Financial woes in South America weighed on Goodyear’s fourth-quarter numbers, as the Akron, Ohio, company on Tuesday posted a loss due mainly to a writedown of the company’s Venezuela operations and ongoing currency volatility.
For the fourth quarter, Goodyear reported a loss of $380 million compared with a profit of $2.13 billion a year ago. The loss was mainly due to a $646 million charge during the quarter as it wrote down the costs of its operations in Venezuela. Moreover, revenue fell to $4.06 billion from $4.36 billion a year ago due to unfavorable currency fluctuations, which shaved $339 million off of revenue. The results also included the release of a $2.2 billion U.S. tax valuation, which represented a one-time, noncash benefit to earnings.
“Automotive production in that region has been sliced almost in half amid economic turmoil,” MarketWatch wrote. “Although some companies have abandoned the area, most are trying to gut it out as they wait for a rebound.”
Excluding one-time costs, Goodyear reported a profit of $257 million, or 93 cents a share, compared with $166 million, or 59 cents a share, in the year-ago quarter. The results exceeded analyst estimates of 75 cents.
According to Fast FT, other major U.S. companies with exposure to Venezuela have been collectively forced to take billions of dollars of writedowns in recent years as Venezuela’s currency problems accelerate.
Goodyear, which continues to maintain manufacturing and sales operations in the country, like its peers “has decided deconsolidate and write off nearly all of its cash and investment there amid little sign that it would be able to take the cash out of the country,” Fast FT wrote.
“The move comes as a soaring inflation and the fast depreciating bolivar render the value of its bolivars lower by the day,” Fast FT wrote.
Foreign currency exchange losses related to the Venezuelan bolivar fuerte came in at $34 million for 2015, Goodyear said.