Titan International(US:TWI)2019-08-03 03:36Financial Data and Key Metrics Changes - Net sales in Q2 2019 were $391 million, representing a decline of almost 9% year-over-year, with a constant currency basis decline of approximately 5% [44] - Gross profit for Q2 2019 was $38 million, down from $58 million in Q2 2018, resulting in a gross margin of 9.8% compared to 13.6% last year [48][66] - The company anticipates 2019 sales to be flat to down 3% compared to 2018, with expected gross margin improvement to be in the range of 11.2% to 11.6% for the full year [23] Business Line Data and Key Metrics Changes - Agriculture segment net sales were $164 million, down 12% year-over-year, with North American tire sales down 15% primarily due to sector issues [55][56] - Earthmoving/construction segment sales decreased by 7% to $184 million, with a slight sequential improvement from Q1 [60] - Consumer segment sales were approximately $41 million, down 3.6% from the previous year, with gross profit declining to $4.4 million [64][65] Market Data and Key Metrics Changes - North American tire aftermarket business experienced a significant drop in demand, particularly in the last month of Q2 [14] - Russian agriculture sales were down 35% due to market challenges, while South American agriculture sales increased by 2.5% [57][58] - European agriculture sales lagged behind the previous year by about 22% due to negative currency impacts and volume declines [58] Company Strategy and Development Direction - The company is focused on managing through the current cycle, protecting the balance sheet, and building for the future through innovation and product development [25][30] - Titan plans to pursue the sale of non-core assets to improve working capital and protect the balance sheet, with expected cash inflows between $30 million and $50 million [28][82] - The board has postponed the potential AIM listing of ITM due to unfavorable market conditions, but remains optimistic about its future growth [40][41] Management's Comments on Operating Environment and Future Outlook - Management noted that the second quarter was disappointing due to global trade battles and poor conditions in the U.S. farming sector [10][21] - The company expects to see improvements in gross margins in the second half of the year, driven by lower production costs and improved market conditions [23][27] - Management acknowledged the challenges faced in the agriculture sector but remains optimistic about pent-up demand being released later in the year [24][25] Other Important Information - The company has settled the Russian put option with One Equity Partners, fully satisfying the obligation [35][36] - Titan's cash position remained steady, with efforts to reduce receivables and inventory balances [73][74] - Capital expenditures for the year are anticipated to be at or below $40 million, down from the original expectation of $40 million to $50 million [77] Q&A Session Summary Question: Guidance for topline revenue - Management expects a slight improvement in agriculture and construction segments, with careful consideration of downside risks [87][89] Question: Wheel inventory build and OEM visibility - The inventory build was based on expectations of favorable market conditions and the need to prepare for specific orders [95][96] Question: ITM business and potential monetization - The board is pleased with ITM's performance and believes in its future growth, but the AIM listing has been postponed due to market conditions [99][100]