4. Growing by Acquisition
This is a short-term unknown that should become a long-term positive. For the past couple of years, Titan has been on an acquisition spree that has favorably altered its geographic and category positions.
In July 2011, it incorporated the Titan Mining Services wholly owned subsidiary, which extended its reach in Chile, Peru, South Africa, Australia and Eastern Canada. In November 2011, the company acquired Goodyear’s Union City tire plant to expand its domestic capacity.
Last August, it acquired 56% of Australia’s Planet Corporation Group to further build its presence in this key mining country. In October, it completed the 100% acquisition of Titan Europe Plc (which had been a related public company doing business on the continent).
The integration of these deals is still under way, and real profitability remains off in the future. Some beneficial signs from them, though, could start appearing as early as this quarter.
5. New Sales Honcho
This personnel shift presents another short-term unknown but likely long-term positive. Last November Titan reached outside the company to tap Richard Rose as its new Vice President of Sales and Marketing. In his 25-year career, Rose previously worked with large industrial firms, including longtime Titan customer AGCO and Knapheide Manufacturing, which produces commercial vehicle bodies. He has expertise in product development, sales force training and acquisition integration, all of which should help Titan. He is also seen as a strong player in the aftermarket sales and service segment, which most analysts believe will become increasingly important going forward. It’s obviously too early to see many real impacts, but an indication of any new initiatives or directions will be interesting.
Conclusion
Even in the best of times, the commercial tire business can be a challenge. It’s not easy to properly and efficiently manufacture the huge, high-quality tires that these industries demand. Sales are heavily dependent on external factors and macro economic trends over which you have no control. Raw material and labor costs are constantly rising. Cheaper newcomers from places like China and Eastern Europe are a growing threat to market share.
But Titan has always attracted active investor interest because its business offers the potential for high margins and it still manufactures most of its primary products within the U.S. Fourth quarter and full-year results should reflect uptrends in farming and construction. Impact from the mining slowdown at this point should not be enough to negate that, and as long as the new acquisitions haven’t proven an unexpected resource drain the quarter and year-end report will likely be positive. Barring changes in the ag or construction trends, long-term performance may be even better.
The article What to Consider Regarding Titan’s Q4 originally appeared on Fool.com and is written by Howard Rothman.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
