Q4 2022 Titan International Inc Earnings Call
Ladies and gentlemen, please remain holding the conference call will begin momentarily again, please remain holding the conference call will begin momentarily.
[music] [noise].
Good morning, ladies and gentlemen, and welcome to the tightened International incorporated first quarter at 20 twenty-two earnings conference call. At this time, all participants have been placed on a listen only mode and we will open the floor for your questions and comments after the presentation. If you should need assistance.
Please dial star zero and an operator will assist you in.
It is now my pleasure to turn the floor over to Allan Snyder, Vice President financial planning and analysis for tightened Mister Snyder the floor is yours.
Thank you for them good morning, I'd like to welcome everyone to Titans fourth quarter of 2022 earnings call on the call with me today are Paul right.
President and CEO and David Martin tightened senior Vice President and C. F O I.
I will begin with a reminder, that the results were about to review represented in the earnings release issued yesterday.
Along with our Form 10-K, which was also filed with the Securities and Exchange Commission.
As a reminder, during this call we will be discussing certain forward looking information, including the company's plans and projections for the future.
Vallve risks uncertainties and assumptions that could cause our actual results to differ materially.
From the forward looking information <unk>.
Additional information concerning factors that either individually.
Or in the aggregate could cause actual results to differ materially from the sword looking statements can be found within the safe Harbor statement included in the earnings release.
<unk> to the company's form 8-K filed earlier.
As well as our latest Form 10-K and forms 10-Q, all of which have been filed with the SEC.
In addition, today's remarks may refer to non-GAAP financial measures, which are intended to supplement but not be a substitute for the most directly comparable GAAP measures.
The earnings release, which accompanies today's call contains financial and other quantitative information to be discussed today.
As well as the reconciliation of the non-GAAP measures to the most comparable GAAP measures.
Q for earnings releases available on the company's website <unk>.
A replay of this presentation a copy of today's transcript and the company's latest quarterly investor presentation, while I'll be available soon after the call on Titans website.
I'd now like to turn the call over to Paul.
Thanks, and good morning, everyone.
Tightened team closed out 2022, an excellent fashion with fourth quarter results that puts us up over the top for record performance in terms of sales profitability and cash Flo how do we get to this point it really comes from our global one tightened team that continues to be energized by working relentlessly to engineer manufacture our market leading products.
That's simply make off road equipment performed better <unk>.
Really our vision and strategy as a company is formed by that premise and it serves as our guiding light the router organization, our core concepts of achieving on our vision and meeting the needs of our customers is through our strong technical connections and users of off road equipment, especially in agriculture.
We have a culture here that is centered around living and learning by playing in the sandbox with end users and really understanding their needs and then bringing that information back into our organization.
With that important knowledge, we didn't let our product and sudden ache all engineers run fast develop and also our operational team manufacture these market leading products and that really creates a cool place for an exciting place to work.
This entrepreneurial culture. This is at the root of our company's foundation and has been for decades, we combined with our strong technical in manufacturing know how this this flows vigorously throughout our day to day activities and is the backbone of the company that we are today.
Moving over to our financial results, we simply had an exceptional year, our revenue reached to $107 billion, 22% higher than last year, but actually 27% higher if you exclude FX in our Australia divestiture, along with strong demand in our end markets. This demonstrates our team's ability to recruit train.
And retain people to grow volumes and a difficult labor market.
R 2022, gross profit had 16.6% that led to an adjusted EBITDA of $253 million, which is a record year for Titan.
We manage our cost structure effectively as well with our SG&A coming in in a little over 7% of sales and only $2.5 million higher than last year and this inflationary environment that we live in.
Looking at the fourth quarter, we close the euro well with $510 million in revenue that's up for 5% and also the first time, we have ever surpassed $500 million in queue for <unk>.
As a reminder, this quarter is a period that is always impacted by holidays in plant maintenance shutdowns. So good to see our team get through that noise effectively to record gross margin of 15%, which compares the 12, 8% last year.
That led to our Q4 EBITDA of $53 million, which is our best fourth quarter in history.
So overall from nearly every angle you could look at all of our business units had an excellent 2022.
