High Performance Metals Segment
Demand for our titanium and titanium alloys and our nickel based and specialty alloys was strong from the aerospace, medical, electrical energy, and oil and gas markets. Mill product shipments of our titanium alloys, and nickel-based alloys and specialty alloys increased 6%, compared to the first quarter 2011 while shipments of our exotic alloys were 8% lower due to the timing of major construction projects. Average selling prices increased 3% for nickel-based and specialty alloys primarily due to higher raw material indices and improving base prices. Average selling prices for exotic alloys increased 9% primarily due to mix. Average selling prices for titanium and titanium alloys were essentially flat with the first quarter 2011 primarily due to mix.
Sales were USD 497.2 million, 45% higher than the second quarter 2010. Mill product shipments increased 31% for nickel based and specialty alloys primarily due to higher demand from the commercial aerospace market. Shipments of titanium and titanium alloys mill products were flat with the prior year's quarter, although the product mix contained more value added product forms. Exotic alloys shipments decreased 13% primarily due to lower project based demand in the chemical processing industry. Average selling prices increased 15% for both titanium and titanium alloys, and nickel based and specialty alloys primarily due to higher raw material indices and improving base prices. Average selling prices for exotic alloys increased 10%.
Segment operating profit increased to USD 92.9 million or 18.7% of sales as compared to USD 67.3 million or 19.7% of sales for the second quarter 2010. Segment operating profit excluding purchase accounting inventory charges was 21.3% of segment sales. The increase in operating profit primarily resulted from higher shipment volumes, improved product pricing, and the benefits of gross cost reductions. Second quarter 2011 segment operating profit was impacted by USD 13.2 million of acquisition related charges and USD 9.7 million of idle facility, start up and qualification costs associated with our titanium sponge operations. The second quarter 2010 included USD 7.7 million of start up and idle facility costs associated with our titanium sponge operations. In addition, second quarter 2011 segment operating profit included a LIFO inventory valuation reserve charge of USD 4.2 million. The second quarter 2010 included a LIFO inventory valuation reserve charge of USD 2.1 million. Results benefited from USD 17.4 million of gross cost reductions in the second quarter 2011.
Flat Rolled Products Segment
Demand was strong for high value products from the oil and gas/chemical process industry and aerospace markets and improved from the global automotive market. Compared to the first quarter 2011, demand increased 6% for high value products, which includes titanium, nickel based alloys, Precision Rolled Strip products and grain oriented electrical steel, but decreased 12% for standard stainless products. The rapid decline in nickel prices during the 2011 second quarter and the resulting effect on future raw material surcharges combined with slower US GDP growth led standard stainless customers to reduce order entry activity. Direct international sales represented 32% of segment sales for the second quarter 2011. Second quarter Flat Rolled Products segment titanium shipments, including Uniti joint venture conversion, were a record 4.9 million pounds, a 90% increase compared to the second quarter 2010. Average selling prices for all products increased 7% compared to the first quarter 2011 primarily due to raw material surcharges and higher base prices for most high-value products.
Sales increased to USD 727.3 million, 18.2% higher than the second quarter 2010, primarily due to higher raw material surcharges and improved base-selling prices for most high value products. Shipments of high value products increased 15% and shipments of standard stainless products (sheet and plate) decreased 16%. Average transaction prices for all products, which include surcharges, increased 23% due to higher raw material surcharges for all products and improved base prices for most high value products.
Engineered Products Segment
Demand improved from the oil and gas, cutting tool, transportation, construction and mining, aerospace, and electrical energy markets.
Sales increased to USD 127.1 million, an increase of 33.9% compared to the second quarter 2010, primarily as a result of the improved demand and higher prices for tungsten based and carbon alloy steel forging products.
Segment operating profit was USD 6.8 million for the second quarter 2011, compared to USD 7.9 million in the second quarter 2010. Results for the second quarter 2011 included a LIFO inventory valuation reserve charge of USD 4.2 million compared to a USD 1.8 million LIFO inventory valuation reserve charge for the comparable 2010 period. Results benefited from USD 2 million of gross cost reductions in the second quarter 2011.
