Allegheny Technologies Inc.
) reported second-quarter 2013 earnings of 4 cents per share,
down from 50 cents recorded a year ago. The results missed the
Zacks Consensus Estimate of 10 cents. Profit plummeted 92 % year
over year to $4.4 million on lower sales.
Revenues slipped 16% year over year to $1,135.5 million,
missing the Zacks Consensus Estimate of $1,214 million. Revenues
were hurt by lower demand across several end markets including
oil and gas, jet engine aftermarket, electrical energy, and
construction and mining. Allegheny also witnessed lower pricing
for many of its products and a decline in raw materials
Operating profit tumbled 55% year over year to $71.7 million in
the quarter with operating margin contracting to 6.3% from 11.8%
a year ago. Lower shipments related with high value products
coupled with lower base prices resulted in the decrease in
operating profit. The impact of higher raw material costs for
products not aligned with lower raw material surcharges also
contributed to the decline.
Revenues from the High Performance Metals segment fell 14% year
over year to $484.5 million in the quarter due to lower mill
product shipments of nickel-based and specialty steel alloys and
zirconium. A decline in raw material surcharges, lower pricing as
well as lower sales of precision forged and cast components due
to lesser demand from the jet engine also impacted the revenues.
Flat-Rolled Products segment revenues were down 16% to $552.2
million on account of reduced raw material surcharges, lower
base-selling pricing and lower shipments of both standard
stainless products and high-value products. Shipments of
high-value products fell 7% while standard stainless products
shipment slipped 8%. Average selling prices for standard
stainless products remained at low levels.
Sales in the Engineered Products division tumbled 26% to $98.8
million, hurt by weak demand for tungsten-based products and
carbon alloy steel forgings. The company witnessed marginal
improvements in the demand for oil and gas and aerospace markets
construction and mining versus the previous quarter, but was
lower from the construction and mining and transportation
Allegheny ended the quarter with cash and cash equivalents of
$74.1 million, down 65% year over year. Long-term debt declined
roughly 29% year over year to $1,053.6 million. Total
debt-to-capital ratio was 37.2% as of Jun 30, 2013, up from 36.8%
as of Jun 30, 2012.
Allegheny, which is among the prominent players in the U.S.
specialty steel industry along with
), expects business conditions to remain challenging through
second-half 2013 due to persistent global economic uncertainties,
short lead time and volatile raw material prices.
Allegheny expects the third quarter to be the softest in many
of its end markets. However, the company remains encouraged by
stabilization in nickel and titanium scrap prices and anticipates
that, if this trend continues, the fourth quarter will witness
improvement in demand and stabilization of selling prices.
Allegheny is primarily focusing on cost optimization and is
accelerating its cost reduction efforts. Allegheny, through this
move, was successful in gross cost reductions of more than $79
million in during the first six months of 2013, a pace which is
well ahead its 2013 target of $100 million in new cost
The cost reductions are expected to reap benefits for
Allegheny in 2013 and beyond. The company also aims to reduce its
managed working capital by implanting lean initiatives to improve
Allegheny currently retains a Zacks Rank #5 (Strong Sell).
Another company in the specialty steel industry,
RTI International Metals Inc.
), maintains a Zacks Rank #1 (Strong Buy).
ALLEGHENY TECH (ATI): Free Stock Analysis
CARPENTER TECH (CRS): Free Stock Analysis
PRECISION CASTP (PCP): Free Stock Analysis
RTI INTL METALS (RTI): Free Stock Analysis
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