According to Titan president and CEO Morry Taylor, who issued the report, the company “had a successful and eventful year and 2008 should prove equally exciting.”
Taylor said that Titan expected 2007 to be a flat year in the agricultural sector, but a robust year in the mining market.
“Agriculture wheels had a strong start in the first quarter, but slowed in the second quarter,” he said. “Volume increased in the fourth quarter and then turned to a strong demand. The OTR wheel business also started strong, but slowed in the second half due to underground coal mining business slowing up. There is strength in the outlook for the future because of what Titan did during the spring and fall of 2007 with mining companies.
“Tires in the agriculture segment did not have a robust start in 2007 and the increase in volume did not begin in the OE section until third quarter. The aftermarket side of farm tires has not shown the same growth and looks poised for expansion in the first quarter of 2008,” he said.
“OEM customers account for approximately 35% of tire sales on an industry-wide basis, whereas aftermarket sales usually account for 65% of industry-wide tire sales.”
Taylor noted that raw material cost increases were significant. “Natural rubber increased from approximately 89 cents a pound to approximately $1.20 a pound at the end of this year,” he said, and Titan had to respond with OE and replacement market price increases during the year.
“OTR mining tires have shown strength from the beginning of the year. Titan started the year with the goal of producing OTR tires in Bryan, Ohio, and Freeport, Ill., so OTR tire sales could increase to over $200 million in 2007,” he said. “This could only happen if Titan could tool up the Freeport facility. The Freeport facility had to produce over $50 million in OTR radial tires. We are pleased to see this happening.
“The Bryan facility has also increased output once the 25-inch OTR radial and some other OTR bias tires were transferred to Freeport. The largest impact on Titan was the decision by Titan’s board of directors to approve the largest capital expansion ever for Titan to enter the super giant tire business,” he said, referring to the company’s plan to begin producing 63-inch OTR radial tires.
“The board was told the first 63-inch tire should be produced by end of first quarter of 2008,” he said. “Anyone in this business would tell you that is impossible. In fact, Michelin and Bridgestone are the only ones in the world who claim to have the technology to produce 63-inch radials. I personally took that as a great challenge. And to our Japanese and French friends: the last time I checked it was Americans playing golf on the moon, and I believe the moon vehicle had Goodyear tires. As you can tell, we get a little passionate about this challenge.”
Taylor said that “Titan put together a team of experienced engineers who have looked at every way tires are built, and we believe we have a superior design. We also believe the new tires (63-inch) should give mining companies greater tire life. All the new ideas have been tried in prototype smaller tires and found to be superior in every way.”
Titan “should have a record sales year” in 2007, he said, with sales “north of $800 million” and “EBITDA over $100 million should be achievable.”
Looking forward, Taylor said, “based on my knowledge today, 2008 is going to be another satisfactory year for Titan. You ask why. Farm should continue to grow and I believe it should last at least a minimum of three years. Mining is continuing strong, along with oil. In my opinion, the U.S. dollar should remain weak for at least the foreseeable future. Titan’s 63-inch should add a minimum of $35 million in added sales. It could be as high as $55 million.
“Manufacturing efficiencies should improve throughout the year, with improvements in margins. The price increases should also help in margin improvement. The remaining changes taken in 2007 should help in 2008. So 2008 without a doubt should produce more outstanding achievements for Titan.
“Now, for all of the negative thinkers, what could go wrong? One: if we don’t produce the 63-inch tires (I have a better chance of being elected President of the United States). Two: the sun doesn’t come up and everything shuts down. Three: Well, I really don’t see any reason Titan cannot have a record year in
2008.
“Therefore, I’m setting the following goals for Titan’s senior executives. The sales goal in 2008 should be at minimum $920 million, to $1 billion or higher. Note there is no maximum but when we hit the $1 billion mark I’ll be drinking a nice bottle of champagne, it should be a fine spot considering the strides we have made in the last few decades. (Remember, we started at zero.)
“We are striving to achieve an EBITDA of $120 million to $150 million. With a variety of over 20,000 part numbers and the start-up of the 63-inch tires, 2008 has many variables. The Cap Ex should be between $55 and $65 million in 2008 and we do not expect to have to borrow to fund the cap ex, as these expenditures will be paid throughout the year,” he said. (Tire Review/Akron)
