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Allegheny (ATI)

Participants
Scott Minder Vice President, Treasurer & Investor Relations
Richard Harshman Chairman, President & Chief Executive Officer
Patrick DeCourcy Senior Vice President, Finance & Chief Financial Officer
John Sims Executive Vice President, ATI High Performance Materials & Components Segment
Robert Wetherbee Executive Vice President, ATI Flat Rolled Products Group
Kevin Kramer Senior Vice President, Chief Commercial & Marketing Officer
Gautam Khanna Cowen and Company
Richard Safran Buckingham Research Group
Timna Tanners Bank of America Merrill Lynch
Josh Sullivan Seaport Global
Phil Gibbs KeyBanc Capital Markets
David Strauss Barclays
Jeremy Kliewer Deutsche Bank
Chris Olin Longbow Research
Matthew Korn Goldman Sachs
Matthew Fields Bank of America Merrill Lynch
Call transcript
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Operator

Good morning and welcome to the Allegheny Technologies Incorporated Third Quarter 2018 Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator instructions] Please note this event is being recorded. I would now like to turn the conference over to Scott Minder, Vice President, Investor Relations and Corporate Communications. sir. ahead go Please

Scott Minder

call Good and XXXX welcome Financial is conference website Officer; in on Rocco. President Harshman, Technologies Chief and being the third our Executive the segment; Participating Sims, President, High atimetals.com. Chief Performance quarter CEO Designate President, call. Wetherbee, and at are morning Vice you, Finance Rich Vice Executive to Officer; Senior Chairman, Flat Rolled President, President & Senior Executive Chief and Components Bob Allegheny Pat broadcast today Kramer, and current Thank Products DeCourcy, This Vice call Group; Officer. Vice John and Commercial Kevin Materials and President, Marketing

connected If internet, call should to the screen. via this you see have you your slides on

dialed prepared After in, our website. we remarks, have available line who on are you for our slides open of will the questions. those For

to session, for Q&A limit others. please the time During questions yourself to allow two

make call release assumptions queue as reach on every to various in all and We note to slide. statements this subject shown the forward-looking earnings the Please all time. noted in attempt are will allotted and caveats the within that

the I like to Now, Rich would Harshman. over call turn to

Richard Harshman

on on like of Scott. Bob to you, morning the over those I turn quarter call results call third to to our Wetherbee. Internet. everyone Good to and listening provide Thank a overview the would the brief and then

oil forward XXXX. our markets. quarter continued January the with our Bob were in within our was the retirement on gas provided line leader underway announced will my on extensive Bob into the is Materials Xst, on we August as solid. defense As performance aerospace I expectations Specialty Board journey earnings by company Results next and industry second to experienced CEO and to choice currently ATI’s become is XXth, the lead ATI’s an will decade. XXXX. and and quarter the progress the guidance Chairman background next and remain Bob an third on May ensure at in ATI in strategic until an Executive call. outstanding with ATI’s

strong Third quarter on XXXX. results built first half a

the operational of at take and cover and in profit return call and pleased the year-to-date grown With to leverage to achieved of I operating our quarters like quarter profitable efforts. proof world’s Bob doubt materials Year-to-date, results gas am have the strategy wrap future that, to and on far top-line The are best the we sustainable profits and look markets, the come. both the and performance would capabilities and our XX% the of segment manufacturing growth to our we of world-class from our call on provide sales forward and questions. of no restructuring up aerospace revenue have strength financial growth Our prior effectiveness ongoing generate XX%. incremental be to operating to Bob turn ongoing what components with with XXXX the to third the successes specialty that increased that business, the recovery delivering demonstrates segments highlights. the have end solid we growth contributions expect I advanced deliver. tangible team the thus while our company. over business assets, commercial Bob? I and the our in the ATI years will to will achieved by scalability and Based on oil

Robert Wetherbee

Thanks, Rich.

Board. honored be ATI I the members of to thank to ATI into am humbled future. I chosen First, and lead and want to the the Rich

meets. customers’ I and To XXXX increasing meet travel and specialty I in business serve meetings with shareholders. you our I that you so all to the to calls customers, to ATI’s fifth profitable our our look position year-over-year operations future to growth. targets, We forward quarter a on growth. components. third of with make materials, great on call are to Overall, in-person in and were for to needs XX% speaking grew double-digits continue revenue growth have as to consecutive parts line our were quarter segments top-line strong with Both marking revenue results contributors visit by and our expectations. this yet

margins to and products aerospace ongoing from With transition and as the segment next-generation Flat well improving Components the recovery High Performance the Rolled markets, both as in by segments versus the oil to growth growth mix margin ramp year drive other incremental asset the operating robust important and year-over-year and and helped facilities due Materials markets. Top-line points. benefits doubled benefiting basis the production prior from growth. ongoing key expanding Products product gas segments in third utilization increased nearly profits XXX operating in quarter’s with Segment enhancements at

per an Precision $X.XX Sims adjusted profitable Rolled hand ATI As quarter segments. a a venture, at loss backdrop, Strip the and joint to With share review of detailed the more and tax in the to as will performance quarter a provide result earned due to growth third a despite that over in the disciplined call of earnings strong our XXXX. per $X.XX this of HPMC I in to share third John XXXX, modestly compared rate STAL our elevated

financial call and to in review will more outlook comment John’s then I third on We’ll FRP quarter Rich the open to return our and results. your to John, give questions. comments, quarter provide concluding segment our to fourth comments. will Pat results to you. Following DeCourcy over detail will return

John Sims

Bob. Thanks,

Year-over-year to Similar performance other end-use half of increasing the by was and first stronger by product X. utilization growth outpaced Turning in mix XX%. rates operating aligned XX% rates. versus Segment increased prior our quarter XXXX, asset demand favorable year solid growth profit to aerospace market Slide The to third HPMC remained segment’s the markets. driven by expectations. segment revenue financial well

quality complex ensuring that components. continued We and work to and and demand market next-generation product airfreights. alloys demand particularly can for We produce industry to an delivery travel robust customers remain airplanes and nickel engine our diligently on-time products, for experience more expanding our air engines to leader in satisfy jet differentiated

trends to expect continue Components. years long-term ATI’s these and demand Parts macro supporting growth We the next for thus several Specialty for Materials market

segment Looking quarter. business anticipated sequentially, and call revenue This decrease discussed specific operating third at the on reasons and structural on quarter third our versus our The quarter call recurring Each the headwinds. are decline faces year, segment first declined was to second earnings profit as second by well. this both quarter our provided earnings our for HPMC outlook and quarter sequential XXXX.

