ATI - Earnings call transcript Q3 2019

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Operator

Good morning and welcome to the Allegheny Technologies Incorporated Third Quarter 2019 Results Conference Call. All participants will be in a 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, Treasurer and Investor Relations. sir. ahead, go Please

Scott Minder

Good XXXX welcome is conference website on Nicole. Technologies being the third our atimetals.com. quarter call. at morning, you, to and Allegheny broadcast Thank This call

Wetherbee, President, Chief in Pat Vice President Vice Sims, Participating Kramer, DeCourcy, Commercial Vice Performance Fields, Senior segment; High Financial President, Marketing Kevin Officer. and President, today Senior Flat Executive call are Vice Executive and Executive President, Officer; Officer; and the and Chief Chief John Components Kim and Materials Finance Bob Rolled Products;

If should you’ve screen. connected Internet, to this call see via the you your slides on

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

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

We the like assumptions reach shown release Please are will a question. forward-looking would in that various on subjects slide. to everyone noted ask earnings who note as to all statements and this caveats to and try

call Now turn to I the will over Bob.

Bob Wetherbee

morning Good joining strong ongoing were solid quarter our and for Scott. facing both continued in These and growth Thanks, end-markets. key customer our generated results near that execution line with segments. reflect operating in expectations demand us. third for results We term thanks

forgings revenue From for year-over-year industrial basis investment segments the titanium a when divestiture total business businesses. perspective, both expanded and castings adjusted ATI in on a of the

to a year declined year-over-year improvement. the prior modestly segments primarily stronger profit operating comparison which to Segment HPMC offset due period segments the FRP

the When items financial earnings slightly the but results third the non-core with detail prior in sales to versus announced in both earnings Pat cover and assets quarter. measures communicated quarter call. significantly John, per these in XXXX closed the will income expectations. share Kim, more due excluded, previously in declined year, versus later and Net increased line are that previously third

imperatives. to call, highlight progress earnings strategic Page I similar to X recent We on will to want several turn and our last

execute our jet on aircraft process to ramp to advanced highly and continue world’s and with single- science we and based engines. engines the to leveraging technologies production materials technical capabilities unique customers, critical for materials the most the First, closely produce broad components required and other our work products. supply double-aisle We and

commercial result, ATI to engine growth for and share jet the a cast As near for horizon. of rods increase as the and as markets materials our airframe further continue powder sub our existing opportunities accretive well forgings advanced term on with

the we production for MAX remain a Boeing to destined and With XXX and for components regards return to term near XXXX. situation, backlog use and and our subsequent advanced continue the on materials service MAX for MAX rate a programs. enjoy to in order the optimistic in We book growth XXXX strong other and

we customers with OEM build and orders a our constant specific We are we near said in rates. to not customer produced communication before, as report it

an is that many a market. and important MAX but important that and program OEM airframe it’s we XXX engine including spare for very healthy one of to also parts to programs it’s supply remember global ATI,

Flat raw our towards regardless policy with trade Rolled of material progress sustainable make to or Products continue we Second, segment prices. profitability

Hot-Rolling on our Pittsburgh. focus with asset partners stable work to driving while results near Our we at utilization products more value is high financial improved our increase Processing Flat and facility

several improving earnings Third, balance call. the events quarter to on our sheet on strides great second with we of our make discussed continue conclusion

balance million QX. cash exercise to to of intend meet divestitures quarters operating quarter significant sheet sales we hear further We received As third cash with pension from generation, Coupled we the cash. ended business strategic annuitization over growth from our cash in and you’ll next concluded objectives. we deploy and strong with asset our over the recent Pat, proceeds and $XXX several

our extended facility based we’ve upsizing adequate asset XXXX. growth in Next, initiating by our facility million liquidity, through lending since reflect it the to XXXX, September, to $XXX ensure long-term

the great expansion demonstrates a the we’re this the growth example deep crew extension soldiers long-term specialty components for substantial components. sailors, we is to year the of BWX global recently and This to helping And at of competitive manufacturer protect lastly, illustrates to of X.X our Technologies announced naval alloys air and and opportunity. team moat accretive defense commitment Congratulations supply to contract our agreement ATI around industry world. how capturing materials for with the

work a the leadership imperatives continue in coming achieving and ATI making grow market progress expect to team’s strategic our shares to The committed aerospace to we’re and in tangible all months. significant extend diligently contracts our We meaningfully long-term defense several and areas.

further look to business to and our increase to generate current ways continue from value for faster portfolio. go shareholder We

We a are improve broad view we to opportunities being as and pursue taking performance. aggressive

to John? segment And HPMC the over I’ll of call turn John call and in the I’ll wrap take questions. to and end up to results discuss your the return detail at the Sims more

John Sims

Thanks, Bob.

