Allegheny Technologies Inc. (ATI) posted earnings from continuing operations of 18 cents per share in fourth-quarter 2014, compared with a net loss of $83.8 million or 79 cents per share recorded a year ago. Analysts polled by Zacks were expecting breakeven results on a per share basis for the quarter on an average.
For full year 2014, Allegheny posted a loss of 2 cents per share. It also beat the Zacks Consensus Estimate of a loss of 23 cents per share.
On a consolidated basis, the Pennsylvania-based specialty steel company posted net income of $22.1 million or 20 cents per share in fourth-quarter 2014 versus net income of $173.4 million or $1.62 a share posted a year ago.
Revenues for the fourth quarter rose 14.4% year over year to $1,047.5 million, but missed the Zacks Consensus Estimate of $1,134 million. Sales decreased 2% from the sequentially prior quarter due to a 1% decrease in sales in the High Performance Materials & Components segment. This decline, in turn, resulted from lower sales of titanium and titanium alloys. Lower shipments and lower selling prices for specific high-value products led to a 3% decrease in sales in the Flat Rolled Products segment.
For 2014, revenues were $4,223.4 million, up around 4% year over year. It also missed the Zacks Consensus Estimate of $4,310 million.
Operating profit for fourth-quarter 2014 was $67 million, compared with an operating loss of $10.9 million in the year-ago quarter. Also, operating profit declined 5% from the sequentially prior quarter. Segment operating profit was negatively impacted by $17.7 million costs associated with the HRPF commissioning and costs related to the Rowley titanium sponge facility. The company’s fourth-quarter results also included $23.2 million in LIFO inventory valuation reserve benefits.
Segment Review
Revenues from the High Performance Metals and Components segment increased 15% year over year to $500.6 million in the fourth quarter on the back of higher mill product shipments, increased sales of forgings, castings and components, and higher raw materials surcharges. Sales improved for nickel-based products. Results were affected negatively by lower operating rates at the company’s Rowley titanium sponge facility and forgings operations.
The Flat Rolled Products’ segment sales went up 14% to $546.9 million mainly on the back of higher raw materials surcharges and increased prices for most products. Shipments of high-value products increased 7% year over year on higher shipments of nickel-based alloys.
Shipments of standard stainless products increased 6%. Average selling prices rose 19% for standard stainless products and fell 8% for high-value products.
Financial Position
Allegheny’s cash and cash equivalents as of Dec 31, 2014, stood at $269.5 million, compared with $1,026.8 million as of Dec 31, 2013, down around 74%. Long-term debt decreased 1.2% year over year to $1,509.1 million.
Total debt-to-total capital ratio was 37.1% as of Dec 31, 2014, down from 40.2% as of Dec 31, 2013. Cash from operations was $94.1 million for the fourth quarter.
Outlook
Allegheny, which is among the prominent players in the U.S. specialty steel industry, along with Carpenter Technology Corp. (CRS), RTI International Metals, Inc. (RTI) and Haynes International, Inc. (HAYN), expects sustainable growth and free cash flow generation. Allegheny expects some long-term agreements to boost growth and lead to improved capacity use at the mill products, forging, and titanium investment casting facilities, particularly from 2016 through 2018, going to the next decade.
The company expects higher volumes and better product mix for its Flat Rolled Products segment. It also anticipates start-up costs of nearly $5 million through the first quarter of 2015 owing to full production capacities. The company sees strong demand for its specialty plate products, driven by its backlog of nickel-based alloy plates for a large oil and gas project.
Allegheny expects capital expenditures for 2015 to be around $290 million, roughly half of which are related to the completion of payments associated with the HRPF project.
Allegheny currently holds a Zacks Rank #5 (Strong Sell).
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