Job cuts continue at loss-making Titan
Titan International released its third quarter 2014 results yesterday, and in the words of chief executive officer and chairman Maurice Taylor, there were a lot of negatives to see. This is bad news for management, bad news for shareholders and, for many Titan employees, very bad news.
A key remedy Titan management has found for these negatives is a reduction in the employee headcount at several Titan sites. The company’s Voltyre-Prom, plant in Russia, which it acquired from Cordiant just a year ago, will bear the brunt of these layoffs. “In Russia, we expect to reduce the employee count from 2,300 to 1,000 this year in line with current demand, stated Taylor. During the company’s 28 October earnings call, he added that half of the reductions would be in non-manufacturing areas. This leaner workforce will gain updated tyre moulds and equipment to improve performance and efficiency, and Titan believes the region will “slowly improve” in the coming quarters.
Australia will also feel the sting of layoffs, as Titan is in the midst of a restructuring plan that will reduce the company’s headcount there by 25 per cent. “We’re going to consolidate underperforming facilities, really right-size that business to the opportunities that exist in the market and not for hopes and dreams of what we think it could be,” commented Titan International president Paul Reitz.
A third location where costs look likely to be cut through layoffs is Italy. The Titan Italia wheel disc press facility in Crespellano will be consolidated into the company’s Finale Emilia plant in Modena. This measure will take around three years to fully implement, and it is not yet known how many jobs will go as a result.
So why is Titan International shedding employees like a dog moulting in the spring? The company’s share price has dropped 58 per cent since March and so far this year it has registered a US$31.7 million loss from operations. Furthermore, Titan was caught out by exchange rate movements after lending money to its operations in Russia and Brazil, and this helped Titan end the third quarter with a currency exchange-related loss of $13.3 million.
Net sales in the third quarter of 2014 were down 9.6 per cent to $450 million, while operating loss amounted to $2.5 million; a marked contrast from the operating profit of $17.1 million a year earlier but nevertheless an improvement on the $20.5 million loss in the second quarter of 2014. Adjusted net loss for the quarter was $9.1 million, compared with a net profit of $8.1 million in the third quarter of 2013. A reason for these results, beyond foreign currency effects, was a drop in demand for large agricultural equipment and the larger products used in the mining industry; Taylor said this had “a significant impact” upon Titan’s business.
Results for the first three quarters are significantly lower than for the corresponding period of 2013. Turnover between January and September declined 9.4 per cent to $1.5 billion, while operating loss, at $31.7 million, was two per cent of turnover.
Titan International anticipates lacklustre sales of large agricultural equipment in North America through 2015 and a flat market in South America. Challenges in the European market are expected to remain, and this should keep business at stable levels. As already mentioned, a slow improvement is expected in Russia in the quarters ahead. “We are taking steps to improve the business despite these challenging markets,” commented Taylor. “Titan will continue to strengthen our path toward growth and improved performance as we enter into 2015 with cost reductions and new product offerings.”
Full details of Titan International’s financial results can be found in our company profiles and reports section.