AIN - Earnings call transcript Q2 2024 | Albany International Corp.

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Operator

Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to Albany International Corp.

Second Quarter 2024 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to JC Chetnani, VP IR and Treasurer. Please go ahead.

JC Chetnani

good and Debbie, you, morning, everyone. Thank Albany to International's Second Call. Conference Earnings XXXX Quarter Welcome

for on statements and detailing GAAP. those refer reminder notice financial text a As listening measures is release use press results. in the issued of of financial non-GAAP the to our the to release last the quarterly their night forward-looking reconciliation our regarding Contained the and our please call, certain

verbal remarks the and statements our differ For implied. risks or of apply make could will to call, this contain which those actual cause of forward-looking morning. same those this statements purposes conference number and are we uncertainties, expressed from results Today, to that a

earnings release August and discussion our filings, well XXXX, full SEC of as these as a our uncertainties, of our XX-K. please including and X, For both risks refer to

to Now Kleveland, opening Gunnar? I Gunnar will our President call turn provide the CEO, who remarks. will over and

Gunnar Kleveland

Good second in performance. JC. later you, our morning, business our you Rob everyone. call. Thank an of provide results financial earnings Thank will discuss quarter joining overview welcome, our detail. will and for I

we good quarter as challenges. and are our Overall, responding well had their industry delivered strong to businesses another results

demand, profitability our Free Heimbach strong second acquisition, slightly with by deliver in further to by balance Clothing and have primarily revenues organic sheet. Europe Machine quarter. continue We million generated our grew million cash driven year-over-year strengthened strong was North the flow and $XX in at America. lower $XXX offset

stable. global Our order remains backlog

make We with Heimbach. progress continue the of integration to

of with half work. us quarter, implementation to on with second for U.K. Heimbach operational margins and implemented on further integration thank expansion them their the will with We which facilities. enable XXX hard SAP disruption, point EBITDA plans all this We Machine sequentially for executing X I our the in year. successfully commend for the Clothing. action quarter-over-quarter improved Adjusted took has team consolidation a no performance global and footprint the further of the our second execute in at Our we basis

segment. Moving Engineered to Composites our

We $XXX in orders, report million. our over during and further are growth revenue quarter, beyond. the new to year-to-date in $XXX received orders over pleased drive bringing XXXX that This to we will million

XX% For quarter, in growth We ramp line delivered growth we commercial especially and current year-over-year in as top other the up. our our platforms. emerging Space see markets, programs

also growing, JASSM is business platforms, Joint the the Defense and by Our partially CH-XXK primarily Strike Fighter offset program.

related the margins year, for However, profitability quarter prior lower adjusted basis XX.X%, by driven our by with to at inefficiencies XXX the ramp-up. lower program EBITDA points versus is

the second We expect to margins mix. and improvements improve operational in half to due program

overall impact this the our Overall, the down to XXXX working guide been prior AEC programs changes versus Despite situation year reduction. profitability. business slightly in at full well. LEAP Turning we're light this to will year, Boeing. revenue program. minimal anticipate as the the to to with offset adjust to be with lead our serve closely performing production, to is our maintaining all of Safran continued plan now production We've We LEAP year

Clothing business Machine improving substantial integration and AEC execute plans wins as our are new our in margins improved we Our have backlog. at Heimbach

to complex to Chris AEC welcome in strategy. critical I they be AEC. execute supply experience as of Stone growth will capability operations skills like combined brings would strategic our These with Chris also President chain. leading as to continue and

to the I'll more it provide hand details quarter. over to that, Rob Rob? with And on

Robert Starr

Composites. and from year. million, driven a organic and our balance of quarter second everyone. Gunnar, you, then of at Heimbach by was up will revenues Engineered the of in The Thank good sales came quarter year. the XXXX for and results of I the last outlook our provide combination Consolidated review $XXX morning, XX.X% at growth second growth net

on a of XX.X% strong offset sales to decline the the basis. year-over-year, by primarily quarter performance versus organic in net a $X were prior Heimbach, due sales second year. America of lower increased by million currency-adjusted $XXX Clothing last in partially quarter the year, Machine a second driven of North million comps

first America the reflects for half However, the of is and stable North variability. quarter-to-quarter year, simply it

second net AEC increased XX.X% from million $XXX of sales of the XXXX. quarter

Our growth programs. CH-XXK, commercial XXX and by was Space driven other and

period of see We $XXX million continue X.X% and up to the $XX last million, gross up programs. Defense commercial profit from a ramp our was various same or Consolidated year.