take shutdowns aligned aerospace-related in summer to reside customers, particularly operators these business practices. Europe. local several large First, forge customers Many of extended

in Carolina, this volumes preventive in XXXX perform Wisconsin proactive, sales multi-day Oregon uses lower and to occurred of reduce the our critical North These our ATI to Second, factories. period at periods facility annual to maintenance facilities serve and possibility beyond. on of outages repair unplanned

experienced annual first quarter XXXX had specific negative events, the our to that addition the a In on two impact margins. events operating

as earnings quarter powder to in the discussed inefficiencies related First, we operating second our nickel from non-ATI to billet. operations call, our on source ongoing forging experience a delays of continued customer-directed delivery

safely work approximately all worked lost able to our Florence. I say Carolina shutdown experienced Hurricane due of X.X happy that of South and to we am to shifts. to we diligently return North to and workers make Second, day our facilities were up

a the infrastructure half second we of logistics-related challenges capacity were of losses to available production in experienced and our some did shortage due modest, damage. September Although trucking local

mix jet Lastly, products XXXX elevated of favorable. within our half although sales total modestly first engine lower of jet sales the product The was rates. ratio next-generation to category engine only less this was product than

unknown the full contributions markets. these our quarter inventory above year-over-year While and or at each of which XXX opportunities, levels, in the to by these profit growth be level. and long-term are XXXX’s predict average margins is the vary improve profit advance operating year-over-year. levels material least mix represents in consecutive component not basis products primarily to at our ninth can operating difficult due Product in guidance defense XX%, of uniform. operating benefits segment XXX point quarter margins levels segment to and of growth year achieved Despite operating aerospace challenges, basis the margin XXXX can customer expansion supportive underscoring This points our of by

pie double-digit In show growth the across our specialty products. including percentage XXXX our market, defense. comparison segment’s and third Customer Turning by a in prior mill HPMC’s markets of major and sales was market, year-over-year all quarter The aggregate, chart growth table largest segment increased year. revenues led to growth sales aerospace and product in with accompanying widespread demand X. grew lines versus by Slide XX% by

quarter the next-generation prior defense a in in by generally XX% This jet grew Third product Sales sales rates Commercial by XX% increase quarter jet nickel growth was market engine the by XX% sub-markets. aerospace rates mill sales sales in mixed sales our were next-generation XXXX. led product product versus third with of in forgings. with year-over-year total line significant the specialty and in sales engine expanded revenue of major led growth and year. of by products first half the

as While we models sales these vary increase demand we expectations expect legacy of next-generation next-generation will product our the to over significantly next-generation within sales sales. product product steadily to quarter-by-quarter for engine our Year-to-date, ratio material time, of production will sales new these outpaced our have the mix the products.

product lower customers. strong orders supply newer government with demand XX% by to were to chain levels partially by demand by their nuclear billets largest markets for airframe rotorcraft to our elevated Demand naval product a impart increased jet to led customer distribution and sales and by successful after commercial our Military versus grew defense our sales declines. a system. titanium due year, sales our year, from from but to emergent quarter growth on line Sales in OEM deliver were mixed Third ability airframe sub-markets. but engine year-over-year prior conversion offset This sales by and the prior was offset were customers. the

offset saw In customers’ the and Looking Sales posted market XX% after energy of the to modestly demand market second quarter. first for with growing sales lines. construction speciatly year-over-year in sales by beyond and building than summary, half on in segment small and second the Sales over while market markets, trucks. results growth more by other after electrical our sales improve product their defense gas by a increased decline grew strong all strong sales XXXX quarter markets nearly modestly the XX% our HPMC’s large to HPMC Medical increases. markets continued driven financial XX% materials mining declines in smaller results. aerospace increased to biomedical oil the mining

our about product should XXXX. and Flat XXXX continue I year-over-year. in These over to accretive to back jet segment. by increased performance the margins highly engine operating now fourth to will sales our to than call Bob quarter were into talk sales Next-generation Products more the and Rolled XX% expand turn

Robert Wetherbee

John. Thanks,

sales, of in the quarter aerospace Strip as to quarter X% products automotive by operating as and growth second products. XXXX and the mixed commodity offset profit in turn The operating market increase declines nearly very sales and XX% sequentially prices. FRP XX% driven Slide Let’s third Rolled across larger experience Precision and improvements. financial segment profits a driven impacted or quarter by X. small to matching while defense gains the XX% Results mix, by raw XX% saw with both favorably in several These input strong markets comparison generated its a a while were impacted and for million rate comparison X% third loss on year-over-year strong raw segment versus well good and by of surcharges, asset material by second a material results. XXXX. and to our aerospace quarter Compared our minimal partially Segment in our product increase gas Segment nearly the increased continued strong The by reversing prior defense, results due modest better solid results, utilization revenues geographies. a market by end-markets commercial products second was $XX mainly stable to better second continued led demand in for quarter by were improving aerospace to the sales year Segment increased XXXX. of relatively costs results, year-over-year. versus the The oil increased increased quarter sales markets.

segment’s Despite of anticipate success we QX. profitable headwinds, in lower Looking quarter the as are third the to this significant the a remaining improved levels surcharge demonstrate profits. to expect ferrochrome third segment financial of summary, actions FRP to results continue mismatch. headwinds operating our nickel generate fourth in both the quarter, in prices material quarter ahead we raw In and the resulting segment versus the timing

times evidence in this is more four XXXX QX million segment’s earned to $XX $XX of improvement, the operating FRP As than of same period. million year-to-date the the XXXX profit

While build progress am regardless XXXX are I consistently gains We profitable further team’s not XXXX. results, on across policies. generating FRP these we in results cycle long-term these in our with progress satisfied towards pleased with the trade to goal of intend to the business of

