Titan reports decrease in net sales, gross profit in Q1

WEST CHICAGO, Ill.—Net sales, gross profit and income operations were down, according to the the first-quarter 2024 financial report recently released by off-road tire and wheel manufacturer Titan International Inc.

The company reported that net sales for the three months ended March 31 were $482.2 million, compared to $548.6 million in the comparable period of 2023. The tire maker attributed the changes to the agricultural and earthmoving/construction segments, due to a decrease in sales volume caused by lower levels of end customer demand in agricultural equipment, and economic softness in Brazil.

The company said the volume change was positively impacted by including net sales from the Carlstar Group, whose acquisition was completed at the end of February. Titan said the volume change was also impacted by negative price due to lower raw material and other input costs, most notably steel, and unfavorable foreign currency translation of 2.3 percent.

Gross profit in Q1 was $77.4 million, or 16 percent of net sales, compared to $95.6 million, or 17.4 percent of net sales, for the same period of 2023. The changes in gross profit and gross margin as compared to the prior year period were due to the lower sales, which resulted in lower fixed cost leverage, Titan said. Gross profit was $80.7 million, or 16.7 percent of net sales.

Income from operations for the three months 2024 Q1 was $25.1 million, compared to $55.1 million for same period in 2023. Titan said the change was primarily due to lower net sales and the result of the items addressed above.

Titan President and CEO Paul Reitz said the last two months were "exciting" as the integration of Carlstar continues.

"I have been particularly impressed by the enthusiasm I see from everyone at Titan and our new team members that joined us with the acquisition," Reitz said. "One of the key strategic rationales for the acquisition was our expected ability to be a 'one stop shop' for customers by delivering best in class products with a deep portfolio for both aftermarket and OEM channels.

From top to bottom, our employees understand this vision and are working hard every day to make it happen. We have made a lot of progress integrating Carlstar's operations and are very pleased by the initial feedback we've received from the market on the 'new Titan' and how that benefits our customers."

Titan reported that selling, general and administrative expenses for Q1 2024 were $39.4 million, or 8.2 percent of net sales, compared to $34.5 million, or 6.3 percent of net sales, for Q1 2023. The change was primarily due to recurring SG&A (selling, general and administrative expenses) incurred on the Carlstar operations that includes management of distribution centers, Titan said.

Acquisition related expenses Q1 were $6.2 million, associated with the transaction-related expenses for Carlstar.

Reitz said Titan is positioned to deliver "more consistent, stronger results throughout various market cycles" as a result of structural changes as well as opportunities created by the Carlstar acquisition.

"... We believe the combined companies in a typical year would have earnings power of $250 million to $300 million of adjusted EBITDA with free cash flow of at least $125 million. Our team is focused on implementing the short and long-term actions needed to deliver this and more, and while fiscal year 2024 results will be impacted by soft market conditions, it is good for our investors to have a perspective on the future opportunities and our steadfast focus on building shareholder value."

Reitz called the Q1 results "solid .. in the midst of challenging market conditions. Overall, all three of our sectors continue to be impacted by macro uncertainty, which is affecting many industries."

He pointed to gross margin at 16.7 percent on an adjusted basis, with ag segment adjusted margins expanding to 17.2 percent from 16.1 percent year-over-year. Consumer segment adjusted gross margin was 21.3 percent, a 20.7 percent increase. Earthmoving/construction adjusted gross margins were behind the other two segments, at 14.0 percent, compared with 18.7 percent, as OEM volume declines in Europe and Latin America.

Reitz said OE demand is down, but he doesn't expect a slowdown to endure. He said with the Carlstar acquisition, consumer segment sales will provide "a more meaningful proportion" of total sales.

"While the consumer sector is facing some of the same macro headwinds as our other two segments, in the form of interest rate uncertainty, geopolitical instability and a looming presidential election, we are encouraged by our new opportunities and the overall margin profile of the segment.

Key to that is our aftermarket business, as that is less correlated to new equipment sales, along with sales synergies we expect to realize as a result of our one stop shop strategy. Titan remains in a strong position to succeed in capturing value due to the strength that we have created over the last several years."