of Heimbach, margin XX.X% to margins in excellent exclude XX year, versus in XX.X% the decreased reduction execution. prior gross of by increased quarter XXXX. from XX.X% basis Heimbach. inclusion second gross Clothing the Machine reflecting XXXX you Clothing Machine When to driven the continued The was points

our integration progress expansion coming Heimbach further and the result a continue to as plans, margin quarters. expect we on We in

This program AEC to a This includes of decreased million XX.X% is inefficiencies margin to from points of basis XX%. gross $X second change the quarter ramp-up. contracts. XXXX XXX in in related the due profitability to estimated long-term unfavorable

For comparison recognized we an $X million prior charge. purposes, the unfavorable in year,

R&D Net revenues. increased approximately prior in remaining of versus quarter at year, second the million $X expenses X% the

to science to ourselves XX.X% our differentiate but continue increased SG&A as from to Heimbach. strides we We competition. make nominally, expenses quarter for by capabilities focus on material this was the further due

of we XX.X% our percentage SG&A to efficiencies. as from to and streamline XX.X%, focus operations on continue a revenue, As further decreased has

acquisition primarily is this Heimbach million, integration-related and due employee-related the $X costs, IT-related to and increased expenses expenses compensation. Corporate

of foreign our These treatment, normal hedging and exchange part quarterly transactions recorded of qualify losses $X such, hedge accounting global as for as hedging in we experience we of million the program. foreign course exchange business. not will do fluctuations Additionally,

year in rate our XX.X% the to adjustments $XX took was rate quarter XXXX with prior GAAP of guidance for $XX tax the year. for the second mainly company the prior net line than for last of income long-term in XX.X% generally XX%. versus year was and The compared effective lower the the The prior quarter to was to due attributable period. year, unfavorable discrete in the quarter the million we million

the non-GAAP reconciliation, unchanged this in year. the adjustments in $X.XX as year. $X.XX period acquisition related last After same adjusted our GAAP in diluted and activities, per same the restructuring EPS was diluted from last EPS $X.XX, primarily other detailed to period Heimbach was quarter the versus share

a also a the is adjusted Clothing the decrease As XX.X% EBITDA Machine foreign our XX.X% hedging $X.XX versus driven Heimbach, reflected prior year. an quarter million inclusion million, by was year headwind $XX versus Consolidated in in in exchange had Heimbach. Adjusted year, were increase with that EBITDA for adjusted X% period. second of versus the EBITDA, was adjustments. $XX including of reminder, margins not prior the $XX the from this prior quarter we million the

a prior the EBITDA XX.X% prior of Adjusted $XX at EBITDA million, nearly XX.X% XX% adjusted sales versus margins AEC over year. the improvement was in year. were AEC

cash $XX million flow $XX flow operating million, free the During of second with by capital offset million. cash $XX was positive approximately expenditures quarter, of

$XXX with cash capacity facility. million remains over of and million balance Our our of strong under committed credit balance a $XXX sheet borrowing

Net leverage is below Xx. financial This provides significant us flexibility. with

for the outlook our XXXX. of to balance Turning

our the We guide around given year. want some guidance are are I environment context provide to the the we in. for reaffirming full dynamic segment level

Heimbach and in softness the the end range realization our synergies. Clothing, targeted the European our in greater-than-expected low markets delays Asian For of and reflects of Machine

realized combined conditions, in high in and Europe, ahead The plan. constructive closing markets with improving the Heimbach end reflects of Americas Asia, market of particular, the synergies machine guide with

programs. further as new rates of program For reductions in AEC, our of end including the well on up as lower the challenges ramp The as ramps, reflects LEAP range the our key performance production, higher XXX range our reflects continued programs. better-than-expected end low we on

like I Now call questions. would to for open the

Operator

Baird. with [Operator Peter Instructions] question comes Your from first Arment line the of

Peter Arment

start you kind just that was you and from in that And -- Maybe just QX North It things, America saw timing of -- I seen up are -- on talk a guess, to guess kind halfway bit the about pacing QX? little as what or continued we more MC. kind Could I -- you down of of related? side QX. the you through organic is in any of have just is

Gunnar Kleveland

year-over-year we for are North difficult the comp was But up. overall for look you this first the year. America half, at Peter, the if

a that U.S. market believe in strong we So continued it's the

Peter Arment

guess, the you it. you've to then go? consolidation. there to more you, that do Got that -- And for is I in are Or Where Is are completed year? continued footprint journey?