And I would personally and sincerely liked the day, our global team for their efforts in recent years to achieve these accomplishments that I just had the honor of highlighting.
I want to move over to our balance sheet now and spend a few minutes on the critical processes progress we have made their a.
A few years ago, David and I spoke quite a bit that one of our top priorities was the fortify our balance sheet.
And the two of us and the rest of our team really did a good job getting our management team around the world focused on that objective and over the past few years, we've done what we set out to accomplish.
2022 Titans generated $114 million in free cash flow, that's enabled us to achieve net debt leverage of one one times.
If you look back a few years ago are working capital was around 27% of sales.
Our board I do recall those days, where our board putting the objective in front of us to get below 20% and we've done that for the past couple of years now.
Most importantly over the past few years, a fortifying our balance sheet, we never stopped investing in product development and innovation as I noted earlier.
This is the part of the culture that what makes us tick and we do not take our foot off that pedal.
Therefore by being strategic with our investments.
Exiting and improving unprofitable businesses and.
And by having a motivated workforce moving in the same direction over the past few years, we have executed at a high level.
To take care of our customers during these challenging times and we propelled our financial results to new <unk> new levels and we've also accomplished are crucial goal of 4% to find our balance sheet.
So now looking towards 2023, it is reasonable to say the overall business climate kicks out a fair amount of noise at the macro level. These days.
However, when you look at our primary and markets. We are encouraged and believe they are still standing on firmer ground, especially the large egg segment.
The recent USDA report illustrates the corn and soybean supply demand factors, along with low stocks will bring good pricing levels into 2024 at a minimum.
That will play a positive role of farmers decisions about purchasing equipment, especially when they're they're going to get their hands on the latest precision AG technologies and not to mention getting their hands on Rls w's.
The strong farmer income for recent years combined with that tense up large equipment demand from.
Is really still lingering from that supply chain of labor disruptions over the past past couple of years.
This along with continuing low levels of available used equipment.
All continues to both very well for 2023 large a demand.
Flipping over and looking at small egg. It appears that inventory is starting to normalize to pre COVID-19 levels, along with the effects of some inflation slowing down demand in smaller smaller horsepower ranges. These.
These factors along with Oem's, drawing down their internal inventory leads us is seen a tape bring a small egg demand of 2023, but again, it's still a good strong segment for our for our company.
Moving over to Earth moving in construction or businesses. In this segment finished the year really strong in fact ITM are undercarriage business had the best quarter in his long history.
We see Earth moving in construction in a good position to start 2023 with mining aftermarket poised for good growth with solid commodity prices in place and the construction market have in the backdrop with some infrastructure support kicking in at points throughout this year. So we look at this is again a continuation of.
Continuation with strong 2022 to start off 2023.
So if you if you circle back to again to 2022 is.
Exceptional year for the tightened team of the customers. We proudly serve as we turned that page into the net into this year, we expect our financial performance to remain at a high level based on the overall healthy market conditions in our end markets farmers will continue to be supported by strong income levels have cash to spend on equipment anti.
<unk>.
Weather conditions had been an unpredictable.
Unpredictable and Thats bodes very well for Rls w's that continued to be the perfect solution for farmers looking to battle through those tough conditions are simply looking to make their equipment perform better and more efficient.
Therefore, we do see our aftermarket to band continuing to remain robust.
We also expect to see certain Oems drawing down their internal inventory levels that.
That will make for a bit of a wild ride so coming off a record 2022, we see twenty-three as a another strong you for Titan and as the year progresses, we're looking to provide more information about our forecasted performance, but we're not going to provide a broad range of expert to the expectations on today's call.
In closing, it's really cool to see the quality quality and innovative products, we build around the world every day that makes for a fun and exciting place to work and be as I mentioned earlier.
We also really is a company strive on the fact that our products play an important role in meeting the evolving needs of our customers and more specifically the end users along with that we have a strong footprint of manufacturing locations that are able to mitigate the supply chain risks that existed today's complicated world.
We continue to believe the key elements are in place to drive continued positive momentum tight.
So with that I'd like to turn the call over to David now.
Thank you Paul and good morning to everyone. That's on the call with us today well.
