Titan confirms interest in Russia
Reports of Titan International’s plan to enter the Russian market have been widely reported by that country’s media, and the US tyre maker has released a statement confirming it has, in cooperation with One Equity Partners (OEP) and Russian Direct Investment Fund (RDIF), entered into negotiations with Cordiant about a potential investment in Russia. Titan says it hopes to “successfully complete these discussions in the near future.”
Titan will be the managing partner in the potential acquisition and states it is “looking forward to working with RDIF and OEP.” The tyre maker says RDIF “brings the expertise to how business is done in Russia and the relationships to deliver value creating transactions,” just as OEP “brings its knowledge of the world of finance.”
Titan intends to grow its tyre, wheel and track footprint in Russia and the Commonwealth of Independent State (“CIS”) countries. A number of major Titan customers, including John Deere, CNH, Agco and Caterpillar, are all increasing their presence within the region, and Titan wants to be there to service them as well as their end users with locally-produced tyres.
In its statement, Titan expresses the belief that “the future growth of farming and mining will be in Russia and CIS countries.” Company chairman and CEO Maurice M. Taylor also commented on the current market situation as Titan sees it through the first five months of 2013. “I have stated over and over that all the talk of tyre shortages has been false. Well, in the past couple months, millions of dollars in tyres have been dropped into the aftermarket from the OEM’s in the farm and construction industries and also the mining companies, who had built up inventories greater than a year and are now releasing these tyres. This will affect every tyre manufacturer worldwide. The entire volume of tyres will have an aftermarket effect for a few months before things get back to normal. We feel that this is a bump in the road as we have experienced this in the past. I think of all the overtime and weekend work to produce tyres that go into building inventory and then when they see the storage cost, they discount them into the aftermarket. The selling price of all our products is going down because our material cost has been dropping. The guidelines that I gave in December of 2012 will be adjusted downward, but I need to find out approximately how much the mining companies will be lowering their inventories.
“Titan sold 44 per cent of Titan Australia to our Planet Group partners so we could combine the companies to get the best results and grow the business. Bill Campbell took over the Bryan tyre operation in April and has been getting that facility back on track, and he feels the facility will continue to improve through the year. We are still moving ahead on the acquisition trail and expect a number of these transactions to close before the end of this year. Overall, I still see this year as a record year and one that will set the course for Titan’s growth.”
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