Titan Q2 results buoyed by Carlstar deal benefits

CHICAGO, Ill.—Titan International said a solid balance sheet and the benefits of acquiring Carlstar Group earlier this year are yielding positive results despite challenging industry conditions in the second quarter.

"The work we have done to optimize our operations, build a strong team, reduce our debt and diversify our company, culminating with the acquisition of Carlstar in February, has enabled Titan to deliver solid financial results while our industry is working its way through a cyclical trough," Paul Reitz, Titan president and chief executive officer, said in a second-quarter earnings statement.

Titan reported an adjusted EBITDA of $49 million and free cash flow of $53 million in the second quarter.

Net sales for the three months ended June 30 were $532.2 million, compared to $481.2 million in the comparable period of 2023. The growth was primarily driven by higher volumes in the consumer segment, bolstered by the net sales contribution from the Carlstar acquisition completed on Feb. 29, Titan said.

The company said the sales increase was partially offset by a slide in demand and reduced sales in the agricultural, earthmoving and construction segments.

"While sales of new equipment by leading OEMs in both Ag and Construction have slowed, our expanded ability to provide aftermarket products as the premier one-stop shop with the acquisition of Carlstar is an important addition as farmers, power sports enthusiasts, homeowners and others continue to delay new equipment purchases, thus driving a need for replacement tires," Reitz said.

Gross profit for the three months was $80.4 million, or 15.1 percent of net sales, compared to $85.9 million, or 17.9 percent of net sales, in 2023. Titan attributed the decrease to negative price/mix, reduced fixed cost leverage, higher material costs and inventory revaluation step-up associated with the Carlstar purchase.

Titan has consistently seen growth over the past few years, thanks in large part to Titan's Low-Side Wall (LSW) wheel and tire assemblies, Reitz said.

"When I became CEO in 2017, LSW was still seen by some inside Titan as concept that was not meant for ag equipment," Reitz said. "We have since proven to not just ourselves, but throughout the farming community the real benefits of LSW, especially its ability to make them more money by saving fuel and improving yields while tackling the most difficult conditions and enjoying a more comfortable ride in the field and on the road.

"We have proven this with thousands of farmers and have seen our LSW sales significantly grow since 2017, and we believe that growth is nowhere near its pinnacle."

Looking ahead, Titan is watching interest rates closely as they impact spending in the ag community. Reitz said there are headwinds because a transition is happening among the farm community, where farmers have spent so many years deferring the investment in new equipment (either because of availability or waiting for rate cuts) that there is a lot of aging equipment that is going to have to be replaced eventually.

Reitz said the company will continue to work through industry challenges throughout the rest of the year.

"We are confident that the long term, structural demand drivers for the industries we serve are very much intact," Reitz said. "Our team also has extensive experience navigating through these cycle, and we are confident in our strategy.

"As conditions improve, which they unquestionably will, we expect to be well positioned to drive organic revenue growth with accelerating profitability."