While we're known closing the book on 2022, and it was quite the ride for Titan, It's truly gratifying to see the success. After all the hard work are one tightened team is put into moving the company forward.
Financial success is just one aspect of those.
Accomplishment of 2022, our team is established new standards for operations planning financial forecasting and most importantly discipline.
And focus in the midst of a tremendous volatility over the last number of years.
Now, let's walk through some of the key highlights for Q4 in our 2022 full year performance Q for sales continued to expand with our organic growth of almost 10% from Q4 last year. After excluding the effects of FX and the sale of Australia, which occurred in the early part of 2022, a full year organic growth is clear.
And those same factors was 27%.
Q for adjusted EBITDA grew by $17 million or 46% from Q4 last year and it kept out a record year for our earnings as Paul said earlier, our full year, adjusted EBITDA was $253 million representing growth of 87%.
Are are.
<unk> earnings per share growth was also very impressive on both reported and adjusted basis.
Adjusted EPS jump from 14, and Q4 2021 to 44 cents in Q4 2022.
And went from 60 per share in the full year of 2021 to $2 20 per share for 2022.
Our cash balances increased by $43 million from Q3 on the strength of these earnings and the solid working capital management.
And last we pay down debt by $36 million in 2022 and grew cash by $61 million driving down that net net that 286 minutes.
Now are that leverage now stands at 1.1 times.
In queue for we experience more traditional ordering patterns in our plant maintenance by customers and fewer production hours for our plants, particularly in the AG segment, it's normal seasonality and it was in line with what we expected at the same time. It is important to see the continued expansion of top and bottom line relative to last year in Q4.
Which was a solid result by the team.
Now, let's look into the performance at the segment level, starting with agriculture.
Agricultural segment net sales were $275 million, an increase of $10 million or 4% from Q4 last year, excluding FX and the lack of Australia in sales this growth was 7%.
Volume mix, we're fairly stable when comparing to last year and pricing.
Does.
A big part of the growth this primarily Stan from increased cost of raw materials and other inflationary factors present in 2022 again, we saw a return to normal seasonality across this segment of the business and we also took advantage to prepare our plans for the needed production levels as we see increased demand in the first part of 2023.
Full year organic growth for AG in 2022 was 30% compared to the prior year.
Agricultural segment gross profit for the fourth quarter was $38 million, which is level with the result that we saw last year, while there was some negative impact from FX in Australia.
The gross margin continued to be solid at 14% similar to last year.
Our earthmoving in construction segment experience, a very strong quarter overall net sales for the AMC segment grew about $12 million or 7% from Q4 last year. Excluding those same factors have been describing from last year are from this year, we were just sort of growth of $30 million or 16%.
The majority of the growth for the segment was driven by increased volume, while there was increased pricing relative to raw materials and other cost inflation, most notably energy costs in Europe are growth came from all aspects of the global business, while ITM had one of its strongest quarters ever in queue for.
For the full year organic sales growth in the AMC segment was 24%.
Gross profit within the AMC segment for the fourth quarter was $33 million, which represents an improvement of almost $13 million or 62% from gross profit last year the.
Gross profit margin AMC segment was significantly better at 17% versus the prior year at just 11%.
Again, the largest driver of our increased profitability came from the increase in sales in the ITM undercarriage business, while growth occurred across all of our businesses and the geographies from last year, reflecting stronger demand in the global construction markets and solid market conditions and mining.
The consumer segments Q for net sales were slightly down in queue for compared to last year.
Sales from the Latin American utility truck tire sales were lower reflecting some tightening of customer inventories in the quarter.
Like the rest of the year, our specialty product growth initiatives in the U S are taking off most notably our custom mixing of rubber stock, which partially offset some of this decline.
For the full year, the consumer segment experienced organic growth of 24%.
The segments gross profit for the fourth quarter was solid at $5 $8 million in gross margins were <unk>.
15% improving nicely from Q4 last year. This improvement in margins are primary reflective positive mix of products again, most notably growth from specialty products in the U S.
Our SG&A and R&D expenses were $33 million in the queue for which represented six 5% of net sales in line with previous quarter's performance and the full year for the full year are SG&A and R&D costs rose less than 1% compared to the prior year.
