Ag tire maker Titan raises fiscal outlook on strong Q2

CHICAGO — Titan International Inc. reported a near tripling of income from operations in the quarter ended June 30, on 30.6% higher sales revenue.

Based on the second-quarter and first-half performance and "continued positive signs" for demand of its products, Titan management has boosted the firm's earnings outlook for fiscal 2022 by 20% to 25% to what could be record levels.

"Our expectations for financial performance remain strong and during the second half of the year we anticipate continued top-line and bottom-line expansion relative to prior year performance," Titan President and CEO Paul Reitz said.

"By almost all standards, we expect this year to be the strongest in Titan's history, and we continue to see positive signs for demand to remain robust into 2023."

Income from operations in the quarter improved 194% to $69.7 million on sales of $572.9 million, yielding a 12.2% earnings ratio.

For the full fiscal year, Titan management said it now expects to report adjusted pre-tax earnings (EBITDA) of $240 million to $250 million, up from $200 million. Sales could end up roughly 5% higher at $2.2 billion.

Titan said the increase in income from operations was due primarily to the higher sales and improvements in gross-profit margins.

The sales increase was across all segments and driven by a variety of factors, most notably healthier market conditions, which offset the unfavorable impact from foreign currency translation of $11.9 million, primarily due to the weakening euro.

"The positive momentum we have seen in our business kept on rolling this quarter and when combined with the continuing strong execution of our team, it resulted in excellent financial performance," Reitz said.

"This performance was buoyed by strong financial performance across all parts of the business as our Titan team keeps running hard like a good, long-distance marathoner."

Reitz stressed that Titan is able to generate "significant" cash flow — $56 million in the second quarter alone — which has allowed the firm to strengthen its financial position considerably and drive shareholder value up.

Reitz noted that Titan believes that U.S. farmers are going to generate high levels of income in 2022 and are sitting on strong balance sheets as well. The large ag equipment fleet is aged with low levels of available used equipment.

"The overall, bigger picture view is that ag fundamentals remain in a strong position," Reitz said, "and we expect the future to remain bright in the sector. This view is also true for our global construction and mining markets, where we continue to see demand holding at a good level through 2022 that should carry to 2023 as public infrastructure spending picks up."

The agricultural sector accounts for nearly 56% of Titan's global revenue, with earthmoving/construction at 36%. The remaining 8% is considered consumer.

"Demand and order books are in a solid position in ag," Reitz said, "and should continue on that path well into the future as supply chain and labor disruptions at OEMs have extended the duration of retail demand, not destroyed it."

"Our expectations for financial performance remain strong," he added, "and during the second half of the year we anticipate continued top-line and bottom-line expansion relative to prior year performance. … By almost all standards, we expect this year to be the strongest in Titan's history, and we continue to see positive signs for demand to remain robust into 2023."