ATI announces Q4 and full year 2020 results
February 22, 2021
Allegheny Technologies Incorporated (ATI), headquartered in Pittsburg, Pennsylvania, USA, has reported its fourth quarter 2020 results, recording sales of $658 million in the period compared to sales of $1,018.6 million in Q4 2019. The company posted a net loss of $1,121 million in the fourth quarter 2020, compared to net income of $56.5 million in Q4 2019.
As previously announced, the company is exiting low-margin standard stainless sheet products, upgrading its capabilities and transforming its Specialty Rolled Products business unit. Fourth quarter 2020 results reportedly include $1,079.1 million of restructuring and other charges, net of related tax impacts, predominantly for long-lived non-cash asset impairment charges associated with these operations. On an adjusted basis, the fourth quarter 2020 net loss attributable to ATI was $41.9 million. Adjusted EBITDA was $23 million, or 3.5% of sales for the fourth quarter 2020.
“Our team continued to focus on execution in the fourth quarter, tightly managing costs and improving cash generation, while producing at increasing rates for our customers,” stated Robert S Wetherbee, president and CEO. “As a result, we exceeded our financial expectations for the quarter despite ongoing challenging market conditions.”
“In the fourth quarter, we took decisive action to accelerate our future by exiting the low-margin standard stainless sheet product line and redeploying capital to high-return opportunities,” he continued. “We’ve already made significant progress on achieving that goal. The transformation represents a major step forward to making ATI a more sustainably profitable aerospace and defence-focused company.”
In the fourth quarter 2020, ATI changed its segment performance measure from Segment Operating Profit to Segment EBITDA, based on internal reporting changes. Prior period results are presented using the new performance measure. The financial schedule of Sales and EBITDA by Business Segment contains further information on depreciation and amortisation by business segment.
High Performance Materials and Components (HMPC) sales in the fourth quarter 2020 were flat versus the third quarter 2020 as demand from the commercial aerospace market stabilised. Sales decreased 55% year-over-year due to challenging end market conditions in commercial aerospace largely brought on by the coronavirus (COVID-19) pandemic. Sales to the aerospace and defence markets in Q4 2020 represented 74% of total segment sales, with sales to the commercial aerospace market down 68%, while sales to the defence markets were 26% higher, compared to the prior year period.
HPMC segment EBITDA was $7.5 million, or 3.4% of sales. Compared to the third quarter 2020, results reflect a weaker overall product mix, particularly in mill products for jet engine applications, and increased costs related to slow-moving inventory. Cost-cutting measures continued to help offset these negative impacts. Versus the prior year, lower overall demand, including profitable next generation jet engine products, and reduced asset utilisation rates negatively impacted operating margins.
Advanced Alloys and Solutions (AA&S) fourth quarter 2020 sales improved 16% compared to the third quarter 2020, but were 16% lower compared to the prior year’s quarter. Sales to the aerospace and defence markets were up 24% sequentially, led by a 62% increase in defence market sales. Compared to the prior year period, aerospace & defence markets sales decreased 28%. Sales to speciality energy markets were 37% higher compared to the prior year period, while total sales to all energy markets, which include oil & gas, hydrocarbon and chemical processing were 18% lower.
AA&S segment EBITDA was $29.5 million, or 6.8% of sales. Segment EBITDA improved significantly from Q3 2020 due to cost cutting measures, stronger sales of high-value products at our Specialty Alloys & Components business, as well as at our STAL joint venture.
Fourth quarter 2020 pre-tax restructuring and other charges of $1,105.1 million predominantly relate to the previously-announced decision to cease production of standard stainless sheet products.
Restructuring charges were $1,080.5 million, including $1,041.5 of long-lived asset non-cash impairment charges primarily related to the AA&S Segment’s Brackenridge, PA operations. These operations include the Hot-Rolling and Processing Facility (HRPF), as well as stainless melting and finishing operations. Restructuring charges also include $33.5 million of severance-related costs for hourly and salary employees, and $5.5 million of other costs related to facility idlings primarily for asset retirement and environmental obligations.
Full year 2020
For the full year 2020, sales were $2.98 billion, with a net loss attributable to ATI of $1,572.6 million. Restructuring and other charges, net of associated tax impacts, were $1,507.2 million. Pre-tax special items for the full year 2020 included $287 million for goodwill impairment, $27 million of severance charges, and $21.5 million of debt extinguishment charges in addition to the fourth quarter 2020 restructuring and other charges mentioned above. Full year 2020 results also include charges for a valuation allowance on U.S. federal and state net deferred tax assets. Adjusted EBITDA for fiscal year 2020 was $196.3 million, or 6.6% of sales.
In comparison, sales for the full year 2019 were $4.12 billion and net income attributable to ATI was $257.6 million, or $1.85 per share. In addition to the fourth quarter 2019 special items mentioned above, full year 2019 results included $89.8 million in pretax gains on sales of non-core assets. Excluding these items, adjusted net income attributable to ATI was $165.1 million, or $1.21 per share. Adjusted EBITDA for 2019 was $439.4 million, or 10.7% of sales.
“Looking ahead to the first quarter, we expect a continued difficult market environment driven by the COVID-19 resurgence and the relatively low rates of global air passenger travel,” Wetherbee added. “Our first quarter 2021 compares to a robust pre-pandemic quarter for ATI that included a surge in wide-body jet engine product sales.”
“For the full year 2021, we are optimistic that the worst is behind us and demand will begin to rebound as COVID-19 vaccines are increasingly approved and administered around the world,” he continued. “We expect our demand to improve in the second half of the year, led by increasing narrow-body engine production volumes enhanced by ATI’s jet engine-related share gains and new business in airframes. In 2021, we are focused on delivering operational excellence for our customers, transforming our speciality rolled business, and maintaining the strength of our balance sheet and cash generation efforts.”