With our growth in sales this provided very solid leverage on our overall improve profitability in our margin.
This was an interesting quarter for a reported taxes on income with the benefit of $16 million for during the fourth quarter were able to release valuation allowances of nearly $29 million for U S. In federal state taxes related primarily to prior prior net operating losses due to the strong performance over.
For the last several years.
And the company's projected performance ahead, we are now in position to utilize these net operating losses.
When you exclude the impact of evaluation allowance release that we did in the fourth quarter income taxes as a percent pretax profits were 25.7%.
Our cash taxes for 2002 were approximately $24 million for the full year.
Wow earnings has been spectacular it is translated into exceptional cash flow performance free cash flow top $44 million in Q4, and a tremendous number of $114 million for all of 2022, which is well above in a year in our history.
We also exceeded our previous guidance of $100 million coming from improved working capital management in the quarter.
This drove our overall cash balance to $160 million at the end of the year.
R capital expenditures for 22 or $47 million and it was in the middle of our guidance range for the year. Our focus has been an ongoing maintenance and our various plants along with investments to bring about increased efficiencies and selected capacity expansion.
Along with tooling related to product innovation and other improvements, particularly in large act.
As I mentioned it as out there at the outset, our net debt that leverage at the end of the same or improved to one one times trailing 12 minutes adjusted EBITDA down from one four times at the end of Q3, and 2.9 times last year at the end of the year.
Now moving broadly to our outlook for 2000 fiscal 2023 were coming off a record performance in 2022 and.
Truly believe that the underlying in mid and long term.
Demand drivers of our business remained very solid.
As you heard today from pulse comments the business environment remains somewhat uneven in the near term, we do expect our performance to remain at a high level supported by overall healthy market conditions and all of our end markets.
We also expect to see stability and gross margins and we will continue to control our operating costs.
And that which should translate into again very strong free cash flow performance for this year.
Are working capital should also remains stable and our capital expenditures should be in the range of $55 million to $60 million. This.
This increase in Capex reflects multi year capital programs in place to manage the maintenance that as I talked about earlier and a very organized way and to improve the efficiencies with continued selected capacity expansion of our global production facilities and continuing tooling improvements from product development.
With this expectation for continued strong fat cash flow, we expect that our credit statistics to improve we will be in a strong position to enact our strategic initiatives for growth and improving returns.
This will include potential stock repurchases, which will be focused on supporting the stock when we need to.
It is also potentially could include focused core acquisitions and joint ventures as they present themselves we will be proactive in this area. While remaining focused on building on the strength that has been obtained with our performance.
Now I would like to turn it off the call back over to form our operator for the Q&A session.
We will now begin the question and answer session.
Ask a question you May press start then one on your touch 10000.
You are using a speaker phone please pick up your handset before pressing the keys. He must try your question. Please press star <unk>.
<unk>.
Our first question comes from the line is Steve Farrah, Signee, which said Daddy, Steve airline account open.
Good morning, Good morning, David.
Detail on the call.
You cited seasonality.
Typical maintenance.
Walk around some of your plants in typical holiday shutdowns spot.
This quarter.
You can see given that was.
The factor why didn't we see any of that impact.
Our business is that just because it hasn't ramped up as fast so far.
Yes, you will note that during the year, it's continued to ramp it's been a little bit different than the seasonality that that the AG set of our business did.
Earlier in the year it was kind of his slower as we were coming out of the.
The prior year. It was it was a little bit weaker as well. So it's been a momentum thing for the business as well and and again high level production.
Really solid.
Pricing in place to manage a lot of volatility.
And so we not only see the top line growth, but we're seeing the margin expansion as well.
<unk> has been running hot as we know through 2021, and we saw it all the way through.
The.
First half of 2022 and you.
Started to see a little bit more return on the seasonality front as.
As we headed into the end of the year, one thing to keep in mind, Steven B during the during the pandemic.
Or add related businesses were deemed critical infrastructure around the world with North America, South America, we had to keep running hard like David alluded to.
