Earnings call transcript Q2 2023

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Operator

Good day. and welcome to the Ampco-Pittsburgh Corporation Second Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Kim Knox. Please go ahead.

Kim Knox

good XXXX everyone conference and today's us Marliese, quarter second call. you, morning joining to on Thank

Joining me Financial Liquid Air today today Steel Officer; Also and Corporation; are us Systems are Brett McBrayer, McAuley, joining Anderson, of Vice Corporation. our Sam Senior and Lyon, President, Union the Dave & Chief on Officer President Treasurer. Mike and call Chief Electric Executive of President

or call comments like to are remind that may Before make include begin, which this statements corporation's plans, may other I would and intentions. objectives, we or expectations risks certain are many statements that and involve the participants forward-looking of everyone the projections outside or control. on financial matters uncertainties, These of corporation's

results suggested filings differ Securities projected in to our undertake to update or may Commission. statements due otherwise the those from Form obligation We in to subsequent forward-looking do with filed risk recently forward-looking publicly XX-K actual revision factors, those any or various release statements. significantly and corporation's the The including discussed Exchange any any corporation's and not most

webcast at A please section be this call or our the on later consult To ampcopgh.com. website of access earnings of release posted our today. Investors the replay website will replay,

I'd CEO. to to Brett? With over that, Ampco-Pittsburgh's like turn McBrayer Brett call the

Brett McBrayer

Thank you, Kim. Good morning, for joining and call. you our thank

we earnings $X.XX share per release, an of the recorded yesterday's year-to-date. share per and press second for As quarter shared in $X.XX

segment its quarter & President Our record-breaking performances particular is XXXX. of Dave more note Liquid year-to-date challenged & the growth of operating triple Of Air with than segments. to our of solid from the both income another is double Systems I with Liquids prior revenue of backlog. Anderson, that continuing year Air

our XXXX to work heart. on Based for strong of rates time with improvements challenge performance I want a I'm still believe assets as we taken recent lost critical, improve. has is also strong position forged to beyond. our Much in our progress capital is to injury and to note continuing and The ahead performance, pleased I that and he completion ourselves U.S. safety recordable our date. with his

to & like the to of Systems. Liquid now turn Dave call Air President Anderson, I'd over

Dave Anderson

morning. Good Brett. you, Thank

year. We the with growth strategic have XX% Sales a expectations. increased history. level, X the exceed plan of achieved new of continue sales consecutive we this more prior Even than sales force Liquid's sales QX again a record are now have X year. in the means Year-to-date, This year to our positive our to sales & results all backlog higher this to up versus grew see quarter quarters. XX% our to compared X our once for continues record sales XX% prior with year-to-date first businesses growth as year prior the highest as expanded months Air in over in backlog achieved new

new continue manufacturing in Lynchburg, for at as to capacity The and is provide grow. QX businesses our additional of operational Virginia now the beginning space we will leased we

additive Navy share Oak also are project manufacturing working Ridge U.S. are on excited to Laboratory. we a National We that at

will parts these lead be manufacturing Additive shorten and supply has additive great XX to U.S. the next chain working capacity. the for Over Navy. designing increase we parts pump of months, potential manufactured on times

to of employee income onetime a Segment in income was included prior the year first sales. million XXXX XX% months policy adjustment. $X.X X operating prior above for due The income increased the benefit year for

and prior increased. have income operating year. Excluding growth of already income Revenue the adjustment versus onetime XX% shows operating

in Our our we Lynchburg, now manufacturing backlog it our than with new increased XX% capabilities. And was is higher ago. months facility have XX

strong we quarters ahead. growth our with in plans means this All of in to forward position a the are continue

Brett McBrayer

Cast and over to call our Forged Thanks, the I'll now segment. Dave. Lyon, of Engineered turn Products Sam President

Sam Lyon

of you, to and quarter million with morning. which a income. operating operating XXXX government energy third quarter We income positive marked a the million, foreign Brett, reimbursement. an $X.X finished benefit of the related of QX Thank $X.X good of consecutive included onetime

operating QX results. our $X benefit, was million, roughly income consistent this Excluding with

prior roll QX lower revenues were XXXX. of and and strengthened million. approximately surcharges year while costs market XX% has variable forged reflects material stable, higher weaker versus raw line $XX.X dollar. is a revenue $XX.X top due million The versus the decreased to roll the Lower energy and is cast market

be starting Engineered the for depressed. Forged recovery FEP the in to back XXXX. in We anticipate of and continuing product continue market half revenues XXXX