Gunnar Kleveland

No, Peter, we're continuing.

on the there's efforts but continuing actions XXXX, frankly, we're and more are through through, plan, coming. We

Peter Arment

Got it. And then just quickly on AEC.

You you anything grow? in or offsetting out to Can mentioned some down. the of CH-XXK, call it be be to programs that revenues is slightly going that the particular? LEAP are maybe JASSM, Is that ability going to providing are you

Gunnar Kleveland

in will some some signing through start the programs, it is this later future. is That's and some programs in our for $XXX CH-XXK backlog the term. good helping that the reported, contracts, Space, guide, engine of there -- new our are continue military components our definitely But that's orders includes and and the that JASSM. we as On year new long million and long-term this well. But additions we a year

So how we're our holding that's guide.

Peter Arment

And on at of the month be Okay. year? with XX the do expect the you to in Boeing gets when Boeing -- rate, if XXX ultimately back lastly, to sync a just gets end

Gunnar Kleveland

Yes. That's difficult to answer, Peter.

We Boeing we challenge have we meeting think any capacity. ramp-up. the -- with know have I no

is with in inventory sure Safran build work period. not do this Our make to we that

our And so rates. adjusted have we

as actual we'll Our that. supply ramp well not the -- through Safran we're challenge LEAP engine and what's of through chain for as adjusting are having up with with be But necessary. us the monitor is will -- the and that following ability this as tied that happening and as to Boeing issues some

Operator

with of Alembic question from Next Skibitski comes line Pete the Global.

Peter Skibitski

I the is or year-to-date Gunnar, sure $XXX Did understood you more than want to that right. AEC, the that million backlog? -- make you is year I say orders

Gunnar Kleveland

transfers Yes, primarily to taken million. orders year and XXXX -- that's beyond. XXXX is $XXX have this this some new And we -- backlog year, but that

Peter Skibitski

Okay.

was the the what's order So that backlog? flow,

Robert Starr

Pete. about It's $X.X billion,

Peter Skibitski

Okay.

Okay. talking you just AEC, about? guys are And that's for

Robert Starr

Yes. is that correct. Yes,

Peter Skibitski

Okay.

new too the with we in can you talk you're Okay. to doing It release new stuff, point. that flow. but, you're That's at guys what the and I to what other kind Space to programs And So long-term great. get we I closer sense kind guess part talked exactly That's was involved are reluctant about about seems the there? much more in of markets. details, to a being this strength in order other then Any know of of of that pretty the able emerging more any been like and you've upside. sizable. talk Space

Gunnar Kleveland

based keep orders well deliver and think not not buys. that good part the is as able on I agreements getting in Space who customers in are. We're spot They're as here -- other programs. we long-term to share to yet the our on ability our they're both

able goal Pete. be I not share as that, point that is think but yet, to these expand, we're to programs my at

Peter Skibitski

Okay.

-- adjustment a of take EAC enough. think do on had Fair serial negative like It charges I Okay. a firms program, I one $X same on analysts for shell that not meaningful are you've me. history after The you feel of good kind a got guys newer it guys at sounds out Last like EAC are there of handle changes any think and programs. shock that size now? AEC, million Aerospace have you was because other quarter the there's in EAC quarter and program

would And particular just accounting so program you've future you like sense well the like to that to really aligned get looks this guys like. a I what got feel

Robert Starr

if is than of X% adjustments been I top mean, you line. Pete, less our this have Rob. look historically, EAC Yes.

the which very bit a would closely million, of And So date, $X.X state sure a than programs. that the we point, number performing. to certainly to it's the we've than about -- operations the been about they're But very year we're to your and adjustments make reflect made we've on working is this good these feel higher monitoring like. of to clearly programs closely we're that

really that feel with programs And this complicated ramp-up. their are are at adjustments. So in stage, the confident these we long-term good

working closely. that we're So very

Gunnar Kleveland

time. and And additional we I this is we're at where the to the add, just added rate same going the would area content, full

major are ramping effort customers. by supporting So the we we're our but is and team a

