$530 million loss in third quarter puts a dent in ATI shares
Pittsburgh Post-Gazette
Allegheny Technologies shares tumbled 15 percent Tuesday after the Pittsburgh specialty metals producer reported a larger than expected third quarter loss and missed analyst revenue estimates as well.
The company lost $530.8 million, or $4.95 per share, vs. a loss of $144.6 million, or $1.35 per share, in the year-ago quarter. Sales fell 7 percent to $770.5 million.
The results included after-tax charges of $508 million, or $4.74 per share, for indefinitely idling its plant in Rowley, Utah that makes titanium sponge, the material from which finished titanium metal is made.
The company announced the decision in August, saying it can purchase the feedstock under longterm supply agreements for less than it would cost to make it at the plant. The company announced in 2006 that it would build the plant at a cost of $325 million. The plant began operating three years later.
Analysts had expected the company to report an adjusted loss of 10 cents per share and revenue of $822 million.
Allegheny Technologies shares closed Tuesday at $15.12, off $2.68. They are up 34 percent for the year.
During a conference call with analysts, Allegheny Technologies chairman, president and CEO Rich Harshman said the Utah plant ended up costing $500 million. Besides high raw materials costs that put the plant as a disadvantage, more titanium sponge capacity came on line after the decision was made to build the plant, resulting in supply that is greater than demand, he said.
The idling will be completed by the end of the year, with an additional $10 million in costs for the action to be incurred in the fourth quarter. The action is expected to increase annual operating earnings by about $50 million beginning next year.
Allegheny Technologies also said it will permanently close its Midland stainless steel melt shop and rolling mill in Beaver County as well as its Bagdad plant in the Alle-Kiski Valley, which makes electrical steel. Both plants were
idled earlier this year.
Before the plants were idled, the Midland plant employed about 250, while 350 worked at Bagdad, according to spokesman Dan Greenfield. Of those, some retired, some took jobs elsewhere with the company, and the rest were laid off, he said.
“We have now concluded that these facilities cannot be operated at an acceptable rate of return,” the company said in a statement.
The company said it would take fourth-quarter charges of $11 million to $21 million related to shuttering the two plants.