Slide in end segment as business margin to profit improvements margins despite these uncertainty, third financial HPMC Turning revenue solid customer when growth growth actions year-over-year X. expectations results our achieved posted management as divestitures. the with industry operating included aligned The quarter well and segment’s We that ongoing and markets. cash smaller for declines aerospace adjusted

and by offset by business increased grew caused volumes businesses actions. primarily due mentioned – management X% forging demand which prior isothermal facilities, to the lower versus Irvine our previously in excluding more cash forging revenues excluding Poland period the HPMC divested than

growth product communicated materials growth mix additional the offset both within our was segment to by weaker basis and expectations. year-over-year line noted the and partially operating third operations margin forging This XXX point The our prior demand earlier with and specialty by forging the quarter driven expansion with versus returned in was our in previously year portfolio.

expected, the primarily declined shutdowns volume profits planned primarily operating Oregon and quarter as Millersburg, from operations. due summer in and Sales driven customer maintenance to impact XXXX versus normal second production outages our

rate and to volume results quarter specialty aerospace and both our components product growth. XXXX. orders, customer year-over-year expect continued fourth materials quarter improve jet defense we industry materials collectively in to above by due current Based lines sequentially on driven forgings for expect maintain financial within we customer as Looking our demand delivered prepare our and to we increased fourth ahead, growth production engine and

we with more the these foundation award, actively several materials awards in building and ATI’s next defense potential earlier well profitable contract on the market We sharing will grow near on engine our and these decade. into working new provide extensions to events to with growth for and and look share details Bob’s future. forward aerospace jet the business are naval comments, Along significant agreements Technologies, our Lastly and BWX airframe extend customers. nuclear a recent long-term

to generation grew unfavorable actions. within HPMC The quarter the for accompanying sales X% segment’s Turning product by table Commercial divestitures cash which pie one Slide year. and prior customer’s X. jet adjusted next due to revenue compared mix largely business by chart by engine driven to ATI’s specialty declined show primarily market the management materials modestly third aggressive

by despite Commercial strong airframe period. prior a year the in revenues to grew growth comparison year-over-year X%

second building continued be We XXXX. continue their and on of Sales primary demand. performance increasing the by XX% gain to year-over-year key defense to support nearly the pace our through emergent OEM healthy quarter a smaller a growth in their market through are for supplier customer privileged

by quarter due and sales nearly enabled military due market rotorcraft. nuclear were across demand, defense products soft biomedical by growth jet Asian for to was XX% grew propulsion broad-based demand. sales third all ATI’s Energy market of increased while markets The declined engines led medical primarily sub-sectors and to

to uncertainty aerospace despite related summary, near In the XXX industry term defense we and and continue service. to to growth MAX returned see

taking to We are the our ability our future long-term extend defense aerospace steps growth and and expand are and confident to agreements and in deliver markets.

will extension growth visibility decade. revenue and multi-year well is Technologies announced prime BWX recently example. into the with earnings These Our a provide contracts next

now Flat products. will to call to over I Kim talk the turn Rolled about

Kim Fields

Thanks, John.

high expected, Turning application. continue FRP plate for product particularly at for to the alloy gas electronics primarily and titanium and used armor our in venture expand China. for vehicle consumer nickel remain joint X, in oil use Slide Demand combat solid volumes, value segment STAL as product to

X% were year XXXX. both higher quarter the second versus As prior segment a and result, revenues of

Shifting to profits. operating segment

to Third quarter by versus several quarter results improved the due second factors. XXXX XX%

increase our segment First, high-value overall margins. product benefiting sales

improve produced China. despite in launched benefit for Chinese venture a slowdowns from electronics some capacity markets. demand outside a joint STAL to recent in newly Asia quarter, of the after from models particularly initial increasing we’re are countries our Second, sluggish consumer first Global seeing expansion continues and Asian

nearly And third, the joint associated while we quarterly narrow million. with still $X A&T work loss our by venture in Stainless progress,

diligent with the negative ongoing continue from the through quarter, our Section import tariffs to partner despite cost fourth in neutrality work controls. to cash XXX achieve impact continued We

HRPF. the to rates absorption conversion lastly, volumes And and utilization improve third drive higher grew helping costs of our carbon year-over-year quarter significantly

the agreement to expect NLMK soon. We carbon our announce of shortly conversion extension

This improvement, operating the results third did impact primarily a prior they decline third expenses tariffs sequential our versus While joint quarter. benefit on XXX due stronger of increased the was ongoing retirement and the quarter Stainless A&T Section venture. to significant demonstrated year’s

inventory process improvement Briefly ATI’s through to lean on FRP focused working will in in its which manage segment shifting overall cover flow are These Pat reduced businesses. levels momentarily. due the cash capital U.S. flows, accelerating initiatives the gains detail evident

our standard are quarter a expect continued in the at elevated for higher project Looking for precision fourth and seasonality, ahead customer to expected than despite rolled production U.S. strip the traditional nickel the China. and the lower segment stainless quarter, early titanium as These inventory business albeit demand to products lower sequentially profitability sheet decrease the volumes levels are year-end in large anticipate pipeline in Revenues total, management quarter. we normal actions. we fourth by in operations products our the U.S. from offset and in complete to third

seasonal align likely volumes, demand in expense the and fourth the higher to forecast. well. fourth This in the the consolidated as of result lower quarter quarter into with annual will result fourth a program As maintenance better plan our maintenance quarter end facility we market

to is positive in prices. the due surcharge On to the timing profits raw benefit segment fourth quarter side, nickel anticipated material rising operating

results impact venture, related increased We holidays NLMK and joint to reduce A&T USA. from thirdly the our local expect additional Stainless joint volumes HRPF downtime further for maintain STAL carbon the solid to negative conversion venture despite

impactful key time. financial results We’ve significantly year segments improved row. drive foundation Our our creating asset partnerships over utilization third in business and that for XXXX, solidly in will remain we a quarter-to-quarter levels the profitable are of long-term the uneven

While the advocating improvement change we based be can strategic fund XXX like the are ATI’s our actions for trade help existing of sheet balance that business and impact cash to ignored, focusing tariffs from on we to items improving assets actions. control Section can't logic on generating

high-value see increases in demand driven fundamental growth nickel The demand and alloy key its segment This by Slide to markets products. year-over-year our expansion titanium market strong growth growth customer to and Turning X. is continues driving share in FRP end opportunities.

