Specialty metals producer Allegheny Technologies Inc. (ATI) on Wednesday reported a profit for the third quarter that plunged from last year, hurt by drop in shipments amid reduced global demand for metals as well as lower raw material surcharges. Earnings per share for the quarter also missed analysts' expectations by two cents.
Quarterly sales halved and missed consensus estimate, with high double-digit drop in sales recorded across all the segments. The company also said it anticipates earnings performance for the fourth quarter to be similar to the third quarter.
In a statement, chairman, president and chief executive officer, Patrick Hassey said, "We are having success in the marketplace by developing and expanding strategic relationships with key global customers, and we are well positioned to meet their growing needs as economic conditions improve and our core markets recover. During the third quarter, we completed several new long-term agreements (LTAs) with key global customers. We are working on several more."
Third Quarter Results
The Pittsburgh, Pennsylvania-based company reported net income of $1.4 million or $0.01 per share for the third quarter, sharply lower than $144.1 million or $1.45 per share in the prior-year quarter.
On average, twelve analysts polled by Thomson Reuters expected the company to report earnings of $0.03 per share for the third quarter. Analysts' estimates typically exclude special items.
Sales for the quarter halved to $697.6 million from $1.39 billion in the same quarter last year, and missed nine Wall Street analysts' consensus estimate of $738.51 million. The plunge in sales was attributed to lower raw material surcharges and indices, as well as lower shipments.
Among Allegheny's peers, Wyomissing, Pennsylvania-based Carpenter Technology Corp. (CRS) is slated to report financial results for the first quarter on October 27, 2009. Analysts expect the company to report a loss of $0.23 per share for the quarter, on revenues of $240.50 million.
Segmental Details
Direct international sales represented 31.0% of total sales, compared to 29% of sales in the same quarter last year, benefiting from the company's global reach. Compared to the third quarter 2008, sales dropped 45% in the high performance metals segment, plunged 52% in the Flat-rolled products segment, and was down 54% in the engineered products segment.
Allegheny's high performance metals sales for the third quarter dropped to $279.2 million from $510.2 million in the prior-year quarter. Shipments decreased 37% for both titanium and titanium alloys as well as for nickel-based and specially alloys. Average selling prices also declined 23% for titanium and titanium alloys and 21% for nickel-based and specialty alloys. However, Average selling prices for exotic alloys increased 23% due to increased demand for certain products. Segment operating profit was $51.3 million, or 18.4% of sales, down from $139.6 million or 27.4% of sales, in the prior-year quarter, due to lower shipments and selling prices for most of the company's products.
Sales for the flat-rolled products totaled $364.2 million, sharply down from $764.6 million in the year-ago quarter, due to lower shipments, and reduced raw material surcharges. Shipments of standard stainless products edged down 3%, while total high-value products shipments decreased 32%. Average transaction prices for all products, which include surcharges, were 42% lower. Segment operating profit was $11.3 million, or 3.1% of sales, sharply lower than $105.7 million or 13.8% of sales, in the same quarter last year.
Sales for the engineered products dropped to $54.2 million from last year's $117.6 million. The segment reported a operating loss of $8.6 million, compared to operating profit of $6.1 million last year, due to lower shipments, reduced selling prices, and costs associated with workforce reductions and idle facilities.
The company's total segment operating profit for the third quarter was $54.0 million or 7.7% of sales, sharply lower than $251.4 million or 18.1% of sales, in the prior-year quarter.
The company ended the third quarter with cash and cash equivalents of $826.3 million, compared to $272.6 million at end of the prior-year quarter.
Nine Month Highlights
For the nine month period, Allegheny reported a net loss of $6.1 million or $0.06 per share, compared to net income of $455.0 million or $4.51 per share in the prior-year period. Excluding special items, adjusted net income for the current period was $10.9 million or $0.11 per share.
Sales for the year-to-date period plunged to $2.24 billion from $4.20 billion in the same period last year.
Looking Ahead.........
For the fourth quarter, Allegheny expects earnings performance to be similar to that achieved in the third quarter 2009, due to the recent volatility in prices of raw materials. The customers are also keeping inventories low due to the uncertain global economy.
For fiscal 2009, Allegheny now expects capital expenditures and asset acquisitions to be about $475 million, which includes the Crucible asset acquisition.
The company currently expects to begin production at its premium-grade titanium sponge facility before the end of 2009. By the end of October, the company expects to close on the Crucible asset acquisition, which is an excellent entry point for ATI into advanced powder metal products.
Looking further ahead, the company expects its operating earnings performance to improve throughout 2010 as compared to 2009. The company also believes 2010 to be a transition year to the next growth cycle in most of its markets, particularly the aerospace and global infrastructure markets.
"Looking past the remainder of 2009, the worst appears to be behind us, and we remain confident in the intermediate and long-term growth potential of our core markets," Hassey added.
Stock Quotes
In Wednesday's regular trading session, ATI is currently trading at $36.28, down $1.81 or 4.76% on a volume of 1.15 million shares. The stock has been trading in a broad range of $15.00 to $44.09 in the past 52 weeks.
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