AIN - Earnings call transcript Q2 2018 | Albany International Corp.

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the second quarter earnings call of Albany International. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer section. Instructions will be given at that time. Albany will conference be of August on request XXXX X, webcast the International, call this Tuesday, At and recorded. like and for now Chief would to conference the I over Financial Officer comments. Treasurer, introductory Cozzolino, John turn to Please go ahead.

John Cozzolino

you Thank morning and good operator everyone.

as our listening those contained the certain GAAP. this last non-GAAP to to issued the including call, filings, also regarding the statements particular this those in reconciliation reference our that of quarterly a financial forward-looking well Safe apply XX-K. for measures and our our release please And statements reminder please about morning. And conference use as press notice detailed associated the the a text of discussion, our of release same on remarks of As for to with full Harbor purposes SEC release night refer verbal for to and our refer call, financial results earnings

turn call our I Now Olivier provide Officer, who Jarrault, Executive Chief the opening Olivier? will will some remarks. over to

Olivier Jarrault

Welcome Good joining call. for second you the John. you thank earnings everyone and quarter Thank morning.

sales of a more follow I income businesses. provide EBITDA begin take effects, sales as by year. while to Net higher profitability in while in fan was increased sales million XXXX, net revisions AEC operating of International in to the impact AEC the XXXX. we And engine sharply. year. QX an sales increase Total your ramp-up QX QX A through was MC publication adjusted compared and as translation quarter the Operating and improvement, XX%, grew last of charge fuselage than XXXX, Higher very net million also calls. and adjusted but to strong a take components, MC F-XX EBITDA income sales. of XXX last will which $XX to blades utilization. ASC to EBITDA this amount to program. driven questions. AEC. significant engines, capacity quarter, Compared improvement sales, in of America, nice I higher strong sales, represented sales, continued million both currency to results performance as for Then more ASC format charge XX% an to primarily grades, growth the to well AEC in which, ASC principally fan LEAP continuing sales. both adjusted was unprecedented both North estimates, sales net also gross of QX in to and to show for XXXX grade $XX or overview XX.X% Boeing excluding AEC a quarter. million XX% the included increases year. impact grew a sales, across the contract will The small MC effects, XXX QX X% XX%, spacers program. currency contract for income We XX.X%, good adjusted $XX.X current company of QX result operating quarter, driven impact sales increased income effects. for growth a improving due the significantly, Albany Adjusted XXXX, cases, Net the EBITDA compared about which of the the sales of global with $XX reflecting excluding quarter. revisions. packaging strong and compared of was improvement net compared productivity in over currency compared of improved sales the income translation increase contributed volume financial with our XX% and for and increase to due XXX increased The improvement. of and for million the quarter, in million outlook. substantial loss increased and margin our XXXX with and and to adjusted another EBITDA compared frames, decline you offsetting increased where improved EBITDA paper translation QX by last QX the QX with principally increased second detail. productivity across in John quarter strong both showed to due CH-XXK jet all XXX to to was similar growth After in was tissue or increased in and LEAP excluding XX.X% increased past which in rising $X.X pretax to the during will the grades. update included a to it to will The a will sales quarter then and good Sales $XX.X as XXXX growth in in was steep

to than well EBITDA impact charge our activities, AEC XXXX of to continued improvement development focus existing, on technologies which XXXX QX our In the and across adjusted QX Excluding performance new compared process during last contract new quarter. more to product progress derivative doubled AEC which revisions, year. optimize and the projects, the for R&D, operational aim our

engine at established, wins, our AEC to contracts The million on major XXXX. new anticipated airframe based AEC first-time to million on $XXX we on are time on not annual will in CFMXX strong be continue beyond on only well announced. ramping aircraft LEAP backlog or orders of content Airbus several represents defense strengthens programs, therefore existing of The LEAP be potential reach ramp-up contracts, of of to Our new contract winning which aircraft, do were $XXX for of where continues the at continued commitments of commercial future excess the potential the deep platforms. have on also LEAP preferred Show, not executing along acquiring on has in the the potential for while already years yet with provide and been providing the production. single-aisle same that the sales and XXXX It to-date for reported in at also a as and increasing share order engine to programs, the engines existing Air reserve This choice additional selected, but and which engine least evidenced XXX one-third Farnborough backlog, new already execution engines orders. AXXXneo-family