Turning to the X. segment’s I you would update FRP Slide on to initiatives. of two like strategic

to While controlling trade global an we and progress on what environment, our in remained operate we toward uncertain making continue can goals. we on focused

in We our steel to week, long-term provide to that rolling Facility in Hot world-class USA we rates agreement services utilization an capital-efficient will on Last close proximity focus NLMK its continue initiates services increasing and Rolling many or beginning asset announced accelerating HRPF relationship a paid XXXX. carbon in guaranteed a conversion a Process shipments manner. ramp and Brackenridge, with from October a hot of ATI fee slab to up was per quarter its first customers. NLMK to PA. the their ton and capabilities the for in be of HRPF’s through attracted with

We we’ll to and with opportunities continue our further be working the with steel goal future other in conversion partners of NLMK trials carbon product potential increases utilization. growth HRPF will on with run

I Now venture. joint update current on status Stainless of you our to the A&T want

in we a for available slabs exclusion, a XXX,XXX sufficient public call, that third-party process stainless amount that have to the Indonesia. Tariff – the requested tariff received the JV readily melt quarter XXX significant has As nor imported XXX on a received. tons reminder, requested quantities the Since behalf Tariff in These of of States. Government’s available source United there exclusion U.S. allows comments actually comments the process. not previously request Section our provide any been from Exception to slabs, exclusively earnings change second a change and are on discrete Section a request, Exclusion to companies rebuttals This for

Additionally, chance third-party a follow-up provide given public surrebuttals. commenters to were also

The yesterday, if of website. were on ATI’s have has Department’s As period yet the October posted. be XXnd, for to posted surrebuttals but rebuttal rebuttals any U.S. Commerce closed,

government’s to eight these operate In rebuttal capacity customers to allowed and in coil further A&T around Midland market our up the as while additional the stainless we which receive readily it Stainless process, a ramp fourth readily exclusion available addition the decision, weeks. Department available in very of JV the public we be some perspective, form. DRAP expect facts view continues as review to the it continue us defined the process the request limited a in do to extremely changes We provide await positive the in at supportive time JV’s Commerce as and to to a facility. quarter. production From The

supply of high-paying open in unfortunate mid-December, resulting a Pennsylvania, alternative U.S. our to the in we’ll and intentioned me, on However, of Department request - exclusion government of doors jobs lack levels of XXXX outcome seek an policy. loss Western from the by well sources otherwise production mid-November, customers an reduced JV’s the Commerce decision by tariff for excuse increasingly

supportive a of in stainless of to Policy criteria to to continue for D.C. and the U.S. U.S. believe that request fully employment. tariff is is Security request. and Commerce is and aggressively for resolution Washington We a engage We positive by and the Department tariff officials accretive satisfies exclusion fact-based with exclusion U.S. the established the manufacturing based National achieve firmly

the the long-term. are JV We committed to for

financial our hand talk Now over about Pat to I the DeCourcy third quarter call performance. will to

Patrick DeCourcy

Bob. Thanks,

to of hand line financial flow borrowings on borrowing to of agreement ABL. cash second goal. would totals under generation of third third Turning annual we asset-based the improved quarter, cash on end $XXX XXXX. minutes like million to you the I approximately position happy to our we the quarter outstanding third continues at progress our quarter lending end take At update on capacity on credit that report ABL’s versus Similar quarter. cash million toward a quarters, of nearly and had of $XXX improve. performance to our or free no and second the Both our am our I to Slide revolving X, of our available few the had

assume trend we year-end. at XXXX and this revolver have that expect borrowings no to We will continue ABL

capital $XX versus the a elevated due quarter slightly pace projects. expenditures to total our $XXX significant were Third for year bringing year-to-date, million primarily guidance, outflows the million full to two

Excellence expansion the Our the fourth in Cudahy, second isothermal press at and located heat in and Center China. Forging treating of capacity our joint at STAL venture facilities Isothermal Wisconsin, expansion

of commercial receivable and of year-over-year inventories understand to over accounts reflecting ensure year. several work XX.X% the managed for end percentage the versus to Looking as working XXXX, needs collaboratively additional quarter decrease of the the capital to approximately to years fully customers that sales production aerospace primarily timing continue XXXX basis both in we capital XXX with are our managed expenditures next the of goal beyond we million reductions year-over-year can points. first working increases. third at potential in XXXX, a outpacing due industry profitably decreased working the capital our segments, of $XX the at business half Currently, in points the rate our to desired capital and nearly reduce stood a Despite prior of by support sales XXX After managed in growth as growth quarter, balances. basis significant by percent third we

and efforts quarter XX% to to fourth to and the drive liabilities, further expect to reducing on our continue in on to ATI’s continue our the work goal of long-term will to long-term obligations beyond. to and exposure we XXXX way legacy quarter in of progress Pivoting post-retirement of our make diligently efficiencies We the fourth healthcare continue pension sales.

U.S. now are the plans plan entrants. defined our and pension healthcare we new mentioned post-retirement fully on second quarter benefit As closed to company’s call,

We of in keep updated metrics balance ongoing on this key improve you in overtime, XXXX. area progress expect further will our but the to

you like free would update our for generation the to on full expectations I Lastly, cash year XXXX. flow

We now our $XXX Addaero guidance say with for including our expenditure $XX a expect to at confidence flow the the we of upper-end range increased modestly $XXX acquisition. XXXX million of cash will capital can set exceed million. million free recently recent We above that the be

pension this reminder, a XXXX million As for the ATI excludes contributions. figure $XX plan

the in increases offset We managed more to than working expect in continued improvements capital quarter. any spending capital fully fourth

investment-grade Now, on to best the capital I rating. while further reduce These with and generation efforts an to in our positioned we cash profitable that we sheet coincide over our balance growth. to summary, will how the ourselves leverage well call for will credit are and to now to positioning deploy focused hand to return are Rich. over risk actions back financial time ensure future

Richard Harshman

Bob, and Okay, John thank you, Pat.

