Q1 2021 Titan International Inc Earnings Call

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Along with our for them 10-Q, which is also been filed with the Securities and Exchange Commission. This morning as a reminder, during this call we will be discussing certain forward looking information, including the company's plans and projections for the future that involve risks uncertainties and assumptions that could cause our actual results to differ materially from the forward looking information.

Additional information concerning these factors that either individually or in the aggregate could cause actual results to differ materially from these forward looking statements can be found within the safe Harbor statement included in today's earnings release attached to the companies for May Cape out earlier today as well as our latest form 10-K and forms 10-Q.

All of which have been filed with the SEC. In addition to today's remarks may refer to non-GAAP financial measures, which are intended to supplement that that'd be a substitute for the most directly comparable GAAP measures the earnings release, which accompanies today's call contains financial another quantitative information to be discussed today as well as.

The reconciliation of the non-GAAP measures for the most comparable GAAP measures today's earnings release is available on the company's website within the Investor Relations section under the visit of events tap. Please.

Please note today's call is being recorded a replay of this presentation will be available soon after the call would be within the Investor Relations section on the website.

Website. In addition, a copy of today's call transcript will be made available on our web site I would now like to turn the call over to Paul.

Good morning, everyone. Since our last earnings release in early March type is really continued to move further on direction, which I feel is definitely reflected in their solid first quarter of mentioned results on.

Occurred adjusted basis, we had our strongest quarter since the first half of 2018 with our sales of over 18% to $403 million and adjusted EBITDA coming in at 26 million along with that we had to return to profitability. This quarter. Those results are all on the high end of our outlook that we have provided for the first quarter. We were also able to <unk>.

That growth into a 450 basis point, Maine, and gross margin to a more reasonable level of 13, 2% this period.

Percentage this quarter with volume gains exceeding 19% in this segment as we have stated before a large percentage of our EMC sales come from our undercarriage Division ITM.

Back in December we had forecasted a good year of growth for ICF, but we did expect it to be more towards the back half of the year. Therefore, it's been really good to see the order books starting on your strong. This has led to solid growth this quarter in construction revenues from both the OEM and aftermarket side of the business and this has primarily been coming out of Europe and the far east.

Also in the ICM has seen significant sales gains in Latin America, which which is coming from the AG segment.

As I just discussed previously.

As we have noted on prior calls our ITM business in recent years has increased its diversification across our customers and our channels and overall I do want to comment that this is a well managed business that has adapted well to changing market conditions over the past few years, we've been increasing our undercarriage capacity in China, Spain.

In Brazil, where we have.

To see higher utilization levels.

And then we already have sufficient capacity throughout other parts of our main production facilities with undercarriage that can support future growth in the marketplace.

So turning down to South America, and Brazil are demand down there has exploded from late last year as the strong accurate AG market conditions and the large grain of sugar countries, obviously, Brazil, but also including Argentina and we've also seen good strong export demand out of our Brazilian plant, which certainly comes with a good margin profile.

With that.

Favorable currency and aging fleet. Good farmer income in Brazil really are some 40, what appears to be a strong market that will continue through all indications are at least through 2022.

I want to note, though when it comes to Titan Brazil.

It will require further investment for us from us in 2021 to meet this expected market growth and really to protect our market share of the market.

I do want to kind of spend a second here just reiterate that since we acquired Titan Brazil in 2011, we have consistently been investing and increasing our large radial AG and OTR capacity, which at the time. When we made the acquisition was really only a small part of the product portfolio. These investments we've been making over the past decade.

That could show up on a result.

At this point, though we have not had to hold each shipments due to price for disputes. We certainly feel on the bigger picture. We certainly feel it's heightened producing valuable products with strong production capabilities and really make us a valuable partner to our customers, especially in times like this therefore, we believe it the market continued to progressively improve we should've seen off.

For 230 to approach pricing with more leverage than what we've had in recent years.

Well before the pandemic started.

Which is hard to think back after on it is going on over the last 14 15 months, but in the third quarter of 2019 tightened management team that outlined both internally and externally our strategic goal to protect our balance sheet, which was really in order to position ourselves to fight refinance or 2023 bonds.

It is critical strategic strategic initiative, clearly not as glamorous as developing new products are growing the business was of the utmost importance to protect our balance sheet can really add some to protect our heart view of the company.

I can't say enough about how well our management team has responded David Barnard CFO Todd shoot are treasured.

We've all done an excellent job over the past 18 months to make consistent progress on improving our balance sheet, we've been highlighted.

