SAN FRANCISCO -- Shares of Allegheny Tech (ATI) - Get Report plunged in late trading Thursday after the metals maker said it now expects lower second-half earnings due to softer stainless sheet metal demand and a "significant" drop in raw material surcharges.
The company said it now expects third-quarter earnings of $1.85 to $1.88 a share, below analysts' average estimate of $1.96 a share.
For the fourth quarter, Allegheny expects the fourth quarter to be further hit by continuing low operating volumes in its Flat-Rolled Products segment and lower LIFO inventory reserve reversals.
The company expects full-year earnings of $7 to $7.25 a share. Analysts were expecting $7.95 a share.
Shares of Allegheny were off nearly 9% to $97.21.
Allegheny said softness in demand for standard stainless sheet is continuing because of higher inventories at certain mills and depots and volatile raw material costs. In addition, significantly lower raw material surcharges and indices are expected from the rapid decline in the cost of nickel, nickel-bearing scrap, and titanium scrap.
The company said the LIFO inventory accounting method mitigates some, but not all, of the impact of rapidly falling raw material costs.
"The softness in demand for standard stainless sheet appears to be bottoming out and inventory levels at distributors are low by historic measures," said Allegheny Chairman, President and CEO Patrick Hassey in a press release. "Demand for these products should begin to improve in early 2008 once the high inventories at stainless mills and depots are reduced.