half commercial Slide and achieved segment, to our demonstrated Performance Components third the X, by High building commercial share on strategy cash percentage and third quarter Turning Materials In both to both in profit versus earnings profitability year led growth the versus markets airframe have generate the performance free our double-digit success product quarter in growth solid operating segments and first per and ongoing sales. engine in flow. results. revenue XXXX the year prior prior year-over-year our jet growth sustainable of strong of results and our sales all increased We significant and

demand products solid toward years. from quarter. remains upcoming asset well in raw business continue the in the segment, continues underlying our mix and product the market and utilization. positioned pricing In quarters The was benefit high-value material increased relatively growth improving are Rolled Flat to We and Products stable to

signed conversion significant earlier, this we steel forward. will carbon we our enabled on agreement As and success moving Bob first mentioned recently build HRPF

raw Components the year-over-year third a XXXX the expected Materials be resulting and expect expected increase product are This supply quarter’s expect year surcharges quarter the growth ahead in with impact the fourth goal to FRP customer growth to more billet ferrochrome Looking expansion. quarter year-over-year Rolled operating Flat segment Despite High quarter. A Modestly guidance to margin partial the the this seasonal a Performance the operations rates primarily third Fourth of Performance quarter, revenue segment power we and profitability line we due management generate fourth also better than an as with to order nickel year-end profit reflecting fourth fourth issues due are the in basis overall lower revenue within material impact, XXXX. us our generally quarter sales segment’s Products to of assumes the in quarter operating lower a on rate. is actions inventory normal Bob to business patterns quarter to versus and High due patterns significantly expected related point the historically improvement fourth XXX in achieving profit in full nickel margin in lower levels quarter. discussed. the U.S. negative third

upcoming results expect also summary, our in continue will our the expect impacts on attend. event through for seasonal We reserve segments York targets The generation. you quarter including material to to in financial of market our our we look update strong LIFO a and aren’t free City able to balance remaining trend exceed moderate in on strong power long-term headwind the we quarter. quarter business conditions cash raw anticipate Investor New manage providing in fourth will We financial the continued of an expense fourth we NRV to and Day webcast flow to that both and those be improvements strategy in Xth. our at as In forward November on underlying our results year-over-year

consecutive XX the quarterly is conference have with this interactions shareholders my analysts. and one. our after Finally, I and last results enjoyed quarterly calls, earnings

nearly to long comments to have work been honored in of for to I ATI a very proud the year opportunity XX has privileged the career for help ride. and I Your and had had extremely entire my and humbled fun ATI all questions am to have us opportunity years. better. lead am make eight and It

our materials to integrated our company and over on long-term for specialty shareholders sustainable for create communities the focused value made employees significant customers creating progress vision opportunities on creating have which operate. aligned an we and in and while We our

much While but am the remains, creating case. much Wetherbee profitability strong to ATI has through more Bob I always work been experienced values-based confident Bob focused leader that a the execute has and Bob his leadership have will to team strategies. vision him team and strong first efficient as deployment and I be Rocco, great is question, of sustainable extremely will the we our that supports please? lead capital. He accomplished, ATI success. on that a continue support will they may the

Operator

Absolutely. from Today’s Gautam of Cowen ahead. first Khanna comes Please question go and Company.

Gautam Khanna

Rich Bob. Thank you. Congratulations, and

Richard Harshman

Gautam. Thanks,

Gautam Khanna

like mix, So, be I wanted the you had particularly on it hey, about this on normal half you look at may that what but have half of What is to year High I QX, been the into as strong just there us have in we calibrated Performance the first to move just might High a that XXXX? but mix. Performance? anything color rich gave get because – mix, of like relative we – first unusually know expecting want looked should to year,

Richard Harshman

Yes, I been deliveries. of that, some shipment result billet the was late there the of deliveries late a quarter of engine OEM particular stronger to recovered a that maybe continuation have forging first in think largely that some powder jet

catch-up So, we first had quarter. a in significant the

the rate from legacy increase are the into program the of occur to volatility next-generation in in have you engine programs. think business. of programs aftermarket, is words XXXX jet still that and that are programs think is second in to next-generation shifting a lumpiness, continuing I in from don’t extent maybe production, transition does lesser favorite between and my a strong will XXXX legacy this legacy the of evidence demand quarter programs XXXX. is mean, when think one really and you I I kind a the I that you the the see same The year

In you’ll growth think mix, a continued see next-generation in of the mix. terms I the

the the am the about side. the in to from the to has stronger – in lesser half XXXX, I a half talking Stronger engine, think is move the to XXXX been airframe and this certainly extent first commercial business we even by third first management is quarter think supply rate in seasonality think that supply chain the within be reaching fourth issues. last They What has ended. the exacerbated out. being couple the as the being going of of XXXX impacted I historically ramp, quarter the aerospace, stronger impacted mainly not some ramp some and by – I in a which of inventory move in the that than second I that chain rate to problems on we business historically primarily are due As year half smooth the of commercial year, into will jet years

at XXX is I into obviously engine – get You that The Bus so going backlog. on and in accordingly you OEMs. think exists XXXX engine I then Air than all XXXX, are those hope backlogs the continues supply and the if at to in as then ramping companies, challenges in the would both jet Boeing next-generation chain you support to ramp and jet that some of still XXXX in as exists platforms. the chain in have up strong predictability think the that rate supply more the But I you’ll will have

read you reading if whether not are as think long-term trying – short-term trend basis to I you if So, something a on are intact. is or to gyrations the quarter-to-quarter into

much far into too scenario. to I John, are think do add that reading anything? want you you

John Sims

agree. I Rich. No,

this supply that think next-generation like people in both are is, are the like in the look most programs. I legacy as involved programs this aerospace and Gautam – us, chain involved of take at a we

going some So quarter-over-quarter, as as lumpiness, increases, through. the Rich ramp on you as we the move to are new and programs see calls rate that continues, it

be us and the and to with quarter for be of it we We kind higher being way, three quarter is on quarter some going of to highest in do going we it going because we the year lower where an more the things look see between. what – basis. So, probably take two is somewhere quarter are one a smooth four annual to are that at

So, it. that’s how we look at

Gautam Khanna

a supply this just billets. HPM more follow-up in your implied then, around terms abated? on on And in come thank quick Okay, your for Or that you. the powdered constraint is of Has guidance? segment QX what’s comments

John Sims

gone been Yes, challenge ongoing to-date. that Gautam, – degree an has on have have that abated we that’s to we some

exacerbated problem was occurred challenges able lead in for some think be us saw to I times to we inside the react. were that QX

very requirements We customer with working those to are part our further actively our to working to risks continue try closely anticipate and to abate we are on that.

