(ATI) Allegheny Technologies’ First Quarter View Disappoints

Allegheny Technologies Inc. (ATI) said that it envisions first-quarter 2013 profit of roughly $10 million or 9 cents per share, a sharp decline from $56.2 million or 50 cents a share earned a year ago.

The Pittsburgh-based company expects sales of around $1.18 billion for the first quarter. This indicates a roughly 13% decline from revenues of $1.35 billion logged in the prior-year quarter.

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), noted that it saw lower pricing and soft demand for its products in the first quarter. It witnessed record low selling prices for cold-rolled standard sheet as a result of low-cost imports. Demand for zirconium and related alloys was also weak.

Allegheny further noted that declining raw materials prices continued to hurt its sales. While its contract business was stable in the quarter, transactional business was negatively impacted by lower raw materials prices and short lead times.

Allegheny reported its fourth-quarter 2012 results in Jan 2013. The company’s profit slid 67% year over year as sluggish economic conditions hurt demand for its products. Adjusted earnings of 18 cents per share, however, managed to beat the Zacks Consensus Estimate by a penny.  Sales fell at a double-digit clip and missed the Zacks Consensus Estimate.

While Allegheny is expected to continue benefiting from its new alloys/products and diversified global growth markets, it is contending with a soft economy. Moreover, reduced raw material surcharges and low base prices for standard stainless products are affecting the results of the company’s Flat-Rolled Products division. Its business environment is expected to remain challenging through first-half 2013 given the uncertain global economy.

Nevertheless, Allegheny sees growth in its key end-markets such as aerospace, oil and gas, electrical energy and medical over the long term. The company also expects improved results in its Flat-Rolled Products segment, driven by the Hot-Rolling and Processing Facility. Construction of the facility is expected to complete by end-2013 with official commissioning is expected in first-half 2014.

Allegheny, which currently holds a short-term Zacks Rank #5 (Strong Sell), will announce its first quarter results before the opening bell on Apr 24.
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