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Titan Machinery cuts hopes for US tractor sales

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Titan Machinery lowered its forecast for farm equipment sales this year, as the agriculture sector faces "ongoing headwinds".

The US ag machinery dealer forecast like-for-like agricultural machinery sales to fall by 28-33% in the year to January 2016, compared to the 20-25% loss it had previously forecast.

Titan Machinery's equipment sales were down by 37% in the three months to October 31, to $215.7m, compared to $343.5m in the same time last year.

The company said it is expecting to make a loss over the fiscal year.

'Ongoing headwinds'

"Our agriculture segment sales continue to be impacted by ongoing industry headwinds," said Titan chief executive David Meyer.

Titan noted that the US Department of Agriculture has projected net farm incomes in the US to fall 38% in 2015, down from their previous estimate of a 36% drop.

This reflects a 9% drop in earnings from crop sales, with livestock sales expected down 12%.

But Mr Mayer struck a more upbeat note for longer term prospects.

"Although farmers are operating with a cautious sentiment in the current environment, they continue to carry strong balance sheets and global trends indicate long-term demand for agriculture commodities," Mr Meyer said.

Falling revenues

Titan Machinery saw revenues fall 43%, to $345.5m, compared to $493.1m in the same period last year.

The company's gross profit fell 21% to $67.1m, compared to $84.7m inn the same period last year.

Titan ascribed the lower gross profits to the decrease in agriculture equipment revenue.

But a restructuring carried out at the start of the year continued to bear fruit for Titan, as operating incomes fell.

Increased margins

Mr Meyer said, "we remain focused on diligently managing the controllable aspects of our business, including further inventory reductions, which will continue to generate strong adjusted cash flow from operating activities".

While we continue to face near-term headwinds, we remain confident in the long-term outlook for each of our business segments.

Earnings rose 42% to $3.4m, compared to $2.4m in the same time last year. This left earnings per share at $0.16.


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