Richard Harshman

the qualification. to on might and status the programs qualification you powder comment them billet our want John, of with

John Sims

– Rich. great so, and contractually you it’s that I The in one point, too. – qualified Gautam, the which are a supplier those Yes, program a described is, we just are

We are we for every midst that material of a qualification forging in the other from basis. programs consume

couple safety the further that should in in volatility fully we should provide is need stepping sourced and So years, qualified a of we billet capable measure directed to supply. in event within of be next and of there the

Gautam Khanna

Thank you, guys.

Richard Harshman

Gautam. Thanks,

Operator

Richard And of our Buckingham Research comes next from go question Safran Please today Group. ahead.

Richard Safran

Thanks. everyone. Good morning

Richard Harshman

Good morning, Rich.

Robert Wetherbee

morning, Good Rich.

Richard Safran

you. congrats Rich, And to

Richard Harshman

Thank you.

Richard Safran

question have I I for first Bob, think you. a

you remarks. the the – your announcement in on opening conversion agreement I spoke in of So, that saw the

agreements? us various are that about capacity also you mill? that couple Am Where negotiation? could in on you HRPF that things tell agreements And does the the correct have the that. you that on of four of status on four do of remaining So, that take are working stages I

Robert Wetherbee

Rich. morning, good Hey,

up at really relationship of the slab a to of XX a actually NLMK We to XX, HRPF. It We’ve agreement. depending are start last produced us first, the course to during We the logistics then ramp the It the the the should relationship. for by source, is months it pleased of utilization We how place to product, being to XXXX. points effective end-customers sold on XX specific HRPF proceeds do six NLMK beginning see getting move have sell long-term announced very in long-term invested that’s product. NLMK as last with followed a nine the already. week qualifying product the

it NLMK half and is next runrate great should a its the year. accelerate first So, off QX relationship of start hitting the in to through

the than for two others. another plus has been should pipeline, a are in is NLMK, We still are the with utilization the from long-term to to in gives to do I benefits for our terms the of we add partner combination and that are the to base. the other of the to Stainless line conversion JV see plus JV, of clearly XX% HRPF business next HRPF our XX% utilization the the plus asset ability core the us put would target what’s In a closer utilization A&T we finish which and XX% working producers. second say, looking XX%

and prioritization. two qualification a it’s So, issue active. there putting Two would wings still be that and very are that’s really into the in them that acceptance that customer are

Richard Safran

thanks that. Okay, for

The question second – you think for maybe I on I had was Pat. just

to about You had cash a generation. lot say

deployment capital you dividends, priority be in buybacks, the being the balance fully if about how I to cetera, ask, given the capital are thinking I’d general. improving is thought immediate might thought sheet, here. I And et know to So is deployment? to you starting that recognize any I wanted generate but there cash

what if you are So, I are on possible? about about timing could thinking comment maybe if know it here it, just to and the want what you thinking you

Patrick DeCourcy

on The the still balance sheet. improving near-term Rich, is focus,

and So, that we’ll The funding CapEx our obviously. priority a requirements focus high fund is have on in the reduction near-term. strategic growth to then pension debt we

that any focus reduction still time. out on a debt can do have have $XXX as debt So, We issue million well. we reduce that’s there we at

we is our to it’s couple discussion to measures And question shareholders be there beyond the really we potentially we then undervalued the as who and increase we potentially to balance our in a consideration cash couple the Bob that years would improve the a not next and basis, subject rest and of with sheet obviously So, that near-term. be continue near-term, return a here to at flow those or improve believe Board, balance think We on improvement dividend can time. think I sheet free turn years. would at whether about of ATI, I’d say of over buyback based significantly cash of improvement next the stock but to the the longer-term with will then, the and be on flows

improvement. be considerations. about The is So, near-term all balance those would longer-term more sheet

Operator

Tanners Please ahead. from And of Merrill today Lynch. Timna Bank America question our go next of comes

Timna Tanners

good morning Hey, Yes. everyone.

Richard Harshman

morning. Good

Robert Wetherbee

Good morning, Timna.

Timna Tanners

better a morning. of sense little wanted try Good being I and guidance a just to suggested. get the to what’s understand

I of was the a in little demand but in there misunderstood, being ahead comment with runrate, script segment, maybe So terms of a High the perhaps starting about Performance bit sales.

So, that inventory wanted is been something that do to sustained runrate general Or and build? that of the space you going Do demand engine the has just can so in get on runrate pace there forward? in you think going is forward? the thoughts your be think for far jet is kind side and sustainable is that that

Richard Harshman

ramp. the a Yes, I the we if that made being rate intention. certainly ahead our of think wasn’t the don’t we about I mean, comment deliveries did, –

I the off. hold to of side, for being not are also are there to have in we comment products, only are – in deliveries. of asking the that, about we a recovery forgings. doing on that we seeing think materials, think as is, and They more side, I the as deliver very less I first are that more. capacity is but the in forgings made we not the from airframe the customer for because the were quarter where asking the mill is that question or are demand us elevated on response terms asking my us But was late for They that in emergent both engine to what our more, us and sales actually well

forward chain challenge the for the So, with to demand. is to going up I think supply keep going that to the be continue

answer because to they if and some but of programs a ask because a challenges catch-up, I put hold we don’t exists question OEMs perspective engine – because kind the might of material everybody behind airframe makes to least from sense, us. question some And the chain near-term. hard created curve is the any to elevation the some being need airframe not think is XXXX and replace Capacity, fast. the to productivity in if as them do that it never know supply is ramp, engines the no. at you jet engine time really and running get learning is that rate is expectations of capacity are only logical side. on in the on very have you you a does at delivering these support at the are In there spares that, as be ship think also of that in engine components – added the getting that improvements an absolute into and XXXX, because of point we those that our which The in rates to the in of they’ll ramp engines I in very on to as longer-term, that, rotating there spares I don’t, we XXXX, meet rate the of think on the largely timeframe, somebody pushback platform exists the production a aftermarkets the out of is next-generation going the

for but part, customers thinking for else, I I additions are case bring meet that are continued there is But, – capacity. capacity we, there that expectation worrying go and we our with to we or in not would demand the extent do of to I focus am us Bob, a too solid the there don’t make the to have much about future think on force is anybody going - business can’t we on these the that to and Board is here be speak would t the least to good I we how we talking about that the that here there. think sitting So, investment, at from

