Titan Int’l Reports 4Q21 Farm Net Sales of $265 Million
“Our fourth quarter builds on our strong performance throughout the year and adds to an excellent 2021 as we grew our sales by an incredible $521 million,” said commented Paul Reitz, President and CEO.
“You may have seen our recent public comments on positive market momentum, and I want to share some additional insights as Titan continues to ride the tidal wave into 2022 and, more importantly, We see the market forces surrounding agriculture continuing to build momentum globally to drive a strong multi-year demand cycle Agricultural commodities are as high as we have seen over the past decade which together with government programs has put farmers in a good financial position there is a strong need for new equipment in the market which remains scarce as OEMs are challenged to produce enough to meet to demand, let alone build inventory Used equipment inventories are also at record highs at the start of the year. t the bottom line of our industry. Let’s not forget that Titan’s wheel and tire products are more focused on the agricultural market, while our undercarriage business is a major player in the global construction and mining markets. Both of these look stronger in 2022 and beyond as infrastructure spending increases over time and minerals continue to see strong demand globally. Titan was able to be there for customers largely in 2021 as demand increased dramatically, with our global production footprint being the best and largest in the off-road wheel, tire and undercarriage industry. . With our unparalleled production capabilities and quality, as well as our innovative products, we are well prepared to serve our global customer base today and in the future.
“We come to questions about global volatility and uncertainty, with all the headlines, from the price of raw materials, to supply chain and labor challenges, and to logistics chaos. includes the most recent crisis in Ukraine. Titan is accustomed to solving problems and overcoming challenges, and our financial results and growth demonstrate this. I am confident that we will continue to manage any challenges ahead. Our management teams focus heavily on managing customer expectations, as well as pricing and cost discipline to generate more margin and improve profitability.
“Titan’s business performance and our financial position have improved significantly in 2021, and as I’ve said before, we expect the positive trends to continue into 2022, with our first quarter performance coming out strong to start the year. Our operating plan, which our Board of Directors supports and calls for our revenues to grow to over $2 billion with our goal of achieving adjusted EBITDA of $175 million, demonstrating strong gains over 2021 levels. Capital expenditures are expected to be between $45 million and $50 million with flexibility on the timing of these commitments to match our cash flow. With continued focus on working capital and levels of inventory able to support our higher production and sales, we expect to generate significant free cash flow in 2022.”
Net sales for the fourth quarter ended December 31, 2021 were $487.7 million, compared to $326.9 million in the comparable quarter of 2020, an increase of 49.2% driven by higher sales in all segments. Overall net sales were strongly influenced by both increased volume resulting from increased demand in all segments of the business, including agriculture, as well as prices. Factors that contributed to the increase in demand were higher commodity prices, lower equipment inventory levels at the farm equipment retail level, and pent-up demand at the following the economic impacts that occurred in 2020. Price increases were implemented due to rising raw material costs and other inflationary effects in markets, including freight.
Gross profit for the fourth quarter ended December 31, 2021 was $62.5 million, compared to $25.9 million for the comparable period a year ago. Gross margin was 12.8% of net sales for the quarter, compared to 7.9% of net sales for the comparable period of the prior year. Gross profit in the fourth quarter of 2020 was impacted by an $11.2 million writedown of Titan Tire Reclamation Corporation (TTRC) in Canada due to the market decline, indicating that the remaining book value of the equipment was above fair market value, as well as $1.3 million in severance pay as part of a restructuring plan to reduce production costs in Italy. Excluding these charges, gross margin was $38.4 million with gross margin of 11.8% during the fourth quarter of 2020. The increase in gross margin and gross margin was explained by the impact of the increase in sales volume, as previously described, which had a favorable impact on the absorption of general expenses. In addition, cost reduction initiatives have been implemented across global operations.
Selling, general, administrative, research and development (SGARD) expenses for the fourth quarter of 2021 were $35.6 million, compared to $39.3 million for the comparable prior year period. As a percentage of net sales, SGARD was 7.3%, compared to 12% for the comparable period of the previous year. SGARD in the fourth quarter of 2020 was impacted by a $6 million impairment related to certain customer relationship intangibles in Australia due to customer attrition since the original acquisition date. Excluding these charges, SGARD increased by $2.3 million due to higher variable costs associated with improved operating performance and sales growth.
Operating profit for the fourth quarter of 2021 was $24.3 million, or 5% of net sales, compared to a loss of $15.8 million, or 4.8% of net sales , for the fourth quarter of 2020. The increase in revenue is primarily attributable to higher sales and improved gross profit margins as well as the absence of the prior year fourth quarter charges noted above.
During the three months ended December 31, 2021, net sales increased 64%, reflecting additional volume resulting from significantly improved demand in all geographic markets, as well as pricing reflecting increased raw materials and other cost inflations. Demand in global agricultural markets reflects improving farmer incomes, the need to replace a large fleet of aging equipment, and the need to replenish equipment inventory levels in equipment dealer channels. The improvement in gross profit and margin is primarily attributable to the impact of increased sales volume, as previously described, and cost reduction initiatives executed at global production facilities.