Allegheny Technologies Inc.
) reported third-quarter 2013 loss from continuing operations of
$28.4 million (or 27 cents per share) compared with a profit of
$31.3 million (or 29 cents per share) recorded a year ago.
Consolidated net loss was $33.8 million (or 32 cents per share)
versus a profit of $35.3 million (or 32 cents per share)
registered in the year-ago quarter.
After excluding a loss of 4 cents per share due to the effects
of income taxes reported in domestic and foreign jurisdictions,
loss from continuing operations was 23 cents per share, narrower
than the Zacks Consensus Estimate loss of 28 cents.
The company recorded a loss of 5 cents per share in the
reported quarter from discontinued operations which include the
tungsten materials business and the iron castings and fabricated
components businesses, which are both part of its Engineered
Products segment. Allegheny's sale of its tungsten materials
business to Latrobe, Pa.-based wear-resistant products company
) for $605 million is expected to close in the fourth
Revenues slipped 14% year over year to $972 million, missing
the Zacks Consensus Estimate of $1,051 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 surcharges.
Operating profit tumbled roughly 76% year over year to $27.6
million in the quarter with operating margin contracting to 2.8%
from 10% 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 with longer manufacturing cycle times not aligned with
lower raw material surcharges also contributed to the
Revenues from the High Performance Metals segment fell 19%
year over year to $463.9 million in the quarter due to lower mill
product shipments of nickel-based and specialty steel alloys and
titanium and titanium alloys. 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, construction and mining, nuclear energy, and oil and gas
markets also impacted the revenues. Sales of zirconium and
related alloys were flat compared with the year ago quarter.
Flat-Rolled Products segment revenues were down 9% to $508.5
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 both
high-value products and standard stainless products slipped 1%.
Average selling prices for standard stainless products remained
at low levels.
Allegheny ended the quarter with cash and cash equivalents of
$535.7 million, up 90.6% year over year. Long-term debt increased
roughly 5.4% year over year to $1,542.2 million. Total
debt-to-total capital ratio was 44.3% as of Sep 30, 2013, up from
35.9% as of Sep 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 the
end of 2013 and potentially in 2014 due to U.S. debt ceiling and
other fiscal policy issues.
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 $123.4 million
in during the first nine months of 2013, a pace which is well
ahead its 2013 target of $100 million in new cost reductions. The
company remains well positioned to align its production, and
inventory levels to match the demands of its customers and end
Despite short term challenging conditions, Allegheny remains
optimistic and expects strong profitable growth opportunities
over the next 3 to 5 years. The company is taking a number of
actions which include negotiating new and extending existing
long-term agreements with strategic customers, positioning its
titanium sponge facility in Rowley, Utah for the premium-grade
(PQ) qualification program and completing construction of its
Flat-Rolled Products segment Hot-Rolling and Processing Facility
(HRPF) to initiate and complete the cold- and hot-commissioning
process in 2014. The company foresees strong market rends and
fundamentals over the long term in the commercial aerospace, oil
and gas, medical and automotive markets.
Allegheny has a solid liquidity position with no borrowings
outstanding under its domestic borrowing facility, and none are
expected in the fourth quarter of 2013. The company expects to
considerably increase its liquidity and financial flexibility
with the previously announced sale of its tungsten materials
Allegheny expects 2013 capital expenditures to be roughly $600
million, with 80% of this being associated with the HRPF. With
the expected closing of the sale of the tungsten materials
business in the fourth quarter, the company forecasts to end 2013
with roughly $1.4 billion of cash and available liquidity.
Allegheny currently retains a Zacks Rank #4 (Sell).
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