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Low titanium scrap costs help RTI’s earnings

Keywords: Tags  titanium, RTI International Metals Inc., quarterly financial results, titanium producer, titanium fabricator, titanium distributor, titanium scrap, titanium sponge Dawne S. Hickton

LOS ANGELES — RTI International Metals Inc.’s profits skyrocketed in the third quarter due in part to falling scrap prices, with the company saying it sees its raw material costs dipping further in 2014.

The Pittsburgh-based titanium producer, fabricator and distributor posted net income of $12.3 million for the three months ended Sept. 30, more than triple its net income of $3.6 million in the same period last year, on net sales that increased 7.1 percent to $196.5 million.

RTI’s titanium group was able to "take advantage" of lower scrap costs during the quarter, vice chairwoman, president and chief executive officer Dawne S. Hickton said during an earnings conference Nov. 7.

Senior vice president and chief financial officer William T. Hull said RTI realized $6.8 million in raw material cost savings in the quarter compared with last year.

Hickton declined to reveal how much RTI’s scrap usage has risen in relation to its alternative raw material, sponge. But she acknowledged that "you can assume" the company is using more scrap and less sponge this year compared with 2012.

RTI, the only one of the three major U.S. titanium producers that does not have its own sponge capacity, purchases sponge primarily from Japan. Hickton said RTI met with its sponge suppliers last month at the annual meeting of the International Titanium Association in Las Vegas, and expects its raw material costs next year to be 5 percent lower than in 2013. She didn’t disclose, however, RTI’s sponge costs in 2014 or how much sponge it intends to purchase next year.

RTI’s higher earnings came despite a 4.8-percent decline in titanium mill product shipments in the quarter to 4 million pounds from 4.2 million pounds in the year-ago period and a 2.3-percent dip in their average price to $18.57 per pound from $19.01 per pound.

RTI’s titanium business segment recorded operating income of $16.8 million in the quarter, nearly triple from $5.5 million last year on sales that dipped 0.5 percent to $89.7 million from $90 million last year. Helping to offset the flat year-over-year overall sales were higher European service center sales to European commercial aerospace customers, which RTI attributed to "order timing."

RTI’s engineered products and services segment, which includes its fabrication operations, posted operating income of $4.7 million in the quarter, up 26.3 percent from $3.7 million last year on sales that rose 7.7 percent to $121 million from $112.3 million.

In addition to the raw material savings, RTI’s bottom line benefited from duty drawbacks on titanium that exceeded their normal run rate by $2.5 million. Hull said drawbacks are expected to revert to their normalized rate in the fourth quarter.

Last year’s operating results included a $2.4 million charge related to a previously disclosed transformer fire at the RTI Alloys melting facility in Canton, Ohio (, Oct. 31, 2012).

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