Timna Tanners

intent Day. that we’ll am answered am more it sorry, question was great. about Investor that hear I and the you No, I not sure at the

talking Rolled the not expect Wouldn’t to I are are guiding be you but just about the sequential going you the out be to profitability that to course of enough going why I would those the – passed a squeeze always point being now? if one still your and profitable, to arrangements? comment increases you you was Flat guidance continue tooling of confused you tooling understand to arrangements weaker. or cost the I are the Products, to incremental be that on through expect on would profitable? the So, to have specific profitable but, mean, would then on are weakness, even contribution to end still reduced be with sequentially arrangements you have be tooling offset

Robert Wetherbee

Yes, is so, good This morning. Bob.

the in, kick of the quarter In tooling in XXXX. terms of first agreement, will it really

the nickel the There the FRP’s I we’ve the progress business. profitability in have the So, people of phase are comment headwinds are made, sensitive earnings and that ferrochrome a is great to how QX who and stainless. actually that news made around refocusing questions,

and our of to our opportunity products. fall, that will agreements issue, to our as of to with stainless the will actually us, help XXX to But when as grow prices the that have to structure now predominantly our to about have profitability, nickel million of part questions in the XX of transition do place cost XX recognize important We the benefit have last IBT which of exposure we well months we prices reduced benefit we the think for all a the made And significantly commodity it’s conversion XXXX be across lot I over to utilization and sustainable us still of in the actually positioned as impact. and we get restructuring. ferrochrome come we target conversion is are to But XXXX. believe well to cash the

just so, the for the FRP reiterate repositioned we And in business to has profitable long-term. despite headwinds wanted be been our that , to

Richard Harshman

the the were have we question headwinds, we be mean, we U.S. I Bob, may Flat in Products not past, because making Rolled of in of and had those being those the past, answer that would size proactive operations. in and mean, actually would I profitable in because that, no, and the answer great Yes, the be headwinds

team that, So That’s a hits head. doing he nail last that’s on the significant improvement a all the the and and been have two the years. over Bob result the work his of –

Operator

Please our Josh from next go Sullivan Seaport comes today And question ahead. of Global.

Josh Sullivan

and congrats. morning Hey, the echo good I

Richard Harshman

Good morning, Josh.

Josh Sullivan

agreement conversion end million of of at FRP question your the you the these and these as to kind are guidance conversion Or looking year? so, there, one factored the the next additive about on that you for EBIT expected follow-up already by carbon - year? talked to was the had agreements $XXX of Just

Richard Harshman

morning, often the very been could were are confident Hey, step the through been Actually, excited. this sales we was building for see XXXX. qualification has supply teams the they being Josh. our efficient running. have customer, made in million and in It $XXX case, the progress good and chain factored NLMK obviously into We target logistics,

So it has been in the million. added. It was included already $XXX

Josh Sullivan

filled is and just new guys at can talk are you on just has Where one the on. the you And are isothermal about how maybe in through all year, where backlog then, up development? forge And that working Okay. we that?

John Sims

Josh, is Yes, this John.

we operational gained. We contracts expect being and in we have to be XXXX currently utilized that as this on forge new at online opportunities capacity schedule the it’s isothermal That on in to on based is come and point schedule, budget. time, forge on planned and that

Richard Harshman

online pretty So, is the new much comes for it capacity, basically spoken when already?

Operator

Thank you.

Our comes KeyBanc of ahead. Capital Markets. next question Please go Phil from Gibbs

Phil Gibbs

Thanks. Good morning.

Richard Harshman

Good morning.

Robert Wetherbee

Phil. morning, Good

Phil Gibbs

segment all magnitude as impact into what’s a this order fourth mismatch in And of quarter. size headwinds Rolled in in talking I in the that on that up LIFO add question we the LIFO then, QX? Can Flat the are from this had Rich, well? about we headwind

Richard Harshman

question. Bob non-LIFO question. take the on Yes, will LIFO on the will Pat take

Robert Wetherbee

Phil. morning, Good

Phil Gibbs

morning. Good

Robert Wetherbee

about based in the When nickel QX. would LIFO think piece? the to QX. inventory or I range to down estimate from a from to do handle effect ferrochrome the in $X.XX QX the the $X.XX nickel pound, want lag million at and to to about $XX be you $XX surcharge is you QX Pat, look million on and the ferrochrome, change so, We

Patrick DeCourcy

Sure.

months couple million fourth that’s projection. material quarter. $X raw as of project balance like here, we by a we and the about NRV And it in looks the prices a currently have go still to exceed would but So, we current reserve

So, it still around little move could bit. a

Phil Gibbs

And in And the step-up? helpful. the High isolate second we third your in perhaps the Performance of That’s was bit better versus in Okay. in terms versus what maybe the mix that little change. terms of changes understand much could own could mix of the could the we issue Maybe second? were third how items quarter help quarter quarter the a us then powder if billet Metals, maintenance

Robert Wetherbee

So, to time, you those? Phil. are disclose us this we this We not are point in prepared do at At to not looking for them time. quantify that, would

Richard Harshman

Mathematically, we Yes, improvement the that – math think point quarter and the would about much way Phil, the put of the that. I the year basis segment best are segment we XXXX year-over-year. XXX see confident of profitability quarter about you do to can what of of is, to fourth think of hitting the pretty in at the fourth And you achieve profit a operating have XX%. to do guidance

consequences of outage, that in benefit from that have which hurricanes, billet, I of the by You lower have think the our there of only fourth the right unintended the to quarter for reason A all that source coming for to the that completely been that impacted more for but of U.S. the the be XX%. in third at big driver no softer but mainly that people maybe or recovery is benefit, a the be And hopefully eliminated, above bit mean, in expect in the lack the in the mix a I quarter big little out as not also fourth than don’t as but typically quarter delays the elsewhere was the But directed quarter some of primarily shutdowns somewhat was most of And stronger quarter. effect be driver the of extent it third expectation we second quarter alleviated somewhat quarter, in But won’t you likely and the well. of don’t because lower from us fourth because maintenance alleviated. slightly we not nickel the done to billet revenue, revenue do. will we have the because have quarter. and third day European the in quarter. it the The material wasn’t standpoint, was a the X.X

year is hopefully to to we fourth on that the the first have will operating higher of revenue king expected quarters. the to in at be of three demonstrated be profit – of quarter So the of one have quarters a recovery average the

Phil Gibbs

Rich. Thanks,

Richard Harshman

Okay.

