Titanium Metals Corp. (TIE) on Monday reported a profit for the fourth quarter that plunged 86% from the year-ago period, hurt by weak demand for titanium due to the global economic downturn and the effects of production delays within the commercial aerospace sector.
Looking ahead to fiscal year 2010, the company expects customer demand for its products to recover and show improvement as inventory levels begin to stabilize within the commercial aerospace supply chain.
Dallas, Texas-based Titanium Metals or Timet said its net income for the fourth quarter fell to $4.9 million or $0.03 per share from $34.4 million or $0.19 per share in the prior-year period. On average, five analysts polled by Thomson Reuters expected the company to report earnings of $0.01 per share for the quarter.
The year-ago quarter's results include other non-operating income of $14.7 million, consisting primarily of $6.8 million in foreign currency gains and a $6.7 million gain on the sale of an investment.
Net sales for the fourth quarter declined 31% to $183.5 million from $265.2 million in the year-ago period, yet topped analysts' consensus revenue estimate for the quarter of $175.60 million.
The declines in sales for the latest quarter reflected lower volumes and lower average selling prices. The company noted that product shipment volumes declined as overall demand for titanium declined due to the weak global economy and the effects of production delays within the commercial aerospace sector.
Timet said it believes many of its commercial aerospace customers implemented steps to reduce excess inventories and to maximize operating cash flows on account of production delays. Average selling prices were lower from the year-ago period due to competitive pricing pressures resulting from lower demand for titanium products and a decline in raw material costs, primarily titanium scrap.
The decline in raw material costs contributed to lower selling prices for certain products under long-term customer agreements, partly due to raw material indexed pricing adjustments included in certain of these agreements.
The company's gross margin for the fourth quarter was 24.5%, down from 49.5% in the same period last year.
Operating income for the quarter was $9.3 million, down from $35.2 million in the same period last year, reflecting the effects of lower volumes and average selling prices for melted and mill products.
Among Timet's peers, specialty metals producer Allegheny Technologies Inc. (ATI) in late January reported a sharp decline in net income for the fourth quarter, impacted negatively by lower shipments and average selling prices for most of the metals. Net income for the quarter attributable to the company plummeted to $37.8 million or $0.36 per share from $110.9 million or $1.15 per share last year. Net sales for the quarter were $815.7 million, down 26.7%from $1.11 billion in the year-ago quarter.
In early February, RTI International Metals Inc.(RTI) reported a net loss for the fourth quarter compared to a profit in the year-ago period, hurt by asset-related impairments and a 35% drop in quarterly revenue. The company posted a net loss of $57.3 million or $1.91 per share for the fourth quarter, compared to net income of $3.6 million or $0.16 per share in the prior-year quarter. Net sales for the quarter decreased 35% to $97.3 million from $148.8 million in the same period last year.
For fiscal year 2009, Timet's net income fell to $34.3 million or $0.19 per share from $162.2 million or $0.89 per share in the previous year. Analysts expected the company to report earnings of $0.17 per share for the year.
Net sales for the year were $774.0 million, down 33% from $1.15 billion in the prior year. Wall Street analysts had a consensus revenue estimate for the year of $766.23 million.
Bobby O'Brien, President and CEO of Titanium Metals, said, "Our operating results in 2009 reflect the softness in demand that has affected the entire industry. Customer demand for our products is expected to recover and show improvement during the next year as inventory levels begin to stabilize within the commercial aerospace supply chain."
O'Brien added, "Boeing has recently completed successful initial test flights for the 787 aircraft and continues to target first customer deliveries during the fourth quarter of 2010, and if this timeline is met we anticipate production rates throughout the commercial aerospace supply chain will accelerate during 2010 and continue over the next two to three years, which should positively affect our sales and operating results."
In mid-November, Timet said it entered into a new, long-term titanium supply agreement with Boeing Co (BA). The new supply agreement will be effective on January 1, 2011 and will expire on December 31, 2015. As part of entering into the new supply agreement, Timet and Boeing amended the terms of their existing supply agreement, which expires December 31, 2010.
In Monday's regular trading session, TIE is trading at $12.06, up $0.27 or 2.29% on a volume of 0.31 million shares. In the past 52 weeks, the stock has been trading in a range of $4.04-$15.33.
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