Operator

America. of Next from line with the of question Lyonnais Jordan Bank comes

Jordan Lyonnais

you guide, AEC the appreciate the color gave earlier. I that On

follow-on how considered being is for were Just production much in risk, an rates be of there strike at that Boeing for -- to LEAP? what extended and much mean the that downside how if would

Robert Starr

if LEAP and like. there the there Boeing, I would that was Jordan, length. Yes. would production, of really downside strike comes to into really that Yes. a that down that's we've a just hard strike certainly on result some if we length mean, mean which what But question. really -- definitely it's downside. reflect think in. mean, lower And the I at I that I really does to clearly, a clearly. of taken -- it depend good looks the were But forecast. strike

Jordan Lyonnais

Got it.

strong across then backlog, new on orders, current do you count the feel And head these ramp meet Okay. programs? how the to about

Gunnar Kleveland

is hiring over think time. I challenging -- has been

I think hiring the site, our most. Lake but where is Salt we're biggest

We current ramp-up. the for the right head that are count almost the need at we that

so the And to now everyone. trick keep is

-- becoming Salt AEC our the team HR on people effective. challenging other a But more And -- have Lake well. hiring than other challenge sites. We're is of and they're sites. any in is I'm MC any that will say So in performing our not for the of team and is bringing I and both we do hiring

Operator

line Ayers comes question of from the Next Cowen. TD Jack with

Jack Ayers

how down are you the I on refine already targets, that into more? just XX% it kind any year, given drill in again I LEAP just the of going CFM what there for about So the on if a guess, HX, kind maybe calling means don't about think at wonder down be output little And ramp color then, that guys can sequential you next guys XXXX, kind in know we production just sort hit year-over-year. of of LEAP would I if those forecast. helpful. just bit XXXX, assumptions those of the

Robert Starr

provide think much any Yes, with revenues Gunnar But in regarding $X-or-so 'XX, looking EBITDA for mean, at towards customers million planning, the close of who million mean, about approximately reduction discussions position a I is aligned XXXX. as LEAP for course, in Jack. $X-or-so very The impact. and I underway friend we're in not of the we're has We're referenced, with approximately XXXX. their clearly LEAP necessarily to engine. outlook I

our flexibility or the adjust either down. have output up we So to

to And to right right, chain, we're have to just LEAP your But us. just lot to do now of navigate. around nothing with point, there's the volatility going supply a

Jack Ayers

quarter. then Okay. that for big guys today called That it makes like is size sense. this And know quick you how one guys? on basically up program a just XXX. I you Can you that

Robert Starr

-- mean I for haven't important program mean we commercial Yes. I is -- we an it us.

not relative size. the have program the discussed past in We

you XXX long our to up production a they as for run pretty X For comp ramp rate time. for a been low we rate And clearly us, year-over-year, production aligning favorable if back per us, to a recall, Boeing are it's but year-over-year, with month.

Jack Ayers

guess Gunnar on into quarters, to this I then for coming here. hear I your And new, Kind Okay. portfolio. I question, Great. for perspective of of just one past think relatively high-level guess, the the love few just sort would

ramping You've business. of got here, business in a a kind Aero unique MC

the So evolving? of to of business moving MC forward, kind the you your would hear kind and how impressions see portfolio love of

Gunnar Kleveland

next through Thank the planning -- you, Jack. now. and And our strategy we the for going review strategy X years are

do I still. new versed. being well I'm So appreciate called

Machine is I think Clothing month. love the -- I I have business. it another really But I --

a I a think way. business. It in the is name a is misnomer great

continue and opportunity as cash a was Heimbach of great like business strong returns we that. acquisition not about to And with good for integrate, a to what's us the great think be I flow. that will

business manage I Aerospace moving of We our Clothing, parts. XD-woven on I the is foundation science, and to our lots Machine a technology able rate but growth expanded this there. material see on towards material opportunity technology, our expand we And to have continued The think repeat more was I have like Clothing with to Aerospace So started need there. we to Machine growth, with what and ability I want be the to is science into and good. very maybe use growth

come. in XD-woven So a to focus years is

Operator

with [Operator the line last Truist from And Michael Securities. of Ciarmoli question comes have our we Instructions]

