Goodyear Tire & Rubber Co. (GT - Free Report) has intensified its focus on Off-The-Road (OTR) tire business by fully acquiring its Nippon Giant Tire (NGT) unit in Japan for an undisclosed amount. The company was a majority shareholder of NGT since 1985 and has bought the 100% ownership in NGT from joint venture partners Toyo Tire & Rubber Co Ltd and Mitsubishi Corp.
Goodyear also announced that it will invest $250 million in NGT for upgrading and expanding its facility in order to meet global demand of OTR tires. The expansion will also help the company’s OTR business in Asia Pacific, mainly Australia, which is one of the world’s largest markets for OTR tires.
The expanded facility is anticipated to be fully operational by early 2014. It will boost employment at the operation to nearly 400 workers.
Goodyear, a Zacks #3 Rank (Hold) company, reported a 34% decline in profits to $84 million or 34 cents per share in the first quarter of 2012 from $127 million or 51 cents in the same quarter of 2011 (all excluding special items). However, profits were significantly higher than the Zacks Consensus Estimate of 8 cents per share during the quarter.
Revenues in the quarter increased marginally by 2% to $5.5 billion from $5.4 million in the first quarter of prior year. The company’s sales were negatively affected by an 8% fall in tire volumes to 43 million units. Consequently, revenues were lower than Zacks Consensus Estimate of $5.9 billion.
Goodyear expects full-year tire unit volume to grow moderately in 2012 due to weak demand in different economies. The company expects tire volume for the full year 2012 to decline 2% from 2011.
Goodyear anticipates raw material costs to increase 12% for the second quarter of 2012 and to be in line in the second half of 2012 compared with 2011. For the full year, raw material cost is expected to hike 9% from 2011.
Goodyear is one of the largest tire manufacturing companies worldwide. The company produces tires for automobiles, commercial trucks, light trucks, SUVs, race cars, airplanes, farm equipment and for heavy earth-mover machinery. It sells its products under the Goodyear, Kelly, Dunlop, Fulda, Debica, Sava and various other “house” brands as well as private-label brands.
The company has two major competitors: Bridgestone of Japan and Michelin of France. These two companies command about 55% of the global market. Other significant competitors include Cooper Tire & Rubber Co. (CTB - Free Report) .