The Goodyear Tire & Rubber Company (NASDAQ:GT) Q2 2023 Earnings Call Transcript August 3, 2023
Operator: Good morning. My name is Nicky, and I will be your conference operator today. At this time, I would like to welcome everyone to Goodyear’s Second Quarter 2023 Earnings Call. [Operator Instructions] Today, on the call, we have Rich Kramer, Goodyear’s Chairman and Chief Executive Officer; and Christina Zamarro, Chief Financial Officer. During this call, Goodyear will refer to forward-looking statements and non-GAAP financial measures. Forward-looking statements involve risks, assumptions and uncertainties 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, please refer to the important disclosures section of Goodyear’s second quarter 2023 investor letter and their filings with the SEC, which can be found on their website at investor.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. This call will focus on questions and answers.
Operator: [Operator Instructions] And we’ll take our first question from James Picariello with BNP Paribas. Please, go ahead.
Unidentified Analyst: Hi, guys. This is [Jake] calling in for James. First, I just want to talk about is the third quarter bridge items. So if I work through those, we get to about $300 million SOI in 3Q. I just want to make sure that I’m thinking about that right. And then looking at full year it looks like the implied guide, it’s about [indiscernible] million. So, can you just talk about some of the puts and takes for the fourth quarter?
Christina Zamarro: Yes. Sure. Hi, Jake. This is Christina. So I’ll start on SOI and I would say if you look at our outlook obviously we are layering in the trends in the industry that we’re seeing as we look into the third and fourth quarters, and as we think about how this has played out, obviously impacts in our earnings in Q2 due to transitory factors like destocking more in consumer but also more recently in commercial. And so, what that means is volume weakness still yet in Q3 and a lot of that is due to our plan for some additional destocking, particularly in Europe with volume approximately flat to up in the back half over the fourth quarter. When I think about the drivers of our SOI block, I mean we’ve laid out the industry assumptions for you unabsorbed overhead wins, I think we’ll have lower Q2 production of about four million units, excluding to below that obviously will impact the fourth quarter.
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We’ve given you those values as well. Price mix versus raw materials should more than offset other cost inflation in the second half, I’d say that that’s true on a full-year basis as well. If I think about commercial truck, and maybe this gets to the heart of your question, what we said is big impact $60 million in mix in the second quarter that declines pretty significantly in Q3 and it’s pretty much not an impact at all in our fourth quarter. When I look at fourth quarter price mix versus raw materials what I would say is obviously really strong benefits and lower raw material costs. We do have RMI index is beginning to take effect. But I would say that there is still relatively small here in the fourth quarter, something like 10% of that raw material benefit.
So hopefully that’s helpful.
Unidentified Analyst: Thank you. That’s very helpful. And then it looks like channel destocking was a pretty big drag on the quarter. When should we expect that trend to start to reverse. Thank you.
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