Albany International's Q1 2025: Navigating Contradictions in CH-53K Progress, LEAP Revenues, and Defense Opportunities

CH-53K program progress and expectations, LEAP revenue and production expectations, LEAP production and inventory management, defense and classified work opportunities are the key contradictions discussed in Albany International's latest 2025Q1 earnings call.



Revenue and Segment Performance:
- Albany International reported revenue of $289 million for the first quarter of 2025, a 7.8% decrease from the previous year.
- The Machine Clothing segment reported revenues of $175 million, down 5.7% year-over-year, while the Engineered Composites segment reported revenues of $114 million, down 11% from the previous year.
- The decline was primarily due to targeted product line divestitures, lower sales to a large Heimbach customer, and a $7 million negative top line impact from EAC adjustments.

Tariff and Market Environment:
- The company noted a stable direct impact from tariffs, as most of their sales and sourcing are regional and therefore, generally insulated from tariffs.
- Machine Clothing orders and backlog remain strong, with regional strength in North America and Europe, despite some weakness in China.
- The Engineered Composites segment is unaffected by tariffs due to regional sourcing and production in Mexico, Canada, and the U.S.

Heimbach Integration and Synergies:
- Albany International is continuing to make progress on the integration of Heimbach, with closures and consolidations of facilities.
- These actions are expected to strengthen operational and production efficiencies, enhancing regionalization and achieving synergy benefits.
- The company remains confident of hitting their original synergy targets with a 3.5 to 4x effective purchase multiple.

Free Cash Flow and Shareholder Returns:
- The company reported a negative free cash flow of $13 million for the quarter, with expectations for a strong free cash flow year.
- Albany International returned capital to shareholders with both a regular quarterly dividend and a reinitiated share repurchase program, repurchasing $69 million worth of shares in the first quarter.
- The company has $193 million in remaining capacity under their latest share repurchase authorization of $250 million.

Engineered Composites Backlog and Growth:
- The Engineered Composites segment ended the quarter with a backlog of $1.3 billion, providing visibility into future business performance.
- The company is seeing growth in advanced air mobility, with expected ramp-ups through 2025, and new program wins such as the long-term agreement with Bell on the 525 program and JASSM contract additions.
- This growth is supported by strong performance on LEAP, CH-53K, and Gulfstream programs, despite some current challenges with inventory management.