ATI has reported Q3 2015 sales of US$833 million and a net loss attributable to ATI of US$145 million, or US$(1.35) per share, in line with prior guidance provided on October 6, 2015.

Sales declined 19% compared to the second quarter 2015, when ATI reported a net loss of US$16 million, or US$(0.15) per share.

 ‘This was a very challenging quarter due to difficult business conditions, especially in the Flat Rolled Products segment, further weakening in demand from the oil & gas markets, and continued weak demand for forged products from the construction and mining market,’ said Rich Harshman, chairman, president and CEO. ‘Sales to the oil & gas market in the High Performance Materials and Components segment were down 34% compared to the second quarter 2015, and Flat Rolled Products segment sales to the oil & gas market were 60% lower as we completed shipments of a large oil & gas pipeline project early in the third quarter.’

ATI sales to the aerospace market were US$335 million in the third quarter 2015. Sales declined compared to the second quarter 2015 due to seasonal demand, primarily in Europe, as well as the rapid decline in raw material prices, particularly nickel, which reduced raw material surcharges.

Sales to the aerospace and defense markets were US$1.16 billion and represented 39% of ATI sales: 19% jet engine, 13% airframe, 7% defense, while sales to the oil & gas/chemical & hydrocarbon processing industry market were US$479 million and represented 16% of ATI sales: 10% oil & gas, 6% chemical & hydrocarbon processing industry.

Sales to the electrical energy market were US$295 million and represented 10% of ATI sales, while sales to the automotive market were US$239 million and represented 8% of ATI sales.

Sales to the medical market were US$167 million and represented 6% of ATI sales. Direct international sales were US$1.26 billion and represented 42% of ATI’s nine months ended September 2015 sales.

Weakening demand

‘Sales in the High Performance Materials and Components segment were US$475 million, a 7% decline compared to the second quarter 2015, and segment operating profit was US$19 million, or 4.0% of sales,’ Harshman said. ‘Segment results in the third quarter 2015 include US$3 million of expense associated with defined benefit pension and postretirement medical plans. Results reflect further weakening in demand for our products from the oil & gas market, very weak demand for forged products from the construction and mining market, and a decline in sales to the aerospace market, compared to the second quarter, due to seasonal factors and customer order profiles. Also, segment operating profit continued to be negatively impacted by lower operating rates at our Rowley, UT titanium sponge facility.

‘Cost reduction remains a strategic focus across ATI and we have targeted a minimum of US$100 million in new gross cost reductions for 2015,’ he added. ‘Our operations achieved US$77 million in gross cost reductions during the nine months ended September 2015. Managed working capital as a percentage of annualized sales increased to 46.0% at the end of September 2015 compared to 38.5% at year-end 2014 primarily due to lower sales volume in the third quarter 2015.

‘Our operating results reflect the very difficult, yet different, economic realities of our two business segments,’ Harshman said. ‘At this point we see no significant improvement in our major end markets until 2016.

‘We remain confident that our High Performance Materials and Components segment operating performance will significantly improve in 2016. Our production schedules from our aerospace customers show demand improvement for our next-generation nickel-based alloys and titanium-based alloys, and our precision forgings, castings, and components.

‘Intense global competition across the end markets we serve combined with rapidly changing customer needs and expectations have a profound impact on our industry. During the third quarter, we announced that we are consolidating and integrating multiple business units within our High Performance Materials and Components (HPMC) segment under a single executive vice president, which we believe will result in a more streamlined, cohesive, and efficient business. As part of this initiative, last week, we implemented a reduction in salaried workforce in both the HPMC segment and at ATI’s headquarters. We expect approximately US$23 million in reduced costs from these workforce reductions beginning in January 2016. Fourth quarter 2015 results are expected to include approximately US$6 million in severance charges as a result of these workforce reductions.’

This story is reprinted from material from ATI, with editorial changes made by Materials Today. The views expressed in this article do not necessarily represent those of Elsevier.