Aerospace increased commercial for titanium quarter and vehicles XX% XX% FRP’s an offshore and up year. included largest have end markets, customers is This gas expand a third armor new market the significantly to pipeline were project. sales bounced China increased jet land electronics year-to-date. and and strong produce for key plating products. nickel market for across defense several That in primarily sales as products. engine Sales to continue oil growth also production in consumer our prior ally versus sub And

due nickel the led expect Quickly nickel a materials We product, titanium strength quarter high-value by year fourth titanium ongoing the but in anticipate a project sales quarter and our of materials. sales revenue the sales of slowdown pipeline increased by of large alloy by fourth strong completion looking at XXXX. of XX% quarter product in prior to versus alloy

standard straight demand broadly end and our sluggish markets rates durables for commodity finishing aggregate Sales lower our and in consumer experienced of third products some asset quarter melting decreased as in XX% our stainless contributing modestly to of driven operations. the by automotive utilization

imperative, a continues demand generating raw input on despite global environment, fluctuations. varied challenging and Overall, make progress the trade team strategic customer related our material cost profitability to sustainable

to the quarter update detail fourth hand financial quarter. for I’ll performance over our Now, DeCourcy an to our and provide Pat more outlook about third call on talk in the

Pat DeCourcy

Thanks, Kim.

Turning X. to Slide

us the This $XXX debt the credit and XXXX. important an five-year a to finalized balance step We long-term or September, about agreement, to we sheet improve extends now me our liquidity. ABL which In proactive asset based Let talking start September, by and total obligations through by access lending of our through option. of to gives provides XXXX $XXX liquidity us capacity low cost committed a a ceiling with portion revolving outsize million. our new with million borrowing extension

of capital third Turning significant an near-term progress. quarter of continues to expanded the cash ended and approximately be area capacity to liquidity. available Managed on working with million $XXX We ABL. $XXX hand under of our borrowing million

As XX.X%. the ending XXX the basis percentage of sales improved points at by year-over-year, quarter

fourth target XX% year-end capital meet or sales. and expect of objective We a to for our as expect be our quarter below the at working to XXXX continued percentage in improvements managed of

with target. $XX Third $XX on We capital were total pace expenditures previously communicated quarter remain year-to-date. our million, capital expenditures meet million to expectations in line XXXX and

pension, U.S. our the expected in of we to defined contributed million. Moving $XX benefit year the quarter part XXXX of $XXX plan full contribution our to pension approximately million as total

XX% completed our reduction third quarter successfully total pension plan pension action years. X,XXX past participation the to third also annuitization over six by people. in the more brings further over We than reducing participant This

proceeds, total second third sales our business and We and also quarter, approximately business finalized of rights in million. bringing and approximately our million our the divestitures tranche of the generating $XXX so assets titanium sales investment the in $XXX castings XXXX oil gas cash,

of sales, cash to divested we full year our adjustments these for million approximately increasing full and $XXX contributions. year As million guidance outlook, by pension a XXXX free plan businesses asset financial excluding updated are result $XX our flow U.S.

Our several quarters. cash strategic with to capital our further us opportunity position the deployment over the priorities next provides

of will XX. now an fourth with financial results. quarter for Slide I the to expectations you our Turning provide update

First, increase digit primarily focusing the revenues HPMC driven increased levels. segment, versus to the production on mid year, we expect prior by by percentage single

fourth revenues reduced quarter million by be businesses. be reminder, quarter a account XXXX to As third million revenues by lowered and of divested should $X for $XX should XXXX

about profit XX%. basis year-over-year operating margins XXX Fourth points improve quarter to approximately by XXXX should

strong we into customer anticipate jet Looking of demand, the half the first engine particularly year. in XXXX,

management Rolled single by digit profitability in challenging decline Flat despite expect compared segment, the fourth the industrial as a large markets. percentage fourth to where mainly Shifting Products anticipate XXXX we continued quarter to to the QX U.S. complete at pipeline a project with alloy revenue along product mid inventory We year in normal XXXX due end. actions lower we nickel quarter sales customer

venture decline, maintenance expected sheet to third the FRP the due lower In required the includes improvement to unfavorable more projects effect line the of will by A&T revenue high-value volumes Stainless production decrease profit to of These the million $X with impacts cost product the benefits demand. outages impacts This than facilitate raw standard and negative to in XXXX from versus stainless the material in and potential quarter. offset is segment $XX million anticipated fourth joint reduction operating results. quarter the profitable

quarter Finally, likely that to your I attention want to couple a draw of items will impact results. our fourth

million of expect we million deferred the due to allowances. of portion First, $XX to valuation the release a benefit of our $XX tax

of the that the this potential million accurately the in impact the do of is believe Second, be may magnitude nickel, in We quarter excess for zero of volatility materials, could inventory reserve. in LIFO quarter. to $X to negative range difficult the predict. average in related impact depending these material primarily raw NRV we a With of remaining expense costs the incur to on significant our

back to will Bob. hand With call that, I the over now

Bob Wetherbee

In financial that solid line with term generated in quarter results ATI closing, Pat. expectations. third near were our Thanks,

their while production our execute expand the strong portion We supply to have in our challenges mitigate to schedules. helped intend level shares our rates chain customers and satisfy a continue of ramp at and and substantial market our our production cases high sustain maintain on We customers production to some increased their performance consistently their airspace backlogs.