U.S., to steel increase the demand the Association also year. XXXX, World seeing compared to in by Europe this X.X% For with Steel estimates growth modest

reports customer energy from sector sentiments and industry, the expecting base solar healthy programs. infrastructure demand automotive Our U.S. similar sustained

remained is new rolling investments pricing supported of supply. of strong, Negotiations most aluminum American to year-over-year and primarily North OG are share domestic mills are market us America. in XXXX. as in forge favorable confidence steel large customers, for This The reliability approximately allowed XX% with on North leaning more complete our has rural value or grow proposition with by and our into heavily XXXX. producers ensure strong is up maintain roll to manufacturers

Energy and and customers, place unforeseen against for transportation of surcharges which income smooth most protect will our in remain our volatility. operating

centers rules X the with fourth machine new stages quarter. We've completed with over XX various in our States completion XX%. first in of improvements continues efficiency mentioned, and received X been United progress Brett the over capital expected startup. plan in of in have machining of As the our the installation to improvement

well maintenance North America North America of unplanned years strategic ahead the are We minimal project imminent the -- positions aluminum results in and growth and to these aluminum and industries. encouraged very completion to us support by and steel downtime. The steel forward look costs many with

Brett McBrayer

you, to McAuley, the regarding our financial who Thank our share to now Sam. will more like Mike Financial performance. I'd turn call Chief now Officer, over details Mike?

Mike McAuley

Brett. you, Thank

that's of X.X% compared consolidated Ampco-Pittsburgh the sales XXXX. an filed quarter night, our expressed press sales last for for million the of in net Form of quarter net in second corporation's As increase $XXX.X to the second were release and XX-Q XXXX

a by to Net most foreign Sales, distribution declined sales and segment Forged shipment the all period, oil prior the X.X% year sales XXXX in volume & notably of mill Engineered driven second the shipments net products year-over-year, for and coils. but volumes. higher offset Sam pass-throughs by unfavorable by of lower Liquid exchange Products as in gas compared XX% explained, driven steel exchange in surcharge heat Cast FEP roll for segment demand and in the quarter lower translation, part businesses, the Air Processing X in higher and markets, grew

to foreign prior quarter to expense strategic a quarter. prior to was better the year prior interest the U.S. This $X.X net exchange compared on credit to mix. due volumes. second investment operations business. compares exchange year overall favorable the recorded the quarter in by manufacturing from and to part rates for shipment capital Interest for program foreign decline in to XXXX the recorded debt. costs on quarter due expenditures both The in income losses Income partly absorption due rise from to the in sales total year were quarter, $X.X operations the the in ongoing current gains and million. in primarily In Sam forge for and for higher less of Other year of cost energy offset Higher quarter increased a foreign referred million. compared

and X% rose the Air Net $XXX.X a backlog, cash timing Engineered ago, backlog differences. FEP $X.X working and and decrease year XX, $X.X demand a capital. & reflecting Backlog primarily was approximately support segment million was and activities Products flows Cast June, QX order XXXX the roll for at year-to-date in in of by of record June operating million use used Liquids of a million XXXX, at approximately from high, Forged segment with

This for the due to lower represents operating XXXX Forged change in $X.X periods. in second million, the Forge capital for XXXX Capital of were a current Products significant business' capital of strategic inclusive results program. quarter improvement improved primarily expenditures and Cast and the the year Engineered segment, working from

expected cash facility million up credit program. that with We equipment facility undrawn hand for June of sheet usage $X.X revolving availability expect million. step and included on expenditure on balance capital and $XX.X XX, the and the CapEx position to QX the of corporation's in our milestones of liquidity finance XXXX,

equipment remaining June capacity of has XXXX. as $X.X In facility XX, addition, million of financing the

questions. Operator, at this time, open for to we line would the now like

Operator

question Our first from [Operator from David comes Henry Trust. Instructions] Investment Wright

David Wright

And for also look apologize can what background couple any the that? SG&A up release, some year-over-year. of and SG&A is I noise. press sequentially does Reading the pretty about quarters? commentary you next for like give from Mike, noticeably

Mike McAuley

higher we level when either. you health a public thank than experiencing where It's lower with to accruals related care we're quite for may you compared to insurers of care Yes, SG&A pandemic think noticeable income, like catch the they people companies our prior and stranger specialists on higher deferring reasons. with at to One of that that it it's a with based be most companies, discussions lot compensation is elevated for of is our we couple lot higher self-insured is few health starting that and up the We're income. are to year listening last may a you own were question. year variable David, a also the had and when now of a costs. to and years for no and

inflation costs care and to things forth. seeing are typical elevated we in so So like wage health addition self-insured

other some is until costs did ramped-up a Liquid, thing new that additional a to The associated there's more that start facility & in get we with and Air we scenario.

