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Goodyear will focus on leverage, balance sheet once earnings improve
By Devika Patel
Knoxville, Tenn., Feb. 8 – Goodyear Tire & Rubber Co. plans to address its leverage and balance sheet once earnings improve.
The company’s leverage was 3x at the end of the last quarter, and management would like to see this improved to 2x.
“I’m focused on the health of our balance sheet,” executive vice president and chief financial officer Darren Wells said on the company’s fourth quarter and year ended Dec. 31, 2018 earnings conference call on Friday.
“It is something that we take very seriously and we intend over time to move ourselves toward a balance sheet that would represent investment-grade.
“That is strategically where we want to see ourselves going,” Wells said.
The company’s management is concerned over leverage levels rising over the past two years and would like to improve leverage to 2x from the current 3x debt to EBITDA ratio.
“[So, it’s] not good to see the increase in our debt to EBITDA that we’ve experienced over the last couple of years,” Wells said.
“Our leverage at the end of the year was around 3x.
“I think something like 2x is where we would like to see ourselves long-term, and we want to start to make progress on that,” he said.
The company’s earnings are expected to improve and management will use extra cash flow to improve the balance sheet.
“As we see our earnings come back up, and earnings start to move back towards peak levels, we would expect to take some of that cash flow that’s generated at higher earnings levels and use that to improve our balance sheet,” Wells said.
“I am very focused on ensuring that we are not allowing our balance sheet to deteriorate any further but I also recognize that some part of improving our leverage is going to have to come from improved earnings,” he said.
The company’s net debt was just under $5 billion at the end of the year, an increase of $276 million when compared to the prior year.
Goodyear is an Akron, Ohio-based tire company.
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