We'd reach a point operationally, where we needed to pull some days out and get focused on some maintenance. So we would be prepared to start twenty-three in a good position.
Makes sense.
We heard from some of your large customers.
And they certainly noted.
Can you supply chain issues component shortages that you don't have are you running ahead of your customers is that turning into a bit of an issue as we see this cycle extend clearly some of your larger customers are continuing to have supply chain issues.
Yeah, I mean, that's kind of.
Led into a pretty good explanation for why at this point, we feel that putting out a broad range of guidance just isn't the way to approach things and we have a strong internal forecast like you said or the market has.
Great backdrop, the Oems Oems all confirm that over the past couple of weeks, but to your 0.1.
One of the things we're seeing is that their supply chains are starting to get caught up so what does that mean for us the <unk>.
<unk> have a lot of partially finished equipment that is on their lots in their inventory and what I have heard and what we've seen is that Titan has done a very good job and.
22, and even going back before that but specifically we've done a good job throughout 22.
That means that partially finished equipment already has wheels and tires on it.
So as they work to get their supply chain caught up in other aspects of components that those deliveries are starting to come in it's trading. This this merchandise in our forecast I mean, we have customers and when I say.
<unk> as in our forecast, it's wheels and tires assemblies North America South America. So this is a broad range perspective. This is not a micro issue related to tighten this is bigger picture.
What we're seeing as they got inventory that they need to move they are gonna move.
It's already got wheels, and tires, they've got some inventories of wheels, and tires and they need to get the two more in balance and so we're seeing some forecast that are moving all the time.
Again this is broad broad big picture North South America.
And we just need some time to work with our customers get those forecasts in line get them stabilized.
We will be able to adjust our operations accordingly.
But we are going through.
A number of revisions of those forecasts and some of them just don't make sense, Steve I mean, that's the hard part is we looked in the second quarter. We're seeing some forecasts that just don't make sense and we're working with the customers would say well look let's let's take a look at it and work together to to moderate some of these fluctuations that you're building into your forecast and so.
Literally every day, we are seeing changes too, but a lot of is driven by what you said I mean, the supply chains are very complicated Oems as they've kind of turn the calendar to 23, they've been focused on getting.
The supply chain caught up focused on getting that partially built inventory off their lots drawn down some of their inventory and so.
Throw that altogether I mean, we believe twenty-three as in a good position of starting to year off strong.
But at this point, we're going to let the inventory situations settled down and then we'll provide some updated information as those customer forecasts become clear.
That makes sense that makes sense.
Can you give us a peek on how Q1 is playing out since for two months.
Yes.
Pretty good start.
We've had a very good January and February across the business and so yes.
Yes.
You can't say a whole lot more than that obviously at this point, but.
It's very solid star.
Okay, and then on another really strong free cash flow quarter, you didn't pay down.
Obviously.
Hundred $50 million on the balance sheet now.
Capex up a little bit, but as you noted you still should be looking at a pretty strong cash flow year anything you want to offer in terms of <unk>.
Capital allocation.
Well, what I said in my remarks earlier of us that we will be looking at opportunism opportunistic acquisitions joint ventures things like that things that can continue to grow our business and our core markets.
Again these things.
Don't always come at the times that.
I can't really give you any strong forecasts for exactly what that is but being a market leader that we are we have opportunities and we will continue to pursue those things that makes sense for us.
We will be supportive of the stock on the stock repurchase program as we need to it's not like we're going to be in the market everyday buying stock, but as we need to support the stock we will do so with that and so we will continue to be building cash for in the meantime.
And be looking at ways to improve our returns.
[noise] proactively.
Okay.
Paul David Thanks.
Sure.
Yes, Thanks, Steve.
Our next question comes from the line as Larry D. Maria.
Blair Larry Your line account open.
Thanks, Good morning, everybody.
First of all.
<unk> and the last question I mean from where we stand now two months through one queue or would we anticipate wants you to be up down flat from a sales and EBITDA perspective, I would imagine we have some visibility on that.
Well I will say that you know we still have.
March to go here, but we are off to a solid start start comparatively to last year.
So okay.
We can't give you specific numbers yet but.
But but it is from the all the all the.
Critical.
