Allegheny's Earnings in Line, Sales Trail - Analyst Blog
April 24 2013 - 7:42AM
Zacks
Allegheny Technologies
Inc. (ATI) 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.
Segment Review
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.
Financial Position
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
year ago.
Outlook
Allegheny, which is among the
prominent players in the U.S. specialty steel industry along with
Carpenter Technology (CRS), Haynes
International (HAYN) and Precision
Castparts (PCP), 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.
Nevertheless, Allegheny expects modest recovery in the domestic
economic growth coupled with demand improvements in its key global
markets.
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).
ALLEGHENY TECH (ATI): Free Stock Analysis Report
CARPENTER TECH (CRS): Free Stock Analysis Report
HAYNES INTL INC (HAYN): Free Stock Analysis Report
PRECISION CASTP (PCP): Free Stock Analysis Report
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