Titanium Metals Down in the 3Q

Revenues and profits for Titanium Metals Corporation (TIE - Snapshot Report) plunged in the third quarter of 2009 due to lower shipments on the back of weak demand from commercial aircraft builders and lower selling prices. Earnings per share for the country's largest producer of titanium was $1.1 million, or $0.01 per share, compared to last year's $40.2 million, or $0.22 per share. Earnings also missed the Zacks Consensus Estimate of 3 cents.

Revenues of $181.4 million declined 39% year over year. Volumes in the melted product segment were down 39% to 675 million tons while prices weakened 20% to $23.9 per ton from $29.85 per ton last year. Shipments in the mill product business plummeted 31% to 3.8 billion tons and prices dropped 6% to $56 per ton from $59.4 per ton. Lower sales were followed by a significant 93% fall in operating income to $3.5 million. Cost of sales declined about 36% to $163.7 million on lower raw material costs. However, low utilization of production capacity more than offsets the favorable impact of declining raw material costs. Hence, gross margin as a percent of sales went down to 17.7% from 72.9% in the year-ago quarter.

Titanium Metals stated that the near-term demand outlook remains unclear. However, the company said that its major customer, the Chicago-based Boeing Company (BA - Analyst Report), recently announced an expected first flight for the Boeing 787 prior to the end of 2009 and first commercial delivery during the fourth quarter of 2010. This is likely to drive production throughout the commercial aerospace supply chain and, thereby, create demand for Titanium products.

Titanium Metals Corporation is the second-largest producer of titanium worldwide and the largest producer in the US. Products include titanium sponge, melted products, mill products and industrial fabrications that are finding their growing adoption in commercial aerospace, defense, energy and several other industries.

We believe commercial and defense aerospace will be the key growth driver for Titanium Metals. The company is also seeing its adoption in geothermal energy extraction and oil & natural gas production. Chemical processing, consumer and sporting goods are some of the other areas of growth.