<unk> numbers, we are continuing to grow.
Okay. That's good to hear thank you.
And secondly, I think you mentioned.
And prepared remarks.
Talk about Capex and capacity expansion. He just maybe delve into that a little bit more because obviously, we're talking about some mixed signals in the market and then.
Global capacity expansion choking, just sort of go into that a little bit more.
Yeah, I'll take that and.
Paul chime in if he needs to but when we talk about selective capacity.
Improvements, it's really surrounding large egg and large radio and so we will focus our efforts on making sure that we have the capacity to run Ellis W. Particularly here in the U S. In Latin America. So.
Very focused on that and because we see demand continuing to rise with.
With respect to that sector of the market.
And so over the last couple of years, we've put in programs that or been in place and we continue to follow that program.
So yeah, it's simple.
Going back to some of the comments made earlier culture.
Culture, who we are we are going to adjust to the changing needs of our customer base and we're good at understanding the needs to end users are customer serve and.
We do not stop with product development. So some of that capacity increase is just really looking at our product portfolio and finding out where we can make that portfolio stronger.
We have consistently been doing that and we will continue to do that going further along with like David said expansion in large large radio.
Okay. It makes sense and then the last thing.
Obviously there was.
I just wanted to get your color on international broadly from your Russian business may be a reset on there and what's going on and then secondly.
How important is this he released the letter on the Indian imports are Russian oil obviously.
Could you just give us some.
Now some discussion around how important Indian imports have become and then secondly.
Just not getting your own Russian business. Thank you.
Yes, indeed imports where is really the similar situation that we've been talking about in the marketplace is seen for a number of years.
We go to Washington D. C. This week and we have the Sunset review on the the case that we put in front of the ITC five six years ago, We did get a positive confirmation from the ITC. When this this case was initially filed five years ago and now it's up for that Sunset review this week.
Again, we feel that the facts and circumstances that we presented five years ago or very much still the case.
Along with the additional information that we put out in the press release yesterday pertaining to the use of Russian petroleum products and and tires that are produced in India that then are exported into the U S and so.
Really what that that letter that we released is addressing as a case again, Larry that's been out there for for five years and it goes back to the original filing that we made from the ITC. So it's not it's not a new situation with India, that's changed but again as we stated in that press release I mean, they are taking Russian oil, which has been sanctioned by president.
They're buying it at a discount as their economic Minister has stood in front of the entire world and said they are going to do what's best for their citizens.
They do not care about any sanctions that are in place and you look at the amount of oil they had been purchasing has gone up nearly 10 times.
In the past year and as we all know all.
Oil byproducts are a big part of what goes into a tire in the form of carbon black and synthetic rubber. So therefore.
Those tires as they are converting those Russian oil byproducts into tires, they're important them into the U S. So.
Again, it's a combination of the case that we previously filed with the ITC regarding Indian imports and we were victorious in that five years ago.
You combine that again with what we feel is complete.
Complete bypassing going around the presidential sanctions that have been put in place and so.
Nothing's really changed other than the fact that.
Again, we Gotta go do that Sunset review this week and we feel that it's even more the case that there.
Operating on fairly with bypassing the presidential sanctions and we do have the supports as you saw.
And the letter from the the U S. W. I think that's the most important thing later that I want to hit on is that.
The folks that build our tires tighten their represented by the U S. W. And then it's an exceptional group of people.
They are highly trained they work their tail off and they're good at what they do and so.
From our perspective and the Usw's when you are bypassing the presidential sanctions, you're hurting American jobs and if you go back two years ago one of the.
The big mantra.
<unk> administration was that they're going to productive industrial jobs and the unions and so.
Again.
We have worked with the union and the head of the Union and we feel that our message there is pretty clear.
Completely bypassing the presidential sanctions so.
With with that our Russian operations, we do operate within all the sanctions that are put in place.
We have been from the onset we continued to do that.
<unk> is operational we.
We do not export from that plant, we do not into markets that are that are bypassing sanctions like I mentioned with India.
We do not supply the military.
There is no cash going in no cash going out.
And at the same time that business serves a critical need of the global supply chain of food and agriculture. So.