Michael Ciarmoli

the the year, to aligned to maybe X,XXX with I would XX% keep flat. this planning of, that beginning engines, you XX% Just nearly Safran. the guess to times LEAP they been they of give is a in scale I LEAP Can idea mean a of for in you issue. you do us growth have said just and XX% you're And an sense inventory beating of were now of to XX% better kind maybe which know have couple back I channel? originally what

I down producing maybe -- color an they channel the more now? So inventory guys in us of units Or you situation? burn any actually are mean, it you Can are what's there? is give or

Gunnar Kleveland

which It started important are were we is continuing burn produce keep down. the fresh that to from and produce. and inventory engaged means Yes, had both the people continue year, we technology last We flat to our we there.

coming we're rates, for into with on beyond inventory an maintain Safran. inventory on inventory to don't the that? the trying have second going further reducing As which we the know. an Where impact half, But are forward. will I contract we're our

Michael Ciarmoli

And Okay. as that knowing contract accretive and then about just to not thinking margins.

quarter, run big The the XX% second it level had you second obviously, you a AEC, looks give drivers rate in kind got of of the in you half. like the margin the sort EAC this confidence half the negative that and so are that half? What but second or in

Robert Starr

is Yes, give that confidence. Rob. a few Michael, this us things There that are

margin. year, sales be feel led second there more and The we're program EACs, bit to to half to a lot is Space to efficiently in is confident the be the that able A The we first challenges improved other some half. of that the a of to expect overcome see working higher of of that operational those, in carry produce shift we'll our and the we going programs back mix. in

have that. you So

to be the are of And the place about reductions the see there. also of AEC a that AEC. getting in these going better significant structure based you made we've contributor on A then the second really to SG&A number year, that much at thirdly, half that a at restructuring cost is activities And

the give those the the back in really items us confidence year that it's X margin. half of So

Michael Ciarmoli

analysis, in you Got do challenges at your don't Defense then one it. But this work. risk. to you capture programs management, on overruns of program to not you Space winning negative mean, presumably, on everything just robust bidding more, and look those design, persistent of any is more and more come broadly sort And get a of sort process, terms, more into EAC. so clearly, contracting to or your EACs? potential contemplate that as lot I directly enough with negative that, hone kind that feel And

Robert Starr

Yes, weigh robust we Michael, process. bid very But I'll a start in. review I'll I and mean, have Gunnar let

We years, last required. I out business risk the walked over we've mean high. out too the number is potential very away with and management have development from program what's -- opportunities, and very handful a the closely the and strong just don't pan built works chain given of really we've team understand a to program that economics supply of

a So very what we're programs large ramp-up labor very quarter experiencing on difficult is in this market. a significant very

So contributor seeing. that's to really the the that you're largest EACs

couple just take programs, programs, net-net If rest you out a the have the neutral. been of fairly of

overall, process review that good about feel, that we of very, and our type very work take. we'll So

XD-woven continue chain, our in related firm risk to we're the to right. fixed-price and in any focus supply labor, particular, price. on much opportunity to you're mentioned, Gunnar And as good when ourselves as have we've to that it, you done technology, opportunities. taken team a we we going feel you we is executing. mean good As on have a But can. I You focus of and And into protecting job contractually, name right? account be contract,

Gunnar Kleveland

We selective. have opportunity the to be

team the of execute we'll great. emphasize to for select have I that is And so sense programs makes us. to this the And ability the most

ramp We're end going We're we're the of That up beginning ramp, So through continuing through to significant of adding this some a programs. and ramp year. new year. that. the of was seeing the we're effects

at are programs new help the various us risk. disperse the of our facilities, Some which added

in So that fully in support of Rob answer.

Operator

There the further I questions to time. no at you. turn this over Gunnar are back Mr. Kleveland, call

Gunnar Kleveland

the everyone, good day. Albany in call continued thank a today. appreciate We And and your for have interest us joining you. on International. Thank you, Thank you,

Operator

This conference concludes today's call.

You disconnect. may now

Albany International (AIN) 7 Aug 242024 Q2 Earnings call transcript