WEST CHICAGO, Ill.,- Titan International, Inc., a leading global manufacturer of off-highway wheels, tires, assemblies, and undercarriage products, today reported financial results for the second quarter ended June 30, 2024.
Paul Reitz, President and Chief Executive Officer, stated, "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.”
“Despite this, we are very pleased to report adjusted EBITDA of $49 million and free cash flow of $53 million. 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 continued, "Our results over the past few years speak for themselves. An integral piece of that success is our Low-Side Wall ("LSW") wheel/tire assemblies that were developed back in 1997 when my old boss had the crazy idea to increase the outside diameter of the wheel and reduce the inside diameter of the tire on farm tire/wheel assemblies.
"He worked hard to get the OEMs to bite on that concept, but didn't get any takers. Now that LSW design is on nearly every pickup truck and SUV around the world. When I became CEO in 2017, LSW was still seen by some inside Titan as concept that was not meant for Ag equipment.”
“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,” said Reitz. “We have proven this with thousands of farmers and have seen our LSW sales significantly grow since 2017. We believe that growth is nowhere near its pinnacle."
"In August, I was invited to visit a couple large farmers in central Canada that recently started using Titan's 1400 LSWs and are ecstatic with the fuel efficiency and overall performance of their LSWs,” Reitz said. “These farmers have a lot of influence among their peers, and we expect the leading OEMs will be listening closely to hear what they are saying about LSWs. This opportunity in Canada is an example of how Titan sees a continuing growth path ahead for LSWs to increase market penetration there and in Brazil while continuing to also grow our base in the US.
“Farmers are seeing the benefits of LSW just as the rest of us have all seen the benefits in our trucks and SUVs, so it's easy to see how nearly all Agriculture and Construction equipment could perform better with LSWs. Our team has developed a deep connection with farmers which has led to dealers developing a strong aftermarket channel to get LSWs to end-users in order to make their equipment perform better,” he said.
“That aftermarket demand created the pull to where we now have OEMs offering LSWs across their equipment portfolio,” Reitz said. “6% savings on fuel costs along with superior performance in the field and lower maintenance costs gets peoples' attention. Today we estimate that approximately 80% of tractors run a dual tire configuration that could benefit by converting to LSWs. Looking towards the future, we have a deep drop rim that will only make LSWs perform better and further excites our team. “
“We're also excited about other, non-farm opportunities, such as the military. I just met a retired military general that handled procurement and he was ecstatic about working with us to get LSWs introduced to the military branches. The government is a substantial buyer of trucks and we are going to chase that volume with LSWs. If it works in the heartland, it will work on the front lines."
Mr. Reitz continued, "Interest rates continue to weigh on the industries we serve. High horsepower agricultural equipment represents a significant purchase for farmers and thus they are highly attuned to the associated financing costs. With the possibility of interest rate cuts on the horizon, farmers are choosing to defer major purchases. Similarly, interest rates impact the cost of working capital for both OEMs and Aftermarket dealers who are being extremely cautious about the levels of inventory they are carrying in their factories and on their lots.”
“We believe that the headwinds we are presently facing are transitory. Equipment currently in the field continues to be used and will ultimately need to be replaced. Additionally, as Ag OEMs continue to introduce new technologies into their products, the ROI that new equipment can produce, including the latest tire technology, will begin to outweigh the financing costs and help drive long term demand. Turning to our EMC segment, sales there held up relatively well.”
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