are our future Consistent and deploying focused our growth Directors expanding of our to our objective, balance on sheet fund with management profitable capital improve stated resources initiatives. our to and Board team increasingly

appreciate a that here I’m of minute highly as make a the ATI’s and teleprompter trajectory off reporting in ATI, fact place I’m are have by to my the up, across we we jump and calls to going we But that have energized the But conference matter scripted I close the team deliver. world. team little across all efficient As growth nervous.

leveraging to and customers to to our respond our innovative expertise are call bring the that advanced going in people technologies what first the going ATI, that at again do These updating And have times Today earned they’re relentless we us. QX we said problems on we in to for QX science on our progress process ATI. continued I’m do team do We expectations. We’ve our really are leveraging solve did calls. and our we’re and from with across world, exciting confident I our really our were the material grow. to line that and in look to forward with customers you future

So with to Nicole, that, the call let’s questions. open

Operator

Thank you.

[Operator Our Buckingham begin now go Instructions] of ahead. will Research from We Please Safran question-and-answer Group. question Richard first comes session. the

Richard Safran

Thanks. you? Hey, good How are morning, everyone.

Bob Wetherbee

Good morning, Richard.

Richard Safran

Okay.

So right issuing I I’m you know guide XXXX bat, to tell XXXX. both you, John and made you’re Pat, going about your But the comments off not here.

if some I XXXX markets willing just course top And big trending, know comment generally you’d trending if of how be line flow drivers next how wanted end possible, if maybe you trends, and your So about year. – of be. to see would to you see what the cash your

Now, mentioned maybe, but remarks, expand opening Pat, I you’ve know you thought engines bit. might be a guys willing your in I to

Bob Wetherbee

recognize a overall and defense book standpoint, contacts But one. a very been We is little that XXXX. as question order Okay. MAX your brings we the jump is naval, let then fundamental We’ve We Bob. customer will – Richard, our – in in continued ground here. with into markets uncertainty, Pat but are John we’ll missiles, and our the from and this There's issue and aerospace But aerospace good. they lot both this see demand start fit. noted strong positive.

QX of those with The the be in year for Flat but in the Rolled strength should there. business, middle moving be Oil backlog good. part the and gas projects do us sector. is see QX pipeline the should into for and good We

flat. On the type actually little yearend for side, relatively by certainly the part to based in value products more participation products. more QX diminished flat, stainless a higher of there a of industrial adjustment opportunity QX. industrial the the will markets volume the more But even we products. standard the have But in some inventory move our be rebound we’ve of most in a bit But think I bit the little from to here of

color? want from think I a well stronger do perspective, So you Pat, any we’re a for market positioned add to XXXX.

Pat DeCourcy

do The continued only are cash XXXX, thing improvements flow free businesses I’d in initiatives add flow. drive We throughout free cash flow, in both free strong levels. Bob to expect on just comment is cash continuing lean inventory to

we do expect we So the continued flow. a there – year. improvement expect And cash profitability next with strong free profitability, strong then

So January we on will provide the guidance call.

Richard Safran

Okay, thanks.

about I weaker LEAP, in if start on we you’ve I’m believe et Boeing certification alloy cetera. that at that So some at I Boeing with John, right about ramp dilutive you anything mix, quarter. Again, the been is assuming – a topic kind shipping when that asked aftermarket also assume MAX last to was do product MAX the that and work the XX, is you weaker – XX. the shipping specific right more of aerospace could get do was and alloy specialty about the thing?

Bob Wetherbee

see call you is can Okay. again. through we Bob Richard, here. this get if We'll the

not customer the producing rate. a that actually we to we’re necessarily build So orders specific get

So that. always back to have remind come we and on

course to is want back XX. has the said expect Boeing of quarters the what think we they get I few next do through to

built. of ramp or ready a people When the won’t do the that. months to expect we not gradual up over adjustments Probably to as then a we’re down to last and may up be have to inventory may XX. certainly – inventory both kind And that. that get through go, work bottleneck XX We to few the they’re been ready

what the We’ll let in they’re but actually of when Boeing ready producing, we’re take they’re ready. terms lead

got John question and you answer too, to want So a all question. that if you Richard’s

John Sims

I Hi, do Rich. Bob.

Richard Safran

you. Thank

John Sims

been term impact couple now not about actions and related was quarters impact say mix for a talking LEAP. the management cash near It things. I The relatively was of to would we’ve related those to

in improving all four see that’s We next and then somewhat is. diminishing year. quarter the that So that

Richard Safran

Thank you.

Operator

Global. comes go Please Our next of from question ahead. Josh Seaport Sullivan

Josh Sullivan

good Hi, morning.

Bob Wetherbee

morning, Good Josh.

