NYSE:AP Ampco-Pittsburgh Q4 2023 Earnings Report $2.22 +0.07 (+3.02%) Closing price 05/5/2025 03:58 PM EasternExtended Trading$2.22 0.00 (0.00%) As of 05/5/2025 04:05 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings History Ampco-Pittsburgh EPS ResultsActual EPS-$2.12Consensus EPS N/ABeat/MissN/AOne Year Ago EPSN/AAmpco-Pittsburgh Revenue ResultsActual Revenue$108.11 millionExpected RevenueN/ABeat/MissN/AYoY Revenue GrowthN/AAmpco-Pittsburgh Announcement DetailsQuarterQ4 2023Date3/25/2024TimeN/AConference Call DateTuesday, March 26, 2024Conference Call Time10:30AM ETUpcoming EarningsAmpco-Pittsburgh's Q1 2025 earnings is scheduled for Monday, May 12, 2025, with a conference call scheduled on Tuesday, May 13, 2025 at 10:30 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Annual Report (10-K)Earnings HistoryCompany ProfilePowered by Ampco-Pittsburgh Q4 2023 Earnings Call TranscriptProvided by QuartrMarch 26, 2024 ShareLink copied to clipboard.There are 9 speakers on the call. Operator00:00:00Welcome to the Ampco Pittsburgh Corporation 4th Quarter 2023 Earnings Results Conference Call. All participants will be in listen only mode. Please note Speaker 100:00:30that this conference is Operator00:00:31being recorded. I'd now like to turn the conference over to Kim Knox, Corporate Secretary. Please go ahead. Speaker 200:00:39Thank you, Rocco, and good morning to everyone joining us on today's Q4 2023 conference call. Joining me today are Brett McBrayer, our Chief Executive Officer and Mike McAuley, Senior Vice President, Chief Financial Officer and Treasurer. Also joining us on the call today are Sam Lyon, President of Union Electric Steel Corporation and Dave Anderson, President of Air and Liquid Systems Corporation. Before we begin, I would like to remind everyone that participants on this call may make statements or comments that are forward looking and may include financial projections or other statements of the corporation's plans, objectives, expectations or intentions. These matters involve certain risks and uncertainties, many of which are outside the corporation's control. Speaker 200:01:29The corporation's actual results may differ significantly from those projected or suggested in any forward looking statements due to various risk factors, including those discussed the corporation's most recently filed Form 10 ks and in subsequent filings with the Securities and Exchange Commission. We do not undertake any obligation to update or otherwise release publicly any revision to our forward looking statements. A replay of this call will be posted on our website. To access the earnings release or the webcast replay, please the Investors section of our website at amcopgh.com. With that, I'd like to now turn the call over to Brett McBrayer, Ampco Pittsburgh's CEO. Speaker 200:02:13Brett? Speaker 300:02:13Thank you, Kim. Good morning and thank you for joining our call. As reported in our press release and 10 ks filing, Ampco Pittsburgh saw top line growth versus the prior year quarter and prior year with Air and Liquid Processing segment sales improving 35% 31%, respectively. Our underlying businesses improved on a non GAAP adjusted basis compared to prior year. Although our U. Speaker 300:02:38S. Forage Roll business performed well and our Air and Liquid Processing segment saw record backlog, record sales and record adjusted operating income during the year. Excess plant capacity coupled with high energy costs in our European cast roll businesses weighed heavily on our 2023 results. With the conclusion of our equipment modernization in our U. S. Speaker 300:03:02Forged roll business and the expansion of capacity in our Air and Liquid Processing segment, we are better positioned to selectively capture market opportunities. The 2023 full year loss of $34,600,000 included a $40,900,000 non cash and undiscounted asbestos related revaluation charge recorded in Q4 of 2023. I'm now going to turn the call over to Sam Lyon, President of our Forged and Cast Engineered Products segment for further comments on his segment's performance. Sam? Speaker 400:03:38Thank you, Brett, and good morning. Q4 of 2023 operating income was about breakeven versus a loss of 1.6 $1,000,000 in Q4 of 2022 on revenues of $75,800,000 $69,600,000 respectively. We focused on reducing working capital across all operations in Q4 and ended the year with 18% lower inventory on flat COGS. These production outages affected our operating income negatively, but improved our working capital in the quarter. In 2023, operating income was $7,600,000 versus $400,000 in 20.22. Speaker 400:04:162023 revenue was 303,800,000 dollars versus 2022 revenue of $299,500,000 Fordrill revenues increased 20% yearly, driven by North American manufacturers' reliance on domestic production to ensure stable supply reliability. Castrol revenues were lower than in 2022 and softness in this market is expected to continue throughout 2024 due to the current steel production levels in Europe. Despite base price increases, revenues were negatively impacted by our pass through to customers of lower energy and raw material costs through surcharges combined with a decrease in FEP demand. FEP revenues decreased in 2023 due to excess distributor inventories at year end 2022 and lower domestic oil and gas drilling in 2023. In 2023, escalating energy prices resulting from the Russia Ukraine conflict retracted and stabilized due to government controls, lower activity in Europe and a mild winter. Speaker 400:05:22In addition, as the post COVID supply chain issues experienced in 2022 stabilized, so did inflation. Core inflation for 2023 was approximately 4% versus 6% in 2022. 