Based in part on improving business in the fourth quarter, Titan International Inc. generated 41.6% higher operating income for the fiscal year ended Dec. 31 on 12.1% lower sales.
The "positive trends" that Titan experienced in late 2020 have increased during the first few months of 2021, leading Titan to predict a "noticeable" improvement in operating income this year.
In fact, President and CEO Paul Reitz said the market has improved "so quickly in a relatively short time period, making it difficult to provide a reasonable full-year 2021 forecast" for sales and earnings.
"The new year is already looking like a completely different story compared to 2020," Mr. Reitz said. "The confidence of U.S. farmers is at record levels with the tailwinds from strong commodity prices and healthy government payments received last year. Dealers are hungry for inventory as channels have been depleted to the lowest levels seen in the past 20 years."
For fiscal 2020, pre-tax operating income (EBITDA) increased to $54 million on sales of $1.26 billion, for an operating ratio of 4.3%. The net loss deepened by nearly 25% to $60.4 million. Sales fell in all segments, Titan said, reflecting the challenges in the earthmoving/construction market as a result of a slowdown of the global construction market, particularly in Europe.
During the quarter, Titan reported adjusted EBITDA of $17.3 million — the best performance since the first quarter of fiscal 2019 — on 8.3% higher sales of $326.9 million. The company trimmed the net loss in the quarter by nearly 31% to $17.2 million.
Looking ahead to the rest of 2021, Mr. Reitz noted that Titan increased prices recently to offset rising raw material costs and expects to enact additional increases as the year progresses to offset higher production costs. This is expected to help Titan manage its gross margins.
On the sales side, Titan said it expects demand to continue accelerating in North America throughout 2021 due to strong farmer income and commodity prices along with low levels of inventory in many channels.
Mr. Reitz lauded his fellow Titan employees for focusing last year on efforts to improve the company's financial position "amidst the challenges of dealing with the COVID-19 pandemic."
"The recent surge in agricultural demand, coming off the tail of the global pandemic, has created a high degree of volatility for our customer base and for Titan," Mr. Reitz added, noting the company is hiring and training staff to meet this growing demand.
By business segment, Titan reported:
Agricultural — Gross profit increased 16.8% to $65.4 million on 2.8% lower sales of $634.7 million, aided by relatively strong performance by Titan's wheel business in North America and improving OE tire demand in the Americas and Europe. Earthmoving/Construction — Gross profit fell 34.3% to $37.9 million on 21.4% lower sales of $510.2 million. Business was impacted heavily by COVID-19-related factory shutdowns and market disruptions during the first half of the year.
Consumer — Gross profit fell 28.6% to $11 million on 22.3% lower sales. Titan cited the pandemic's negative effects on the Latin American light utility truck tire sector for the downturn.