Josh Sullivan

mentioned give percentage Can could if now? on when coming you Just you you just contracts for here. those comment timeframe, maybe EBIT renewal have on publicly? those the of And what right up us then contracts your any see we overall cover you might

Bob Wetherbee

the All a first right. of Josh. question. Good morning, I’ll that take part at stab

both into kind we’re products in Obviously, nuclear of contracts three growth, of the happy terms the longevity. a break contract of the major pieces. Technologies contract pretty us, that’s with naval with So in BWX terms for

in other announcement the be year next round expect the to that two of side. of the make terms engine of actually by side. end buckets interested year we in the to you’re wrap should jet to the an most The are And up and able of jet probably engine the LTAs end the close

through On based there’s the bid those program. major airframe with be an QX manufacturer activity known in probably think I consolidated announcement. another to airframe well some European a expect going side, who’s we And

gift was We year BWXT should coming contracts Josh's great think next believe us want all for add any conclusion part second Jet I to to of John the see convent. to Christmas question? we early So the you great. color and engine are of here.

John Sims

Yes Bob.

when Technologies, seven had Josh just eight BWX we – announced we number So working with was remaining. the been we’re contracts working

we completed think begin and into probably anticipate maybe those year of in update the later early along. year, we'll those by I QX then go you two as five end, are

worth As of XX% your EBITDA. contracts about what probably far they're question these do about as our represent, of EBITDA our percent

Bob Wetherbee

I setting that of that think the your is the middle the decade. you in part really remarks, said goes John as well other next the it's into up part foundation with us

us So pretty that's stage. for the sets transformational and

Unidentified Analyst

the just year? that on two cash related you management XXX XXX idea any XXXX, implemented impacts customer get to production impact some to of guys? see this might And then we that in you those the next how when does have secondly, color. or guys? – just might your I outlook which cut then appreciate the And on late Are that trying an impact

Bob Wetherbee

Josh. question good Yes

to time their opportunity I impact. For lead chain and earned visibility that supply opportunity – continue be supply the seen, we've by what the XXX the at able emergent have to offset would to are to Boeing given the as good actually that on expect demand minimum that. we pretty the to and The intentions say XXX the

In of impact your course see much through the an of an don't a your we much terms customer of the XXXX referenced don't the question second you on of really and or see impact supplier the in question. part of

Unidentified Analyst

you. it. Appreciate Great. Thank

Operator

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

Phil Gibbs

Hey, good morning.

Bob Wetherbee

Hey, good morning Phil.

Phil Gibbs

I Pat the had want a question with about terms just of and make for here we've there's expectations for things sales way divestitures. quarter. I communicate margins. the want the sure guidance the that for some the them you both high-performance right fourth And that in to know models I just to got that

Pat DeCourcy

Okay.

to with we're which our year. at the guidance end side is the on margin year in So for line the XX%, going

a points year, margin the that's prior substantial so So improvement side. improvement over over significant XXX prior basis on quarter, the

we digits, side mid-single okay. revenue the said On

– for maybe our quarter lower bit consistent than but guidance with little strong here. a and expectations, So the very slightly original previous

Phil Gibbs

did. should I XX% just the think relative you So the that XX.X% to about

that's communicating. So you're what

points So basis sequentially? XXX

Pat DeCourcy

Sequentially, that's correct.

Phil Gibbs

Okay.

Pat DeCourcy

XXX. Year-over-year

Phil Gibbs

Okay.

to clarify lot the interesting things think, on balance Just you're wanted I And that. a there's doing that of sheet. then,

deployment capital strategic about priorities. talked You

pension what in You – frame being cash the kind But did like should a annuitization. here moving the up just we to with priority. pension a third to frame with expect terms of would building. forward And then, want you obviously of

like further that. So Thanks. thoughts would around some just

Bob Wetherbee

overall We're to levels. look take our a remain same. at debt going priorities So the the

obviously current valuation on continuing in So looks near pension. the at The we this to reducing the are next term year. end levels of we're and the for to the that we'll the cash still work Also what pension funding on consistent pension and year we're the At has with of some through considering addition this impact sheet. But see point obviously the balance liability to funding. level committed in number. on that additional focused year side those update in with time that, that

then the with for remain related And along same. capital the to So that strategic growth priorities largely ATI. deployment, projects

initiatives. So no overall sheet change our in balance

Phil Gibbs

you. Thank

Operator

of Our next ahead. question comes Cowen. Khanna from go Gautam Please

Gautam Khanna

Yes, thank you guys.

Bob Wetherbee

morning. Good

Gautam Khanna

be destocking it Good morning. seeing airframe the to guys MAX? doesn't are you be if appear want on side. And so, I any just the clear, on to

So quantified or million, you you discern what exactly at? you're I'm you actually shipset blended guys rate any at the the way whether You just $X.X Is you're there what rate discern shipping? MAX. curious can are have on can

Bob Wetherbee

them. I'd got Yes, start a The are couple is answer we there. of so in slowdown or seeing for I there's No, questions with, discernible no shift? any that.

the market demand incredibly I is service and during to been think captured to emergent MAX to underlying is And the supply confident is some back to going this come period strong. return and still chain we've that able perform demand.

of than still spares on, for some other at thing airplanes and being think it's But and the been are still beginning I the us. are had anticipated flying still obviously parts that's the are we year. going consumed, of which healthy in shapes different

Kevin really to you decline. haven't anything market? color seeing want we So what to do we're seen add in any the

Kevin Kramer

avoid again, it's as seen with ourselves. in never XXXX, still strong. Bob short very spot year-end of inventory said, have the the can quite only our the either terms shift And underlying in load positive. term that on. the a Bob's The forward agreements is engineering into we small and trends think or we've very are financial I order the go and we through X with sell But that's direct at X Tier is No, comments maybe that shift customers some Tier of directed volume. frankly things view very But customers quite still are adjustments. going mega They need