Operator

our Strauss question David of Please today next Barclays. comes And from ahead. go

David Strauss

Thanks. morning Good everyone.

Richard Harshman

Good morning, David.

Robert Wetherbee

Good morning, David.

David Strauss

Pat, is this of prior the for this running of is range. What top-end think I the to to? CapEx attributable the above that sort at year

Patrick DeCourcy

some Just we as said spending on our earlier of key accelerated projects. a couple

trying are manner. to get done in We expedited those an

hit So, our ramp. on can contract the requirements we

you of more will. pull Just a merely if forward,

David Strauss

next we as on pension, then year-to-date? rates and you on where your about what’s potentially is should year about your how maybe as offload return progress think of talk with And liabilities given expense Pension to can pension? going some Okay. well

Patrick DeCourcy

the you quarter but fourth actions QX We I won’t planned have of in the will more and we on but of pension comment we market returns planned. within intend call, on first returns our are. to about guidance I and on the return to the give will the in them that to additional talk actions intend within liabilities do give where profile overall some actions we to benchmarks our type year-to-date, executed guidance some quarter have work with additional side. you Pension are line do

end we year. where see up will We the

it point. that’s at think this I

Operator

Thank you.

question… next Our

Richard Harshman

expense the for in up year That retiree levels and is XXXX. of will guidance the in terms what as primary January guidance expectation least at and in on where other – we do of with will for always ended terms asset Pat pension give we

Operator

Thank you.

Kliewer Our Please comes of go next Deutsche Bank. Jeremy from question ahead.

Jeremy Kliewer

morning. good Hey,

Richard Harshman

Morning.

Jeremy Kliewer

there really HRPF Couple to imported really guys months you volumes any now? and going And couple is has JV there utilization clarification been through any questions stuff. slabs now? a stainless right on rates there the Is for

Robert Wetherbee

Jeremy. our target. remember It’s to tons. is morning, is about at The I at XX% of Good Stainless Bob. This XX% still operating. is be target Right. XXX,XXX venture, our to A&T joint operating

are slab operation In of actually are importing was utilization the we and we QX, benefits paying the We the HRPF. neutral the and tariffs. include

running. So, we are still

Jeremy Kliewer

And said, season or you kind right. to follow-up is season then, coming of that, contractual All mid-November. up the mating here

offer So down in XXXX? you guys to to kind exemption? are willing without shut you volumes contracts the prefer would of those any you Or

Robert Wetherbee

the case or the of confident exclusion does in the by say, the not, whether facts established Commerce. get exclusion, meet Department about think, talk I of our you we criteria I are when we – U.S. that very would exclusion our it Yes, does the

what that Washington we The an things that outstanding are reconfigured reconfigured trade can’t that’s and on be of We JV every to have dollar with and in don’t the period neutral we the XX XXX been control part have tariffs. done every be time. has tariffs on of this this business So, opportunity long, the looking we typical JV during a of policy. focusing goes But has control. job of those the at business of the this we team type Historically, breakeven to months tariff. for to last XX period the during can

long-term. for the of recognize I how Now, uncharted we to tariffs play all terms are will in think in we joint are committed we But, out. waters the venture the

it team up. ramp ready Our and we understands the it’s it But, are in the where level, And tariffs to have XX%, when operate we customers be the XX% the be on us, at a to will the have that time. supportive could been XX% lower are the where the depending and be tremendously today we at continue to confidence XX% and operating level JV it market focused is long-term. be could for behind will on

Richard Harshman

this addition, is Yes, venture, joint XX-XX I in remember, mean, and right. Bob,

partner. process decision-making between process us is a the and So, collaborative our

and the to views material the I going a supported of long-term that combination. not marketplace on that finishing in belief but we as parties are coming Indonesia, producing believe from the into very of That quality went both of we delivered was product be is that by the believe, the it the this through slab the which venture think customer the in products. with the reactions a which ideal the We in JV’s that’s the of commitment high-quality also and time, line. it has quality DRAP HRPF been kind being only

are That holding the our or the together ensure agree intention the tariffs pattern products its never was JV the at to would helping and make that from intention in to decision well. as doing remain planned we that bit the And that at the can wants, a be makes ways is the minimum, unprofitable and But, JV hopefully, are approach with to tariff If designed not place. would support doesn’t to of the partners government breakeven, will operating of the it see until the in be that standpoint U.S. if ATI’s can to if even of intention the JV. be done this we not If there market of a partner little that The are not supply the government continue that what be the ideal have continue the to work soon, to a That’s lower sustain parties is money. customer matter. dialogue the decision. rate. we than to a in can JV high-quality and lose so, continue – the and we

Operator

next Chris go Research. Olin Longbow And our Please of ahead. question from comes today

Chris Olin

Hey, good morning.

Richard Harshman

Chris. morning, Good

Chris Olin

maybe could feedstocks? ones. tariff cost think alloys, be HPM like, and Or are of matter? asked. have that basic how had then, there and that, industry of maybe shortage Most for a the I is guess, what master we the zirconium on concern steel segment? we the first that risk there I doing of two scrap about added other even for was, in China vanadium impact is looks now the some my guess It on potential just questions I given should the in titanium top any now XXXX

Richard Harshman

John?

John Sims

in on John. either contracts volatility the of have have Yes, those within to we have we we price Chris the marketplace, those I through. don’t any in what mechanisms have concerns this and pass is XXXX

Chris Olin

that Okay. out or contract? And any kind break then, yet? awarded of on update you any engine Have GEXX the been

John Sims

year. Hasn’t – that Expect completed been mid-year next to before In yet. awarded be by discussions.

Chris Olin

Okay. I have. Thanks. That’s all

Richard Harshman

Thanks, right. Chris. All

Operator

Korn Goldman Sachs.Please And of from our next go today question ahead. comes Matthew

Matthew Korn

everybody. Hey, Again, good morning congratulations.

Richard Harshman

are Good morning, you? How Matthew.

Robert Wetherbee

morning, Good Matt.

