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Titanium Metals Corporation reported net earnings of $28.6 million or 16 cents per share in the fourth quarter of 2011, in line with the Zacks Consensus Estimate. However, the results were ahead of the prior-year earnings of $23.3 million or 13 cents per share.
In fiscal 2011, net earnings were $114.0 million or 64 cents per share, up significantly from $80.6 million or 45 cents per share in fiscal 2010.
Quarterly revenues of $258.7 million increased 19.1% year over year. However, the results missed the Zacks Consensus Estimate of $276 million. The year-over-year increase was driven by a rise in sales volumes for both melted and mill products, primarily reflecting improved demand for titanium products in the commercial aerospace sector as well as increased shipments of industrial products.
In fiscal 2011, net sales were $1,045.2 million versus $857.2 million in fiscal 2010.
Costs and Margins
Cost of sales increased 20.8% over the prior-year quarter to $201.3 million. As a percentage of sales, costs increased 77.8% in the reported quarter from 76.7% in the year-ago quarter. For the fourth quarter of 2011, gross profit was $57.4 million compared with $50.6 million in the fourth quarter of 2010, reflecting higher sales volume.
Selling, general, and administrative expense also increased 5.3% year over year to $15.9 million.
Operating income in the reported quarter increased by 31.3% year over year to $44.5 million. Higher sales volume, including the impact of the increase in sales of industrial products, contributed to improved operating income versus the prior year.
Melted product shipments of 1,325 metric tons decreased 8.6% from last year’s shipments of 1,450 metric tons. Average selling price increased from $20.95 per kilogram to $23.05 per kilogram. However, milled products shipments of 3,985 metric tons surged 25.5% year over year from 3,175 metric tons and product prices moved down to $52.60 per kilogram from $54.15 per kilogram in the fourth quarter of 2010.
Titanium Metals witnessed increased demand in mill products through the year. The company’s commercial aerospace customers significantly increased their purchasing activity due to build rates for legacy and next generation models and replenishment and growth of inventory to support the anticipated increase in future aircraft deliveries.
The company expects demand to remain strong for the remainder of the year and 2012, in line with the industry’s estimated timelines for fleet replacement and aircraft production.
Delaware-based Titanium Metals is the leading worldwide producer of titanium metal products.
Titanium Metals has been successful over the last several years in establishing significant flexibility and cost advantages in its entire manufacturing process.
During the fourth quarter of 2011, Titanium Metals acquired certain assets, intellectual property and know-how in order to enhance its production capacities and capabilities while extending its product technology.
To meet the growing demand for complex, high-temperature alloys utilized more extensively in new generation aircraft engines, the company has commissioned the addition of a plasma cold hearth melt furnace at its facility in Morgantown, Pennsylvania, which is expected to be completed in 2013.
We believe the company’s fiscal discipline and industry experience has allowed it to manage its production rates and costs effectively while investing capital conservatively and maintaining a strong, debt-free balance sheet. The company’s financial strength and operating flexibility position it well to take advantage of opportunities for strengthening and expanding its presence in key markets.
The company competes with Allegheny Technologies Inc. (ATI - Analyst Report) and RTI International Metals, Inc. (RTI - Snapshot Report).
We maintain our Neutral recommendation on Titanium. Currently, it holds a Zacks #3 Rank (Hold).