Goodyear Tire & Rubber Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 7, 2023

There are 5 speakers on the call.

Operator

Morning. My name is Nikki, and I will be your conference operator today. At this time, I would like to welcome everyone to Goodyear's Third Quarter 2023 Earnings Call. All lines have been placed on mute to prevent any background noise. After the opening remarks.

Operator

There will be a question and answer session. Today on the call, we have Rich Kramer, Goodyear's Chairman and Chief Executive Officer to Cristina Samaro, Chief Financial Officer. During this call, Goodyear will refer to forward looking statements non GAAP Financial Measures. Forward looking statements involve risks, assumptions and uncertainties questions that could cause actual results to differ materially from those forward looking statements. For more information on the most significant factors that could affect future results, the important disclosures section of Goodyear's Q3 2023 investor letter under filings with the SEC, our website at investor.

Operator

Goodyear.com, where a replay of this call will also be available. A reconciliation of the non GAAP financial measures that may be discussed on today's call to the comparable GAAP measures is also included in the investor letter. I will now turn the call over to Rich Kramer, Chairman and CEO.

Speaker 1

To. Great. Thank you, Nikki. Good morning, everyone, and thanks for joining the call today. By now, you've seen our investor letter covering Q3 results and also an announcement that we'll be with you again next Wednesday, November 15, with an update on the results coming out of our strategic and operating review.

Speaker 1

Now with that in mind, we're happy to take questions on the quarter this morning, but I'd ask that you hold any questions related to the review until next week one will be able to say more. So thank you for that. And Nicky, with that, let's go ahead and take the first question.

Operator

To take our first question from Rod Lachey with Wolfe Research. Please go ahead. Your line is open.

Speaker 2

Good morning. I was hoping to ask 2 questions, maybe just higher level. I know you don't want to get to any details on the strategic and operational review. But just

Speaker 3

first of all, at

Speaker 2

a high level, maybe you could talk a little bit about the Europe business, to Which is still quite weak with a 1.5% margin. And just at a high level, there's the worry is that it's a very structurally challenging market that would require a lot of investment. Right now, your restructurings typically take $3 to $4 of to Structuring Cash For Every Dollar Savings. So could you maybe just talk to us a little bit about the changes that are being made there and to whether some of the you see some structural changes that make this more fixable. And on the strategic side, to I expect that you'll give us more specifics over the next couple of weeks, but any high at a high level, any indications of interest that you're assessing on businesses within Goodyear.

Speaker 1

Yes, Rod, First of all, I think we would agree with you relative to the performance of EMEA. You may recall, we said our near term goal was to get back to the to sort of the $50,000,000 pre COVID $50,000,000 per quarter run rate and Q3, while a little bit better than Q2, to Certainly, it's well below that run rate and that's the issue that needs to be addressed to your point. I'd point out, again, as you know, The industry is still really challenged relative to 2019. If you've seen in our investor letter, we included the 2019 numbers to where you see the consumer business is down, let's call it still 15% and the truck business 22% versus 2019. So look, it's not back to normal.

Speaker 1

But having said that, to your point, we've been and are evaluating EMEA and to looking at all options to generate value in the near term and continuing to assess sort of the long term solutions as well to the operator. Given the macro environment of what's going on over there and particularly I think we've all seen sort of the recent sort of to number of articles talking about the ICE to EV conversion, the competitive challenges, high cost of doing business there and the like. And I think That's the tough environment that you've referred to. So I'd say, Rod, near term, like we have, we're acting now, to And I'd say more to come. What we're doing now is, as you've pointed out, we've announced already some manufacturing and some plant actions there and some SAG actions as well over the last two quarters.

Speaker 1

You've also seen some competitors do some similar things like that. To And also in the near term, what we're looking to do is make sure that we stabilize those earnings in the near term and not lose the benefit of those cost savings that we've done as to the Q1 of 2019. As we know, that's happened in the past as well. So I'm going to go back to my opening statement and say, look, we are continuing to actively discuss this, including with our review committee. And I would just say more comments to come next week as we look at this.

Speaker 1

But it is certainly a challenging area. I would agree with you.

Speaker 2

And on the IOIs, just relative at a very high level, are you receiving to any indications of interest from other players in your businesses. It's pretty well known that you're going through the strategic review and to you. You'll have more detail to come, but can you just offer any kind of high level comments on that?

