Net income was US$4.4 million on those sales, compared to the second quarter 2012 where net income was US$56.4 million on sales of US$1.36 billion.
For the six months ended June 30, 2013, net income was US$14.4 million on sales of US$2.31 billion. For the same period in 2012 net income was US$112.6 million on sales of US$2.71 billion.
“Challenging conditions in many of our end markets continued during the second quarter 2013,” said Rich Harshman, ATI chairman, president and CEO. “Lacklustre global demand for standard stainless and grain-oriented electrical steel products combined with excess global supply and falling raw material surcharges for stainless resulted in continuing pricing pressure and reduced margins on these products."
Harshman noted that weak economic growth in the US, negative growth in the Eurozone, and slower growth in China, India and other developing economies continued to negatively impact demand and create pricing pressure for our products from the chemical process industry, electrical energy, and construction and mining equipment markets. At the same time, market fundamentals remained strong in the commercial aerospace, oil and gas, medical and automotive markets. Overall, consistently falling raw material prices, especially for nickel and titanium scrap, continued weak demand from the jet engine aftermarket, and aggressive inventory management actions throughout the supply chains, combined with relatively short lead times, continued to negatively impact short-term demand and prices for most of our products used in these markets, Harshman noted.
ATI’s sales to the aerospace and defence market represented 34% of ATI business, while sales of nickel-based alloys and specialty alloys represented 24% of first half 2013 ATI sales. Sales of titanium products, including Uniti joint venture conversion, represented 15% of first half 2013 ATI sales.
“Segment operating profit in the second quarter 2013 was approximately US$72 million, or 6.3% of sales,” Harshman noted. “Operating profit in the High Performance Metals segment was 13.9% of sales and was negatively impacted by reduced operating rates, and reduced raw material surcharges due to continued falling raw material prices not being aligned with higher raw material costs due to long manufacturing cycles for many of our products, and pricing pressures on transaction, or spot, business. In addition, the segment was impacted by low demand from the jet engine aftermarket, aggressive inventory management in the aerospace supply chain, reduced demand for forgings from the construction and mining equipment market, and low demand for zirconium products from the nuclear energy and chemical processing industry markets."
While the short-term remains challenging in many of ATI's end markets, Harshman is confident in the strong profitable growth opportunities for ATI over the next 3 to 5 years. “In the short-term we continue to focus on issues within our control," he explained. "We are accelerating our cost reduction efforts, resulting in more than US$79 million in gross cost reductions during the first six months 2013. This pace is well above our 2013 target of US$100 million in new cost reductions for the full year. These cost reductions are expected to benefit ATI operations later in 2013 and beyond." As ATI looks ahead to the second half of 2013, Harshman is not seeing any significant signs of changes in market conditions. "The third quarter may prove to be even more challenging, as it is traditionally the softest quarter of the year in many of our end markets, especially in Europe," he said. " We are encouraged by recent signs of stabilization in nickel and titanium scrap prices. If this continues, we may begin to see an improvement in demand and stabilization of selling prices beginning in the fourth quarter 2013."
