Allegheny Technologies Inc. (ATI) announced restructuring of its Engineered Products segment and announced that it expects to incur loss in the third quarter 2013. The company stated that it is taking the strategic action in order to improve the financial performance of the company in 2014 and beyond, and increase the company’s focus on its strategic business.
Allegheny announced that as a part of its strategic review, it will close the fabricated components and divest the iron casting businesses which are both part of its Engineered Products segment. The restructuring follows Allegheny's sale announcement of its tungsten materials business to Latrobe, Pa.-based wear-resistant products company Kennametal Inc. (KMT). The sell-off for $605 million is expected to close in the fourth quarter. The company also stated that it has integrated its precision titanium and specialty alloy flat-rolled finishing business into ATI Allegheny Ludlum's specialty plate businesses.
The company expects to incur loss in the third quarter due to challenging conditions on account of lower sales, higher raw material prices, a stainless steel price increase which will not have a material impact on the third quarter results. Allegheny expects loss of about 27 cents to 30 cents a share in the third quarter, including higher income tax and a $9 million expense from the closing and planned sale of two small businesses. It expects sales of about $970 million in the third quarter and total segment operating profit in the range of $25 million to $30 million.
Though Allegheny envisions challenging conditions to continue through to the end of 2013, it remains strongly positioned to deliver profitable opportunities over the next 3 to 5 years. In order to ensure this the company is extending its existing long term contracts with select customers. The company is taking measures to increase cost efficiency and improve its liquidity and financial flexibility with the sale of its tungsten materials business.
Allegheny currently carries a Zacks Rank#3 (Hold).
Other companies in the basic materials sector with favorable Zacks Rank are Companhia Siderurgica Nacional (SID) and Shiloh Industries Inc. (SHLO). Both Companhia Siderurgica and Shiloh Industries maintain a Zacks Rank #1 (Strong Buy).