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Titan Rebounds Financially in 2Q 2018

Posted on August 8, 2018

Titan International Inc. posted net income of $5.7 million on net sales of $429 million for the second quarter ended June 30, 2018. That compares to a net loss of $6.3 million on sales of $365 million for the same period last year.

The company’s income-to-sales ratio was 1.3%.

Operating income was up 268%, from $4.4 million in Q2 last year to $16.2 million this year.

Titan said managing raw material costs was one of the second quarter’s financial challenges.

"Tariffs have brought steel costs to their highest level in more than 10 years. Natural rubber prices remain low, but other costs within our tire business have been rising, including synthetic rubber, carbon black, bead wire and chemicals."

Through the first six months of fiscal 2018, Titan recorded net income of $22 million on net sales of $854.2 million. That compares to a net loss of $17.7 million on sales of $721.9 million in 1H 2017.

Here’s what Titan’s management had this to say about the company’s financial condition. It also discussed and analyzed the operating results of each of its segments.

Market conditions and outlook

"In the first half of 2018, Titan experienced higher sales when compared to the same period of 2017. The higher sales levels were primarily the result of increased demand, primarily in the agricultural and earthmoving/construction segments. Net sales levels improved in both OEM and aftermarket channels. Market conditions across all segments are generally improved in 2018 compared to 2017.

"Energy, raw material, and petroleum-based product costs could be volatile and may negatively affect the company’s margins. Additionally, the company's markets and raw material prices may be negatively affected by tariffs and duties. Many of Titan’s overhead expenses are fixed; therefore, lower seasonal sales volume trends may cause negative fluctuations in quarterly profit margins and may negatively affect the financial condition of the company."

Agricultural market outlook

"With the rise in global trade protectionism and an evolving business climate that includes declining crop prices, rising interest rates and ongoing tariff battles, there is concern for the overall health of the agricultural economy, particularly North America where U.S. farm net income is expected to decline in 2018. Overall declining/stagnant farm income levels have continued to keep demand for large farm equipment at reduced levels, however, the need to replace equipment as part of a typical replacement cycle is expected to drive additional volume in both OEM and aftermarket sales. Most major OEMs are forecasting 2018 agricultural equipment sales to be up over 2017 within most regions. North American used equipment levels have decreased from peak levels.

"Many variables, including weather, grain prices, export markets, currency, as well as government tariffs, duties, policies and subsidies, can greatly influence the overall condition of the agricultural market."

Earthmoving/construction market outlook

"In the first half of 2018, net sales in the earthmoving/construction market increased primarily due to higher net sales volumes. This increase in net sales was a continuation of increases which began in the latter part of 2017. Demand for larger products used in the mining industry improved, with growth in international markets outpacing growth in the U.S. Demand for Titan's products in this market is anticipated to continue to improve in the second half of 2018. Demand for small and medium-sized earthmoving/construction equipment used in the housing and commercial construction sectors is also anticipated to increase.

"The earthmoving/construction segment is affected by many variables, including commodity prices, road construction, infrastructure, government appropriations, housing starts, and other macroeconomic drivers across the globe."

Related Topics: ag tires, farm tires, OTR tires, raw material costs, tariffs, Titan financials

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