Thu Aug 5, 2004
By Karen Padley

CHICAGO (Reuters) - Goodyear Tire & Rubber Co. (GT.N: Quote, Profile, Research) on Thursday reported a quarterly profit that beat analysts' expectations, helped by price increases and sales of new products, sending its shares up 8 percent.

The company, whose troubled North American unit made money for the first time in nearly two years, also credited improved sales of higher-margin products, the consolidation of two subsidiaries and the weaker U.S. dollar.

Akron, Ohio-based Goodyear, one of the world's largest tire producers, said all seven of its business units reported improved results from a year earlier, even though higher raw material costs offset savings generated from job cuts and increased productivity.

"It seems they are regaining their footing, with a decent launch of new products like the Assurance tire," said Scott Lee, a credit analyst with Fitch Ratings.

He said the company is being helped by good industry demand, especially for tires used on trucks and off-highway equipment, such as bulldozers and excavators.

Goodyear reported a second-quarter net profit of $25.1 million, or 14 cents a share, reversing a year-earlier loss of $53.0 million, or 30 cents a share.

That exceeded analysts' estimates, which averaged a profit of 2 cents a share, according to Reuters Estimates.

Sales rose to about $4.5 billion from $3.75 billion a year earlier, in line with the company's July 21 forecast.

Its troubled North American unit, the company's largest, said sales increased about 17 percent to a second-quarter record of $1.98 billion. The company credited higher volume, increased selling prices and more sales of higher-margin products.

That helped its operating results jump to a profit of $30.4 million from a loss of $10.2 million a year ago.

The North American business has been struggling for several years due to marketing mistakes, soured relationships with dealers and a failure to benefit from a major recall of Firestone tires by competitor Bridgestone Corp. (5108.T: Quote, Profile, Research)

Goodyear has lost more than $2.3 billion in the past three years, largely as a result of those problems. It has cut jobs, closed factories and refinanced its debt as part of a turnaround plan.
The company said its second-quarter results show those plans are beginning to work. It expects some of the momentum seen in the first half of the year to carry over into the final half.

"The tire industry overall is experiencing strong demand, and while we don't believe the first-half growth rates are sustainable, we do expect growth to be solid for the full year," Chairman and Chief Executive Robert Keegan told analysts on a conference call.

Goodyear said second-quarter results included a charge of $8.6 million, or 5 cents a share, to cut 150 jobs, primarily in the European Union. That brought total job reductions to about 6,000 in the past year and a half. The company currently has about 86,000 employees worldwide.

Second-quarter results also included a charge of $9.0 million, or 5 cents a share, for professional fees for its previously disclosed accounting investigation; and a gain of $1.7 million, or 1 cent a share, on asset sales.

In the year-earlier period, the company had a restructuring charge of $11.5 million, or 6 cents a share, and a loss of $6.2 million, or 3 cents a share, on asset sales.

During the most recent quarter, Goodyear consolidated South Pacific Tyres Ltd., a tire manufacturer in Australia and New Zealand, and T&WA, a U.S. tire-mounting operation, boosting net income by $4.4 million.

Goodyear shares rose 86 cents or 7.9 percent to $11.71 on the New York Stock Exchange at midday on Thursday, not far from their 12-month high of $11.90, reached in January.

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