Higher EMEA tire volumes, lower costs drive Goodyear profit beat

By Arunima Banerjee and Shashwat Awasthi

(Reuters) - Goodyear Tire & Rubber Co (GT.O) reported a higher-than-expected quarterly profit as its sales volumes in the Europe, Middle East and Africa (EMEA) region recovered after more than a year of decline and its raw material costs fell.

Shares of the No.1 U.S. tire maker rose as much as 9 percent in morning trading on Tuesday.

Goodyear's sales volume in EMEA rose 11 percent in the fourth quarter, driven by strong demand for replacement tires. The region accounts for nearly a third of the company's total revenue.

"We are positive on EMEA's long-term potential and we believe stronger margins are achievable in the competitive EMEA market," Chief Executive Richard Kramer said on a conference call.

The company, which is facing stiff competition in Europe from Michelin (MICP.PA), Continental AG (CONG.DE) and Pirelli (PECIn.MI), has been moving some operations to lower cost centres in EMEA.

Goodyear has also benefited from lower oil and rubber prices, with its cost of goods sold declining 8 percent in the quarter. The company, whose brands include Dunlop and Fulda tires, expects raw material prices to fall further by 5 percent this year.

Brent crude prices (LCOc1) nearly halved from a year earlier in the fourth quarter and rubber prices fell 4 percent.

Goodyear said it expected to spend $700 million on restructuring between 2014 and 2016, higher than the $600 million it had estimated earlier.

DOLLAR PINCHES

Goodyear reported a net loss of $380 million, or $1.42 per share, attributable to shareholders for the quarter ended Dec. 31, hurt by a charge related to its Venezuela operations.

Excluding items, the company earned 93 cents per share, handily beating the average analyst estimate of 75 cents, according to Thomson Reuters I/B/E/S.

Revenue declined 6.7 percent to $4.06 billion, hit by a strong dollar, but beat analysts' expectations of $4.01 billion.

Goodyear, which also makes tires for aircraft and NASCAR racing cars, said its tire volumes rose 7 percent, partly helped by the acquisition of Nippon Goodyear Ltd in Japan.

The company's shares were up 5.6 percent at $27.82 in late morning trading.

(Reporting by Arunima Banerjee and Shashwat Awasthi in Bengaluru; Editing by Kirti Pandey)