ATI Announces Rightsizing Actions to Align Flat Rolled Products Operations to Challenging Market Conditions
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Focus on Products and Markets that Require Technical and
Manufacturing Leadership
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Reduce Exposure to Commodity Stainless and Grain-Oriented
Electrical Steel Products that are Challenged by Global Overcapacity
and Reduced Demand
Allegheny Technologies Incorporated (NYSE: ATI) today announced that it
is taking rightsizing actions to align its Flat Rolled Products (FRP)
operations to the challenging business conditions for its commodity
products. The actions improve ATI’s focus on differentiated flat-rolled
products that serve growing global markets.
Specific actions announced today are:
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Idling of the standard stainless melt shop and sheet finishing
operations at the Midland, PA facility, which is expected to be
completed in January 2016.
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Idling of grain-oriented electrical steel (GOES) operations, including
the Bagdad, PA facility, which is expected to be completed by April
2016.
The future restart of the Midland and GOES operations, respectively,
will depend on future business conditions and ATI’s ability to earn an
acceptable return on invested capital on products produced at these
operations.
Due to challenging market conditions impacting commodity flat-rolled
products, ATI is conducting an impairment review of affected long-lived
assets in the FRP business, including goodwill, and will provide an
update on this review prior to the January 2016 news release announcing
fourth quarter 2015 results.
“The actions announced today are the result of an extensive strategic
review and analysis of the current and expected medium-term market
conditions affecting our U.S. Flat Rolled Products operations,” said
Rich Harshman, Chairman, President and CEO. “These actions are designed
to return the FRP segment to profitability as quickly as possible and
execute our strategy for sustainable long-term profitable growth.
“The actions announced today simplify and streamline our FRP operations
and better focus our efforts on the products and global markets that
require and value ATI’s technical and manufacturing capability
leadership. The Hot-Rolling and Processing Facility (HRPF) enables ATI
to grow our high-value product lines, such as nickel-based and specialty
alloys, titanium and titanium alloys, Precision Rolled Strip® products
and engineered strip. These differentiated products serve key global
markets including Aerospace and Defense, Oil & Gas/Chemical and
Hydrocarbon Processing Industry, Electrical Energy, Consumer
Electronics, and Automotive.
“Market conditions for our commodity stainless steel products have been
challenging for an extended period and have continued to deteriorate
throughout 2015, with further deterioration during the fourth quarter.
These conditions are the result of global excess capacity, which has led
to unfairly traded imports in the U.S. market, including the first half
2015 record surge of low-priced imports, primarily from China.
Base-selling prices have fallen throughout 2015 and are now at historic
lows. In addition, falling raw material prices, primarily for nickel,
has resulted in aggressive inventory reduction actions by customers.
“As a result of these market conditions, total transaction prices for
standard stainless sheet products, which include base prices plus raw
material surcharges, have declined to levels not seen since 2003. And
demand for our standard sheet products is showing no signs of
sustainable improvement as we head into 2016.
“In addition, while showing some signs of improvement, our GOES
business, which serves the electrical energy distribution market, will
continue to face increasingly challenging market conditions due to
global excess capacity and aggressive pricing. An additional challenge
is the move by most of our customers to high permeability GOES products,
which would require a significant capital investment by ATI. Market
conditions for high permeability GOES products do not currently support
the business case for such an investment.”
Mr. Harshman continued, “Our High Performance Materials and Components
segment is well-positioned to achieve significant profitable growth over
the next several years, beginning in 2016. We are committed to fix our
flat-rolled products business so it can contribute to ATI’s
profitability. With the rightsizing actions announced today, we expect
our Flat Rolled Products segment to be modestly profitable by the second
half of 2016. In addition, as we resize our FRP operations we expect
2016 cash flow from FRP operations to be sufficient to fund its 2016
capital expenditures, including all remaining capital expenditures
relating to the HRPF.”
This news release contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements 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, that may cause our actual results,
performance or achievements to materially differ from those expressed or
implied in the forward-looking statements. Additional information
concerning factors that could cause actual results to differ materially
from those projected in the forward-looking statements is contained in
our filings with the Securities and Exchange Commission. We assume no
duty to update our forward-looking statements.
Creating Value Thru Relentless Innovation®
Allegheny Technologies Incorporated is one of the largest and most
diversified specialty materials and components producers in the world
with revenues of approximately $4.0 billion for the twelve months ended
September 30, 2015. At September 30, 2015, ATI had approximately 9,500
full-time employees world-wide who use innovative technologies to offer
global markets a wide range of specialty materials solutions. Our major
markets are aerospace and defense, oil & gas/chemical and hydrocarbon
process industry, electrical energy, medical, automotive, food equipment
and appliance, and construction and mining. The ATI website is www.ATImetals.com.
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