Allegheny Technologies Incorporated (NYSE:ATI) is closing two of its facilities as it cites tough business conditions. The company is shuttering its Midland plant that it idled early this year and sent home close to 259 employees. The Midland facility was used for stainless steel melting. Allegheny acquired the Midland facility in 2004 from J&L Specialty Steel.
The other facility Allegheny is closing permanently is the Bagdad plant, which the company had operated for 34 years. The facility was used for grain-oriented electrical steel (GOES) finishing. The Bagdad factory was also idled early this year and 350 employees retrenched.
The closing of plants will induce charges of between $11 and $21 million in 4Q16, Allegheny told investors at the release of 3Q16 earnings. But the management insisted the restructuring is important despite the pain. Allegheny said some of the employees at the affected plants had been moved to other facilities.
The reason Allegheny decided to permanently shutter the stainless steel and GOES factories is that it sees continued pressure in the markets for the two commodities amid excess global capacity. The oversupply of the products has also created a weak pricing environment that makes operating the plants uneconomical.
3Q16 results dip
Allegheny reported 3Q16 earnings that slid from the same quarter last year. Revenue of $771 million fell 5% YoY and EPS loss of $4.95 was wider than EPS loss of $1.35 in the comparable quarter a year-ago.
The wider loss in the latest quarters was partly caused by special charges that came at $4.74 a share. Income tax valuation allowances also wiped more than $173 million from the bottom line.
Improving value for shareholders
CEO Richard Harshman said the reason for the restructuring measures is that they are keen on returning Allegheny to sustainable growth and profitability. Management believes a lean and efficient Allegheny will generate more value for shareholders than a bloated corporation weighed down by huge costs.
Despite the troubles, Allegheny stock is up more than 34% YTD.