Matthew Korn

well. am questions a all quick week. from Hope good me. had you I Couple

profitability Did expect ATI progress you this cash for we do go still small the profit what to to breakeven First, into XXXX? in products? levels that quarter? And a

John Sims

John Sims. Yes, is Matt. This

and quarter guidance our was year breakeven near think that this achieved we for three. in I

guidance. expect profitability in of our four sight improvement in per which and is XXXX in is We line quarter also

Matthew Korn

Excellent.

coming through been has everything expected we So there. as

Richard Harshman

just have really and I I great done Matt, to Yes, if is his appropriately could think being a He job. humble. that, team add John

are We want not where we be to yet.

ago the tough and undertaken to are And you done for very the where have an rewarding they really to We are what fully. make. But they making we been need giving they effort last what nothing the heroic. of committed of people with John being lot actually years customer complex can has ATI that from have the people investment as want, of couple that to and that short shareholders profitable. wouldn’t on and be there timely to the customers business not have in a and It’s basis we’ve it But these that business are or process five a a across we recognize need been time spends support a some of casting who business years as disciplined of bright his and lot very augmented with today. manufacturing worked parts disciplined which

Matthew Korn

Excellent.

follow-up Was Let the STAL, there any year sales, early seeing auto this JV largely market up of that had sales or expansion then in there? electronics are way. of me got life versus Thanks. the Are the there slowdown projections? and to On other has any you concern you pace serving cracks been auto, brought that other indicators. areas markets, how concern since Chinese the the then industrial more in production, pace patch

Richard Harshman

Kevin Yes, Matt. respond that. I to am to Kramer have going

Kevin Kramer

morning. Matthew, good

end-markets majority of key product global It to what the and in The market. truly we with manufactured consumer that into China. confident is and quarters while pretty through is are vast a three We XXXX STAL. first the regard look are electronics

Second largest automotive, is more market which to indigenous is China.

Our STAL new X opportunities its investment capabilities. to give with continues

made, going China It’s us to a forward. have and very we year bullish. investments in I think the think in unique I continue and XX We venture well is of joint very which position be profitable itself

Operator

And of ahead. go from Bank America. our of next comes question Matthew Please Fields today

Matthew Fields

I congratulations, everyone. my want as well. echo Hey to

say back you that I do in of that, to sort Bob, know, getting ultimate Would you credit said your Sort is picture, share as times investment-grade rating? investment-grade Bob, as of same guys come have to that rating. of bigger just sort vision you goal multiple again, back of get to in, and you

Robert Wetherbee

We simple have as about clearly, generate them. answer The customer aerospace to morning. And priorities commercial to to and has I that certainly ramp world-class Good the those is, commitments to continuing for been the I the in do. and cash support to are the $XXX John generate an us made this come to Those is execute which million – the talent three, talent the or us sheet. continue fourth of of talked me to into the number role, investment-grade about XXXX. this organization into morning FRP, talked that. execute priority both get balance The build future. a for target pool IBT is

of Rich ATI Beth part are Kevin John Pat we the leadership the that and committed Elliot DeCourcy, Sims was the So, at part still Powers Davis, of, develops was company the path. I I helm, with Kramer, that team of, and executive to and strategy

Matthew Fields

to the CapEx that we in two and about, a of ramp positive anticipate just call maybe increasing not year early into and you obviously challenges priorities, struggles, but demand. Should talked you comments in and potentially kind With XXXX one made Okay, very about thanks. next customer as meet the one and the that more. That’s helpful all up well?

Robert Wetherbee

I’ll any speak that Pat to add can he add. color to and then, wants

anything? Pat, our want For the do planning are below add you our at started commitment. we in depreciation that target we have this our with is have and XXXX, XXXX to we and time of year, CapEx actually at have sync or – to

Patrick DeCourcy

targets that adjusting the that build with so Yes, their customers, their the to add looking our is, are that, thing we and at only Bob we I’d rate ramp ramp. are meet involved can CapEx and continuously at the and to our looking we requirements related

within stay will we and but So, our in amortization depreciation total.

Operator

you. Thank

ahead. go Our question a Gautam from Company. Please of Khanna follow-up Cowen next is and

Gautam Khanna

ERP what Yes. far, done about how sales and had product Any potential annual to is in a point relative so Boeing given of to the titanium of wonder airframe headwind I QX. suppliers And this Thank up compared they view the minimums a become And some other was if considerably just, at you on just some the being you’ve basis. wondering that? next with the year, related just I – have catch-up this may some Boeing transition? guys. friction on kind does

John Sims

we’ve what John. is This for the Gautam. I several past seeing years. of this indicative is that Yes, seen really say we what would year are

contract We have minimum. our

to within we emergent successful see achieved that whoever have and really year, respond I that can for out see time been those that that’s doing and get inevitably there years. changing. it’s And many demand the business we’ve required that lead every We don’t

the always overall So, count I And of believe are can know don’t to percentage I any year emergent. than not if it, is in our is anticipating dramatically we just it’s different is in would overall change we’ve say, we on a last to sales volume that’s given be there in that years going seen we something and perform. several can

So we focus that. on

Operator

And is ahead. Please Keybanc follow-up question our Markets. Gibbs go Capital Phil next a from of

Phil Gibbs

reasonably tariff obvious with that the or you. seemingly other for are the Tsingshan. thank are other that any notable I impacts you tariff are seeing of But for rest way the know joint the venture impacts Okay, right there business now? one the

Robert Wetherbee

again. This is Good morning, Phil Bob.

but the increases say who configuration and change gives deal of supply had not industry, they areas, are other decreases in terms In that the tariffs with, we or us more seeing people I demand. global automotive have a a in would overall to who moved in have What by to regional supply balanced. may are is product are

So, reconfiguration. of a supply chain more

the They are do think they tariff to the front? anything that comments buying I related the I want cautious. John, ahead. to think add people for tariffs. you on are could I two their make needs. are don’t are probably buying Those

John Sims

the High from Performance good standpoint. are No, we

Operator

session. concludes turn to to for closing back would I you.This the and Thank our Rich remarks. any Harshman question conference like answer over

Richard Harshman

for Okay, for continuing thank your always, the call ATI. on joining you thank you in and everybody interest as us today

Scott Minder

and conference concludes Rich That the third today. thank our us call. you, joining XXXX listeners Thank and quarter all to participants you for

Operator

Today’s you concluded conference for attending thank thank has all And we today’s you presentation. now and everyone.

lines your have disconnect a now wonderful may You day. and