Allegheny Technologies Inc.
) reported first-quarter 2013 earnings of 9 cents per share, down
from 50 cents recorded a year ago. The results were in line with
the Zacks Consensus Estimate. Profit plummeted 82.2% year over
year to $10 million on lower sales.
Revenues slipped 12.8% year over year to $1,179.4 million,
missing the Zacks Consensus Estimate of $1,215 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 falling raw materials surcharges.
Operating profit dipped 52% year over year to $78.3 million in
the quarter with operating margin contracting to 6.6% from 12.1%
a year ago. Lower shipments related with high value products
coupled with lower base prices resulted in the decrease in
operating profits. 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 11% year
over year to $518.4 million in the quarter due to lower 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 also impacted the revenues.
Shipments of nickel-based and specialty alloys went up 7%.
Titanium and titanium alloys mill products shipments soared 25%
while zirconium and related alloys shipments decreased 34% due to
weak demand from nuclear energy market and chemical process
industry. Sales increased 10% in the segment's largest end
market, aerospace, in the quarter.
Flat-Rolled Products segment revenues were down 12% to $558.1
million on account of reduced raw material surcharges, lower
base-selling pricing and a product mix of higher percentage of
standard stainless products and lower percentage of high-value
products. Shipments of high-value products fell 6% while standard
stainless products shipment climbed 10%. Average selling prices
for standard stainless products remained at low levels. Average
transaction prices for all products decreased 15%.
Sales in the Engineered Products division tumbled 24% to $102.9
million, hurt by weak demand for tungsten-based products and
carbon alloy steel forgings. The company witnessed weak demand
for oil and gas markets however saw marginal improvements in the
construction and mining, cutting tools, transportation,
aerospace, and automotive market.
Allegheny's cash and cash equivalents of $138 million as of Mar
31, 2013, were down 44.8% year over year. Total debt of $1,479.1
million was flat year over year. Total debt-to-capital ratio was
37.3% as of Mar 31, 2013, down marginally from 37.4% recorded a
Allegheny, which is among the prominent players in the U.S.
specialty steel industry along with
), expects business conditions to remain challenging through
first-half 2013 given the uncertainties surrounding fiscal policy
and weak global economy.
Allegheny expects challenging economic conditions to prevail,
thereby impacting the end-markets throughout the second quarter
of 2013. The company expects its customers to remain cautious as
economic uncertainties persist over the near term, lead times
remain short, and raw material prices remains under pressure.
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Nevertheless, Allegheny expects modest recovery in the domestic
economic growth coupled with demand improvements in its key
Allegheny also said that it will focus on implementing cost
reduction actions, identifying market opportunities and taking
measures to reduce managed working capital for achieving long
term profitable growth.
Allegheny currently retains a short-term (1 to 3 months) Zacks
Rank #5 (Strong Sell).