more back quarter. let's to go John Now on John? details the for

John Cozzolino

QX QX to to XX% QX the Starting by sales the currency XXX XXX ASC compared increased revenue recognition sales of Also XX.X% XXX. sales, both impact and [ph] Olivier. up to you to currency ASC XX.X% XXXX effects, and like in and slides. XX.X% refer up Thank effects year you net slide QX would segment. increased three, X.X% MC from currency were compared our sales and excluding QX XXXX with net company ASC AEC financial net compared net in standard, performance I QX new excluding to X.X% last and effects, and year-to-date. Total year-to-date.

good well four. AEC higher to million, strong QX related year-to-date. to at XXXX, labor in Adjusted gross MC the was impact for utilization. productivity. year-to-date was and of basis EBITDA XX.X%, XXXX. total QX of EBITDA in $XX.X in income $XX.X in QX company profitability for XX.X% slide compared result estimated Total quarter full-year QX million, and improved Slides was $XXX.X of compared a very EBITDA margin the adjusted was and gross gross XXXX, MC six profit sales good to and that included total segment for sales five million as QX year-to-date, was improved the reflecting show which in margin impact capacity adjusted net QX year-to-date adjusted the year. bringing higher XX.X% by million a the and was from XXXX margin AEC in million to $XX.X ahead a and compared EBITDA QX in through AEC million. XXXX XXXX. profit AEC million results two QX of million $XX.X the profitability On the to X.X% million XX% $XX.X company to QX Turning charge both in in June, charge. Gross $XX.X $XX.X contracts. adjusted $XXX.X profit improvement in XXXX profit included in total to EBITDA revisions margin the company last a

slide seven, share adjustments, Europe. per share. $X.XX per We to XXXX valuation per of to earnings compared a related per of mostly income a QX for in Moving company in reported tax in earnings share to the QX net included the per share benefit attributable year. $X.XX $X.XX QX allowance to of reversal share last of

Once XXXX. share income $X.XX XXXX as QX $X.XX that the that on Excluding both included per impact per to slide periods, the from noted charge. $X.XX in attributable adjustments net per for and item reminder, a XXXX in the AEC a company share QX was and share QX other again,

debt about multiple a resulting to QX. capital increase AEC. Total and debt. Lastly, were end in debt in a million to was slide small Payments of eight increase net our in shows million QX $XX $X offset support in expenditures million investments increased increase the debt. equipment $X mostly of a That in balance continued ramp-ups at million, in all about $XXX $X by million cash, net XXXX for reflecting total

second to year. $XX through half expenditures per million the expect from continue capital $XX the million range to to We quarter of

we before it to Olivier for turn go Now, I back would Q&A. to additional comments like some to

Olivier Jarrault

you John. Thank

let's to EBITDA the track full-year performance of Now adjusted of million. to turn the our $XXX year The $XXX our business strong half the places in MC million high end on first the outlook. to of over range expected exceed

per significant be adjusted or conditions Assuming QX quarter. million EBITDA in the of $XX to range in no to rates, and million changes currently in we $XX global economic anticipate currency QX

to of to the second year. the half We expect AEC continue well perform over

And should of end XX% XX% the profitability fluctuate full-year second somewhat sales the increase to improvement net XXXX, last the over half, show the up we For the strong EBITDA we discussed upper compared percentage to could of range expect closer in XXXX. full-year as adjusted while sales incremental quarter. to a end to

XX% Beyond XXXX. adjusted our sales EBITDA XXXX, we of in a goal as remain towards on of XX% track percentage to

summary, in performance with was in very company profitability good this with AEC. a outstanding and financial the for So good MC sales solid quarter growth in

the expectation both compared XXXX previously year-to-date for go for our over mind, to and good for or year, better full-year to line in strong outlook the is of financial improvement the With our levels expectations. for XXXX businesses Operator? second discussed of in the performance questions. line that half with results With let's at than the any

Operator

[Operator Instructions].

