Allegheny Technologies Inc.
) posted loss from continuing operations of $3.8 million or 3 cents
per share in second-quarter 2014 compared with a profit of $3.7
million or 4 cents per share recorded a year ago.
The results include $4 million pre-tax (or $2.8 million
post-tax) of Hot-Rolling and Processing Facility (HRPF) start-up
costs, and $11.4 million pre-tax (or $8.1 million post-tax) of
costs related to the Rowley titanium sponge facility Premium
Quality (PQ) qualification process.
Excluding those impacts, earnings for the quarter were 7 cents
per share, ahead of the Zacks Consensus Estimate of 2 cents.
On a consolidated basis, the Pennsylvania-based specialty steel
company posted a net loss of $4 million or 3 cents per share in the
quarter versus a profit of $4.4 million or 4 cents per share
registered in the year-ago quarter.
Revenues for the second quarter rose 5.9% year over year to
$1,119 million, exceeding the Zacks Consensus Estimate of $1,091
million. Sales also increased 13% from the sequentially prior
quarter due to higher shipments of titanium and nickel-based alloys
in the High Performance Materials & Components segment. Higher
shipments and improved selling prices for high-value and standard
products led to increased sales in the Flat Rolled Products
Operating profit fell roughly 7.1% year over year to $65.2
million in the quarter but rose 49.8% sequentially. Segment
operating profit was negatively impacted by $15.4 million of
start-up and qualification costs associated with two strategic
growth projects, the HRPF and the Rowley titanium sponge facility.
The second quarter results also included $28.9 million in LIFO
inventory valuation reserve charges related to the Flat Rolled
Products segment, which were primarily offset by the reversal of
the remaining $26 million of net realizable value inventory
Allegheny Technologies Incorporated -
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Revenues from the High Performance Metals and Components segment
increased 2% year over year to $514.1 million in the quarter due to
higher mill product shipments, and higher sale of nickel-based and
specialty alloys. Sales for zirconium and related alloys were 6%
higher in the reported quarter. Revenues were affected by lower
sales of titanium and titanium alloys and lower sales for forged
and cast products.
Flat-Rolled Products segment sales went up 9% to $604.9 million
on account of higher shipments of both high-value and standard
products. Shipments of high-value products increased 11% year over
year on higher shipments of Precision Rolled Strip products,
engineered strip products, and nickel-based alloys. Shipments of
standard stainless products increased 15%. The segment benefited
from $18.1 million gross cost reductions in the quarter.
Allegheny's cash and cash equivalents, as of Jun 30, 2014, stood
at $355.1 million compared with $74.1 million as of Jun 30, 2013.
Long-term debt increased roughly 44.3% year over year to $1,520.7
Total debt-to-total capital ratio was 34.8% as of Jun 30, 2014,
down from 37.2% as of Jun 30, 2013. Cash flow used in operations,
as of Jun 30, 2014, was $37.5 million, including a $127.6 million
investment in managed working capital associated with increased
business activity compared with cash used in operations of $58
million including an investment of $36.1 million in managed working
capital, in the year-ago period.
Allegheny, which is among the prominent players in the U.S.
specialty steel industry along with
), expects sustainable improvement and demand growth from most of
its end markets. The company expects improvement in business
conditions to continue through the third quarter of 2014.
However, the company expects third quarter results to be
negatively impacted by start-up and qualification costs related to
its two strategic growth projects, HRPF and Rowley. HRPF start-up
costs, in the third quarter, are expected to increase to roughly
$12 million, pre-tax, as the company speeds up the commissioning
process. Allegheny forecasts that third-quarter will be impacted by
about $6 million of costs as it continues Rowley titanium sponge
facility PQ program.
Based on current year-end projected raw material costs, the
company expects net LIFO/NRV inventory valuation reserve charges of
about $19 million, pre-tax, in the third quarter.
Excluding these costs and inventory valuation charges, the
company expects pre-tax operating results from continuing
operations to improve $15 million to $20 million in the third
quarter, compared with the second quarter of 2014.
Over the next 3 to 5 years, the company aims on maximizing value
creation from the investments in new products, strategic capital
projects, and strategic acquisitions that it has made over the past
Allegheny anticipates capital expenditures for 2014 to be
roughly $300 million of which $98 million was spent in the first
half of 2014. The company remains focused on cost optimization and
is accelerating its cost reduction efforts. Allegheny, through this
move, was successful in gross cost reductions of $41 million in the
second quarter. The company is targeting $100 million in new gross
cost reductions in 2014.
Allegheny completed the commissioning of the Hot-Rolling and
Processing Facility (HRPF) in the first quarter of 2014 and began
the hot commissioning of the HRPF, which is scheduled to be
completed in Oct 2014. The HRPF is a critical part of the company's
strategy to transform its flat rolled products business into a more
competitive and profitable growth business. Allegheny expects to
begin realizing these benefits in 2015 upon the completion of the
Allegheny currently holds a Zacks Rank #2 (Buy).
Another specialty steel company
RTI International Metals Inc.
) carries a Zacks Rank #1 (Strong Buy).
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