Titan breaks out the red ink for 2014 results

Details of a difficult 2014 have emerged in Titan International’s full-year financial report, which was published earlier today. The tyre maker’s CEO and chairman, Maurice Taylor, took the eye-watering US$80.4 million loss attributable to Titan on the chin, referring to 2014 as “a year of very real challenges for businesses in the agriculture, construction and mining sectors.” He also reported that Titan International shed at least 1,900 people from the payroll during the year due to lower production output, with the company’s global employee count sinking below 6,500. Other issues that arose during the 12 month period included currency impacts, impairment charges of approximately $76.5 million and a union slowdown.

Full-year net sales fell 12.0 per cent to $1.9 billion and gross profit of $140.6 million was less than half the 2013 figure, while gross profit margin dropped from 14 per cent to seven per cent year-on-year. The loss from operations was $97.6 million compared with income of $102.4 million in 2013, and as mentioned, net loss attributed to Titan was $80.4 million, a crass contrast with the $35.2 million net income attributable to Titan a year earlier.

Despite this, Taylor’s glass remains half full. “It’s important to recognise that despite these challenges, there are several factors in play that I believe will lead Titan to the top in coming years,” he commented today. The Titan boss’s outlook is buoyed by the achievements of the ‘Grizz Squad’ (a team of 24 field staff whom Taylor credits much of the LSW technology’s success to), the added competitiveness that currency devaluation has the company’s plants in Russia, Brazil, Europe and Australia, and various sustainability efforts such as Titan Tire Reclamation’s arrangement with Suncor.

The drop in sales affected every segment where Titan International is active. Demand for mining tyres was slow at the OEM level for the entire year, although the company saw some improvements in the aftermarket during the final quarter of 2014. Agricultural machinery manufacturers cut production of their bigger, high margin units, while increases were seen in the lower margin 100hp and under sector. Taylor described margins in the agricultural aftermarket as “fair”. The construction sector, he added, is “steady”, but not back at the levels last experienced in 2007.

Broaching the layoffs that occurred last year, Taylor said “Titan removed approximately 2,000 employees plus numerous temporary workers during 2014. “The cost for all of this was recognised in 2014. Titan knew we had to do this in Russia, but all the other facilities had to go through top/down justification on employment levels and what improvements had to be made. This without a doubt was the most painful process the new team had to do, but long term we expect that this will produce Titan’s greatest return. We are still looking at consolidation everywhere we can.”

The new team the Titan boss mentioned is the leadership team ushered in last year and headed by Paul Reitz, with the assistance of CFO John Hrudicka. “We saw the retirement of several valued team members, but the new leadership has stepped up to meet the challenges,” said Maurice Taylor.

According to the Grizz, Titan is “lean and ready to go in 2015. He says the year will contain “pure cutting and a lot of surprises” – because “that’s the way it is here.” His EBITDA goal for 2015 is approximately $115 million, and he thinks the farming downturn this year will be lower than some project (12 to 15 per cent rather than 25 per cent down). “I leave you with the advice given to me by my mentor who I worked with for over twenty years. When the going gets tough, work harder than your competition and you will ultimately win,” he concluded.

Full information about Titan International‘s full-year and Q4 results can be found in our company profiles and reports section.