2023 operating results benefited from the tailwind associated with deflation, positive surcharge recovery as higher cost inventory was sold through and a one time foreign government energy reimbursement of $1,900,000 partially offset by higher medical costs. 2024 revenue looks to be roughly in line with 2023 as Europe is still depressed. We are starting commercial discussions for the 2025 business and we'll get a better look at the forward market in the coming months. Speaker 400:06:05Q1 of 2024 will be adversely affected by an unplanned 3 week outage at our Sweden Cass plant, resulting in an unfavorable $1,300,000 to $1,600,000 operating income impact in the quarter. All but $500,000 of this will be recovered in the coming quarters. As stated on the last earnings call, the intermediate to long term demand picture for flat rolled steel and aluminum remains strong, and we are well positioned to supply our customers as demand increases. Our North American customers are all bullish on the next decade and are investing in new capacity. Over the next decade, the global aluminum market is expected to grow with estimates of approximately a 5.8% compounded annual growth rate through 2,031 according to Allied Market Research, Next Market Research, Future Market Insights and SkyQuest. Speaker 400:06:55Our strategic capital project for the FCEP segment is essentially complete and we are ramping up the new equipment. The equipment is expected to be in full rate production in the Q3 of 2024. As stated in previous calls, this investment will provide many years of increased productivity, capacity and reduced maintenance spending. Speaker 300:07:15Thank you, Sam. Dave Anderson, President of Air and Liquid Systems will now cover his segment's results. Dave? Speaker 500:07:23Thank you, Brett. Good morning. 2023 was a record year for Air and Liquid as sales increased 31% to a record high of 100 and $19,000,000 Even with the record sales, our backlog grew 12% in 2023 as we continue to see growth opportunities. All three businesses achieved at least 20% sales growth compared to prior year. I would like to thank all the Air and Liquid employees for their hard work and dedication to drive the business forward. Speaker 500:07:54Operating income for Air and Liquid declined in the 4th quarter and for full year due to the non cash asbestos related charge in the 4th quarter. Excluding the asbestos impact, operating income in 2023 improved versus prior year due to the higher volume of shipments, offset in part by higher operating costs, including those associated with the sales growth and plant expansions, as well as unfavorable product mix. The additive manufacturing project we are working on with the U. S. Navy at Oak Ridge National Laboratory continues to make progress toward the goal of using additive technology to make parts for the pumps we provide to the U. Speaker 500:08:35S. Navy. This research and design work will allow us to manufacture parts that do not need to go through the traditional foundries that continue to have long lead times and quality issues. While this project is focused on parts for U. S. Speaker 500:08:51Navy pumps, the technology will also be applied to other pumps we sell. We expect to begin using additive parts in the second half of twenty twenty four. As I discussed on the last earnings call, Air and Liquid has received a 1 point $6,000,000 funding grant from the U. S. Navy for the purchase of new manufacturing equipment. Speaker 500:09:13The new equipment is expected to arrive at our facility in the Q2 of this year and will be operational in the Q3 of this year. The equipment will increase 2022. The 1st year of the plan saw our backlog grow substantially as our expanded sales force made an immediate impact on incoming orders. In 2023, we saw those orders turn into shipments as sales surged by more than 30%. We also increased our manufacturing capacity by adding an additional manufacturing location in Virginia and expanding our production workforce. Speaker 500:09:57Air and Liquid entered 20 history. We have seen much success in the last two years and it is just the beginning of what we are capable of doing. Speaker 300:10:14Thank you, Dave. At this time, Mike McAuley, our Chief Financial Officer, will now share