Titan International Inc. recorded adjusted net income of $40.5 million on net sales of $463.1 million for the first quarter ended March 31, 2012. That compares to income of $18.7 million on sales of $280.8 million for the same period last year.
The higher sales levels were the result of the April 2011 acquisition of Goodyear Tire & Rubber Co.'s Latin American farm tire business, which recorded sales of $90.3 million for the first quarter 2012. The company's income-to-sales ratio was 8.7%.
Operating income was up 118%, from $26.9 million in 1Q 2011 to $58.7 million this year. According to Chairman and CEO Maurice Taylor, the sales and net profit were quarterly records for the company.
"The order book is filled for the year, and we must keep increasing our output. Farming, construction and earthmoving and mining are all very strong and we expect 2012 to be another year of growth."
Taylor also spoke on a number of topics, including Titan's goals in 2012.
Industry overview: "The dynamics in agriculture are changing around the world and are positively impacting the demand for machinery in the industry. Prices for metals, oil and gas prices in the earthmoving and mining markets are expected to remain at attractive levels to support strong demand."
Expanded mining service: "Titan’s mining service business is a hot market. We have just opened a facility in the oil sands in Canada and already are receiving the demand to double the facility. Our partner in the oils sands is Saskatoon Wholesale Tire, and they have never seen anything like this.
"In order to meet demand, all of Titan’s factories will be hiring and expanding operations. Titan has also ventured in to some new areas with the Union City, Tenn., factory. This large facility used to produce 48,000 passenger car tires per day. Since Titan doesn’t produce auto or truck tires, we will be contracting to various firms where we will supply the equipment and they will operate the business of mixing, calendaring and fabricating. Titan will still operate warehousing, equipment repair and new material inventory received.
"There is no question, with 2.2 million square feet under roof, we have plenty of room to expand or lease the space at this facility. To better visualize the size of this building, translate 2.2 million square feet into approximately 53 acres under roof."
Goals in 2012: “As we enter a new year, Steve Briggs took over as president of
our North American tire plants. We also have David Salen, president of the wheel group; Paul Reitz, CFO Titan International; and Mike Troyanovich, assistant general counsel. (They) will be running this company’s operations in the future. The senior team — myself included — will be focusing on the new opportunities we believe will grow this business.
"As I’ve outlined before, our vision is to be between a run rate of $3 billion to $4 billion in revenue by the end of 2013.”
Strong demand in the agricultural and earthmover is part of the reason BB&T
Capital Markets is reiterating its Buy (1) rating on the company's stock (which
lists as TWI on the New York Stock Exchange).
Analyst C. Schon Williams says the company's 1Q earnings per share were
higher than BB&T estimated.
"All told, this was a solid operating quarter for TWI, he says.
"Operating margins were the real needle mover in the quarter. Operating margins were 14.4% vs. our 10.5% forecast. Incremental margins accelerated in the quarter and were the highest level we’ve seen in a year.
"Management cited volume leverage and better plant utilization. We believe price vs. cost on raw materials was also favorable in the quarter," he adds.
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