Goodyear NZ accounts tagged as future relies on latest restructure

Goodyear & Dunlop Tyres (NZ), the local unit of the biggest US tyre maker, posted a third annual loss last year and its accounts were tagged by the auditors as its future viability becomes increasingly reliant on its decision to quit retailing in New Zealand.

The annual loss widened to $20.4 million in calendar 2012 from $9.3 million a year earlier, according to financial statements lodged with the Companies Office.

Goodyear's sales plunged 25 percent to $114.8 million and it booked restructuring expenses of $10.4 million as it shifted to a new strategy of focusing on marketing and wholesaling tyres, and improving its services to dealers and aviation customers.

Last month it signalled plans to exit local retailing, selling 52 Beaurepaires retail stores and 180 employees shifting to Beau Ideal, owned by TyreLine Distributors' founder Grant Rushbrooke. Rushbrooke's Beau Ideal would also take on Goodyear's local retail marketing and licensing programmes. It sold its heavy commercial tyre service in 2012.

The loss was the biggest since 2006, when Goodyear booked about $50 million in restructuring costs and impairment charges to close its local tyre manufacturing plant in Upper Hutt, laying off about 430 staff, and took retained losses to some $26.2 million, leaving Goodyear in negative equity.

Without qualifying its opinion, auditor PwC said in its May 31 report that Goodyear's negative equity of some $5.4 million "indicates the existence of a material uncertainty that may cast significant doubt about the company's and group's ability to continue as a going concern".

The validity of its status as a going concern "depends on the outcome of the significant restructuring activities undertaken in 2012 to improve business performance, and the ability of the company and group and their related party to comply with the covenant requirements of the joint bank facility".

Drew down $20m

The New Zealand unit shares a joint banking facility with Goodyear Australia Pty and Goodyear & Dunlop Tyres (Australia), which is guaranteed by US parent Goodyear Tire & Rubber Co. It drew down $20 million in the 2012 year to repay a related party loan to Goodyear Luxembourg.

Goodyear NZ's directors say the negative equity position prompted "significant restructuring activities, including the sale of commercial tyre operations, closure of retail sites, closure of retreading plants, reduction in head count through redundancies and the consolidation of support functions".

Those measures, along with the joint bank facility, "provide sufficient support to enable the company and group to meet its obligations as they fall due", the directors say, while acknowledging the bank covenants depend on the performance of the Australian and New Zealand groups.

Goodyear's NZ unit has gone through a number of restructuring attempts to stem its decline in sales, which were as much as $240.6 million annually before it closed its local manufacturing plant.

The decision to quit retailing came in a year when government figures showed a pick-up in motor vehicle and parts retailing, with a 10 percent boost in the volume of sales and an 11 percent increase in annual value, outpacing retail sales growth across all industries of 3.6 percent in volume and value terms.

Rival Bridgestone New Zealand, the local unit of the world's biggest tyre maker, reported a decade-high profit $10.2 million in calendar 2012 and paid its first dividend since 2007.

(BusinessDesk)