The external markets on that progress throughout 2020, and really excited that based upon these efforts and the improving market conditions last month, we found a good opportunity to coach the market to refinance to refinance or 2023 bond and really our entire debt team on board are pleased that our average resulted.

With the successful refinance a R $400 million 2023 bond two of 2028 matures day.

So let me conclude here today by stating.

Some things about tightened to start with first I mean, Titan has a long history of being flexible through adjusted market volatility, we have tremendous and robust production capabilities around the world that are designed to meet the needs of our customers. These are definitely difficult times. We are currently operating in.

I want to give credit to our Titan team is working hard to adjust to the current surge in demand and really be in a good position to serve as a long term business partner to our customers are solid first quarter results clearly support their end markets and tightened are moving into favourable direction.

Noted earlier there are numerous positive indicators that provides support towards the broader strength of our end markets, especially when you look at an AG.

However, tightened simpler for many companies in dealing with various supply chain of labor challenges a business for himself. While we're also dealing with some impact of the pandemic.

Tightened as world class on our industry with a production and truly capability to handle growth.

We intend to be in a position to do so with our labor capacity increases at this point, we are effectively dealing with with these challenges whether it's related to supply chain or labor and we continue to believe we can effectively manage through these challenges. This year is off to a strong start orders are good our operations are performing well and there are <unk>.

The size on our end markets, but we feel the range of possible outcomes continues to be too wide to provide guidance. Today's the remainder of 2021, so with that I would now like to turn the call over to David Martin.

Thanks, Paul on and good morning to everyone. Thank you for joining the call today.

Well the first quarter was a wild ride, but we manage this very strongly through on off and we successfully delivered the results that we anticipated.

Now before I get into the result, the details of the results I want to highlight some of the more important takeaways for the quarter.

Again sales grew by 18% and without the negative currency impact sales were up Brian at 20% for the quarter.

The last time, we had sales over $400 million on a quarter was in Q1 of 2019.

For all the world disruption, including the tariffs the global construction slump and depend on it.

Our growth between AG Nancy was very balance acts sales grew by 21% and see for about 20% for for the consumer segment reported that the client a 5%, but that was entirely due to currency devaluation without that consumer segment sales would've been up by two 4% point as we would've had growth and all three segments.

That's for the quarter.

Our gross profit level was impressive at $53 million with the margin 13, 2%, which shows the power of our leverage on a cost physicians within our operations.

Despite the rapid rise in sales from queue for to Q1, our cash position that $96 million was resilient due to the continued strong discipline across the business on working capital management.

Now, let's let's get into the details for the corners performance as I just mentioned net sales rep, 18% over Q1 2022.

Sales in queue on also exceeded fourth quarter 2000 sales by 23, 4%.

We'll continue to the recent sales momentum as we progress through the quarter in our March sales exceeded $150 million. This is the strongest month in sales we've had since March of 2019.

Currency negative negatively affected sales for the quarter by approximately $6 million for 1.7% the.

The results as interesting as we saw continues to currency degradation in Latin America, along with Russia, but there was strength in the euro the British pound and the Australia.

Which offset almost all of that loss.

As a reminder, we saw a direct impact on the first quarter of 2020 sales $14 million related to COVID-19 plant closures and disruptions.

All right are overall sales volume for the quarter on.

On a consolidated basis was up by 15% from last year price and mix for the first quarter was also up by for 8%, reflecting higher prices to offset increased raw material costs logistics and other production costs.

Consolidated net sales and the ex segment improved by 27% in the first quarter on a constant currency basis for AG sales would've been up almost 25 per cent.

And the first quarter led by North America, Europe, and Latin America.

We mentioned that we started to see early signs of recovery in the construction markets on our last call and the results proved it during the first quarter Amc's sales grew by 24% on a reported basis on on a constant currency basis degree by 17 per cent the.

The largest driver. This rebound came from ICM are undercarriage business as construction markets in Asia and parts of Europe began to wake up from the effects of the pandemic.

Business grew by over 35% and you can see from the first quarter last year, which is also reflecting on week sales experience last year due to the early impacts on the pandemic.

<unk> deck for the business remains strong strong coming out of the quarter and we believe that we will continue to see growth extending through the year.

Our overall North American AG sales were up 13 percentage relative to last year. The OA World is truly come to life in recent months and our aftermarket business continues to be very strong.

The expectation is that this will continue through the year with the order a deck of significantly at the end of Q1 and even grew through April.