more detail regarding our financial performance for the quarter. Mike? Speaker 600:10:24Thank you, Brett. As indicated in our press release and in the corporation's Form 10 ks filed yesterday, Ampco's net sales for the Q4 of 2023 were $108,100,000 an increase of approximately 16% compared to net sales for the Q4 of 2022. Full year sales of $422,300,000 rose approximately 8 percent. The Air and Liquid Processing segment led the growth, increasing their sales by 35% for Q4 and 31% for full year compared to prior year. Prior year due mainly to higher mill roll shipment volumes. Speaker 600:11:10The segment sales were approximately flat for the full year as higher forged roll shipment volumes and higher net roll pricing was offset by lower forged engineered products and cast roll shipments. The corporation reported a loss from operations for the Q4 of 2023 of $41,600,000 which was heavily impacted by a $40,900,000 non cash charge associated with a revaluation of the asbestos liability and related insurance receivables. This charge reflects the net difference between the change in the undiscounted asbestos liability, including estimated defense costs and the change in undiscounted related insurance receivables, which both increased with the new valuation. The main drivers behind the higher valuations are unfavorable recent trends in claims experience, including higher average settlement values and a higher proportion of mesothelioma claims in the case mix, which typically have higher settlement values. As disclosed in the non GAAP financial measures reconciliation tables presented in the press release and in our Form 10 ks for 2023, non GAAP adjusted loss from operations was 0 point $7,000,000 for Q4 2023 as the Forest and Cast Engineered Products segment experienced unfavorable cost absorption from the plant downtime that Sam described during the quarter. Speaker 600:12:49And the Air and Liquid sales volume growth impact was more than offset by higher operating costs and unfavorable sales margin mix in the quarter. Full year 2023 adjusted income from operations of $4,200,000 improved by $4,500,000 over full year 2022. The Forged and Cast Engineered Products segment led this improvement primarily as a result of improved net pricing and better product mix, overcoming lower shipment volumes of forged engineered products and lower manufacturing cost absorption. Full year selling and administrative expenses were approximately 12 percent of net sales for 2023 compared to 11.2% for 2022. The increase in selling and administrative expense is primarily due to higher employee related costs, inclusive of short and long term incentives, a rise in medical insurance and includes the full year effect of staff added last year to support Aero Liquid's commercial growth. Speaker 600:13:56In addition, the prior year benefited from a change in an employee benefit policy, which reduced 2022 selling and administrative expense by $1,100,000 Interest expense for the quarter increased compared to prior year due to a rise in both interest rates and in total debt. This reflects interest on the sale and leaseback financing transaction and the equipment financing arrangement completed during the second half of twenty twenty two, the latter of which has been funding the equipment modernization project in the U. S. Forged business. And it also reflects higher average borrowings under the revolving credit facility to support growth in working capital and other cash needs in 2023. Speaker 600:14:45Other net improved for Q4 2023, primarily due to lower foreign exchange losses, partly offset by lower pension income. However, other net declined for the full year, primarily due to fluctuations in foreign exchange and lower pension income, partly offset by unrealized gains in the Rabbi Trust investments compared to prior year unrealized losses. The income tax provision for Q4 and full year 2023 includes a $1,300,000 income tax benefit related to the asbestos related charge as well as a $300,000 allowance against valuation allowance against the net deferred income tax assets of the corporation's U. K. Operations, which entered into a 3 year cumulative loss position during the quarter. Speaker 600:15:40Given the higher energy costs it experienced during that time frame in the wake of the Russia Ukraine conflict and the resulting shift in the majority of its production load to another facility. Net income attributable to non controlling interest rose for the quarter and full year due to higher operating results for our majority owned Chinese joint venture. As a result, net loss attributable to Ampco Pittsburgh for the 3 12 months ended December 31, 2023 was $41,800,000 or $2.12 per share $39,900,000 or $2.04 per share, respectively, which include approximately $2 per share and $2.02 per share, respectively, for the after tax impact of the asbestos related charge recorded in Q4 2023. Total backlog at December 31, 2020 3 of $378,900,000 rose approximately 