Allegheny Technologies reports 3Q loss of $33.8M
Allegheny Technologies Inc.'s CEO Rich Harshman said on Wednesday the manufacturer of specialty steel and titanium could have an upturn in 2014 and benefit from reduced capital spending and its $1.2 billion rolling mill nearing completion at its Brackenridge Works in Harrison.
The Downtown-based company reported a third-quarter loss of $33.8 million, or 32 cents a share, caused by lower sales and expenses from a restructuring of its engineered products segment.
“In 2014, I think there's a chance that the fundamentals can begin to improve,” Harshman said in a conference call with analysts. “And '14 could be a better year than '13, which wouldn't be a stretch because '13 has probably been the most challenging year in the stainless industry ever,” he said. “We are bouncing along a bottom that we have been at for a while.”
So far this year, most of the $395 million in capital spending went toward the hot strip mill at its Allegheny Ludlum Brackenridge Works. The company said it expects spending this year to total about $600 million, with 80 percent on the mill. Next year, spending should be no more than $300 million, he said.
The company plans to complete commissioning of the mill and for it to produce all of its flat-rolled specialty metals products beginning in 2015. That strategy will result in the idling of its outdated and non-competitive 60-year-old hot strip mill.
“The mill is designed and engineered to elevate ATI to a new level of quality, efficiency and productivity” of flat-rolled titanium and nickel-based products, Harshman said. By about mid-year 2014, the new mill will be producing more orders than the old mill.
In April, he said operating profit could jump by $150 million to $250 million a year when the mill is in full use.
The third-quarter loss compared to net income of $35.3 million, or 32 cents a share, in the same quarter a year ago. Sales fell 14 percent to $972.4 million from $1.13 billion a year ago.
ATI said aerospace, oil and gas, medical and automotive markets remain strong. But low demand in the jet engine market reduced shipments of mill products and forged and machined components. In the fourth quarter, “we are not seeing any significant signs of improvement in market conditions,” Harshman said.
Last week, the company said it closed a fabricated components business in Bolingbrook, Ill., and intends to sell its iron casting business in Laporte, Ind., both of which were part of the engineered products segment. During the first half of 2013, the units had revenue of $10 million and a loss before taxes of $9 million. The restructuring follows ATI's sale of its tungsten materials business for $605 million to Kennametal Inc., expected to close in the fourth quarter and yield a large profit.
Cost reductions, which Harshman said are a top priority, totaled $123.4 million during the first nine months, above the target of $100 million for the full year.
Its shares rose 70 cents to $33.49, and are up 10.3 percent for the year.
John D. Oravecz is a staff writer for Trib Total Media. He can be reached at 412-320-7882 or firstname.lastname@example.org.