw materials cost increases through price increases and the sale of a higher percentage of more expensive tires.
“On balance we remain optimistic that we will see the first quarter trends continue, but we can also envision possible disruptions along the way toward full economic recovery from continued economic volatility,” Chief Executive Richard Kramer said in a conference call with analysts.
The company’s net loss shrank to $47 million, or 19 cents per share, in the first quarter, from $333 million, or $1.38 per share, a year earlier, when the economic downturn pressured sales to auto manufacturers and to the replacement market.
Excluding a 41-cent-per-share charge for the Venezuelan currency devaluation, and other one-time items, Goodyear reported earnings of 18 cents per share. Analysts on average had expected a loss of 2 cents per share on that basis, according to Thomson Reuters I/B/E/S.
Sales rose 21 percent to $4.3 billion in the quarter from a year earlier as tire volume increased, Goodyear said. Favorable foreign currency translation and third-party chemical sales in North America also supported revenue.
Tire shipments rose 14.2 percent to 43.9 million tires in the quarter from a year earlier.
Goodyear has been cutting costs as industry tire volumes improve. The cuts have included plant closings, and shifting low margin tire production to lower cost countries, leaving the focus in high cost regions on more expensive tires.
Earlier this year, the Akron, Ohio-based tire maker said it would cut costs by $1 billion over three years, following on an earlier four-year program. The new plan led to $148 million of savings during the first quarter, it said.
Miles driven and vehicle production are key factors in tire demand for Goodyear, both of which were pressured last year by the economic downturn. Both might be expected to increase as the U.S. economic recovery continues.
However, high U.S. unemployment and fluctuating miles driven leave the outlook uncertain, Goodyear said.
In its key North American tire unit, Goodyear’s loss narrowed to $14 million in the quarter from $189 million a year earlier. Sales revenue rose 15.2 percent in the region and units sold rose by 9.2 percent.
Profits more than doubled to $109 million in its Europe, Middle East and Africa region; rose 58 percent to $76 million in its Latin America region; and more than quadrupled in its Asia-Pacific region to $69 million.
Goodyear shares were up 22 cents at $14.27 Wednesday on the New York Stock Exchange. Through Tuesday, the stock had been about flat since the start of 2010, while the S&P 500 index was up more than 6 percent.
Reporting by David Bailey, editing by Gerald E. McCormick, Derek Caney, Dave Zimmerman