3% from December 30 1, 20 22, with the Air and Liquid segment backlog up by $14,500,000 or 12% based on record order intake for the year. And the Forged and Cast Engineered Products segment backlog was down by $4,600,000 or approximately 2% with lower FEP product demand and lower cast roll orders, partly offset by higher forged rolls backlog and the impact of foreign exchange. Speaker 600:17:16Net cash flows provided by operating activities was a positive $6,600,000 for Q4 2023 and was a use of $3,700,000 for full year 2023. Investment in trade working capital stabilized in 2023 after a significant increase in 2022 in response to a higher level of business activity and higher costs associated with inflation and the impact of supply chain disruptions. Asbestos related settlements funded by the company in 2023 were $10,600,000 We expect asbestos related payments to approximate $9,000,000 in 2024. Capital expenditures for the Q4 of 2023 were $6,300,000 primarily for the Forged and Gas Engineered Products segment, inclusive of the Forged Business's modernization capital program. Full year CapEx of $20,400,000 compared to $16,700,000 in 2022. Speaker 600:18:24At December 31, 2023, the corporation's liquidity position included cash on hand of $7,300,000 and undrawn availability on our revolving credit facility of $25,100,000 In addition, the equipment financing facility has remaining capacity of $3,300,000 as of December 31, 2023, and is sufficient to finance the remaining expenditures of the modernization program, spending on which is expected to be completed approximately by the end of Q1, 2024. Operator, at this time, we would now like to open the line for questions. Operator00:19:23And today's first question comes from Justin Bergner with Gabelli Funds. Please go ahead. Speaker 700:19:30Good morning, Brad. Good morning, Mike. Good morning, everyone else that's on the call. Speaker 300:19:36Good morning. Speaker 700:19:40My first question relates to CapEx. Given the modernization program coming to an end, what's a reasonable number for CapEx in 2024 and should we kind of expect to further step down 2025 when the modernization program is fully complete? Speaker 600:20:01Yes, Justin, we're going to spend a little bit more just to finish it out in Q1, but I mean outside of that, when we think about the forward look for CapEx, we think that we're going to be in the $20 type $1,000,000 range for the foreseeable future. And I think if you think about that, we've been saying and I think it's consistent that for our business, like maintenance level of CapEx is somewhere in that $15,000,000 to $20,000,000 range. So that kind of is representative of pretty much maintenance CapEx going forward. Speaker 700:20:43Okay. As a follow-up there, I mean, you did $20,000,000 this in the year just completed with a fair amount of modernization. What is going to offset the modernization CapEx going away on the upside? Speaker 600:20:59Jason, I misspoke. I was referring to projected depreciation expense. Excuse me. We're more in the line of $10,000,000 $11,000,000 over the next couple of years for CapEx. Sorry about Speaker 700:21:12that. Okay, that's helpful. So is that the maintenance CapEx or is that the total CapEx just Speaker 600:21:16That's the total CapEx and Speaker 100:21:18it's also reflective of a step Speaker 600:21:18down reflecting primarily maintenance CapEx. Of a step down reflecting primarily maintenance CapEx. Speaker 700:21:24Okay. So there's a few million above that $10,000,000 to $11,000,000 this year with the completion of modernization program and then a full step down level. Okay. Secondly, the mix in Air and Liquid Processing, what drove the weaker mix in the Q4 and is the full year 2023 as a whole reflective of a normalized mix for that business? Speaker 500:21:51Dave, do you want to take that? Dave. Yes, I can do that. Primarily in the Q4, Justin, it was related to some older orders going to shipyards. Those orders were taken a couple of years ago and inflation eroded some of the margin there. Speaker 500:22:08So our mix was not so great on that. Same thing during the year, but I would say overall, yes, the year's mix was about correct, slightly unfavorable due to the issue with pumps that I just described. Speaker 700:22:27Got you. And then as we look at 20 24, I mean, does that issue of kind of older backlog dissipate? And does that have the potential to allow for some margin expansion in that business? Speaker 500:22:44In 2024, we'll still have some of it, but my expectation is 2024 is the last of it. So yes, going forward, you'll begin to see that issue will be gone. Speaker 700:22:58Okay. And I don't know if you guys are able to share, but any idea how much your margins might have been weighed down in Air Liquide Processing by that old backlog into 'twenty three or looking into 'twenty four? Speaker 500:23:15I don't have those particular numbers, Justin, but I can look and see. Speaker 700:23:20Okay. Thank