Gautam Khanna

quarter. through titanium emergent performance it? has was gone been the up not at producing And actually haven't it pretty growth it Boeing the – airframe quarter. about you how high year. much have talked well? strong know I you the don't what Okay. side? I other to your guys for on all it are tie suppliers But this as demand explains seeing Is what are Or explains the

Bob Wetherbee

customer base the say extended do would to conference demand. a need. our confidence to time some can of competitors in performance heroically given our that our we and get think call. times But respond they supply never from do to ill times that and near-term to we has Lead I have lead and speak time asked I on us

I So as certainly think the Kim seeing systems. side, number defense we're about, issue. that's probably In armor one the the on talked it,

you color side? to want the on to HPMC titanium add the Kevin side And

Kevin Kramer

would X% thing we Bob last is of say about top very strong year Only up I a as increase are well. on

to continue we grow. So

Gautam Khanna

for one expectation? – And with just that that at what's Yes, wondering, potential year hoping still a close absolutely. is still just And nickel contract could then point, does Rolls-Royce. we were if revisit, or this have we powdered your to billet on

Kevin Kramer

is We're performing our still it. through It that and though working as we have Gautam. way

So we're paperwork. continuing with the

Gautam Khanna

one, What you… Okay. contributions cash year. Pat Last next are pension

Pat DeCourcy

we're year number we this sticking But will in updating about year. number. did a what the we on January with you evaluation that be end we'll now at similar to Right and update

Gautam Khanna

you right. All Thank you. much Thank very guys.

Kevin Kramer

Thank you.

Operator

of David on. next will your Please comes Strauss Our Barclays. David from question is go And ahead. open. move we line

from of go of Merrill America Our next Please comes Lynch. Bank question ahead. Timna Tanners

Timna Tanners

the of actually about win you talked those contracts, how on landscape, of us help I to be of an Thanks. ramp Hey, you was more you new not bit may wondering your good the morning. that much when are much up business? how may those if extensions competitive or a and how forages of could please provide opportunity isothermal could an Specifically update grow?

Bob Wetherbee

then can color. John a couple jump in and good add thoughts Yes, of his Timna morning. and Yes,

capital I to driven our – of by majority are the expenditures commitments of significant start of customer all, most our with. think first

said is So well for to it's see the and in us the think that committed about the customers our we're I the a have have chicken kind And putting long-term. reversed And the egg that. the we're capacity – customers I the excited and isothermal into future. that of reason value

But John, to where with update you want isothermal are and growth there? forgings the the we

John Sims

Yes, Bob.

share heat the we cases and also the market So but capability year operations, plus expansion in both on time next both facility major for the the growth track, budget, press expected projects had actual some be in demand, terminal growth. there, on or Timna, our running not Wisconsin only of capacity of installation the on those of treatment in going our expected to of in

So we're that well. tracking

The continue we chain standpoint customers as other those where come discuss a be said, Bob term commitments. timing longer those up is to think us they based evaluate we move us from may we and of want them, projects on to I supply investments. when to

Timna Tanners

looking political about said great. are you about the environment HRPF say think for the Tsingshan going I play on And am horizon quarter, other losses. potential asked on for out. the to the that know then JV, you are feeling there's narrow you if and Okay, how change also given but opportunities still curious, you like this – every I I else any But and I an can anything Thanks. update you might JV the

Bob Wetherbee

let And here a Fields questions. so is with couple of her Kim me. Yes, in. I'll jump

were questions there? chain. there know I will very question. NLMK? of through see shortly. a capabilities just get the was So we built now contract here the course HRPF think convert with in mastered supply in a I you will And conversion them? grow I going marketplace. how say NLMK. And matter there Kim's slabs in that a How efficient extension you the it's What's will the with have? market, And they've on working XXXX team have of continuing What would to And

working continue. that's pretty actually So for And well us. that will

target and quality did that. the rolling cold XX-inch our wide supply The we hot on for side, to track and level the JV working QX, lot that to cash market to our reason meet. in parts like and we're the a can get is position different chain of to here JV The that neutral changed. pieces feel stainless On rolling looking minimize supply is hasn't

No, the excited then we've a we In to about cost costs, chance the the long-term, position, to a the in the we can work imported United of got preserve we’ve market on slabs? work States not. interest position? is the tariff in we point believe to best we're believe this customer. the neutral if to really, and joint incoming opportunity we to for cash venture of that on and Are our on we which slab, got get But the long-term and have get

probably have more I that than question. Kim on I would answered So answered

to where are any we add to want You benefit? for Timna color

Kim Fields

the look were Xx I when aggressively. year-over-year Yes, about and Bob of kind think, a I I with HRPF conversion basis, up mean through the relationship said, where conversion, NLMK. we standpoint. teams as at that on And on we're well worked ramped We've volume a from

and again, the stages relationship. seeing final are both today. some we're And results them NLMK, us with of So in benefits, and very kind as Bob – of ourselves at our already the we're happy seeing seeing those mentioned, you're

we'll on planning that. hopefully shortly on we're So renewing. have And enough

Bob Wetherbee

full utilization could I looking think HRPS the for that for. provide we're NLMK the

still opportunities think there's – that there table. still well know I floating we there's out are that around on two or still are one still the other

options, but utilization level can we're to really the NLMK us. take those for So up the to target work continuing

Kim Fields

management over out through facility. of or so Yes, they last some had we've I slabs in the around think the worked challenges and of year and the

mean, in breakeven. a On got the targeting their can I continue needs. been focused slab think, working we're we and good support sure that's we an to to executed just strategy a good we've joint plan. venture, with as ATI I Bob From flow said, sourcing are make that We've standpoint, customers cash got

Timna Tanners

much. Okay, Thank very you super.

