ATI outlook down on 1Q headwinds

Specialty steelmaker Allegheny Technologies (ATI) expects lower earnings for 2019 after powder billet shortages and higher costs impacted revenues in the first quarter.

ATI cut its profit outlook for the flat rolled products (FRP) segment by as much as 44pc to $42mn-46mn, while maintaining its profit and raising its sales outlook for the high-performance materials and components (HPMC) segment. The company expects better market conditions for the FRP segment in the second quarter, particularly after recent contracts for nickel and titanium products. HPMC sales for the coming quarter are projected to be in line with earlier guidance amid the continuation of nickel powder billet supply issues.

Combined shipments declined by 9.5pc to 175mn lbs in the first quarter from a year earlier. Standard product shipping volumes fell to 93mn lbs from 109mn lbs a year earlier. Shipping volumes for high-value products dropped to 82mn lbs from 84mn lbs.

Average high-value sales prices edged down to $3.27/lb from $3.30/lb the prior year, while standard product prices improved by 9pc to $1.37/lb.

First quarter sales increased to $1bn compared with $979mn a year earlier. Profit declined from $58mn in 2018 to $15mn in 2019 because of powder billet shortages, weak demand for stainless products, and higher operating costs.

HPMC segment sales increased by 7.2pc to $601mn, helped by growth in airframe and government aerospace and defense sales. HPMC revenue for the quarter was lifted by sales of titanium and nickel-based and specialty alloy products, while forged components saw a decline in demand. Next-generation jet engine product sales rose by 8.9pc and comprised 52pc of the jet engine product sales. A shortage of third-party nickel powder billet supply and drop in cobalt prices contributed to a decline in profit growth.

Sales in the flat rolled products (FRP) segment dropped by 3pc to $404mn, brought down by weaker demand for stainless products, particularly in the oil and gas industry. Lower commodity stainless sheet sales led the drop down. Demand weakness, customer inventory destocking, and operational inefficiencies in downstream finishing operations were cited as contributing factors. Aerospace and defense sales counteracted soft stainless demand, rising by 70pc from a year earlier, supported by titanium armor plate production for US and UK military vehicles.

ATI is Pittsburgh-based global manufacturer of specialty materials and components for aerospace and defense, oil and gas, and other industrial markets.