Titan International Inc. posted a net loss of $12.3 million on net sales of $363.4 million for the fourth quarter ended Dec. 31, 2018. That compares to a net loss of $30.2 million on sales of $376 million for the same period in fiscal 2017.
The company also experienced a $925,000 loss in operating income in 4Q 2018. That compares to a loss of $4.3 million for 4Q 2017.
For fiscal 2018, Titan recorded net income of $16.1 million on net sales of $1.6 billion. That compares to a net loss of $60 million on sales of more than $1.4 billion for fiscal 2017.
Titan's income-to-sales ratio for 2018 was 1%. Operating income for the full year was $42.4million.
"When we take a step back and review the progress that Titan has made over the past couple years, we believe it’s a really good story that we’re proud of working hard to have accomplished," said Paul Reitz, CEO and president. "This is evidenced in our 2018 net sales that came in above $1.6 billion with adjusted EBITDA of more than $119 million. In 2016, we ended the year under $1.3 billion in net sales and just over $47 million in adjusted EBITDA. Those figures represent top-line, organic growth of more than 26% along with an adjusted EBITDA increase of over two-and-one-half times over this two-year period.
"We have said it before, but it’s worth repeating: The operational improvements and strategic investments in our existing business during this period and prior are reflected in these improved financial results."
Reitz said many factors in 2018 impacted not only Titan's business, but also other companies as well. They created an often volatile operating environment.
"These factors include the much discussed tariffs standoff, steel prices that reached the highest level in more than a decade, and sluggish commodity prices continuing to impact farmers. Despite those challenges, in 2018 we were able to achieve double-digit revenue growth on a constant currency basis, and we successfully leveraged that growth to drive a return to positive bottom-line earnings for the first time since 2013.
"Throughout the year our earthmoving/construction segment, particularly the ITM undercarriage business, led the way with full-year segment growth of 22% while also showing strong growth in margins and EBITDA.
"We did a good job in managing our business in 2018 and performed well compared to the financial outlook we previously provided," he said. "Net sales grew 9% during the year and would have been up over 11%, excluding negative currency impacts, well within our expectations of 9 to 12% growth. Our SGARD expenses came in better than the outlook at slightly more than 9% of net sales, beating the low end of the target of 10% by more than $14 million. EBITDA was $107.9 million, reflecting a 98% improvement over 2017, and was within our outlook of an 80 to 100% increase over the previous year."
David Martin, senior vice president and chief financial officer, said it was disappointing Titan didn’t achieve positive cash flow in 2018, despite the strong earnings growth, "and that was directly attributable to increases in working capital, specifically growth in inventory."
"Earnings must be translated into cash flow in the business to continue to invest for profitable growth, and what we experienced in 2018 in working capital increases will not be the expectation moving forward. Our management team is focused on the strategies to manage working capital in a much stronger way. Specifically, we expect to strategically target increased inventory turnover in a number of areas of the business which should drive improved cash flow in 2019."
Business outlook and strategic evaluation
"As we look to 2019," said Reitz, "we believe that Titan is positioned for continued overall net sales growth in the range of 6% to 7.5%. Specifically, within our segments we anticipate net sales growing as follows: agricultura, 4 to 6%; earthmoving/construction, 8 to 9.5%; and consumer, 2.5% to 4.5%. With the continued growth in revenue, we believe that gross margin will improve and finish the year within the range of 12.8% to 13.2% of net sales."
Reitz also predicts continued investments in capital expenditures of between $40 million to $50 million in 2019.
"We recently announced that we are evaluating strategic alternatives with respect to ITM, our undercarriage business. Titan’s board of directors has engaged advisors to assist us in carrying out this evaluation with the goal of maximizing value for our stakeholders. These alternatives, among others, includes a public listing within Europe.
"ITM’s financial performance has improved significantly since we last formally considered selling the business in 2016, and, as a result, we believe ITM's overall value has increased."