Speaker 1

Yes, Brad, again, I'd have to say we'll be back see you next Wednesday on a separate call. The committee is doing all inclusive, including EMEA comprehensive review evaluating all the options, to Again, with the idea of maximizing shareholder value. So we'll come back to you on Wednesday.

Speaker 2

Okay. Then just maybe one thing that you may be able to answer is just to You've had a pretty nice improvement in raw materials versus net pricing, again this quarter. To But obviously, oil price is starting to move in an adverse direction. Any thoughts on to how things are kind of shaping up until early 2024.

Speaker 1

Yes. I mean, Rod, maybe I'll let Christina jump in. I would just maybe add to your point, we're still seeing a very stable pricing environment in Q3. We continue to see that in October as well. To And our business this quarter really focused on those areas where we can drive value again, which is that premium part of the market to where our value proposition holds up really well.

Speaker 1

And that's what we did. That's what we saw. To And I would tell you that part of the market even as we get into 2024 and Rod, you'll remember this, to As we sort of bifurcate the market, the premium part of the market still has the dynamics that are favorable to us. To Certainly, in terms of segments, it's the profitable that's the most profitable profit pool, if you will, of the market. It's where we have 18 inches above growing fairly significantly, I think about 7% in 2023.

Speaker 1

Our products, our brand, our Technology, both Goodyear and Cooper played really well there. And again, the demand to supply dynamics still work in our favor. To And I think that's what you saw in Q3. That's what you'll see in Q4 as we move ahead. And look, maybe I'll turn it over to Christina.

Speaker 1

We'll certainly still to see some inflation coming at us and you'd be right to think that we're going to go to offset that in the marketplace with the value of our products. But to Christina, you might want to jump in on it.

Speaker 4

Hi, Raj. So I'll just anchor us back to what we said on the 2nd quarter call. We had given some guidance for the first to next year indicating that we thought our raw material tailwind would be about $400,000,000 over the first half to share with you the Q1. With the increase in spot rates across our base commodities, we would say that feedstocks to our press release. We are down about $120,000,000 since then, so implying a benefit of about $280,000,000 in the first half.

Speaker 4

I think we right now would still see a benefit in Q3, maybe a slight headwind in Q4. But we are continuing to assess to all opportunities on non feedstock savings as well. Some of those energy transportation costs are coming down. To the operator today. So we'll continue to refine the assumptions and come back to you on our Q4 call, but that's how we're seeing it right now.

Speaker 2

Great. Thank you very much.

Operator

To to. We will move next with James Picariello with BNP Paribas. Please go ahead. Your line is open.

Speaker 3

To Hey, good morning, everyone.

Speaker 1

Good morning, boys.

Speaker 3

Just for the 4th quarter to guidance framework, if we want to call it that. The only missing piece and of course, you continue to appreciate the color to the Q3, outlook roll up. The only missing piece would be the other line, right? So in the Q3, for instance, you had Your Chemicals business incurred $21,000,000 headwind, dollars 32,000,000 overall for other. How should we be thinking about that

Speaker 4

to Yes, James. So we've the company's Q3. We indicated a $15,000,000 SOI impact from the fire that impacted our factory in Poland in the 3rd quarter. That's to a discrete item and that was what will be shown in other. We won't have a continuing impact from chemical the sales like we saw earlier in the year, we're lapping that comp in Q4.

Speaker 3

Okay. So excluding the fire impact, to The other line should be something close to neutral. Correct.

Speaker 4

Yes.

Speaker 3

Okay. Understood. And then to. As we think about restructuring spend and free cash flow for next year to the operator today. And just focusing on the series of actions that you guys have announced throughout this year to With detail on what the intended cash spend is for those actions, can you speak to what cash restructuring Could look like for next year relative to the $100,000,000 that you're guiding for this year?

Speaker 4

Yes. So we've announced programs to our in flight program so far this year totaling $100,000,000 in savings for 2024. To And Rich mentioned earlier a couple of programs in EMEA. 1, that was a larger SHE restructuring program, also a reduction in our production at a Fulda factory. And then there's also been an announcement related to a change in our go to market model in Asia Pacific and to Australia in particular.

Speaker 4

So with those in flight programs and what's been announced to date, restructuring cash next this year would be around $300,000,000 in 2024. Those programs also have a stub into 2025 of about $60,000,000 to the operator.

Operator

Thank you. And this does conclude our Q and A session as well as our conference call. Thank you all for your participation and you may disconnect at any time.

Powered by Quartr
Earnings Conference Call
Goodyear Tire & Rubber Q3 2023
00:00 / 00:00