Allegheny Technologies Inc.
) posted loss from continuing operations of $83.8 million or 79
cents per share for fourth-quarter 2013 compared with a profit of
$16 million or 15 cents per share recorded a year ago.
On a consolidated basis, the Pennsylvania-based specialty steel
company raked in net income of $173.4 million or $1.62 per share
in the quarter, up manifold from a profit of $10.5 million or 10
cents per share registered in the year-ago quarter.
Consolidated net income includes gain (of $261.4 million, post
tax) on sale of the company's tungsten materials business to
Latrobe, PA-based wear-resistant products company
Barring charges associated with restructuring measures and
inventory valuation adjustments of $75.1 million (post-tax), loss
from continuing operations was 8 cents per share, narrower than
the Zacks Consensus Estimate of a loss of 19 cents.
For 2013, loss from continuing operations was $98.8 million, or
93 cents per share compared with an income of $150.5 million or
$1.36 per share recorded a year ago. Excluding one-time items,
loss from continuing operations was 22 cents, also lower than the
Zacks Consensus Estimate of a loss of 33 cents.
Revenues for the fourth quarter slipped 10% year over year to
$915.3 million, missing the Zacks Consensus Estimate of $1,031
million. Revenues were hurt by soft demand across several end
markets. Allegheny also witnessed lower pricing for many of its
products and a decline in raw materials surcharges in the
For the full year, revenues fell roughly 13% year over year to
$4,043.5 million, also falling short of the Zacks Consensus
Estimate of $4,324 million.
Operating profit slid roughly 51% year over year to $44.6 million
in the quarter with operating margin contracting to 4.9% from
8.9% a year ago. Lower shipments of high value and standard
products coupled with lower base prices led to the decline 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 decline.
Revenues from the High Performance Metals segment fell 17% year
over year to $436.7 million in the quarter due to lower mill
product shipments and a decline in sales of precision forged and
cast components, hurt by weaker demand from the jet engine,
construction and mining, nuclear energy, and oil and gas markets.
Lower pricing also affected sales.
Flat-Rolled Products segment sales went down 4% to $478.6 million
on account of reduced raw material surcharges and lower
base-selling pricing. The company saw lower demand on a
sequential basis across oil and gas/chemical process industry and
electrical energy markets.
Shipments of high-value products rose 10% on higher shipments of
Precision Rolled Strip products, nickel-based alloys and
titanium. Shipments of standard stainless products rose 6%.
Average selling prices for high-value and standard stainless
products fell 8% and 13%, respectively.
Allegheny ended 2013 with cash and cash equivalents of $1,026.8
million, a more than three-fold year over year rise. Long-term
debt increased roughly 4% year over year to $1,527.4 million.
Total debt-to-total capital ratio was 40.2% as of Dec 31, 2013,
up from 37.4% as of Dec 31, 2012. Operating cash flow for the
full year was $368.4 million, including $141 million for the
Allegheny, which is among the prominent players in the U.S.
specialty steel industry along with
), expects business conditions to gradually improve through 2014.
However, it sees modest recovery in global economic conditions.
Allegheny anticipates market conditions to remain favorable
across many of its major markets over the next 2-5 years. It
expects continued increase in aerospace build rates. The company
also sees modest growth in demand for jet engine spare parts
Allegheny expects capital spending on global oil and gas
exploration and production forecasts project to remain strong and
sees modest growth in demand for its high performance specialty
materials from the medical market. Moreover, demand from the
electrical energy market is expected to remain flat for both
power generation and power distribution in the short-term.
Allegheny expects its High Performance Metals unit to benefit
from growing demand from many of its major global markets and
higher demand for its new products, notably from the aerospace
market. This will be partly offset by sustained weakness in
demand from the nuclear energy market.
For the Flat-Rolled Products division, the company expects
improving demand in 2014 for its high-value products, in
particular, nickel-based alloys and specialty alloys and
Precision Rolled Strip products. The new Hot-Rolling and
Processing Facility (HRPF) is expected to cut costs, lower cycle
time and incite revenue gains staring in 2015. The commissioning
of the facility will take most of this year and is expected to
result in start-up costs of roughly $30 million to $35 million
(pre-tax) in 2014.
Allegheny anticipates capital expenditures for 2014 to be roughly
$300 million, down $313 million from 2013. 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 $141.2 million in 2013. The company
is targeting $100 million in new gross cost reductions this
Allegheny currently retains a Zacks Rank #5 (Strong Sell).
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