John Our from with first & the Please go line ahead Sidoti question Franzreb of is Company.

John Franzreb

Good morning great Congratulations a and on John. quarter. Olivier

Olivier Jarrault

you. Thank

John Franzreb

talk you Clothing. business recent trends down X% little flat considering about kind stellar that to quite The start some time. that I actually Can organic to with in of been want a Machine is demand? year-over-year growth have bit driving what's for

Olivier Jarrault

growth, Yes, to only, the also think at do best the only at one to sure. you for half but I to second look John, first our quarter last really sales thing if look of is to quarter versus year. or will, year the not

low grade the the years, declining X% of look communicated, PMC a will, have on few publication for you have to past sales Where in the in So right, really XX% like it decline, X% of the range growth that it's really at year-over-year, the rate of versus months year if if we right. first you this, the last we few year right. side seen

we continue those than to packaging grade right, PMC Overall, and we said as and lesser say, used tissue half. were also, for offset than decline increase expected, what by, and already declines the a we sales. first global X%, netting in grade to more than So

in Canada, height for right, stayed that you the to packaging could due newsprint market, consumption continues Now as know, PMC the if you little decline at production. the the our say a grade. and you offsetting year, market grade driven decline the roughly more right, at in tissue bit shrink expectations look by publication U.S. to for stable detail, publication

However, Brazil is pacing upward.

If you no for you. news Europe, to switch

to market European continues the know, drop. you As

less but publication machines reason key than that publication machine. fact One many, machines the or consume if is been several you will, PMC, have converted to key machines packaging factor packaging of the

will shared Southeast drop Asia is in growing to So we you continue Good we have see the already. European as a well market. as with news, as China,

the that you glance a positive. gives PMC market. very So at It's overall

John Franzreb

year of PMC revenue the expect below half to you year would the be the or So in above ago? second

Olivier Jarrault

sale Well, standpoint in the right. I to at increase I in packaging six decline and right, a say in months, next forward least tissues think the going will offset, sales in in from that continue sales that the publication, PMC

that half in or a second flat line the see, little right, the of versus with year. of And right, last so year, we bit right, in should line, right, increase,

Okay?

John Franzreb

better end XX%. you programs expectations engineered just in that up the on it year? in faster Okay. have you Or little LEAP? expected that to ramping it are talk the of bit than high or your bumped XX% of a revenues ramp to expected than beginning is about, than And components, you regarding Could is expected probably faster other now

Olivier Jarrault

So think question. good it's yes, I a very

I it's our if result it's or the improvements the not also, a right. platform. across the CH-XXK think And will, F-XX it's as serving plants only Boeing combination but both, of a also the of serving a of plant. in all the XXX AEC and It's both, you LEAP engine productivity combination

months, if the in few in yield, you are assets. efficiency, segment as of that with terms labor labor effectiveness, will, I operational So strong I key good productivity, which shared met, starting we the right, of have critical in some know been you already quite past say, deploying systems when have to of would operating aerospace we our you improvement

As that, you of a nice a momentum, therefore we in result our and right. nice production see, sales, will, our increase a if

you saw So it.

QX year-over-year a rate increase engine of high based ability increase right, QX. of to demand, steep follows XX% on but we therefore feel previous LEAP in be year. XX%, higher confident, right, demand And unprecedented That the in XX%. only growing our programs, at versus to a saw not You the also to XX% produce the range the on a

Okay? Okay?

John Franzreb

will I into queue. Okay. back get

some you. questions. else Thank ask somebody Let

Olivier Jarrault

you. Thank

Operator

the to with go Klieve go ahead Capital Ben Next, Noble of we Please line Markets. will

Ben Klieve

looking into off you. I piggyback on quickly this first overall first to from rate? get Thank half couple of that to at growth questions Based Hi. business here, side. MC a looking pushed quarter like second to deliver opposed kind the a on the level your at first of from of second did quarter the would about John's the itself, your of as comments kind by

John Cozzolino

I Ben, think about John. as it is This being Ben. Hi pushed. wouldn't really

other sales As with can understand from where get at growth sometimes from from some you look a we to year-to-date That's we you perspective to are why aspects. some perspective. tend know, and a quarter-to-quarter, this business try to it really timing

months it over So it what at thus strength there of And wasn't year, the first that trend really happened pushed, far year. that for a it better the overall particular was quarter. the when been got the you in it just second the a look of you six has get view

Ben Klieve

Yes. Okay. That's fair.

