QUINCY, Ill.Titan International Inc. suffered double-digit drops in earnings in the quarter ended March 31 on 6.8-percent lower sales, prompting management to put its workforce on notice that it will be adjusting employment levels in the second quarter.
The sluggish first quarter performance and uncertain market conditions for the rest of the year prompted management to rescind the firm's fiscal 2014 targets issued last November.
Titan CEO and Chairman Maurice Taylor Jr. cited the negative effects of the harsh, prolonged winter in North America along with declining farm and construction business and a nonexistent mining business as reasons for the lackluster performance.
Titan reported income from operations of $300,000 for the quarter, down from $47.9 million a year ago, while net income plunged 88.7 percent to $2.2 million. Sales fell to $538.9 million, impacted significantly by reduced demand for mining products and currency exchange issues.
We need to reduce our expenses and work harder during the rest of the year, Mr. Taylor said, referencing the need for employment adjustments.
Titan does have a lot of good things going forward, he added. Our new tires and wheels are taking hold and the LSW (low sidewall) tires and wheels are performing great out in the market. We have begun an aggressive campaign for the LSW concept, which we expect to improve Titan's agriculture and construction wheels and tires business.
Mr. Taylor noted market conditions improved in Marchbut not enough to offset the severe declines during January and February. In particular, he said, agriculture and construction seem to be improving slightly, but a recovery in the mining sector looks like a long haul.
Regarding 2014, Titan is reviewing the situation and intends to revise its expectations. In November last year, the Quincy-based tire and wheel maker indicated it expected pre-tax operating income in 2014 of $240 million to $270 million and sales of $2.4 billion to $2.7 billion.
The current outlook for mining tires continues to be negative, Mr. Taylor said. The price of tires continues to drop and will in the foreseeable future. Titan seeks to penetrate into a niche specialty tire and wheel market in the construction and mining segment, which could generate additional revenue between $200 (million) and $400 million and additional EBITDA between $40 (million) to $120 million.
Titan President Paul Reitz and CFO John Hrudicka will be involved in drafting profit optimization plans, Mr. Taylor said.
Looking at its various operating units, Titan said its ITM business, which makes tracks for construction and certain agricultural machines, is growing in South America, while business in Europe remains weak.
Titan said it is moving ahead with activities in Russia, where last year it acquired a 30-percent stake in Voltyre-Prom, an agricultural/industrial tire producer in Ekaterinburg, Russia.
The political circumstances in Russia remain a challenge but we are proceeding on with our plan, Mr. Taylor said. Titan expects Voltyre-Prom to contribute approximately $200 million in sales eventually.
Separately, Titan announced that Mark H. Rachesky, founder and president of MHR Fund Management L.L.C.a New York-based investment firm that owns nearly 11 percent of Titan's shareswill join Titan's board of directors June 1.
MHR Fund bought its stake in Titan earlier this year in a series of acquisitions for approximately $94 million.
Mr. Rachesky also is chairman of the board of Loral Space & Communications Inc., Telesat Canada and Lions Gate Entertainment Corp.