you. And then lastly, with respect to Forged and Cast Engineered Products, the modernization program coming to an end in terms of the CapEx, I mean, should we expect a meaningful margin step up in that segment in 'twenty four as things ramp and come 'twenty five as the ramp is complete? Speaker 400:23:47Yes, Justin. This is Sam. In the second half of twenty twenty four, as we're completing training and the people, it's really employee costs come out and some transportation costs go away between plants. So the total savings was in the neighborhood of $3,000,000 So in the second half of the year, we would expect to start seeing that in 2025 fully. The remaining savings that was quoted earlier was really expansion of business, so that will yet to be seen. Speaker 400:24:21So we have more capacity available to expand our business in 'twenty five timeframe. Speaker 700:24:26Got you. And is the $3,000,000 a full year number just to make sure I'm on the same page? Speaker 400:24:31Yes, it's actually $29,000,000 I think is what we've been quoting, but yes, that's a full year number. Speaker 700:24:36Okay, great. Thank you so much. Operator00:24:45Our next question comes from David Wright with Henry Investment Trust. Please go ahead. Speaker 800:24:54Follow-up there on Justin's question. What kind of an overall operating margin is it's kind of defined in the segment breakdown in the footnotes, are you looking at for 2024? Is it kind of in the 11% to 12% range that we saw in the 2nd and third quarter? Like what's the overall target? Speaker 500:25:25I think it will be similar, David, to what we saw in 'twenty three as we continue to work through some of the older backlog and then we'll start seeing that number move up as we get into the more recent years in the backlog. Speaker 800:25:43So move up from 11% to 12%? Speaker 500:25:47Yes. It will stay it will be in that neighborhood in the 1st part of the year and then we'll start edging our way upward from there. Speaker 800:25:55There had been some number of product for the Navy that was delayed because of delays in the whole submarine program. Are these the pumps that you're referring to presently? Speaker 500:26:11These would be delayed more for the surface ships, but yes, that's what we're talking about is there's been a lot of delays and it's pretty common in any of the work that you see the Navy releasing that they are quite a bit behind on their build schedule. Speaker 800:26:26Right. So this is the list of that you had finished and now as you're shipping it is how it's hitting the P and L. And you've got more of that to ship this year, correct? Speaker 500:26:39Yes, sir. That's correct. Okay. And we expect that will be over this year. Speaker 800:26:47Your backlog in your segment was down around $11,000,000 from Q3 to Q4. You booked a lot of good business last year, I know. What's the booking environment been here in the Q1 for your business? Speaker 500:27:05For Buffalo Pumps and for Aerofin, it's been really good, solid bookings. For Buffalo Air, lower just because we have booked so much that we're pretty far out now as far as using our capacity. Even with the expansion that we did last year, we've been able to sell that capacity quickly. Speaker 800:27:29Okay. Well, that's encouraging. Sam, help me out. The equipment, I guess it was all going to be in by the Q4 and then it was all going to be by the Q1 and then you said something here on the call about you won't be getting the full benefit of it until the Q3. I know that most things take longer than one thinks they're going to, but just help me understand a little better kind of like when what's happening between now and when the company is going to start getting the full benefit from the equipment? Speaker 400:28:07There's really one of 2 things that's going to happen. So we have extra as we were training people on the new equipment, we were carrying extra people across the business. And I'm hesitant to make a change in employment levels pending what we see happening in 2025 kind of business levels, just because of the time it takes to train and get people up to speed and disruption to the business. So that's really so either A, we'll have a pickup in business and the savings will flow through that way or B, we'll have to make an adjustment to staffing and we'll get it that way. So that's really what's happening. Speaker 400:28:56Everything is in with the exception of one last furnace being expectation, but that's the main issue. Speaker 800:29:08So it's basically employee training is getting people up to speed to a level that you're comfortable with is what's determining when the equipment is going to be kind of all fully available and functioning? Speaker 400:29:25Correct. Speaker 800:29:26Okay. And then one more thing will be my last. Company for mill rolls put in surcharges because of inflation, but it took time for them to get into the system. The company raised mill roll prices last year. They were