Lower Costs and Higher Tire Volumes Drive Profit at Goodyear

Goodyear Tire & Rubber posted a quarterly profit that was higher than had been expected as sales volumes across the Middle East and Africa as well as Europe recovered following over a year of decline. At the same time, costs of raw materials were less expensive.

Shares at the No. 1 tire maker in the U.S. were up by 9% in trading on Tuesday afternoon.

Sales volume at Goodyear in its EMEA region was up 11% during its fourth quarter, driven by the strong demand for new tires. The regions represents close to one third of the total revenue of the company.

Richard Kramer the Goodyear CEO said the company was positive on the long term potential of the EMEA region and believes that stronger margins can be achieved in the competitive EMEA region.

The company, which has faced tough competition across Europe from Continental AG, Pirelli and Michelin, has moved some operations to the EMEA region due to lower cost centers.

The tire maker has benefited as well from the lower rubber and oil prices, with cost of goods dropping by 8% during the quarter.

Goodyear, whose brands include Fulda and Dunlop tires, expects its prices of raw materials to drop another 5% in 2016.

Price of Brent crude nearly halved during the fourth quarter from one year earlier, while prices of rubber dropped by 4%.

Goodyear said it was expecting to be spending $700 million on its restructuring between the years 2014 and 2016, which is higher than $600 million, which it estimated earlier.

Goodyear reported a $380 million net loss equal to $1.42 a share that was for the quarter ending December 31. It was hurt by one charge related to operations it has in Venezuela.

Excluding certain items, earnings for the company were 93 cents a share, handily beating estimates of analysts that averaged 75 cents.

Revenue was down by 6.7% to end the quarter at $4.05 billion but even though it was hurt by a strong U.S. dollar, it beat expectations of analyst of $4.01 billion.

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