Titan International(TWI) - 2021 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Titan International reported a strong third quarter with revenue of $450 million, a 48% increase year-over-year, and adjusted EBITDA of $35.1 million, marking the strongest third quarter since 2013 [11][29] - The company expects full-year adjusted EBITDA to exceed $130 million, the highest annual total since 2013 [12][56] - Gross profit increased by 93% to $60 million, with a gross margin improvement to 13.4% compared to 10.3% last year [29][32] Business Segment Data and Key Metrics Changes - The agriculture segment led growth with net sales of $244 million, a 60% increase from the previous year, and gross profit of $33 million, up 105% [34][36] - The earthmoving and construction (EMC) segment saw net sales grow by 37% to $166 million, with gross profit increasing by 71% to $21 million [37][39] - The consumer segment's net sales rose by 32% to $37 million, with gross profit margins improving to 15% from 9.5% last year [40][41] Market Data and Key Metrics Changes - Demand in the agriculture sector remains strong, supported by high commodity prices, with corn above $5 and soybeans above $12 [14][15] - The EMC segment is benefiting from infrastructure investments globally, with significant growth in Latin America and Europe [17][38] - Inventory levels at dealers are low, indicating pent-up demand that is expected to carry into 2022 [67] Company Strategy and Development Direction - The company is focused on increasing production capabilities and expanding its workforce to meet growing demand [23][28] - Titan has strategically invested in capital expenditures to enhance production efficiency and product innovation [21][50] - The company aims to maintain a disciplined approach to cost control while capitalizing on market opportunities [20][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate supply chain challenges and adjust production as needed [73][74] - Despite fluctuations in commodity prices, management believes demand will remain strong due to robust farmer incomes and ongoing construction projects [83][84] - The company anticipates a strong fourth quarter and a positive outlook for 2022, driven by solid order books and inventory replenishment needs [56][94] Other Important Information - The company refinanced $400 million in bonds and improved liquidity through an ABL credit line extension [24][52] - Net debt leverage improved to 3.3 times trailing twelve-month adjusted EBITDA, indicating a stronger balance sheet [55][56] Q&A Session Summary Question: Outlook on adjusted EBITDA considering the strike situation with a major customer - Management acknowledged the importance of the customer and indicated that production adjustments could be made based on the situation [62] Question: Ability to shift production capacity between OE and aftermarket products - Management confirmed that while adjustments can be made, it requires planning and alignment with operational teams [64] Question: Supply chain issues and potential customer slowdowns - Management stated they have effectively managed supply chain challenges and have a diverse customer base to mitigate risks [73][76] Question: Labor force hiring and retention status - Management reported a 12% increase in the labor force year-to-date and emphasized ongoing efforts in onboarding and retention [78] Question: Stabilization of material costs and its impact - Management noted some stabilization in raw material costs and expressed confidence in maintaining margins [80] Question: Visibility on order books for 2022 - Management indicated strong order books and confidence in robust demand for 2022, driven by inventory replenishment needs [91][93] Question: Capital allocation and cash requirements for next year - Management expects capital expenditures to increase slightly next year while maintaining a healthy cash flow [94][95] Question: Impact of steel price fluctuations on results - Management stated they can manage costs effectively and would handle any significant drop in steel prices similarly to how they managed increases [97][98]