supposed to be good, that we're going help hit in 'twenty four. Speaker 800:29:56So now the surcharges are rolling off, the price increases are rolling in. Is the net effect going to be better? Or is it going to be are things going Speaker 500:30:07to be the same that they were? Speaker 400:30:13We will see. In the Q1, the price increases are delayed probably about half just because of backlog. So we're shipping 2023 orders out in 2024 and then the full effect of the price increases we'll see in Q2, so about half in Q1, half in Q2. The surcharge, it is what it is, it's pass through or not. So that is covered on the majority of our shipments are all surcharge protected. Speaker 400:30:44So it's really just that price increase offset by either the volume being up or down. So we will see it pass through or come through this year, David. Speaker 800:30:55And so are you still feeling that you're going to get the sequential quarterly improvement that you had been looking for previously that it's just going to be a little delayed? Speaker 400:31:09The answer is yes, except for I did mention, we did have an outage in our Sweden facility that affected shipments and absorption that again will recover the majority of that in Q2, Q3, but it will impact Q1. Speaker 800:31:23Okay. A lot of information in the call today. Thanks very much. Talk to you later. Speaker 300:31:29Thanks, David. Operator00:31:31Thank you. And our next question comes from Dennis Cano with Ritterbanger Capital. Please go ahead. Speaker 100:31:37Yes. Good morning, gentlemen. Sam, I was wondering if we could give a little bit more color about 4 gs Engineered Products. I understand the service centers were, I guess, looking to reduce their inventory and I guess that frac business kind of evaporated. I'm just kind of wondering like how much visibility do you have on that business? Speaker 100:32:07Kind of what is the outlook? It does look like the sales really do are pretty darn volatile, both on the upside and the downside. And obviously, recently, we've experienced on the downside. Just, yes, if you can give a little more color on kind of where you think we are in that business and outlook for say 2024 and 2025? Speaker 400:32:30Yes. We it is very volatile and we don't have a lot of visibility. It's more transactional business. And on the frac side of it, we really are in the we're selling the Tier 1s, but the smaller Tier 1s. So the Halliburton's Schlumberger, we don't sell to, so we're selling to Kerr and Gardner Denver and people like that. Speaker 400:32:53And in the short term, we've kind of chosen to not have that business based on working capital requirements. On the distribution bar, normal open die forge kind of other side of that business, we've been really finding where the market is from a pricing perspective. We have seen a recent uptick in order volumes for that kind of business. And that's really a function of finding where the import pricing is and what we have to do to and whether we want to participate at that particular price. Speaker 100:33:36And did I hear you that the pricing is such that it is at a level that you do are looking at to participate more in the service centers in the near term? Speaker 400:33:47Yes. It's definitely positive from a contribution margin perspective. If we were 100% full, then probably no, but where we're at, it's positive business for us. Speaker 100:34:00Yes. Okay. And I think you said that with rolls being up and forge rolls being up and cash rolls down, I guess, particularly in Europe, thinking overall flattish sales. So we should be seeing margin improvement though in 2024 with and I'm thinking particularly in the second half with the investments we've made. Is that a fair kind of assumption? Speaker 400:34:32Yes, it's fair. The only offset would be revenue is flat, but volume is down. So we have an offset in activity in the second half with higher margins on what's going out the door. So yes, we'll see better margin in the second half. Speaker 100:34:46Okay. Yes. And then, then, Dave, obviously, Air and Liquid Products has been just a really nice success story here. But following up on the other the previous questioner's comments, the 4th quarter orders did look really light relative to where we've been. I don't was that all Buffalo Air or was there other things going on or it doesn't look like there's a whole lot of seasonality in the business because last year's Q4, I'm talking 2020, Q4 of 2022 was pretty strong. Speaker 100:35:25So just any more color on the lightness in orders in the Q4 of 'twenty three? Speaker 500:35:32Yes, I can do that. The Buffalo Air, certainly, as I talked about, was one of the impacts. The other one, Buffalo Pumps was light in the 4th quarter, which happens sometimes when you're dealing with government contracts. Sometimes they want to get them placed or don't. While that was slower in the 4th quarter, we saw it pick right back up in January February. Speaker 500:35:55So I