And any guess quarter. so that then, on Is timing business was customer I pulled based a of issue, fair? getting just that skewed anything new large one strong comment board wasn't that just growth, was order, and that across or kind the the really in really there the in it

John Cozzolino

I a Yes. could strength certain that consider would there in disclosure. But There enough a pull-out given customer drive be with nothing or significant could activity particular weakness that notable any for quarter. was

Ben Klieve

the really programs if you expecting can in half year. am XX% kind the ramp hone of touched the flatten for the know then below on if businesses bit the with half decelerating curious results, of to second curious here a have any Perfect. that half talk would you of are on decelerate am Based to cadence on I I of here the you end build Are but Okay. growth. about the you side first to programs up there second just John, of on side, any kind can here? year? And the specific on AEC the out that I in rate

Olivier Jarrault

at No. Actually, not all.

you for and LEAP today the know the coming how strong program from As even Farnborough book Air you well know, the order is. very stronger Show, very well

before book Farnborough excess of think the into XX,XXX walked engines, in about production. and we I it's several was of order right, years

right, heard X,XXX-plus in produced CFM the X,XXX XXXX. year the CEO reconfirming, right, of of up to engines Farnborough to XXXX, You be to X,XXX in reiterating engines, goal in this and ramping

placed commitment orders LEAP-X and the CFM show. XXX really, So during

both no say, increase, again well you XX driven Airbus weakness going confirmed and in it's And by Boeing the or now towards and at from very projected as continuous side. XX, Farnborough year. next the or know that all Boeing by MAX regards So on build increase, XX rates XX XXX you at LEAP definitely the of all

news, standpoint, for from increase rates jet that build very in offshore. from the single-aisle Nice good So, for coming program. nice the associated right, LEAP growth, and engine

if as The Boeing very well right, the you the now, rates now year. produce could XXX know, platforms frames, So as confirming, and as position, few right, XX increase at frames, other programs build to look position on in next be up have the very well we CH-XXK we which, where you next established we F-XX it fuselage move from in XX months. to an ramping nice programs

of order at weakness. all very and book So sign no strong any

on therefore, right, revenue increasing, versus So we keep our last year.

Ben Klieve

And just kind any bit increase the can squeezing juice beyond on customers comment there output here, are the more with seeing current you any a to that you renewed high Well, your demand? levels? that very your additional are good. demand of pressures of LEAP in out given off for you building that interest Is

Olivier Jarrault

in have mean, continuously we I doing QX and I it up, right? mean, QX. we are Well, ramping been

on We it. will keep doing

pressure on particularly the to system have have to been ramp-up, able we We but it. LEAP, the definitely in demonstrate

expansion are capacity the by We We employees, efficient, way, have keep more very plan. more and on hiring employees our training finite becoming on And them. right.

while basis we labor nice on plant. daily on efficiency, to daily tracking me, that manner, improvement. a So a utilization, see by labor are track and a pleased, the we Believe

I And ramp. the as ramp to some are pressure to against I very achievable. to, have well are we that is used definitely that and before, that feel said So continue delivering we demonstrate but

Ben Klieve

color. a here. on I congrats back for you. in good get And Thanks queue. Thank very the to will Perfect. you both quarter

Olivier Jarrault

Thank you.

Operator

Next, of to will ahead the go Stephens. we Drew go Lipke with line Please

Drew Lipke

Good Hi Congrats Olivier and on John. great quarter. morning. a

Olivier Jarrault

you. Thank Good morning.

Drew Lipke

Just to takes of gross looking with think should for the of full-year, have the that the margin maybe we was performance as in about the line gross lot we And average years? to tied sure the to starting we on should a and margins how two at the just half am expect performance utilization. margin I some the the just kind in we better in But volume machine still last be, year? puts back of the over seen look clothing, quarter, improvement of

Olivier Jarrault

very I pointed Well, QX as good gross you in mean, margin out, at XX.X%.

a last saw, versus just you noticed full-year was at As nice nice XX.X%. The improvement XXXX and a same year, of quarter XX.X%.

