Wheel maker Titan stays on course for growth despite BRIC slowdown

WORCESTERSHIRE-based steel wheel manufacturer Titan Europe has said it remains confident of medium to long-term growth despite a slowing down in the industrial powerhouses of China and Brazil and closure of its Italian facility following the earthquake there.

In an AGM statement, the Kidderminster firm said external sales for the first five months of the current financial year were ahead of 2011 and in line with management expectations.
 
The group’s order books in most business areas and in aggregate remain in line with management projections. However, it said that in China, equipment manufacture remained at a very low level and in Brazil, although its business continued to be strong, it has been weaker than originally forecast.  

It has predicted additional strength in North America’s order books and expects to be ahead of forecasts in this area.  The UK business continues to be very strong; Australia, Chile and Peru also show encouraging trends.
 
It said in its three end markets, Agriculture and Mining continued to see strong demand, while Construction demand showed considerable variability, both between end products and geographically.  

“In aggregate, after a strong period of growth, construction demand has now flattened out.  OEM demand has generally been stronger than the aftermarket, except in Mining applications where both continue to do well,” it said.
 
The company said it remained watchful that events in Europe could be reflected in order books later in the year. However, it said should this happen, it would be prepared and the geographical diversity of end-users would help offset any variance.

Titan’s production capacity has been seriously hampered following the Italian earthquake in May which forced the closure of its factory in Finale Emilia. The plant accounts for around £50m of sales (10% of group revenue).  

It has said that under Italian law the plant had to remain closed while remedial work was carried out to standards agreed by government authorities.  

The board said excellent progress was being made on the restoration work and it anticipated that, subject to relevant local permission, it would be able to have critical production units working during the European August holiday period.
In the meantime, production has been transferred to the company’s other facilities in France and Turkey.

In addition, Titan has procured product or manufacturing capacity from various other manufacturers including two of its significant shareholders and the new facility it recently installed for the Bobruisk Plant in Belarus.

In outlook, it said: “Full restoration of the Italian facility is a lengthy project but we anticipate, as events unfold, direct and consequential costs to be met by insurance cover, with additional help from Italian government sources.  However, in the short-term, we have substantial extra cost affecting not only Finale Emilia but those plants which we have brought into emergency production.”

It added that despite short term uncertainty around the European market and destocking in China it continued to believe its key markets would see strong medium to longer term growth.  

“Customers continue to advise that the future for mining equipment sales is consistent with our commitment to the development of new products in this area and to the use of our Mining Service strategy.  We believe the medium term future for Agriculture continues to be good, particularly with the re-equipment of former Eastern bloc agricultural holdings,” it said.
 
It concluded: “In the 2011 report delivered to shareholders, the company outlined its strategy for the group’s business and its investments that are being made to deliver its strategy including extending Titan’s presence in low-cost production capability for wheel manufacturing.  In the opinion of the board, developments in Finale Emilia reinforce the appropriateness and effectiveness of the group’s strategy.”