DOW JONES NEWSWIRES

Allegheny Technologies Inc. (ATI) posted a 26% decline in fourth-quarter net income on lower sales and margins as the company hasn't been able to benefit from slumping raw materials prices.

That is because the specialty metals maker is locked into contracts at a much higher price than the current going rates for metals.

President and Chief Executive L. Patrick Hassey projected 2009 would be challenging, saying weak demand will continue through the first half of the year.

Allegheny Tech reported net income of $110.9 million, or $1.15 a share, compared with $148.9 million, or $1.45 a share, a year earlier. The company in October projected $1 to $1.10, well below analysts' then-expectations.

Revenue dropped 13% to $1.11 billion for the company, whose markets range from include aerospace and defense to chemical processing to food equipment. Analysts polled by Thomson Reuters forecast $1.12 billion.

Gross margin slumped to 20% from 23.1% amid the raw-materials costs and sales decline.

Hassey said the company, which has been reducing costs, targeted a minimum of $150 million in new reductions in 2009. Allegheny also expects 2009 capital expenditures of about $450 million, down from last year's $515.7 million, and is committed to continuing to self-fund the projects.

For the high-performance metals business, which includes titanium alloys and nickel-based alloys, profits fell 37% as sales slumped 12%. But the flat-rolled products business, which include titanium sheet and grain-oriented steel, had a 12% earnings increase on cost cutting. Sales fell 14%.

Shares closed at $24.10 on Tuesday and weren't active in premarket trading. The stock is down 70% since June.

-By Shirleen Dorman, Dow Jones Newswires; 201-938-2310; shirleen.dorman@dowjones.com

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