Albany International Corp. - Ordinary Shares (AIN) 7 Aug 24 2024 Q2 Earnings call transcript

Albany International Corp. recently held its second quarter 2024 earnings conference call, revealing a strong performance across its Machine Clothing and Engineered Composites segments. The company, under the leadership of its new President and CEO, Gunnar Kleveland, reported a mixed picture, with some notable growth opportunities and challenges.

Strong Performance and Strategic Moves

Machine Clothing revenues reached $194 million, up 21.6% year-over-year, primarily driven by the acquisition of Heimbach. This acquisition has strengthened the company's balance sheet and improved its profitability, with free cash flow reaching $64 million in the second quarter. The consolidation of two U.K. facilities and the successful implementation of SAP at Heimbach are significant steps towards streamlining operations and enhancing integration efforts.

Engineered Composites Segment Highlights

In the Engineered Composites segment, the company reported a 20.5% year-over-year increase in net sales, driven by over $200 million in new orders and the ramp-up of various commercial and Defense programs. The acquisition of Heimbach has played a crucial role in this growth, with new orders expected to further drive revenue growth in 2025 and beyond. However, profitability in this segment was lower than expected due to inefficiencies related to program ramp-up, with adjusted EBITDA margins at 16.9%. The company expects margins to improve in the second half of the year.

Challenges and Strategic Focus

A key challenge for Albany International Corp. is the impact of Boeing's production issues on the LEAP program. The company has had to adjust its production plan, anticipating slightly lower LEAP revenue this year with minimal impact on overall profitability. The company's focus is on maintaining a flexible output to align with Safran's requirements and to manage inventory levels.

Another challenge lies in the hiring market, particularly in Salt Lake, where the company is experiencing difficulty in meeting the current ramp-up. The team is working to maintain headcount and keep new hires effective, with a focus on expanding the team as needed.

Outlook and Strategic Vision

Looking ahead, Albany International Corp. is focusing on its Machine Clothing business, which has a strong foundation and potential for growth, particularly in the area of material science and technology. The company is also exploring opportunities to expand its 3D-woven parts technology into the Aerospace sector, with a view to managing growth and maintaining high returns.

The company's strategy review and planning for the next 5 years is underway, with a focus on leveraging its technology and material science capabilities to drive growth and innovation. The integration of Heimbach is expected to continue to be a strong business for the company, with great returns and cash flow.

Conclusion

Albany International Corp. is navigating a dynamic environment, with a strong performance in the second quarter and a clear strategic focus on growth and innovation. Challenges such as Boeing's production issues and hiring difficulties are being addressed, and the company is well-positioned to capitalize on opportunities in the Machine Clothing and Engineered Composites sectors. With a robust bid review process and a focus on operational efficiency, Albany International Corp. is well-positioned for continued success in the coming quarters.