Titan International Inc. (NYSE: TWI), a leading global manufacturer of off-highway wheels, tires, assemblies, and undercarriage products, today reported results for the second quarter ended June 30, 2017.
Net sales for the second quarter of 2017 were $364.4 million, an increase of 10% when compared to $330.2 million in the second quarter of 2016. Net loss applicable to common shareholders for the second quarter of 2017 was $10.3 million vs. $5.2 million in the second quarter of 2016.
Net sales for the first 6 months of 2017 were $721.9 million, an increase of 11% vs. $652 million in the first 6 months of 2016. Net loss applicable to common shareholders for the first 6 months of 2017 was $20.8 million, vs. $23.1 million for the first 6 months of 2016.
Overall sales volume was up 7% driven by higher volumes in both the agriculture and earthmoving/construction segments, partially offset by lower volume in the consumer segment. Favorable changes in price/mix contributed a 2% increase to sales and currency translation increased sales by another 1%.
Gross profit for the second quarter ended June 30, 2017, was $43.6 million, flat compared with $43.7 million in the comparable prior year period. Gross margin was 12% of net sales for the latest quarter, compared with 13.2% in the comparable prior year period. Increases in raw material costs across all markets and geographies negatively impacted gross margins during the second quarter of 2017 due to the timing of passing along increased costs to our end customers.
Gross profit for the 6 months ended June 30, 2017, was $83.3 million, up 16% from $72 million in the comparable prior year period. Gross margin was 11.5% of net sales for the first 6 months of 2017, compared with 11% in the comparable prior year period.
Paul Reitz, president and chief executive officer, commented, "Our second quarter results mark the second consecutive quarter of significant year-over-year growth in net sales. Our top line growth of over 10% included an 18% improvement within our agriculture (Ag) segment.
“Following a protracted downturn of more than 4 years, these results continue to demonstrate early signs of a recovery and provide optimism moving into 2018. Ag continues to be sluggish at the OEMs, but our moves in the North America aftermarket have benefited Titan thus far in 2017. Along with the Ag gains this quarter, we continue to see market conditions improve in aftermarket mining and construction which fits well with our strategy that was launched almost 2 years ago to position ourselves to capture more of this business.
"The current quarter saw sequential gross margin improvement, up from 11.1% in the first quarter to 12% in the second. This improvement was in spite of significant raw material pricing headwinds that negatively impacted gross profit by approximately $11 million during the second quarter. Although we believe that raw material pricing has now stabilized, our OEM contracts in North America did not allow us to fully pass through these higher costs during the quarter. Because of these headwinds, we did not reach the gross margin level we experienced this quarter last year; however, with the increased pricing that has now taken place with the OEMs and the raw material price stabilization, we do not anticipate further negative impacts from raw material prices in the second half of this year.
"During the quarter, we had a number of positive events that planted seeds for a strong future. First, Titan finalized agreements with the United Steelworkers Union (USW), which represents our three North American tire plants. These new 5 year contracts provide added profit incentives for our union workforce while providing Titan with more economic flexibility. This will benefit all stakeholders and allow Titan to maintain our position as a leader in the North American tire market.
"We are excited that New Holland recently began offering our Low Sidewall Technology® (LSW) tractor setup with LSW1000/40R32 fronts and super single LSW1100/45R46 rears. Last year, a study was conducted by Mark Stallings, a farmer and owner of the Delta New Holland dealership, which compared standard duals to LSWs. As we previously announced, the study demonstrated that LSWs deliver higher yields. Because of this successful study and the efforts of Stallings, we are now able to offer that same LSW tractor setup to all New Holland customers.”
Reitz added, "As we've worked our way through the downturn over the past few years, the Titan team has consistently deployed a balanced, disciplined approach focused on the needed short term actions to balance costs with net sales, while also looking to the future with our investment decisions. We see future opportunities to utilize our tire manufacturing and technical expertise to expand into other related products that don't require significant, additional investment."
Source: Titan International press release