Titan's 3Q Net Loss was 'Worse than Anyone Forecasted'
Titan International Inc. posted a net loss of $31.4 million on net sales of $308.8 million for the third quarter ended Sept. 30, 2015. That compares to a net loss of close to $9.1 million on sales of $449.5 million for the same period last year.
A net loss $14.4 million in 3Q operating income compares to a net loss of $2.5 million for 3Q 2014.
"The third quarter for our end markets was worse than anyone forecasted," says Chairman and CEO Maurice Taylor. "This was consistent with our large customers and competitors.
"We continue to be focused on what we can control. This can be seen in our third-quarter results. Our Titan employees are dedicated to working very hard to lower manufacturing costs, improve quality and improve how we manage the company.
"While unfortunate, we continue to make the difficult decisions to reduce headcount as production continues to slow," he said. "In addition to our focus on reducing manufacturing costs, we are exploring wheel and tire designs to both reduce cost and improve performance. You will continue to hear about these efforts in the quarters ahead."
For the first nine months of fiscal 2015, Titan recorded a net loss of $24.4 millon on net sales of nearly $1.1 billion. That compares to a loss of $27.4 million on sales of $1.5 billion for the same period last year. A net loss of $6.1 million in operating income through three quarters of 2015 compares to a net loss of $31.7 million last year.
Taylor also commented on Titan's new licensing agreement with Goodyear (see "Titan is "Back in the Game' Thanks to Latest Goodyear Agreement").
"The expansion of the Goodyear-brand farm tires in Europe, the Middle East, Africa, Russia and other Commonwealth of Independent States countries is significant," he said. "This includes more than a hundred countries: Albania, Algeria, Andorra, Angola, Armenia, Austria, Azerbaijan, Bahrain, Belarus, Belgium, Benin, Bosnia and Herzegovina, Botswana, Bulgaria, Burkina Faso, Burundi, Cameroon, Cape Verde, Central African Republic, Chad, Comoros, Croatia, Cyprus, Czech Republic, Democratic Republic of the Congo, Denmark, Djibouti, Egypt, Equatorial Guinea, Eritrea, Estonia, Ethiopia, Faroe Islands, Finland, France, Gabon, Gambia, Georgia, Germany, Ghana, Gibraltar, Greece, Guernsey, Guinea, Guinea-Bissau, Hungary, Iceland, Iran, Iraq, Ireland, Isle of Man, Israel, Italy, Ivory Coast, Jersey, Jordan, Kazakhstan, Kenya, Kuwait, Kyrgyzstan, Latvia, Lebanon, Lesotho, Liberia, Libya, Liechtenstein, Lithuania, Luxembourg, Macedonia, Madagascar, Malawi, Mali, Malta, Mauritania, Mauritius, Moldova, Monaco, Montenegro, Morocco, Mozambique, Namibia, Netherlands, Niger, Nigeria, Norway, Oman, Palestine, Poland, Portugal, Qatar, Romania, Russia, Rwanda, San Marino, Sao Tome & Principe, Saudi Arabia, Senegal, Serbia, Slovakia, Slovenia, Somalia, South Africa, Spain, Sudan, Swaziland, Sweden, Switzerland, Syria, Tajikistan, Tanzania, Togo, Tunisia, Turkey, Turkmenistan, Uganda, Ukraine, United Arab Emirates, United Kingdom, Uzbekistan, Vatican City, Western Sahara, Yemen, Zambia, Zimbabwe (Rhodesia).
"These countries are in addition to our existing agreements covering North and South America. What this addition amounts to over time is huge.
"From the time Goodyear exited EMEA (Europe, Middle East and Africa) farm tire business in 2014, Titan has suffered the loss of business relating to new equipment being exported from North America to Europe," said Taylor. "In fact, we estimate over $100 million in U.S. sales were lost. Titan will work to get all that business back plus more, but it will take time.
"This agreement is positive for all of our existing tire facilities as they support production of the Goodyear-brand as well as the expansion of Titan's LSW technology to these new regions."
More details from Morry Taylor
1. "My second quarter comments indicated my plans to visit large farms in South America," said Taylor. "I recently spent a week meeting large farm owners in Brazil. It was a really exciting week for me along with our Grizz Squad and sales team leaders from South America.
"The first farm we visited was 1.2 million acres consisting of corn, soybeans and cotton. I was surprised to learn this farm group has over 800 machines, with not a single large four-wheel drive tractor on the entire farm. These farmers were interested in our LSW technology, and we will be demonstrating how the LSW technology can improve the performance of their equipment.
"The initial LSW product in Brazil will come from the U.S., but I expect our facility in Sao Paulo will be producing these tires within the next six months. I plan to spend more time visiting these large farmers in the coming months to continue to drive the LSW rollout in South America.
"As I mentioned, I was really shocked by the absence of large four-wheel drive equipment in South America," he said. "I've talked with U.S. dealers about taking used machinery to South America, reconditioning the equipment, and then getting local dealers to work with U.S. dealers to sell the equipment. This would be great for the OEMs because that market could absorb a large portion of the used machinery located in the U.S. I believe that a few U.S. dealers with entrepreneurial drive could make this happen.
2. "I was recently at the Sunbelt Ag Expo in Moultrie, Ga. One of our customers came to me about some tires they would like to put on new, larger size tractors -- over 100hp. When I explained to him how our new LSW technology could solve the issues they were facing, he wanted to get the wheel and tire assemblies as soon as possible. The compact tractor business is also growing, and we expect to capture additional market share with our LSW assemblies for these smaller size tractors. I believe Titan will expand the LSW technology on many of these compact tractors within the next 9 to 12 months."
3. "Titan Tire Reclamation Corp. is on track for the expected start up on April 1, 2016. One of the reactors has now been relocated to our site in Fort McMurray, Canada. The remaining five reactors are expected to arrive within the next two weeks, which is the time it takes to transport them up there."
In summary, Taylor said Titan has improved its cash position during the quarter despite the challenges.
"I believe that we have set up all of our facilities to be the most competitive in the world. Shareholders are welcome to visit any of our facilities and our employees would be proud to show you our operations. While no one can predict the future, we will continue to lower costs and make Titan a better company.
"After the markets start the climb up, we will strive to hit new highs in our sales and profit as the world leader in farm. I believe 2016 will be a much better year for our shareholders with the strengths of Titan clearly demonstrated."