Really nothing has changed with that business, but we do continue to operate and follow all sanctions that are in place.
Okay very clear thank you Paul and good luck this year.
Thanks, Thanks, Larry.
Our next question comes on the line <unk>.
With Imperial capital K Caroline is now open.
Hello, Paul David.
Hey, good morning.
Thank you for the call.
Just to follow up on the on the Indian tire imports do you know off hand, how what percentage of the U S market.
Indian tire imports half.
Not often.
The top of my head no.
It's really hard to get that clear data I know there is a a publication of industrial publication that puts out tire data, we have not participated in that sense.
I think 2014, we found some inaccuracy using the data that was being compiled there so.
No. We don't have accurate information on that other countries I know in Europe , and Brazil, you're able to kind of use some government statistics to pull that together, but in the U S.
Not specifically able to give you an answer on that if we come across that maybe this week, we might come across the weather ITC review, but.
I don't have enough top of my head right now.
Okay. That's fine yeah, I can imagine it can tires can originate in India and go through any number of countries before they get air So, it's probably pretty tough too.
To pin down.
With respect to input costs, I noticed a pretty big spike in.
Coyle and the last week.
And I know that over time.
You've talked about your ability to pass through.
Input cost increases onto customers and that it seems like you are making some progress there could you maybe talk a little bit about how your contract protection has changed if it has with respect to.
Passing steel on steel price increases.
Yeah, I'll take a couple of different angles. One is we we carry less inventory.
Then we used to from a raw material perspective, and we also have tightened up our contracts with our suppliers with respect to trying to make sure that we're not hitting spikes and peaks and valleys with respect to steal because you know it's been very volatile over the last couple of years and so first of all we know we've we've tightened up the supply side.
To prevent any major movement, one way or another and then that's enabled US to also did work with our customers to tighten it up on the on the pricing in so that we have again less less volatility overall.
And we do have contracts that are in place and we have they're changing typically either.
Every 90 days or and sometimes there's lags on how that index is used for purposes of pricing.
So we got any number of ways to combat volatility.
As we know that as we went through 2022, we were seeing a very strong drop in pricing on.
On hot roll calls as well. So if you think about that in the U S. It's been it's been pretty volatile than we were able to manage it through 2022.
Fully expect with the actions that we've taken that we'll be able to.
Lessen the volatility with respect to how it flows through our production.
Thank you so I guess.
Input costs or a tailwind and 22 is that safe to say.
Well, none on the tire size, we've had elevated costs throughout 2022 that we are able to manage and you can see the margins had been pretty solid with all that.
I'd say right now it's.
More stable as we enter 2023, then it was throughout 2022.
And then our assurance of supply is actually getting a little bit better as well. So I think as we look forward.
I think we're in really good shape with that will how we're going to be able to manage those input costs at the same time, we do face inflation on things such as labor in other areas as well that we're trying to manage as well but.
As far as raw materials themselves, we think.
Getting the actions we've taken them to manage on both on the supply side and the pricing side has had lessened are.
The amount of volatility that we could see from that.
Got it. Thank you and then lastly on the capital back to the capital allocation question just.
For a second one follow up.
You mentioned opportunistic acquisitions.
Or jv's, Android Jv's, which side of the business are you where are you seeing the opportunities.
I think we're in a good position where it could be in a number of different areas across the spectrum of customers and products that we produce.
Mining or construction, but it will stay within our core.
So we'll be able to leverage that in a way that will be beneficial.
We are not looking to reach in and expand in ways that again don't don't fit in for me.
And it's not just in a cost synergy, but it is our ability to better serve the marketplace and take care of our customers. That's those are the synergies that we would expect to get and where we're looking.
So it would be focused on improving the the range of product.
Range of products and our distribution for those products correct.
Okay got it I appreciate it thank you very much congratulations on <unk>.
Fantastic year.
Yeah. Thanks, Thank you.
This concludes our question and answer session I would like to turn the conference back over to Mr reached for any closing remarks.
I just want to thank everybody for your participation in today's call and really look forward to giving you an update at the end of our first quarter results. Thank you have a good day.
Thank you for attending today's presentation a conference call has now completed.