(ATI) Allegheny Technologies Incorporated Teams with Rolls Royce

One of the world’s largest specialty metals producers Allegheny Technologies Incorporated (ATI) signed a long-term contract with Rolls-Royce for the supply of ATI 718Plus Alloy for the period stretching from 2011 till 2024.

The ATI 718Plus is a nickel based super-alloy that is used to manufacture various jet engine parts. Rolls Royce requires high-quality triple melted material for rotating applications and therefore the company chose ATI’s super alloy.

Currently, ATI 718Plus alloy is employed in numerous rotating and static jet engines. This alloy considerably decreases the total production cost and enhances the productivity of its customers. It also has the potential to increase the fuel efficiency of engines. ATI 718Plus is a nickel-based superalloy that is used to manufacture various jet engine parts.

The agreement covers ATI 718Plus alloy disc-quality products, which are sold to Rolls-Royce and its suppliers by ATI Allvac, an operating unit of Allegheny Technologies. ATI is working with Rolls-Royce to expand the ATI 718Plus alloy application into next generation jet engines.

In April 2011, the company released its first-quarter 2011 results and earned $56.3 million or 54 cents per share, surpassing the Zacks Consensus Estimate of 49 cents and last year’s $18.2 million, or 18 cents per share.

Quarterly revenues soared 36.5% year over year to $1.23 billion from $899.4 million on higher shipments and rising raw material prices. Revenues were above the Zacks Consensus Estimate of $1.12 billion.

Allegheny continues to expect 2011 revenue growth in the range of 15% to 20% compared with 2010, and anticipates segment operating profit to be approximately 15% of sales. The company targets a minimum of $100 million in new gross cost reductions. Capital expenditures are forecasted in the range of $300 to $350 million

Based in Pittsburgh, PA, Allegheny Technologies Inc. is one of the largest and most diversified specialty materials producers in the world. The aerospace market has started recovering while boosting the demand for Allegheny’s products.

Allegheny has been arresting cost-pressures associated with high raw material costs by implementing price hikes through surcharges. The High Performance Metals segment internally sources sponge, which is processed for use in titanium and titanium alloys, and zirconium and hafnium alloy products. The Engineered Products segment is also similarly integrated. Allegheny’s integrated business model provides a competitive advantage.

The company’s competitors include Carpenter Technology Corp. (CRS) and Sutor Technology Group Limited (SUTR).

Currently, Allegheny has a short-term (1 to 3 months) Zacks #1 Rank (Strong Buy) and a long-term Neutral recommendation.

ALLEGHENY TECH (ATI): Free Stock Analysis Report

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