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RTI International Metals, Inc. (RTI - Snapshot Report), the producer and supplier of titanium mill products, reported earnings of 23 cents per share in fourth-quarter 2012 compared with break-even results in the same period last year. The results surpassed the Zacks Consensus Estimate of 16 cents.

For full-year 2012, RTI International posted earnings of 77 cents per share, exceeding the Zacks Consensus Estimate by 27 cents.

Revenues surged 38.4% to $196.4 million in the quarter from $141.9 million in the year-ago quarter. It was also ahead of the Zacks Consensus Estimate of $190 million. The year-over-year rise in revenues is attributable to higher demand from the energy market customers for advanced, engineered structural components required for deepwater drilling and exploration applications. Sales were also aided by favorable scrap input costs in the Titanium Group.

For full-year 2012, revenues increased 39.4% to $738.6 million from $529.7 million in 2011, beating the Zacks Consensus Estimate of $732 million.  

Results in 2012 were supported by the acquisitions of Remmele Engineering and RTI Advanced Forming. Sales related to 787 Dreamliner accelerated throughout the year and ended with total shipments of 44 seat track ship sets. This contributed to the rise in sales of engineered components for deepwater applications, mainly in the Gulf of Mexico. RTI International also benefited from increased demand from energy market customers.

Segment Details

Titanium Group: Sales slipped 5.5% year over year to $76.6 million (including intersegment sales of $37.1 million) in the reported quarter. Shipments also fell to 3.7 million pounds at an average realized price of $19.13 per pound in the quarter from 4 million pound at an average realized price of $19.11 per pound a year ago.

Fabrication Group: Sales soared 101.4% year over year to $119.2 million (including intersegment sales of $17.8 million). The healthy increase was mainly driven by the acquisition of Remmele Engineering in Feb 2012 and RTI Advanced Forming in Nov 2011.

Distribution Group: Sales decreased 3% year over year to $56.6 million (including intersegment sales of $1.1 million).

Financial Position

RTI International ended 2012 with weak liquidity position as cash and cash equivalents decreased 38% to $97.2 million from $156.8 million recorded a year ago. Long-term debt was $198.4 million as of Dec 31, 2012, up 6.1% from $186.9 million as of Dec 31, 2011. The company ended 2012 with $230 million of convertible debt due in 2015.

Acquisitions

The acquisition of Remmele Engineering has helped RTI International to emerge as a fully-integrated manufacturer and fabricator of advanced titanium products serving diversified markets. These products are used in various markets, including aerospace and defense, medical devices and energy exploration and production.

Remmele provided engineering and advanced robotic manufacturing technology to the company’s capabilities and allowed it to diversify into fast-growing new end markets.. Sales from the recent acquisitions amounted to $146.3 million in 2012.

Outlook

For 2013, RTI International expects sales to be nearly $775 million with operating income in the range of $65 million to $75 million. Titanium mill product volumes are expected to be roughly 16.5 million pounds. Seat track component shipments for the 787 Dreamliner are expected to exceed 75 ship set. Capital expenditure is expected to be within the range of $50 million to $60 million. Overall, the company expects to see moderate growth in both consolidated sales and operating income.

However, RTI International expects first-half 2013 to exhibit some softness in production. Nevertheless, it sees healthy momentum in the second half owing to accelerated production schedule for 787 components and sequential increases in mill product demand. For the first quarter, operating income is expected to be lower than $10 million.

RTI International, which is among the prominent steel specialty companies along with Sutor Technology Group Limited , CITIC Pacific Ltd. , and Material Sciences Corporation , currently retains a Zacks Rank #4 (Sell).
 

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