Allegheny Technologies Incorporated ATI has announced its board’s decision to suspend its quarterly dividend, effective from the fourth quarter of 2016.
Allegheny is expected to save roughly $35 million annually through the suspension. This is expected to improve the company’s liquidity and financial flexibility and thus aid its transformation plans in 2017. The company’s results in 2017 are expected to improve, with growth in the High Performance Materials & Components segment as well as modest profitability in the Flat Rolled Products segment. The cost reduction initiatives, previously undertaken, by the company are also expected to impact the earnings positively.
Allegheny expects earnings to improve in 2017. The company plans to use free cash flows for the year to fund capital expenditures, reduce debt, improve the funded position of the company’s defined benefit pension plan as well as improve liquidity. The company also plans to make a $135 million contribution to the U.S. defined benefit pension plan and pay back the $100 million term loan due in 2017. Additionally, capital expenditures are projected to be roughly $120 million in 2017 and roughly $100 million annually for several years thereafter.
Allegheny is focused on improving shareholder value in the long term. Management aims to return the company to profitability, improve the balance sheet and maintain financial stability along with strong liquidity.
Shares of the company fell around 4.7% to close at $16.93 on Dec 2.
Allegheny reported an adjusted loss of 21 cents per share in third-quarter 2016, much wider than the Zacks Consensus Estimate of a loss of 11 cents. Revenues for the third quarter fell 7.5% year over year to $770.5 million, missing the Zacks Consensus Estimate of $839 million. The top line recorded in each segment fell year over year.
The company’s cash in hand as of Sep 30, 2016 was $188.4 million, down 4.63% year over year while long-term debt increased 24.6% to $1,870.4 million. Cash flow used by operations for the first nine months of 2016 was $111.7 million. Total debt to total capitalization was 56.3% at the end of the quarter, up from 38.5% a year ago.
Zacks Rank
Allegheny currently carries a Zacks Rank #3 (Hold).
Some better-ranked companies in the basic materials space include POSCO PKX, AK Steel Holding Corp. AKS and Grupo Simec S.A.B. de C.V. SIM.
POSCOhas an expected long-term growth rate of 5%. The stock holds a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AK Steel, with a Zacks Rank #2 (Buy), posted a positive earnings surprise of 61.54% in the last reported quarter.
Grupo Simec, with a Zacks Rank #2, saw its estimates for the current quarter increase from 17 cents per share to 26 cents per share in the last 60 days.
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