Allegheny Technologies Inc.
) posted loss from continuing operations of $18.1 million or 17
cents per share in first-quarter 2014 compared with a profit of
$9.7 million or 9 cents per share recorded a year ago. The loss
was wider than the Zacks Consensus Estimate of a loss of 6 cents
On a consolidated basis, the Pennsylvania-based specialty
steel company posted a net loss of $20 million or 19 cents per
share in the quarter versus a profit of $10 million or 9 cents
per share registered in the year-ago quarter.
Revenues for the first quarter slipped 10% year over year to
$987 million, missing the Zacks Consensus Estimate of $1,070
million. However, sales increased 8% from the sequential quarter
due to higher shipments of titanium and nickel-based alloys in
the High Performance Materials & Components segment. Higher
shipments of high-value products and moderately improved selling
prices for standard products led to increased sales in the Flat
Rolled Products segment.
Operating profit slid roughly 43.9% year over year to $43.5
million in the quarter with operating margin contracting to 4.4%
from 7.1% a year ago. The results included $8.3 million in
inventory valuation charges related to the Flat Rolled Products
Revenues from the High Performance Metals and Components
segment fell 10% year over year to $484.4 million in the quarter
due to lower mill product shipments, declined base-selling prices
for most products, and reduced raw material surcharges. Revenues
were hurt by lower sales of nickel-based and specialty alloys,
titanium and titanium alloys and lower sales for forged and cast
Flat-Rolled Products segment sales went down 10% to $502.9
million on account of reduced raw material surcharges and lower
base-selling pricing. Shipments of high-value products increased
9% year over year on higher shipments of Precision Rolled Strip
products, engineered strip products, nickel-based alloys and
grain-oriented electrical steel.
Allegheny's cash and cash equivalents at the end of Mar 31, 2014,
stood at $837.7 million compared with $138 million as of Mar 31,
2013. Long-term debt increased roughly 4.4% year over year to
Total debt-to-total capital ratio was 40.4% as of Mar 31, 2014,
up from 37.3% as of Mar 31, 2013. Cash flow used in operations in
the quarter was $56.9 million, including a $68.5 million
investment in managed working capital associated with increased
business activity compared with cash flow used in operations of
$57.4 million for the first quarter of 2013, resulting from an
investment of $84.4 million in managed working capital.
Allegheny, which is among the prominent players in the U.S.
specialty steel industry along with
), expects business conditions to gradually improve through 2014.
The company expects sustainable improvement and demand growth
from most of its end markets.
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 several years. The company is negotiating a number of new
long-term agreements and extending its existing agreements with
strategic customers that are expected to continue to enhance
Allegheny's competitive market position, not only in mill
products but also for parts and components.
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 to realize these benefits in 2015.
The company acquired Dynamic Flowform Corp. in Feb 2014, which
has been renamed ATI Flowform Products. Allegheny expects ATI
Flowform Products to improve its market position in the aerospace
and defense, oil & gas and chemical process industry markets.
In Apr 2014, the company decided to shut its LaPorte, IN iron
castings facility, which was held for sale as part of
discontinued operations. However, it could not complete a sale
transaction due to which it expects to record roughly $2 million
in closure costs, primarily severance in the second quarter of
Allegheny anticipates capital expenditures for 2014 to be roughly
$300 million. 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 $30
million in the first quarter. The company is targeting $100
million in new gross cost reductions in 2014.
Allegheny currently retains a Zacks Rank #2 (Buy).
Another specialty steel company
CITIC Pacific Ltd.
) retains a Zacks Rank #2 (Buy).
ALLEGHENY TECH (ATI): Free Stock Analysis
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