Operator

Korn ahead. of comes Our Goldman go Sachs. next Matthew question from Please

Matthew Korn

too. Hey, good everyone. taking morning for my questions Thanks

Bob Wetherbee

Yes, good morning.

Matthew Korn

would on X, So for MAX, be? you've the so, I you the end year? out what engine at that And Slide whatsoever that XQ have laid jet versus moving last the at say all there next-gen here if CAGR looked change among you projecting inventory over management why any were if your expected is pieces of growth

Pat DeCourcy

Slide more expecting. Kevin looking change your to to thinking it's growth with sure. there's were or the we we're but at I uncertainty, what a any Maybe through decline John, and question. you anything? just than add ourselves don't want the MAX X from growth slight shift Yes, right a think deferred for

Kevin Kramer

contracts and focus as the our I working might for it that's of end the through, growth Yes, the long and through our gain. add incremental as year profitable provide other we're some all is, that the only that the hits John said, the objectives. meets share thing requirement early customer as in Certainly may XXXX

CAGR. be change that may that that thing the suggest other I So would would

Matthew Korn

hearing so but for I'm right to you a like in little bit the All risk sounds of you shift particular it upside if right, right? also a some

Kevin Kramer

Yes, I that's a to… think way good

Bob Wetherbee

Yes.

Matthew Korn

just any to more you be other our year? couple what's quarters? lumpy then highlighting one particular on are patterns have engine I near gotten we'll this Are of customer that is mentioned something And for these orders be then through truly can this the you that you, the your to uneven term? confirm, back last been just clarify, mean, And me rate, is this look, last confidence that time, ready? the past underlying there on one that's telling previous you've effectively side, they order

John Sims

what customer very objective cash us into we differences they're and with an the need careful, the they that the underlying any closely I to nothing Yes, some And artificial into do capacity risk have that. contracts, not won't demand, on would it collectively trying be impact sure engine Kevin them position internal for these And evaluating may upside/downside head Matt, share we reduction, with because generate help handle it have has this as how we an that is John. inventory demand flow understand said, say to that demand do it. I working upside impact we're to reduction, that. understand to to have ourselves protected as have It's to And as And we to to completed do, further has to go with do to meaning the we XXXX. to be negotiation on the of we've to actions other are we a reasons.

our as in QX. impact as that reduced head said, see we'll of so further I something that through we'll into XXXX. way that reduced it’s working And we're And see, we

Bob Wetherbee

Reduced I from right. right. that, think, John impact Yes, is

book maximum bit the end I production the that in at demand, is also financial year there of probably are it’s it confirm on what efficiency. for use think inventory – may of But little our XXXX for side of more uptick level going the seeing the engineering we the because an they term we and we order the fundamentals. to I into unnatural be see output But want for we're XXXX. will look towards have orders well, a there think artificial, than to the

Matthew Korn

Got it.

other not into but behavior, would seeing it a broadening customers? customer still So – of it's important this you're the an of bleeding any

Bob Wetherbee

are not. we No,

Matthew Korn

to guys. Good you. Thanks it. Go luck

Bob Wetherbee

Yes. Thank you.

Operator

go comes Please question of Misra next Berenberg. Our ahead. from Paretosh

Paretosh Misra

guys. thanks Great,

be back rolled, high that, to so going BWX flat Technologies Just mix? the that or a sales will the contract, performance, or from

Bob Wetherbee

– components. is contract components alloys Yes and is our in that this especially actually and high part Bob. which that of Yes performance good morning, contract is business, materials

Paretosh Misra

or And you what nickel comment materials more that can if or would of be? it's kind titanium, alloy,

John Sims

and its products primarily Yes, a currently hafnium. the this bit situation. produced zirconium hafnium produced they're products, odd is are Millersburg, John. But And products. it’s in today facility, are Oregon primarily. zirconium These meaning little and are our These – plate flat of an

Paretosh Misra

investments more. you Interesting. making to more be And now, enough? you're have would then might that capacity? invest capacity? I some that build you you have share, gain more Do your to and gaining plan enough right market realize Or you but need

Bob Wetherbee

is this Bob. so Yes,

on Most need are daily taken we customers a capacity new stay with believe So have the sync. of working capital our so the customer we've contracts, necessary it. our capability are by for in we actions to we expenditures place they or obviously capacity basis, in when so driven new

and I more shorter tends millions more contract bit be XXXX. think little invest would more have a to share and in obviously lead and as go into new some require talking install. we not are downstream-type you talking extensions that us up XXXX, to have finishing that hundreds We're procure times opportunities millions, that it capacity assets of to wrapping of we’re tens

think, I some And the based the window capacity can and that. of titanium the for we within finishing times, products, on lead downstream do to current add

projects that steps rest of but would necessary. necessary, there's the say place then side, lot made like as in taking next are be taking asset. And steps good down will So we simple seems comes on it I the shape. the on And finishing it HPMC of a that the isothermal the year forge press the

John add do color? anything to want you or Kim, to the

Kim Fields

it. support we're said, year. see that we that to next covered as titanium our mean positioned in you've for to think I you for finishing the support revenues we're I to investing well No, line obviously, the And come coming. demand

