ATI ATI Inc

Allegheny Technologies Inc. (ATI) reported earnings of 31 cents per share in the fourth quarter of 2011, excluding non-recurring charges, and substantially increasing by 107% from 15 cents per share in the fourth quarter of 2010. However, it missed the Zacks Consensus Estimate of 54 cents per share.

Including the restructuring and Ladish acquisition expenses, earnings in the fourth quarter of 2011 came in at 29 cents per share.

For full-year 2011, the company reported earnings of $2.23 per share excluding non recurring charges, a jump of 210% from 2010.

Sales in the quarter increased 20.6% to $1.25 billion, driven by higher shipments and higher raw material surcharges for most high-value products. However, sales were lower than the Zacks Consensus Estimate of $1.31 billion, and were offset by significantly lower demand coupled with low base prices for its standard stainless products.

For fiscal 2011, sales grew 28% to $5.18 billion from $4.05 billion in 2010.
Segment operating profit surged 30% to $114.4 million in the fourth quarter, or 9.1% of sales, from $88.0 million, or 8.5% of sales, in the fourth quarter of 2010.

Segment Results

Sales in the High Performance Metals segment surged 50% to $524.6 million in the quarter. The increase in sales in the quarter was driven by increased average mill product selling prices for titanium and titanium alloys and nickel-based and specialty alloys. This was primarily attributable to a favorable product mix, higher raw material indices and improving base prices.

Segment operating profit increased to $90.3 million, or 17.2% of sales, from $63.5 million, or 18.2% of sales, in the fourth quarter of 2010. Operating profit was partially offset by approximately $18.4 million of start-up and idle facility costs. The company also derived a benefit of $6.0 million on account of LIFO inventory valuation reserve in the quarter.

Sales in the Flat-Rolled Products segment inched up 2.0% to $598.5 million, driven by higher shipments and improved base-selling prices for most high-value products and offset by lower surcharges and weak demand for standard stainless products.

Operating profit decreased to $17.5 million, or 2.9% of sales, compared with $24.2  million, in the fourth quarter of 2010 due to weak demand and low base selling prices for standard stainless products. The segment recognized a LIFO inventory valuation reserve benefit of $5.0 million due to falling nickel prices and facility restructuring charges of $2.6 million.

Sales in the Engineered Products segment soared 27.0% to $128.3 million, driven by higher demand for most of the products. Segment operating profit was $6.6 million in the reported quarter compared with $0.3 million in the fourth quarter of 2010.

Financials

Allegheny’s cash on hand was $380.6 million as of December 31, 2011, a decrease of $51.7 million from $432.3 million at the end of December 31, 2010.

Cash flow provided by operations for the year 2011 was $296.8 million. Increased profitability was partially offset by an investment of $273.3 million in managed working capital due to a higher level of business activity.

Net debt as a percentage of total capitalization was 31.3% at the end of 2011 compared with 23.6% at the end of 2010. Total debt-to -capital ratio was 37.8% as of December 31, 2011 compared with 34.3% at the end of 2010.

Outlook

Allegheny expects to continue to benefit from its new alloys and products, diversified global growth markets and differentiated product mix.  The company expects revenue growth to be at least 10% in 2012 and segment operating profit in the range of 13% to 14% of sales.

In its High Performance Metals segment, the company forecasts to have a strong demand for its products in its major markets. As per Allegheny, its acquired company Ladish will start giving profitable returns in 2012.

In its Flat-Rolled Products segment, the company anticipates improved demand for its standard stainless products.

In the Engineered Products segment, the company expects continued growth in demand for its tungsten-based products and industrial forgings and castings.

The company expects 2012 retirement benefit expense to be approximately $122 million, or $44 million higher than 2011.

Based in Pittsburgh, Pennsylvania, Allegheny Technologies, produces and sells specialty metals worldwide. Its primary competitor includes Carpenter Technology Corp. (CRS). The company currently retains a Zacks #3 Rank on its stock, which translates to a short-term (1 to 3 months) Hold” rating.

 
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