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Titan cuts sales hopes on worsening crop price outlook

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US tractor retailer Titan Machinery cut its sales forecast, citing the bearish outlook for crop prices and farm incomes.

Titan forecast 2017 agricultural same store sales in the US to fall by 17-22% year on year, where it had previously expected a 13-18% drop.

And the tractor seller forecast international sales to drop by 7-12%, were it previously forecast sales flat year on year.

Bearish crop prospects threaten demand

David Meyer, Titan's chairman and chief executive, said the bearish forecast was "primarily based on the larger than anticipated crop, its impact on commodity prices and the anticipated effect on our customer's demand".

"Although earlier weather predictions this year indicated the possibility of a La Nina weather pattern negatively impacting crop yields and improved commodity prices, as the growing season progressed, most of our country's major corn and soybean growing areas received timely rains and favourable growing conditions," Mr Meyer told analysts.

"This improved yield outlook was reflective of the August 2016 Wasde report, which projected increased yields in corn and soybeans, with a record crop anticipated, which is leading to large increases in expected crop carryovers, adding pressure to commodity pricing and creating weaker customer sentiment," Mr Meyer said.

Restructure to help profits

But Mr Meyer was upbeat on profit prospects, despite the "challenging operating environment," thanks to an ongoing programme of inventory reduction, as well as other measures.

"Over the past couple years we have made significant improvements to our cost structure and balance sheet," Mr Meyer said.

"We continue to take the necessary steps to weather the current environment and improve our balance sheet to position us for long-term financial performance and capitalize on future opportunities."

Shares fall as profits miss expectations

Titan Machinery reported sales down 16.7% year on year in the three months to July 31.

Sales were reported at $278.3m, compared to $334.2m a year ago.

Gross profit for the three month period was $52.9m, compared to $62.1m last year, "primarily reflecting a decrease in revenue".

Titan Machinery reported a net-loss of $0.12 a share, compared to analyst forecasts of $0.6 a share.

Titan machinery shares in New York were down 2.5%, at $10.88.


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