Titan damps down growth prospects for fiscal 2023

WEST CHICAGO, Ill.—Titan International Inc. suffered double-digit drops in income for the quarter and half-year ended June 30 on lower sales, prompting management to project lower full-year results compared with fiscal 2022.

Titan reported a 34.6-percent drop in income from operations of $46 million for the quarter on 16-percent lower sales of $481.2 million, yielding an operating ratio of 9.6 down two-plus points from a year ago.

Titan attributed the reduced profit and margin primarily due to lower sales volume, which resulted in lower fixed cost leverage and the timing lag in higher raw-materials costs relative to contractual customer price reductions in North America.

The net sales revenue decrease was due primarily to sales volume drops caused by elevated inventory levels at customers in the Americas, particularly OEM customers, Titan said, along with a negative price/mix linked to lower steel prices and unfavorable currency translation.

Net income fell 55 prcent to $30.2 million.

Despite the sales and earnings declines, Titan CEO and President Paul Reitz said management was "very pleased" with the second quarter results, considering the temporary inventory impact with some of the firm's customers.

"Our global team executed effectively to serve our customers well and drive strong profitability, which is a testament to the strategic actions we have taken over the last few years to transform the business," he said.

In addition, Reitz noted that Titan generated $61 million of free cash flow through the first half of the fiscal year, the highest first-half level in more than a decade.

For the half-year, income from operations fell 11.4 percent to $101 million on 8.8-percent lower sales of $1.03 billion.

Longer term, Reitz said demand for Titan's products remains healthy in "core end markets," and "our ongoing commitment to serve our customers and end-users at the highest level continues to be our primary focus.

In agriculture, Reitz said farming fundamentals remain supportive due to high replacement needs for aging large equipment fleet and farmer income, which remains healthy despite recent drops in corn and soybean prices.

The earthmoving/construction markets are underpinned by increased mining capital budgets and forecasted GDP growth, the Titan exec added, a dynamic that supports infrastructure projects in the years to come.

"Overall, we are highly confident that the fundamental changes we made to the business, including our strong One Titan culture, will enable us to navigate continual dynamic market conditions to deliver near historic highs this year and strong results into the future."

For the full fiscal year, Titan is projecting sales of $1.85 billion to $1.9 billion, or roughly 12 percent below the fiscal 2022 performance. The pre-tax operating (EBIDTA) ratio would be in the 5.8- to 6.5-percent range, compared with a ratio on nearly 12 percent in 2022.