Specialty steel maker
Allegheny Technologies Inc.
) reported fourth-quarter 2012 adjusted earnings of 18 cents per
share, down from 31 cents recorded a year ago. The results,
however, beat the Zacks Consensus Estimate by a penny.
The adjusted earnings exclude charges related to asset
write-downs in the Pennsylvania-based company's Engineered
Products division associated with the closing of a casting
facility. Profit, as reported, sagged 67% year over year to $10.5
million (or 10 cents per share) on lower sales.
Revenues slipped 12% year over year to $1,101.1 million, trailing
the Zacks Consensus Estimate of $1,139 million. Sales fell as the
company saw declines across the board in the quarter.
Allegheny, which is among the prominent players in the U.S.
specialty steel industry along with
), said that uncertain economic conditions led to lower demand
for its products in the quarter. The company also witnessed lower
pricing for its standard stainless products.
Operating profit dipped 17% year over year to $95.3 million in
the quarter with operating margin contracting to 8.7% from 9.1% a
For full-year 2012, adjusted earnings of $1.51 per share beat the
Zacks Consensus Estimate of $1.48 while declining from $2.23 per
share recorded in 2011. Profit, as reported, fell 26% year over
year to $158.4 million or $1.43 per share.
Revenues for the year fell roughly 3% year over year to $5,031.5
million and missed the Zacks Consensus Estimate of $5,068
Revenues from the High Performance Metals segment fell 4% year
over year to $503.8 million in the quarter due to lower shipments
of specialty steel alloys and a decline in raw material
surcharges resulting from lower nickel raw material and titanium
Shipments of nickel-based and specialty alloys went down 6% due
to weakness in the electrical energy market while titanium and
titanium alloys mill products shipments edged up 1% as lower
demand from the jet engine market was offset by higher shipments
to airframe customers. Improved demand for niobium-titanium alloy
products from the medical market led to a 9% rise in the shipment
of zirconium and related alloys in the quarter.
Flat-Rolled Products segment revenues were down 17% to $495.6
million on account of reduced raw material surcharges and lower
standard stainless product pricing. Lower shipment of titanium
products to industrial markets also contributed to the decline.
Shipments of high-value products fell 12% while standard
stainless products shipment climbed 28%. Average selling prices
for standard stainless products and high-value products fell 14%
and 20%, respectively.
Sales in the Engineered Products division tumbled 21% to
$101.7 million, hurt by weak demand for tungsten-based products
and industrial forgings. The company witnessed weak demand from
the construction and mining, transportation, and oil and gas
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Allegheny ended 2012 with cash and cash equivalents of $304.6
million, down 20% year over year. Total debt of $1,480.1 million
represents around 2% year over year decline. Net debt as a
percentage of total capitalization rose to 32.2% from 31.3% a
year ago. Total debt-to-capital ratio was 37.4% at the end of
2012, down modestly from 37.9% recorded a year ago.
Moving ahead, the company expects business conditions in the
first quarter as well as the first half of 2013 to remain
challenging given the uncertainties surrounding the U.S. fiscal
policy and weak global economy.
Nevertheless, the company expects to continue to benefit from its
new alloys and products, diversified global growth markets and
differentiated product mix. It envisions growth in its key end
markets such as aerospace, oil and gas and medical over the long
term. The company expects demand for jet engine spare parts to
improve in the second half of 2013.
The company, however, sees demand from the electrical energy
market to remain sluggish in the near term, in part, due to weak
GDP growth in advanced economies.
Allegheny further noted that it will remain focused on improving
its cost structure and expects at least $100 million in gross
cost reductions this year. The company expects modest year over
year improvement in sales and operating profit in 2013. It also
envisions capital spending of roughly $550 million in 2013.
Allegheny currently retains a short-term (1 to 3 months) Zacks
Rank #4 (Sell).