While we to be higher could saw and little we margins, expect you to will as QX gross maintain the right. it not lower, it same bit certainly year last extent right, then level,

So full-year year, in I a we any have right. good gross going are margin, think very right, John, comment? to

John Cozzolino

at No. business margin, important some the When get when that's Drew that thing you sales, works you is and one in pretty in going improvement has margin. looking high are fixed-cost to leverage. you improvement this are a the too It ways. see a the both

have at increase seen a really, from it over look if you that good you margin. So X% a little year-to-date sales, in perspective,

bit half fixed-cost half off. and to the leverage the work Over seasonal reasons get drop be way. a bit other that than the first of a of little tends for second the lower again could little a We usually, that can it various year,

quarter but magnitude, expect last the kind will fourth don't we some. some to we we But said, year. we are improvement that that have off is last show probably I year Olivier think to of drop way over tracking As had

Drew Lipke

SG&A, you about? then machine there half we a clothing? rate there think of Is down anything did right any year just run there? comments a we this well. the great one-off Or as keeping to back guys around sort costs as Or SG&A job the look is Okay. And should for

Olivier Jarrault

No.

optimize, detail attention continuously I cost. for think, monitoring, say, to say, really to That's lower monthly would SG&A we ways I very something right, we look are weekly, pay and cost structure every a our I our overall basis. we to, would organizational on our

John and in the and expect on management So stable, SG&A this management, to I really focused to and controlling on forward, very those the the going come, right. keeping can very year them years see you costs, and focused us, right overall

Okay?

Drew Lipke

on on productivity measure Yes. operating labor then know called you I productivity thing that place? there. you you just cost scrap process? Okay. in of improvements AEC, efficiency think mean, implementing in on have And Olivier, forward? same your that and you systems about And that great where cost for labor how I feel out and in we should SG&A we And of managing rates this implementing to update systems Can are like quarter. you job kind maybe how much us of is And put are AEC going the kind

Olivier Jarrault

the of business, No. Absolutely, part of right. I think it's right, management, managing

shared now yes, So across the in systematic deploying plants, say, of stage at coupled operating as already, the are we you those a systems standard with, very months AEC with early discipline. five of I after past

month-to-day about all whole it's effectiveness versus a and about of in both the production improvement, terms financial scrap yield but team, improvement, operational our terms execution. with rework of terms team, production. terms reduction of follow-up in and financial assets of in in follow-up It's of manufacturing also daily disciplined all know and the entire critical forecast, coupled You team, progress operational execution, disciplined our and with

you we we the developing are So that financial if monitoring doing bad daily also with of how of on basis, at developing us group matrix right. beginning are, well right or will, system, the help the a yes, versus the helps that

why result nice nice it we margins very am better next some keep our in very a to right, on, yielding I and the move we right So of XX% XXXX. objectives, right, EBITDA right, on XX% year. can seeing and improve, year That's confirming, throughout only improvement as are and going influx, a

with I in nice doing delivering executing the and and progress has way team been am We the pleased very the past are months. five

Drew Lipke

a it. lot Got guys. Thanks

Olivier Jarrault

welcome. are You

Operator

go line ahead the Franzreb Sidoti of & to go Company. We Instructions]. Please John [Operator with

John Franzreb

Machine some guys will competitive Yes. you was that the do there and you could if Clothing. think A just competitor buyer play in wondering now? I found how out landscape address key recently

Olivier Jarrault

Listen, you Xerium. as which you Yes, sure. mean, just as ANDRITZ, know about, I said about

and is the will our and below machine this packaging, listen, global clothing the certainly leadership publication, the existing various packaging board That and machine papers. global being transaction clothing good way in tissues company So their across right, industry business, increase, of market. ANDRITZ said, presence towel and segments a

We away global customers are the assets. leader else increase as productivity, the I definitely far and will terms their focused technological effectiveness their customers key superior leader, on from value in our cost, of stay advanced anyone to said, providing we maintenance our their improve solutions, decrease of helping

willingness We course, basically right. on will terms our times delivery, zero levels increase defect on-time of focused improving extremely and service products, and zero defects yield and stay improve global quality our awareness in lead of to

doing. we what are that's definitely So

that footprint position, that, globally and continue In throughout addition of I global our and will industry productivity to the And maintain our even we to drive MC savings. strengthen, manufacturing Albany we will all manufacturing position. as we across global would know team a process therefore, say, result, leadership

Okay?

