(By Balaseshan) Allegheny Technologies Inc. (NYSE: ATI), a specialty metals producer, reported a 66.5% drop in quarterly earnings due to continued low demand and historically low base prices for standard stainless products. Earnings exceeded Street's expectations.
The company blamed headwinds resulting from uncertain global economic conditions. ATI said it saw continued conservative inventory management driven by near-term concerns about the U.S. economy related to resolution of U.S. fiscal policy issues and challenging economic conditions in Europe, Japan, and to a lesser extent China.
Earnings for the fourth quarter were $10.5 million or $0.10 per share, down from $31.7 million or $0.30 per share last year. Before special charge, earnings per share fell to $0.18 from $0.31.
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Sales decreased 12% to $1.101 billion, due to lower prices for raw materials.
Analysts, on average, surveyed by Thomson Reuters had expected an earnings of $0.14 per share on revenue of $1.14 billion for the fourth quarter.
Sales declined 4% in the High Performance Metals segment, primarily as a result of lower shipments of specialty steel alloys and lower raw material surcharges. In the Engineered Products segment, sales fell 21% on lower demand for tungsten-based products and from the electrical energy market.
In the Flat-Rolled Products segment, sales decreased 17% primarily due to lower raw material surcharges, lower base prices for standard stainless products, and reduced shipments of titanium products to the industrial markets due to project delays.
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"Although near-term global economic and U.S. fiscal policy uncertainties remain, we are cautiously optimistic that business conditions will gradually improve as we move through 2013," said Rich Harshman, Chief Executive of ATI. "We believe conditions in the first quarter, and perhaps the first half, of 2013 are likely to remain challenging."
Looking beyond these near-term headwinds, the company believes market conditions remain favorable for strong secular growth over the next 3 to 5 years in many of its key global markets. The company expects moderate growth in revenue and improvement in segment operating profit in 2013, compared to 2012, with the first half of 2013 providing greater uncertainties.
The company currently expects 2013 capital expenditures to be about $550 million, which includes about $450 million relating to the HRPF project. ATI expects 2013 to be its peak year for capital expenditures. Depreciation expense in 2013 is anticipated to be about $195 million.
ATI is trading up 2.72% at $31.40 on Wednesday. The stock has been trading between $25.35 and $50.96 for the past 52 weeks.