Goodyear Hikes Tire Price

Goodyear Tire & Rubber Co. (GT - Analyst reports) announced it would raise prices of its commercial truck tires by 15% and the price of the tread rubber up to 7% from next month . The price increases were driven by rising raw material prices.
Rubber, both natural and synthetic, is mainly used to manufacture tires. This, in addition to carbon black, sulfur and other chemicals are used in tires.
Recently, natural rubber prices hit record high due to rising demand in Asia, especially China - the world's largest consumer of rubber. Moreover, there is a shortage in the supply of natural rubber due to heavy rains in major rubber producing countries, thereby pushing up the price.
Goodyear Tire, a Zacks # 3 Rank (Hold) shares, revealed a 32% drop in profits to $ 21 million, or 7 cents per share (excluding special items) in the fourth quarter of 2010 of $ 31 million or 14 cents per share in the same quarter of 2010. However, the company did well in comparison to the Zacks consensus estimate of a loss of 7 cents per share during the quarter.
The decrease in profit was due mainly to higher raw material costs, increasing the monetary effects of selling, administrative and general expenses and unfavorable translation. company's cost of sales increased 17% to $ 4,190,000,000, while selling, administrative and general expenses increased 12% to U.S. $ 715 million.
Sales during the quarter appreciated by 14% to 5.07 billion U.S. dollars, higher than the Zacks consensus estimate of $ 4,880,000,000. Was supported by a 4% increase in the volume of tires to 45 million units, which positively affected sales by $ 130 million.
In addition to the volume of unit sales were favorably affected by improved product mix / price leading tire revenue to increase by 12% during the quarter, excluding the effects of foreign currency translation.
Sales also benefited from an increase of $ 159 million in sales in other tire related businesses, sales of chemicals especially in third in North America. However, it was negatively affected by 111 million U.S. dollars due to unfavorable currency translation effects.
Goodyear's total segment income decreased $ 25 million to $ 224 million in the quarter. This was attributable to net $ 397 million of higher costs of raw materials ($ 430 million before the shares of raw materials cost reduction) and the negative impact of $ 17 million due to unfavorable foreign currency effects on translation which more than offset the benefit of $ 315 million due to improved price / product mix.