QUINCY, Ill.—Titan International Inc. swung back into the black on an operating and net basis in the quarter ended Sept. 30 as sales increased 3.7 percent to $384.7 million.
Titan generated third-quarter operating income of $4.82 million after reporting a $4.67 million loss in the year-ago period, and reported net income of $2.29 million, compared with a $12 million loss in the year-ago quarter.
Titan attributed the return to profitability to production efficiency gains associated with the increased sales volume. The gain partially was offset by higher raw materials costs.
President and CEO Paul Reitz noted that this is the first time since 2013 that Titan has reported a profitable adjusted earnings per share in the third quarter.
The net sales increase was driven by gains in the earthmoving/construction segment in most geographies, the company said, and partially was offset by decreased net sales in the agricultural and consumer segments.
Titan's earthmover/construction segment was the only segment to increase sales during the quarter, reporting a 15.3 percent increase in sales to $180.4 million.
Agricultural tire/wheel sales slid 4.4 percent to $163.4 million while consumer tire/wheel sales fell 6.1 percent to $41 million, Titan said.
Overall net sales volume climbed 5.9 percent over the comparable prior year quarter. Favorable changes in price/mix positively impacted net sales by 3.9 percent, while unfavorable currency translation—primarily in Latin America—impacted net sales negatively by 6.1 percent, Titan said.
"The benefits driven from our continuous operational improvement efforts and the fruits derived from our strategic investments over the past few years continue to show up positively in our financial results," Reitz said.
"Our earthmoving/construction segment, in particular the ITM undercarriage business, has performed exceptionally. Year-to-date sales for this segment are up over 28 percent with that growth also translating well into meaningful margin and EBITDA improvement for Titan."
For the first nine months, Titan recorded a net profit of $28.4 million, compared with a loss of $29.8 million a year ago, as net sales increased 13.3 percent to $1.24 billion.
During the period, all three tire segments enjoyed a jump in sales: agricultural tires increased 3.8 percent to $544.4 million, earthmover/construction surged 28.2 percent to $568.1 million and consumer tires edged up 0.8 percent to $126.5 million.
Overall net sales volume increased 10.2 percent with higher volume across all segments, particularly in the earthmoving/construction segment, Titan said. Favorable changes in price/mix contributed a 4.3 percent increase to net sales, while unfavorable currency translation negatively impacted net sales by 1.1 percent.
"In North America, sales of large to mid-sized ag machinery have seen a mild upturn over the past year, and small equipment sales have maintained a strong, upward trend," Reitz said.
"Recent surveys indicate that most dealers expect more of the same in 2019. Generally speaking, dealers are optimistic about prospects for improving both new and used equipment revenues moving into next year. This is consistent with what we are hearing from many of our customers.
"Additionally, ag equipment indicators for both OEMs and dealers remain positive, including improved early order levels over last year, equipment inventories at good levels, and the increasing age of the fleet for higher horsepower equipment. Larger equipment sales levels remain below longer-term, historical averages which, along with an aging fleet, indicates the potential for upside at some point" he said.
"We have worked hard the past few years to not only get through the cyclical downturn, but to also set a solid foundation for the future. It's great to see those efforts starting to come through into our financial results with 2018 year-to-date adjusted EBITDA more than doubling from 2017 levels. These improvements over the past couple of years are not by coincidence or luck, and as we approach 2019, we have a strong belief in the fundamentals that support our business and drive our future."
Gross profit for the third quarter rose to $43.7 million, compared with $40.1 million in the comparable year-ago period, driven by increased sales volume partially offset by higher material costs. An increase in gross margin was primarily the result of production efficiencies driven by increased volume, offset by increased raw material costs, the company said.
For the third quarter, R&D expenses edged up to $2.6 million, compared with $2.5 million in the year-ago period. For the first nine months, R&D expenses totaled $8.2 million, compared with $7.9 million last year.
The R&D spending reflects initiatives to improve product designs and ongoing focus on quality, the company said.