Working through the downturn: Titan International increases net sales, reports $6.5 million loss
The year-on-year gain in net sales seen at Titan International in the opening quarter of this year has continued in the second. For the three months to 30 June 2017, the manufacturer of off-highway tyres, wheels, assemblies and undercarriage products reports net sales of US$364.4 million, an increase of 10.4 per cent on the second quarter of 2016. Net sales for the first half of the year amount to $721.9 million, up 10.7 per cent from a year earlier.
“Our second quarter results mark the second consecutive quarter of significant year-over-year growth in net sales,” commented Paul Reitz, president and chief executive officer of Titan International. “Our top line growth of over ten per cent included an 18 per cent improvement within our Agriculture (AG) segment. Following a protracted downturn of more than four years, these results continue to demonstrate early signs of a recovery and provide optimism moving into 2018.” While the original equipment side of the AG business remains sluggish, Reitz said the aftermarket business has particularly benefitted from Titan’s moves in North America.
“Along with the AG gains this quarter, we continue to see market conditions improve in aftermarket mining and construction, which fits well with our strategy that was launched almost two years ago to position ourselves to capture more of this business,” Reitz added.
Gross margin, which was 11.1 per cent in the first quarter of the year, amounted to 12.0 per cent in the second. “This improvement was in spite of significant raw material pricing headwinds that negatively impacted gross profit by approximately $11 million during the second quarter,” commented Reitz. Although the Titan International management team sees stability coming to raw material pricing, the higher costs during the quarter couldn’t be fully compensated for due to the company’s OEM contracts in North America. “Because of these headwinds, we did not reach the gross margin level we experienced this quarter last year; however, with the increased pricing that has now taken place with the OEMs and the raw material price stabilisation, we do not anticipate further negative impacts from raw material prices in the second half of this year,” shared the president and CEO.
Income from operations rose 52.6 per cent year-on-year to $4.0 million (1.1 per cent of net sales) in the second quarter of the year, however due to the $7.0 million loss from operations experienced in the first quarter, a loss from operations of $3.1 million (0.4 per cent of net sales) was recorded in the six months to 30 June 2017.
At the bottom line, it was still a net loss rather than a profit in the second quarter, with the figure growing 71.8 per cent year-on-year to $6.5 million. The net loss for the first half of the year increased 6.1 per cent to $17.1 million.
“As we’ve worked our way through the downturn over the past few years, the Titan team has consistently deployed a balanced, disciplined approach focused on the needed short-term actions to balance costs with net sales, while also looking to the future with our investment decisions,” stated Reitz. “We see future opportunities to utilise our tyre manufacturing and technical expertise to expand into other related products that don’t require significant, additional investment.”
Full details about Titan International’s results can be found in the Tyrepress.com company profiles and reports section.