John Franzreb

in in at in wonder you your now But your sector. was a opportunity of Okay. of you engineering exploring pipeline remarks, I about in And side in that aerospace. opportunity kind there like of while? Olivier, firm if on opportunities the the been have thoughts you give the for what kind could automotive that us touched the looks business talk of component the the prepared past

Olivier Jarrault

you that any strategic about like publicly well very we transaction. to potential talk I first, mean, don't Well, know

very always question, in being your we value. any said, part As of of return to always course, provide transaction that open, the right, shareholder stay strong maximize would first case they will we and and

I centered that think on was for you we growth more focused I now I answer stay the aerospace think on side. prefer automotive And side, the automotive. that question particularly on right to your Now, would really

and great machine lot have being would in, do right, I markets would key our being, of to right. work don't want, say, time on I for is be We aerospace, a It being. prefer the to I focused, time the right, clothing stay market to for there. a

Okay?

John Franzreb

Thank enough. Fair sir. Okay. you

Olivier Jarrault

You are welcome.

Operator

go with And question ahead of is our from line next Christopher Hillary the Please Roubaix.

Christopher Hillary

Good morning.

Olivier Jarrault

Good morning.

Christopher Hillary

I having, just just the as out could where growth of the are next aerospace coming expertise lie? you to in company's ask, characterize XXXX the targets towards are see help that and from, you assets and heading you wanted chapter and where footprint you your given success

Olivier Jarrault

Yes, about aerospace the objective of by round right. I sure. I $XXX predecessor, that, XXXX my EBITDA, showed we is delivering, million in summarize, a healthy of good, already think a good mean, if right, as target, listen, and

We how to we finish and wait are right. going see XXXX,

We right, that XX% roughly I in But, million million, to see XXXX if a time objective. the should, XX% $XXX will revise, right, is being, keep for of mean, of EBITDA I those to we million targets. $XXX $XXX good

of looking, XXXX, growth. three drivers one, Now are definitely I beyond guess, there organic

well execute First to one being, very we are continue of to on the positioned. ramp-up the platforms on which

but the are the and working platforms, we continue we and to and Europe, publicly you in platforms to Boeing military. acquire, of opportunities competitive the properties XXX we will, NMA today, to right. us, and us proven, even the woven and would advantage the RTM potential several of engines single-aisle engine it the all of future, are, course, key content they programs, them existing of there is beyond You speak, is working to which one those second on which CH-XXK, that contracts XXXX on. very we third XD both commercial opportunities, that tolerance know is cannot of increase XXXX. we that mechanical there are and particular regarding Then weight all past working and offer right, have also lever potential. we on and reduction the and right, mind, if damage are the platforms of launch, grow in And technology on, lever as content, And detail platform light in F-XX XXX we and new our in especially the and I right, then, not, the win know which their offers, describe, properties are course, really then, growth and will Boeing where are on closely jet of ongoing are growth platforms that its to airframe of the engine the acquire the is that you have that in on

organic if taking ample okay? will, opportunities, XXXX. Once I past am So you growth, about again,

Christopher Hillary

Great. Thank you.

Olivier Jarrault

Welcome.

Operator

no And questions. we further have

may continue. You

Olivier Jarrault

meeting all you today. speaking the future. the and for really to person with attending Thank in look enjoy in you did I call forward you

Operator

gentlemen, our noon available Thank website Thank your and a for approximately International and of will participation today. you conference Eastern be conference Albany the you. AT&T Service. call at Ladies using for replay does Time TeleConference beginning Executive conclude That this at for today.

now may You disconnect.

Albany International (AIN) 10 Aug 182018 Q2 Earnings call transcript