High inventories in Q2 2023 drive down Titan International’s volumes

The decline in net sales and income that Titan International, Inc. experienced in the first quarter of the year has continued in the second, with all operating segments reporting year-on-year decreases. Company president and chief executive officer Paul Reitz is nonetheless “very pleased” with these Q2 2023 results.

Net sales of US$481.18 million in the three months to 30 June 2023 represent a year-on-year decrease of -16.0 per cent. Titan International primarily attributes this drop in net sales to high inventory levels in the Americas, particularly at OEM customers, and the impact of this upon sales volumes. A negative price/mix largely caused by lower steel prices also impacted sales, as did unfavourable currency translation of 2.3 per cent.

Gross profit for Q2 2023 was $85.9 million or 17.9 per cent of net sales, down -21.7 per cent on a year earlier (gross profit of $109.7 million, 19.1% of net sales). Titan International says the decrease in gross profit and margin was mainly due to the lower sales volume, which resulted in lower fixed cost leverage.

Selling, general and administrative expenses for Q2 2023 were $34.9 million, almost unchanged from the $34.7 million recorded a year earlier.

Income from operations for Q2 2023 was $45.9 million, a -34.1 per cent decline year-on-year. The decrease in income from operations is largely attributable to lower net sales.

Net income was $31.90 million in Q2 2023, a 53.7 per cent drop on the corresponding quarter of 2022.

Temporary inventory impact

“Our One Titan team delivered once again this quarter,” states Paul Reitz, president and chief executive officer of Titan International. “I am very pleased with our second quarter 2023 results as we navigate the previously communicated temporary inventory impact with some of our customers. Our global team executed effectively to serve our customers well and drive strong profitability, which is a testament to the strategic actions we have taken over the last few years to transform the business. In addition, we generated $61 million of free cash flow year-to-date, the highest first half level in more than a decade, which further bolsters our balance sheet and provides optionality to continue to invest in the long-term growth of the business.

“Titan is the leader and partner of choice for off-the-road tyres, wheels and undercarriage solutions to our customers,” Reitz continues. “Mid- and long-term demand for our products remains healthy in our core end markets, and our ongoing commitment to serve our customers and end-users at the highest level continues to be our primary focus.”

Full-year 2023 outlook

For FY 2023, Titan International expects to achieve revenues between $1.85 billion and $1.9 billion, adjusted EBITDA of $200 million to $210 million and free cash flow ranging between $110 million and $120 million. The company’s capital expenditures should range between $55 million and $60 million.

“While there are still some lingering effects of inventory destocking with our OEM customers, visibility is starting to improve, allowing us to provide our full year outlook,” says David Martin, chief financial officer. “Overall demand for our market-leading products remains steady, particularly for large Ag. We are well positioned for a solid year, particularly in terms of profitability and free cash flow generation.”

The final word goes to Paul Reitz, who shares that Titan International is overall “highly confident” that the “fundamental changes” made to the business, including its One Titan culture, will it company to “navigate continual dynamic market conditions to deliver near historic highs this year and strong results into the future.”

Read and download detailed information about Titan International’s Q2 2023 financial results here.