QUINCY, Ill. (July 30, 2015) — Titan International Inc. reported improved earnings in the quarter ended June 30 despite 28.2-percent lower sales, a performance Titan CEO and Chairman Maurice Taylor said proves the company's recent strategic moves are paying off.
Titan reported its gross profit more than doubled to $51.1 million and the firm returned to the black for both income from operations and net income.
Sales, however, fell to $376.1 million, a plunge Titan attributed to the negative effects of lower agricultural equipment sales, “competitive pressures” and unfavorable currency translation figures. Titan said 11 percent of the reduced sales was related to lower volumes, 7 percent to price/mix erosion and 10 percent to currency.
Acknowledging that sales are off more than 25 percent from 2014's first half, Mr. Taylor pointed out that Titan's operating margin rates and liquidity have improved, demonstrating that Titan is “on the right track.”
Mr. Taylor pointed to the “Business Improvement Framework” instituted in 2014 for his optimism, saying the framework's initiatives helped to drive headcount reductions, expenditure rationalization, increased productivity, lower raw material costs, lower warranty costs and pricing optimization.
Gross profit for the second quarter was $51.1 million, or 13.6 percent of sales, Titan said, up from $20.8 million a year ago. However, the 2014 profit included an asset impairment and inventory writedown totaling $34.8 million.
Gross profit for the first six months of 2015 was $93.8 million or 12.1 percent of sales. This is up compared with the 2014 reported figure of $72.8 million, although again the 2014 period was affected by the asset impairment and inventory writedown totaling $107.5 million.
Sales for the six months fell 27 percent to $778.1 million. Lower sales in the farming sector were offset partially by stable demand for products used in the construction industry, Titan said.
Looking forward, Mr. Taylor said Titan is counting on its efforts to get customers to adopt its LSW low-sidewall tire concepts, which Titan touts as a low-pressure alternative to conventional radials.
Titan claims its efforts to create “pull-through” demand from big farmers, large contractors and mining companies is allowing it to gain momentum with key vehicle makers and to convert new customers daily.
“We are in discussions with equipment dealers to offer a program by which traditional tires/wheels are exchanged for new LSW technology,” Mr. Taylor said. “We believe this program will potentially drive customer loyalty and ultimately improve their bottom line."
He also said Titan is working with customers to purchase their equipment without tires/wheels, and then buy LSW tires and wheels separately. This potentially could yield tax benefits in addition to performance enhancements.
Titan also sees additional revenue potential from the run-flat Goodyear-brand ATV Goodyear tires, new underground mining tires/wheels and new super single tires that are designed to be used with three-piece wheels for ease of dismounting.
Titan also is exploring plans to expand a wheel plant in Turkey and establish wheel manufacturing in Brazil to accompany its tire business there.
Titan's capital expenditures were $22.5 million through June 30, down 27.2 percent.