David Wright

as a we quarters look $XX quarter couple next should million at well? for So of the

Mike McAuley

XXXX $XX SG&A and about for will I in that QX. think QX consolidated be million

Operator

from next Bergner Justin question comes our from Funds. And Gabelli

Justin Bergner

first my working cash be guess and capital. question I flow on would

kind Forged of remaining inventories rolls in and So high. flattish Cast sales The your are territory. are the and more

the working cash gets an down? outlook operating So positive And second flow worked should what's in as inflection we for the inventories to half? expect capital

Sam Lyon

occurred Sam. take in him. specific inventory QX we weeks expect out. and had is this our very, end North of very front come Mike assets, we into and of the But We that some general, to X down. QX American might numbers outage in our have at for Justin,

over built operations and ahead of through support the quarters. flow to to X out inventory rest of So we base, next the the that flow that then will the customer

Mike McAuley

addition to year drop add should might the in to by from second with But Justin, working It little the keep I income, mind while it's capital based We flow the the cash kind activities, inventory operating as Mike. bit reduction to is that a is in activities almost neutral And higher up offset that's on operating full the thing the add-backs. with from things the we other cash flow X in for catch and Yes. in inventories. expected might that's think I add be of half. that. cash in that -- to

is a The mind thing to bit continue while we U.S. the elevated to complete other to keep in in be is CapEx investments going the

Forge business.

be So think is going we do to higher. that CapEx

So be step if that cash you're like next we that for the CapEx difficult to with it's going deck. free the to turn flow, on positive have thinking

Justin Bergner

it. does go into the have what's your year? the sort the needs guide for you Or helpful. of all finance to Got then sort revolver? cover sort of equipment do facilities That's of CapEx And of And the there? kind

Mike McAuley

is The facility equipment the the of It a $XX covers strategic million vast facility. finance CapEx. majority

for -- particular those the equipment particular collateral serves the In fact, facility. -- as that that

but has XXX% such group. million financing outside So incremental not $XX supplemental allowance covers our it's or the it, coverage, of a agreement bank it credit for largely

that. of most use to expect We

the cover And so not at to all. I'm for funding much. about We've concerned pretty CapEx got

probably should quarter back year in be down million CapEx of in quarter funding you pocket the things QX. facility. we're covered But range should our -- for is the a it our for giving of some lower the like we or And QX thinking CapEx of of highest out equipment foundation outlook and engineering. $XX some are XXXX. by total something kind part and then financing And utilities, cost kind terms full guidance the of the We of in year of of into lowest bulk CapEx, drop on of

As forward we go yes. --

going we're of levels down 'XX, total and and more 'XX historical be quite out years. obviously into stepping in back into forward the to go we as CapEx So significantly

Justin Bergner

then Okay. XX-ish sort historical would more And team be of or...

Mike McAuley

would I say of XX south XX.

Justin Bergner

Yes.

lastly, Engineered then the results And and the then pricing that pricing. And quarter. of sort second up Cast Brett, on the right. say to a comment, costs about made based All has you didn't caught now XXXX I Products you the Forged that a Okay. looking in third would of XXXX quarter? most early better second in of further expect in so XXXX. sort and into quarter of sort than relative? realize gets you improvement are Or pricing trending experiencing decided you conditions Would you towards for

Sam Lyon

next Justin. got the second pricing, for our major are year, then This is in The done raw quarter-ish Sam, allocations. of our and most we contracts

comment. my raw in union excess And transportation, we're that was materials that to know Most our is pass-throughs. our be of attain major costs, all so the is of And going able pricing inflation The to there what then energy, we contracts. inflation. raw materials, on all wage

And than confident that to we so able cover more we're were there. cover inflation --

the for piece this done year. pricing year -- are They last last done. and of The QX block QX were

So the or of QX be and similar pricing will the pricing would will we this -- in year. be that QX similar QX to experience

Justin Bergner

Okay.

your looking next pricing full And less or year year, QX this the for inflationary half expecting get pressures? inflation of set the caught and more you're to so as beyond with some then and is up of pricing into back

Sam Lyon

correct. Yes, that's

Mike McAuley

would materials but I completely pricing, and pricing costs. XXXX other on need This and Sam potentially materials The with raw the in as energy raised is like to XXXX with is caught get in not focus that inflationary described. and items. line in Hence, year, the pricing say transportation up Yes. and

Operator

And is shareholder. who Bennet] a Instructions] our from question [Greg [Operator comes next

