Sales and Earnings Decline in Titan's Second Quarter
Titan International Inc. posted a net loss of $2.4 million on net sales of $330.2 million for the second quarter ended June 30, 2016. That compares to a net profit of $4.3 million on net sales of $376.1 million for the same period last year.
Titan said adjusted net loss for the second quarter of 2016 was $1.9 million, compared to net income of $1.0 million in the second quarter of 2015.
Operating income for 2016’s second quarter was 4.0 million, or 1.2% of net sales, compared to operating income of $7.5 million, or 2.0 percent of net sales, for the year-ago period.
"Second quarter has some good news, some not so good news, and some great reasons to be optimistic,” says Chairman and CEO Maurice Taylor.
“Titan has seen an increase in our cash balance. Our sales in the under 100 HP tractors are holding up well. The market for high horsepower tractors and combines continue to decline in North America, but in talking with equipment dealers, they have been moving used equipment and look forward to an uptick this fall.
“Titan has seen an uptick in construction and forestry tire sales for our aftermarket customers. I believe the agriculture market is at or near the bottom and we expect to gain business from our competitors. We also must keep showing farmers and construction companies the benefits of Titan's LSW tires/wheels.
"Titan's next super single LSW assemblies for 400, 500, and 600 HP tractors have been developed with new double sleeve hubs to hold on to the axles. OEMs have only single sleeve hubs which are too weak for this high horsepower equipment," said Taylor.
For the first six months of fiscal 2016, Titan recorded a net loss of $11.2 million on net sales of $652 million. That compares to a net profit of $3.2 million on sales of $778.1 million for the same period last year. A net loss of $4.0 million in operating income through two quarters of 2016 compares to a net profit of $8.3 million last year.
Taylor said many positive things are happening at Titan to give optimism for the future:
"Titan Tire Reclamation Corp. (TTRC) is expected to be in full production by late August. We had planned to be running in April, but obtaining the permits and training requirements took longer than expected. Then the great forest fires of Fort McMurray occurred which shut everything down until July. TTRC will be filing a business interruption insurance claim which could offset a portion of the costs associated with the delays.
"We continue working to lower our production costs of wheels and tires. This will come from operations as well as our selling, general and administrative expenses. Additionally, Titan has leased out (with a purchase option) an additional 500,000 square feet in our Brownsville, Texas site. We now have over 800,000 square feet leased and the possibility of leasing another 200,000 square feet in the near future.
"As previously announced, Goldman, Sachs & Co. has been engaged as financial advisor to the Special Committee of Titan's Board of Directors in connection with the possible sale of Titan's subsidiary Italtractor ITM S.p.A.. The Special Committee is doing their job and I believe the Board of Directors would consider a sale of ITM as we continue to focus exclusively on our core business of wheels and tires.
"So with our current cash of $207 million and the potential proceeds from the sale of noncore businesses, our total cash balances will continue to grow and help grow our core tire/wheel business. I believe we are in a great position to expand in our core business of tires, wheels and assemblies for farm, construction and mining. I believe there is no other company in the world with the capability and drive to produce the wheels and tires which will meet the demands on the agriculture, construction and mining equipment of the future. With all the positive things happening within Titan, I continue to be optimistic about our future."