Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Albany International Corp (AIN, Financial) reported strong free cash flow of $64 million in the second quarter.
- Machine Clothing revenues grew year-over-year to $194 million, driven by the Heimbach acquisition.
- The company received over $200 million in new orders for its Engineered Composites segment, contributing to a year-to-date total of over $900 million.
- Adjusted EBITDA margins in Machine Clothing improved by 220 basis points sequentially.
- The successful implementation of SAP at Heimbach was completed without operational disruption, aiding integration plans.
Negative Points
- Machine Clothing gross margin decreased from 50.8% to 45.9% due to the inclusion of Heimbach.
- Adjusted EBITDA margins for Engineered Composites were lower at 16.9%, down by 130 basis points from the previous year.
- The company faced inefficiencies related to program ramp-up, impacting profitability.
- Foreign exchange hedging losses of $4 million were recorded, affecting financial results.
- LEAP program revenues are expected to be slightly down due to adjustments in production plans with Safran.
Q & A Highlights
Q: Could you talk about the organic performance in North America for Machine Clothing, given the fluctuations between Q1 and Q2?
A: The year-over-year comparison was challenging, but overall, North America is up for the first half of the year, indicating a strong market in the U.S. - Gunnar Kleveland, President and CEO
Q: What is the status of your footprint consolidation efforts? Are they completed for the year?
A: We are continuing with our consolidation efforts, which are on plan and will extend through 2025, with more actions to come. - Gunnar Kleveland, President and CEO
Q: With LEAP revenues expected to be slightly down, which programs are offsetting this decline?
A: The CH-53K and JASSM military programs are offsetting the decline. Additionally, new orders in Space and engine components will contribute to growth, helping us maintain our guidance. - Gunnar Kleveland, President and CEO
Q: Can you provide more details on the $900 million in year-to-date orders for AEC?
A: The $900 million represents new orders taken this year, which will contribute to our backlog primarily in 2025 and beyond. Our current backlog for AEC is about $1.2 billion. - Gunnar Kleveland, President and CEO and Robert Starr, CFO
Q: How are you managing the potential impact of an extended strike at Boeing on LEAP production?
A: We have factored in some downside risk for lower LEAP production, which would be affected by a strike. However, the extent of the impact would depend on the strike's duration. - Robert Starr, CFO
Q: How is the hiring situation, particularly in Salt Lake, to meet the ramp-up across programs?
A: Hiring in Salt Lake has been challenging, but we are nearly at the required headcount for the current ramp-up. Retention is now the focus, and hiring is not an issue at other sites. - Gunnar Kleveland, President and CEO
Q: Can you elaborate on the LEAP production forecast and its impact on 2025?
A: For 2024, we anticipate a $5 million reduction in LEAP revenues with a $1 million EBITDA impact. Planning for 2025 is ongoing, and we are aligned with Safran to adjust output as needed. - Robert Starr, CFO
Q: What gives you confidence in achieving a 21% margin run rate for AEC in the second half?
A: Confidence comes from a shift in program mix to higher-margin Space programs, overcoming operational challenges, and restructuring activities that improve cost structure. - Robert Starr, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