Unidentified Analyst

So next costs. expansion margin these I year, have guess you my for for question

the variable, to through you contracts which then have you that customer. pass-through, and costs down, are negotiated go guess these cost You've I pass your if

have it comes color you to could that was really margin think -- So expansion on I the of give program. us for this modernization mentioned wondering that you if down I savings. more the X improvement. But quite of about productivity you savings X years equipment a generating first was talking And or place. pieces on when in this, ago about X embarked you were you X significant

out want? way If more turning you that, the could about tell color. that us you more Is

Sam Lyon

be and the the million Greg, our -- numbers that that $X.X to, what on volume, million range million depending worth to in say, to $X looking the -- us that and another there's our -- furnaces then expand million Yes, savings $X at allow expansion in putting that we're we're throughput will increase And business. forge the roughly X non-roll -- improvement. are of $X

Unidentified Analyst

So we fourth there do quarter any might there improvement chance see this start next 'XX seeing think more Any in to you it's third or year? we quarter? see beginning or or of would really any

Sam Lyon

It's by intercompany have. really savings. And product shift be run end product a we of be up That's Carnegie of year more cuts And of that, costs some costs would that more another on QX, we in have more the of our with then next year. training bit year, which little will to running. next say along plant, transportation transportation. I QX because and be a costs piece the ramp-up everything there's and between next

Unidentified Analyst

wondering turn your them? doing those delivery customer as are customers recently, to Most able as case Or rolls? looking manufactured of look were Okay. you destocking of delivery back now rolls finding you've were used your some overordering. calls customers soon for want the don't just-in-time that for of to are heard take -- to than they and just I've to in are I'm you an --

Sam Lyon

little mean there's but it's very pull-ins, that. normal. not than any pushouts some been There's different of always I or

So yes, a from we for seeing approval high And manufacturing, the [indiscernible], our it's And But taking of we pushouts of don't get other very want. next we're rate unique, we significant they any know, unique thing them then product. estimates start X what we we once before start. but them business any not year, start, to have success is kind. get I to

Unidentified Analyst

I question, final think. One

Navy. manufacturing, Air as a very but with You it this with quick, Liquids lot the creating it's referred how -- you working? is the refer & technology think additive Or to touched where there manufacturing Navy a I And is was the What's Or new as you of XD contract people touched to program but -- parts. it that? is on for CapEx for that that? funding

Dave Anderson

this the they is Ridge. question. the this for additive towards recent of that with because it's program the been they or Oak it. for chain of and term a go answer years a shipbuilders. call use right, supply now, intent that with either XD see And Navy as they've you're it's you additive thank Dave, issues for funded more an Greg, in Right lot Navy's is or the to The to having

now, invest right equipment. learning in future committed would us, manufacture at how funding to we things for we're parts, to So we like and to to Navy look were the if these the expect in

learn determinations to XX-month investments to at may it's point. needed be now, a with some or and design make right them So what that we them may and then on program how not work

Unidentified Analyst

be you that until way if wouldn't will to go ahead the Is but So be it? that there program, XXXX. about CapEx with this, a think

Dave Anderson

would developing around on use parties And funding equipment, It we for that. use contract really could could invest out be that from obviously that take probably upon request of equipment. Navy own could and approaches parts. we We to equipment other to or pay their these couple help there's a could our the we

third So that option not CapEx. really require would

So really end variety using all of of those up may options. X depends it we and a

Unidentified Analyst

Do that this? the there you one the with participating this Navy? know are that program you're multiple with in companies are only Or

Dave Anderson

There an wants the multiple to companies that move really participating. towards. are initiative Navy is This

Unidentified Analyst

you is to outside this technology produce of Navy to transferable Is contract? possible And other the it for parts?

Dave Anderson

absolutely transferable, is yes. It's

Unidentified Analyst

is You’re but manufacturing, future, the additive which you. I’ve the thank first about I company heard think talking

Dave Anderson

And right. Yes. Thank you. I think you’re

future is of it the part too. I think

Operator

back would And you. this for like McBrayer Thank over session. to closing conference concludes I the turn remarks. question-and-answer Brad our to

Brett McBrayer

Thank you.

previously, mark step half our noted in forward an important XXXX of will the I Ampco-Pittsburgh. of As transformation second

U.S. the With of completion our

a I Board our shareholders we thank for want I Thank Virginia, for our in want our will employees to our thank outstanding XXXX capacity production and for call work. also expanding our support. of company this and position Directors for beyond. their continued to their joining you modernization and equipment strong Force our morning.

Operator

concluded. the presentation. for has Thank today's attending And now you conference

disconnect. now may You

Ampco-Pittsburgh (AP) 10 Aug 232023 Q2 Earnings call transcript