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Investing.com -- Moody’s Ratings has affirmed Titan International (NYSE:TWI), Inc.’s B1 corporate family rating but changed the outlook to negative from stable, citing weaker-than-expected credit metrics amid ongoing agricultural and construction equipment demand challenges.
The rating agency expects Titan’s key credit metrics to remain below original 2025 projections as demand constraints are likely to continue into 2026. High interest rates, macroeconomic uncertainty, tariff concerns, and moderating commodity prices are limiting new equipment spending.
Titan’s February 2024 debt-funded acquisition of Carlstar Group LLC has worsened the impact of weak operating results on credit metrics, as the purchase coincided with the beginning of the current agricultural sector downturn.
Despite these challenges, Moody’s acknowledged Titan’s solid competitive position as a tire and wheel supplier to leading global agriculture and construction equipment manufacturers. The company’s long-term demand outlook remains supported by increasing global grain output needs, aging equipment fleets, and demand for advanced farming technology.
In the near term, Titan’s agricultural customers have reduced production due to weaker demand, significantly affecting Titan’s operating results. The earthmoving and construction equipment markets show mixed performance, with solid mining demand but slower construction activity outside of infrastructure and onshoring projects.
Moody’s expects Titan’s EBITA margin to improve only slightly to the mid-3% range in 2025, up from approximately 3% in 2024. The company’s debt-to-EBITDA ratio exceeded 6x as of March 31, 2025, though it’s projected to fall below 6x later this year as free cash flow is directed toward debt repayment.
The anticipated benefits from the Carlstar acquisition, including enhanced scale and a broader customer base, have been limited by the weak demand environment, with aftermarket revenues unable to offset the decline in new equipment spending.
Titan’s SGL-2 liquidity rating remains unchanged, reflecting the company’s cash position of around $200 million and expected increased availability through revolver repayments during the remainder of 2025. The company had $57 million available under its $225 million asset-based lending facility at the end of Q1 2025.
Moody’s projects positive free cash flow for Titan in 2025, though lower than previous years, as disciplined working capital management and reduced capital expenditures will not fully offset weak earnings.
For a potential ratings upgrade, Titan would need to sustain operational efficiencies supporting an EBITA margin above 7%, achieve debt-to-EBITDA approaching the mid-4x range even during downturns, and maintain EBITA-to-interest above 4x.
Conversely, the ratings could face downgrade if Titan’s EBITA margin stays below 5%, debt-to-EBITDA remains above 5.5x, or EBITA-to-interest stays below 3x. Deteriorating liquidity or a shift toward aggressive financial policies could also trigger a downgrade.
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