Market Conditions
- Aerospace and defense sales in the second quarter 2018 were $438.5 million, 3% higher than the first quarter 2018, and represented 74% of total segment sales. Compared to the first quarter 2018, commercial jet engine sales and commercial airframe sales were both 3% higher, and government aero/defense sales were 1% higher. Total HPMC second quarter 2018 sales increased 6% over the first quarter 2018, with sales to the electrical energy market up 31%, and sales to the construction & mining market 8% higher. Direct international sales represented 51% of total segment sales for the second quarter 2018.
Second quarter 2018 compared to second quarter 2017
- Sales were $591.9 million, a $65.5 million, or 12%, increase compared to the second quarter 2017, primarily due to higher sales of next-generation jet engine products. Sales to the commercial aerospace market, which represented 63% of second quarter 2018 sales, were 14% higher than the prior year, including a 16% increase in sales to the commercial jet engine market. Construction and mining market sales were 52% higher, and electrical energy market sales were 67% higher, from a low prior-year base in both end markets.
- Segment operating profit improved to $97.9 million, or 16.5% of sales, compared to $68.0 million, or 12.9% of sales for the second quarter 2017. This operating profit improvement reflects higher productivity from increasing aerospace and defense sales, and an improved product mix of next-generation nickel alloys and forgings for the aero engine market.
Flat Rolled Products Segment
Market Conditions
- In the second quarter 2018, conditions continued to improve in most end markets including automotive, consumer durables, aerospace & defense, and electrical energy, while project-based sales to the oil & gas market declined, all compared to the first quarter 2018. Additional project-based oil & gas demand is expected later in 2018. Sales increased 8% for standard products, and declined 4% for high-value products primarily as a result of lower project-based oil & gas sales, compared to the first quarter 2018. Direct international sales were 32% of second quarter 2018 segment sales.
Second quarter 2018 compared to second quarter 2017
- Sales were $417.6 million, a $63.8 million, or 18%, increase compared to the prior year period. Sales of high-value products were 27% higher, primarily for nickel-based and specialty alloys, and sales of standard products were 6% higher, compared to the second quarter 2017.
- Segment operating profit was $26.1 million, or 6.3% of sales, compared to $2.9 million, or 0.8% of sales for the second quarter 2017. Compared to 2017, results in 2018 included a better matching of raw material surcharges with changes in prices for nickel, ferrochrome and other metallics, improved cost absorption through higher operating rates, and benefits from the recently-formed A&T Stainless joint venture.
Closed Operations and Other Expenses
- Closed operations and other expenses in the second quarter 2018 were $5.1 million, compared to $13.2 million in the prior year quarter. Changes between periods were primarily the result of foreign currency remeasurement gains in the second quarter 2018 compared to remeasurement losses in Q2 2017.
Income Taxes
- ATI continues to maintain income tax valuation allowances on its U.S. federal and state deferred tax assets, and we do not expect to pay any significant U.S. federal or state income taxes for the next few years due to net operating loss carryforwards. The second quarter 2018 6.1% tax rate primarily relates to income taxes on non-U.S. operations.
Allegheny Technologies will conduct a conference call with investors and analysts on Tuesday, July 24, 2018, at 8:15 a.m. ET to discuss the financial results. The conference call will be broadcast, and accompanying presentation slides will be available, at ATImetals.com. To access the broadcast, click on “Conference Call”. Replay of the conference call will be available on the Allegheny Technologies website.
This news release contains “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995. Certain
statements in this news release relate to future events and expectations
and, as such, constitute forward-looking statements. Forward-looking
statements, which may contain such words as “anticipates,” “believes,”
“estimates,” “expects,” “would,” “should,” “will,” “will likely result,”
“forecast,” “outlook,” “projects,” and similar expressions, are based on
management’s current expectations and include known and unknown risks,
uncertainties and other factors, many of which we are unable to predict
or control. Our performance or achievements may differ materially from
those expressed or implied in any forward-looking statements due to the
following factors, among others: (a) material adverse changes in
economic or industry conditions generally, including global supply and
demand conditions and prices for our specialty metals; (b) material
adverse changes in the markets we serve; (c) our inability to achieve
the level of cost savings, productivity improvements, synergies, growth
or other benefits anticipated by management from strategic investments
and the integration of acquired businesses; (d) volatility in the price
and availability of the raw materials that are critical to the
manufacture of our products; (e) declines in the value of our defined
benefit pension plan assets or unfavorable changes in laws or
regulations that govern pension plan funding; (f) labor disputes or work
stoppages; (g) equipment outages and (h) other risk factors summarized
in our Annual Report on Form 10-K for the year ended December 31, 2017,
and in other reports filed with the Securities and Exchange Commission.
We assume no duty to update our forward-looking statements.