Bob Wetherbee

so very do the much side, we're dialogue standpoint. this isn't pretty in it's surprise us. lined a our from speculative Yes having we ongoing investment. little either customers, one And contract really defense of a aerospace with to and Particularly up

may think I is, an is while earlier and that – what's is drawing have board out organic a we market, the of going gave of timing based outlook things the this growth ten-year part within in on and may and supply from will move we we five around difference the on standpoint, the chain on The there. think chain. Tim the have in I our position an answer to supply

the in a I then in negotiated. and particularly ramp probably to for if noticed, for And we environment, accelerated chain the our you've as demanding our requirements investment and somewhat contracts response response last jet supply we've ability think emergent to to our four years, a engine market ability growing have the position perform to asset

Paretosh Misra

color. appreciate the everything incremental luck I with guys. you. Thank Good

Bob Wetherbee

Thank you. Yes.

Operator

of next ahead. comes David Strauss Barclays. from Please go Our question

David Strauss

Can you me? hear

Pat DeCourcy

We can.

Bob Wetherbee

can Yes you. we Good morning. hear

David Strauss

All right.

about Sorry before. that Good morning.

guess you've relative customer or those these So Are last incrementally about, cash to getting I incrementally, worse better? talked management those efforts quarter? are

Pat DeCourcy

John. ahead Go

John Sims

Hi, David.

I one. of quarter that. was normal actions ordering patterns answer in to going to some the lost. say in and quarter bottom. who's probably We'll start impact quarter out probably of three I would that, deciding four believe We’re then reduced we resumption climbing No, meaning those

David Strauss

are Okay. exactly expect ramped? And where do you ramp, in The then powder John. to fully sticking And guess that? when be I nickel you, with you

John Sims

first – by and the in we to up production We and in XXXX, expect rate a basically expected a about year performing at guess. ramp And ramped talked at think when this performing late you I are rate ago, we I are today. that fully we

prepared for call it, earlier, essence increased agreement. finishing agreement, we're Gautam the, So the rate. administrative while the performing per negotiation answered we're the I well we're of the And in as

David Strauss

capture, share the in you're fully Okay. – guess are And ramped, I while you you that? how potential have far along

John Sims

be. participating anticipate to as We and the trying at we're low powder in to almost balance that customer where ourselves performing essentially beyond then a close we're sole we're source balance XXXX, so in, well. for with to share trying want very that Well, discussing we're not We're we customers with that the type to program only out that that's other between XXXX.

David Strauss

Got then cash Okay. And flow. free it.

through at in going – on think Can XXXX So was us around – flow over I the looks update Day, you XXXX like And $XXX free average on million prior over this to basis. thinking Pat, ex this guidance back come we $XXX the year be you're million, should Investor I pension. how cash about guess it that longer cash term?

Pat DeCourcy

Sure.

year of levels million next a at back We to have million opportunity level those that get with were that And over the $XXX think years, to we circumstances $XXX ago. couple year, towards slightly, to we're this next we're part including inventory of sale produce some sort some extenuating actions first some going for year. down of inventory in the are where there but the

number. free resume expect $XXX line We're we abate, those to flow in above as So year. strong with next million and cash

David Strauss

missed say your the much you balance have cash this. to the might I at you how And of Okay. Did expect be year? end

Pat DeCourcy

million improvement. So we're expect at $XXX so now, we

for million previous $XXX guidance year end. was Our

we'll or So at be above that level.

David Strauss

Alright, Okay. guys. thanks

Bob Wetherbee

Thanks.

Operator

go ahead. Please comes Olin question Research. from Chris next Longbow Our of

Chris Olin

Hey good morning.

Bob Wetherbee

Hey good morning Chris.

Chris Olin

are guys the million month. was rates you two make sure about under assumption per coming XXX. per production $X I to always the I guidance million down want somewhere or that did aircraft I between the the understand to comments $X

outlook? be essentially the for wouldn’t that titanium that, million titanium on impact how the intensive And that given cost sales emergent reduce the next then a second difficult get that $XX wouldn't jet to on need So demand Did year? is, side? your

Bob Wetherbee

say of opportunities. here lot a add to take have color would John some one can we think with I with But able emergent on Yes, me. been that I we on

tight, they a Yes, share times the that out. that out the able So today, lead that market that also the have in bigger have when say your to I been book getting we're that given is results of market would you, share?" the were – what's pie. say, down "Well, these smooth are that we

best that be it the is that to that side. smooth we and of disrupt steady demand, the So interest don't and Boeing's I emergent think and keep much the on chain then because titanium to expect supply

other for think be make there be will happens. to of the I plenty anything there'll on programs activity there that up

So the on I think side. seeing we're defense also growth

going think also titanium have have bidding and the demand for aerospace QX. on up So at other and some wrap that defense, total you and expect in engine, contractual we we when look you to frame ATI,

it's who that a So lead to think the time smooth I model see out of that don't pure a make wants gain perspective, I think sure mathematical from we'll to customer supply share described. working, you've chain

Operator

like would I the to remarks. for Bob closing back to session. question-and-answer our concludes turn any This over Wetherbee conference

Bob Wetherbee

call right, All the the going I'm thank teleprompter joining on and interest to thanks ATI. say here to for you today stick for and us your continuing in

Scott Minder

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

Operator

concluded. you for today’s has attending Thank presentation. Your conference now

now You may disconnect.

ATI (ATI) 31 Oct 192019 Q3 Earnings call transcript