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Allegheny Technologies Reports 4th Quarter, Full-Year 2009 Results
01/28/2010 - Allegheny Technologies reported net income of $37.8 million on sales of $815.7 million for the fourth quarter and net income of $31.7 million on sales of $3.05 billion for the full year 2009.
Allegheny Technologies Inc. reported net income of $37.8 million on sales of $815.7 million for the fourth quarter and net income of $31.7 million on sales of $3.05 billion for the full year 2009.
Fourth Quarter Results — The $37.8 million ($0.36 per share) net income compares to net income of $110.9 million ($1.15 per share) in the year-ago fourth quarter. Sales of $815.7 million reflect a 26.7% decrease from sales of $1.11 billion in the year-ago fourth quarter.
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Allegheny Technologies’
Flat-Rolled Products Segment Demand increased for some of the Flat-Rolled Products Segment’s high-value products (including Precision Rolled Strip® products, grain-oriented electrical steel, and nickel-based alloys) as compared to the previous quarter. Flat-Rolled Products segment titanium shipments were approximately 1.6 million pounds, an increase of over 7% compared to the previous quarter. While demand for most of the segment’s standard stainless products remained low, they did improve 1% compared to the previous quarter. In addition, average prices for standard stainless products increased 22% compared to the previous quarter, primarily due to higher base selling prices and raw material surcharges.
Segment sales of $438.5 million were 22% lower than the fourth quarter 2008, due primarily to lower shipments of high-value products, and reduced raw material surcharges. Shipments of standard stainless products (sheet and plate) increased 24% vs. the year-ago quarter, while total high-value products shipments decreased 14%. Average transaction prices for all products, which include surcharges, were 25% lower due primarily to significantly reduced raw material surcharges.
Segment operating profit decreased to $30 million (6.8% of sales) compared to $62.8 million (11.1% of sales) for the year-ago fourth quarter. Operating profit was negatively impacted by approximately $5.2 million of costs associated with idle facilities and workforce reductions. A $15.3-million LIFO inventory valuation reserve benefit was recognized in the fourth quarter, as compared to an $81.1 million LIFO inventory valuation reserve benefit in the year-ago fourth quarter.
Results benefited from $23.4 million in gross cost reductions in the fourth quarter 2009, bringing the full year 2009 gross cost reductions in this segment to $76.9 million.
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Segment operating profit was $118.4 million (14.5% of sales) compared to $178.1 million (16% of sales) for the comparable 2008 period. Results were adversely affected by lower shipments of most high-value products and by idle facility, workforce reduction, and start-up costs of $15 million. These negative impacts were partially offset by a LIFO inventory valuation reserve benefit of $43.8 million. The LIFO inventory valuation reserve benefit, which was $24.1 million higher than forecasted primarily due to lower raw material costs, compares to a fourth quarter 2008 LIFO inventory valuation reserve benefit of $132.7 million.
Full Year Results — Net income of $31.7 million ($0.32 per share) compares to net income of $565.9 million, ($5.67 per share) in 2008. Sales of $3.05 billion reflect a 42% decrease from sales of $5.31 billion in 2008 as a result of significantly lower raw material surcharges and indices, and lower base selling prices and shipments for most products. Direct international sales represented 31% of total sales, compared to 28% for 2008.
Results included $17.0 million ($0.17 per share) of non-recurring after-tax charges related to second-quarter 2009 actions to retire debt and the tax consequences of the company’s $350-million voluntary pension contribution. Excluding special charges, results for the full year 2009 were net income of $48.7 million ($0.49 per share).
Management Comments — “The fourth quarter was by far our best quarter in 2009 as we began to see signs of stabilization and cyclical recovery in many of our markets,” said L. Patrick Hassey, Chairman, President and Chief Executive Officer. “ATI’s fourth quarter performance benefited from better volume, pricing and mix for certain products, lower raw materials costs, and improvements to our cost structure.
“ATI was profitable in 2009 in spite of the most challenging global recession in nearly 75 years,” continued Hassey. “Our balance sheet is strong. Cash on hand at the end of the year was nearly $709 million, and net debt to total capitalization was 15.3%. We achieved nearly $173 million in gross cost reductions in 2009, exceeding our goal of $150 million. Our U.S. defined benefit pension plan is essentially fully funded.
“Looking ahead, we expect to see gradual and steady improvement in most of our global markets in 2010. We plan to continue to improve our cost structure through a 2010 target of at least $100 million of new gross cost reductions. Further, we expect to recover and profitably grow faster than our core global markets as a result of our new and extended LTAs and innovative new products that improve our market position, and our leading manufacturing capabilities.”
Allegheny Technologies Inc. is one of the largest and most diversified specialty metals producers in the world with revenues of $3.0 billion during 2009. The company’s products include titanium and titanium alloys, nickel-based alloys and superalloys, grain-oriented electrical steel, stainless and specialty steels, zirconium, hafnium, and niobium, tungsten materials, and forgings and castings.
