November 2017

Producers Riding Out Improved 2017

Sales up across the board for North America’s producers of steel, aluminum and specialty metals.

Compiled By the Staff of Metal Center News

Allegheny Technologies
Sales Up for ATI in Third Quarter
Allegheny Technologies Inc., Pittsburgh, reported third-quarter sales of $869 million, an increase of 12.7 percent from the same quarter in 2016, but down 1.2 percent from the prior quarter.

The specialty metals producer reported a net loss of $121.2 million in the quarter, primarily the result of a goodwill impairment charge. Absent the charge, the company reported a net loss of $7.6 million.

“In our High Performance Materials & Components segment, sales of our specialty materials mill products continue to meet our expectations. We continue to make good progress to meet elevated customer demand levels for aerospace titanium castings and expect our casting business to be at or near break-even for 2018, and return to profitability in 2019,” said Rich Harshman, chairman, president and CEO.

Looking ahead, Harshman expects continued demand strength for mill products, forgings, casting and components related to the jet engine build over the next several years. “We anticipate that the 2017 financial headwinds from our castings business and completion of the start-up and qualification of our new nickel alloys powder facility will provide meaningful profit improvement opportunities in 2018,” he said.

Arconic Reports Third Consecutive Quarter of Revenue Growth
New York City-based metals manufacturer Arconic reported net income of $119 million in the third quarter, compared with $166 million in the year-ago period and $212 million in the prior quarter. Through the first nine months of 2017, total earnings of $653 million were 51.5 percent higher than in 2016.

Increased volumes across all business segments and higher aluminum prices contributed to a 3 percent year-over-year increase in revenue in the quarter. Sales totaled $3.2 billion, compared with $3.1 billion a year ago, and consolidated adjusted EBITDA was $430 million, a 14 percent increase from third quarter 2016.

“Arconic delivered its third consecutive quarter of year-over-year revenue and EBITDA growth,” interim CEO David Hess said. “We are demonstrating consistent improvements in operating performance on the back of healthy organic revenue growth, coupled with better-than-planned progress on streamlining, restructuring and net cost reduction.

“Our results were negatively impacted by a sharply higher, non-cash LIFO charge, resulting from a spike in aluminum prices,” Hess added. “We remain focused on a strong finish to 2017 and reaffirm the Arconic full-year earnings guidance.”

Arconic’s engineered products and solutions segment reported revenue of $1.5 billion, a 5 percent increase year over year. The company said increased aerospace volume and continued net cost savings were partially offset by unfavorable price and mix, as well as higher than expected engine ramp costs.

Meanwhile, the global rolled products segment saw third-quarter revenue decrease 4 percent to $1.2 billion. The results were driven by reduced aerospace wide-body build rates, airframe destocking and pricing pressure in regional specialties, according to Arconic.

Revenue for transportation and construction solutions totaled $517 million in the third quarter, up 15 percent from last year.

Kaiser Aluminum
Kaiser Income Increases in 3Q
Kaiser Aluminum Corporation, Foothill Ranch, Calif., reported net income of $20 million in the third quarter, a 33 percent increase from the same quarter in 2016. Income through the first nine months of the year totaled $61 million, a modest decline from the previous year.

Net sales in the quarter totaled $333 million, an increase of 3.6 percent from third-quarter 2016. For the year to date, Kaiser’s net sales of $1.05 billion were up 4.5 percent from the previous year.

“Our third-quarter 2017 results were consistent with the market dynamics and business trends we experienced in the first half,” said Jack A. Hockema, chairman and CEO. “In addition, as previously discussed, the third quarter reflected normal seasonal demand weakness and higher major maintenance expense. We continued to benefit from improvements across the platform in underlying manufacturing cost efficiency.”

Value-added revenue of $187 million for the third quarter was down 5 percent, despite 1 percent higher shipments, due to lower sales margins on non-contract sales and a leaner mix of shipments. Aerospace/high strength value-added revenue declined 9 percent to $98 million reflecting a 4 percent decline in shipments due to continued supply chain destocking and throughput constraints at Trentwood.

Nucor Earnings Dip in Third Quarter
Nucor Corporation, Charlotte, N.C., reported consolidated net earnings of $268.5 million for the third quarter, down from $305.4 million in the year-ago period and $323 million in second-quarter 2017.

Net sales in the quarter increased 21 percent year over year to $5.2 billion. Through the first nine months of 2017, net sales were up 24 percent from 2016 at $15.16 billion. Total net earnings of $948.4 million were also higher this year, compared with $636.6 million a year ago.

The company shipped 6.6 million tons to outside customers in the third quarter, a 12 percent increase over last year but down slightly from the prior quarter. Steel mill shipments increased 18 percent year over year, and downstream steel products increased 3 percent over third-quarter 2016.

Earnings in both its steel mills and steel products seg-ments were down significantly in the third quarter, however. The steel mills segment saw net earnings of $432.7 million, compared with $591.8 million a year ago, and steel products reported net earnings of $59.2 million in the quarter, compared with $72.6 million last year.

“Despite high utilization rates at our sheet mills, continued pressure from imports has prevented prices from keeping pace with increasing raw material costs,” said Chairman, President and CEO John Ferriola in the third-quarter earnings report. “The profitability of the downstream steel products segment in the third quarter of 2017 decreased from the third quarter of 2016 due to margin compression resulting from higher steel prices. In particular, our rebar fabrication operations have experienced significant declines in performance due to a combination of margin compression caused by higher steel prices and delays on larger, more profitable projects.”

Steel Dynamics
SDI Reports $6 Million Bump in Operating Income
Steel Dynamics Inc., Fort Wayne, Ind., saw net income drop 2.5 percent year over year to $153 million, while income from operations increased $6 million over the prior quarter to $271 million.

Net sales in the quarter totaled $2.4 billion, compared with $2.1 billion in the year-ago period, and trailing 12-month adjusted EBITDA was $1.4 billion.

President and CEO Mark Millett said he’s pleased with his company’s recent performance despite pressure from continued high levels of steel imports, which prevented domestic steel prices from keeping pace with raw material costs.

“Despite reported low levels of steel service center inventory, we believe steel traders built inventory at the ports ahead of potential domestic trade actions, which resulted in an overhang position for flat-roll steel during recent months. This oversupply resulted in periods of weaker customer orders.”

Total shipments in the quarter totaled 2.5 million tons, compared with 2.2 million tons in third-quarter 2016 and 2.4 million tons in second-quarter 2017. Millett added that SDI’s sequential earnings increase was driven by improved engineered bar, structural and merchant steel shipments.

The company also reported strong underlying demand from the construction sector and stable demand from the energy sector. And while demand from the domestic automotive sector softened, Millett said SDI’s steel operations helped mitigate the impact by continuing to gain market share.

“Despite a somewhat noisy market environment related to continued high levels of steel imports, we remain optimistic that macroeconomic and market conditions are in place to benefit domestic steel consumption in 2018,” Millett said.

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