think that for pumps, it was just a timing issue. For Buffalo Air, it's an issue of a bit of a product of our success in bookings that we have simply sold out a lot of our capacity. Speaker 100:36:08Yes. Okay, great. And then just for clarity, the grant from the U. S. Navy for manufacturing equipment, is that for additive manufacturing or is it for a different process? Speaker 500:36:22It's for a different process. These are CNC machines. This is separate from the funding they provided for the additive work we're doing with them. Speaker 100:36:30Got it. Okay, great. Thank you. And then just, Mike, thinking about cash flow for 2024, it was very helpful that first questioner on kind of separating out the maintenance cap spending because that 15 to 20 was a lot higher than I had been penciling there. Speaker 600:36:50Yes, sorry about that. Speaker 100:36:51Yes. No worries, no worries. It's sharpened draw of breath, but I feel better now. But for 2024, it's going to be higher than that $10,000,000 to $11,000,000 I'm guessing we have $4,000,000 left in the forged businesses capital program. So would we expect it closer to $15,000,000 or $16,000,000 or am I being too pessimistic there? Speaker 600:37:17Well, first of all, we're probably going to spend about $18,500,000 on the Forest and Cast modernization program, not the full 20. That's one piece. That's how much we're going to use on the equipment financing facility. So that's one piece. And it's funded. Speaker 600:37:42So yes, we'll have CapEx. Our original business plan was something in the range of $10,000,000 $11,000,000 It might creep a little higher than that, Dennis, but it's going to be it's not going to be much higher than that and it's definitely a big step down from 2023 where we had a lot of the spending going on for the major program. Speaker 100:38:07Absolutely. No, that's great. And working capital, would you think that would be a source of cash in 'twenty four, particularly kind of no growth on the roll business? Speaker 600:38:19That's kind of the yes, that's kind of the thought process for the construction of our 2024 outlook is that we're expecting that working capital doesn't at least provide additional pressure in terms of cash flow from operating Speaker 100:38:36equity. Great, great. And then just one last thing, and I know on the asbestos issue, and I know these calculations are really are very complicated. But just looking at your reported results, when you talk about the cost per case settled, it's actually gone down. It was like 22,000 in 20 20 20 20 21 and in 20 23, it was under 19,000. Speaker 100:39:01Just kind of curious, so the but your the actuaries or whomever are doing these calculations are saying, no, we're expecting that to go higher going forward. Speaker 600:39:11Yes. Usually, Dennis, that's a very good question, Dennis. But usually, we don't do revaluations every year. We do them every couple several years because you hate to jump and do a whole revaluation and then suddenly things change in variables and some of the most sensitive variables in the entire valuation are average settlement values and the claim mix. And those are the two things that have caused the increase here. Speaker 600:39:46If you think about when we did the last valuation a few years ago, we were looking at a rolling average that pulled in multiple years prior to the current data. And those values were more in the range of 14, 15 ish kind of numbers. And now that they've stepped up, that's kind of the rationale. Speaker 400:40:15Yes, got it. Speaker 100:40:15Okay. Okay. I think I understand. Great. That's all for me. Speaker 100:40:19Good luck for a strong 2024. Thank you. Speaker 600:40:23Thanks, Dennis. Thanks. Operator00:40:25Thank you. And this concludes our question and answer session. I'd like to turn the conference back over to Brent McBrayer for any closing remarks. Speaker 300:40:34I continue to be encouraged by our strengthening operational performance as we work to mitigate the headwinds in our European casserole business. We're very optimistic with the opportunities we see for stronger financial performance moving forward. I want to thank our employees for their tremendous hard work and dedication to the business. They've done an outstanding job and continue to do so. I also want to thank our shareholders. Speaker 300:40:58Thank you for joining our call this morning. Operator00:41:02Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallAmpco-Pittsburgh Q4 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Annual report(10-K) Ampco-Pittsburgh Earnings HeadlinesAmpco-Pittsburgh (NYSE:AP) Coverage Initiated at StockNews.comMay 6 at 2:19 AM | americanbankingnews.comAmpco-Pittsburgh Schedules First Quarter 2025 Earnings Conference CallMay 5 at 4:04 PM | businesswire.comThink NVDA’s run was epic? You ain’t seen nothin’ yetAsk most investors and they’ll probably tell you Nvidia is the undisputed AI stock of the decade. In 2023, it surged 239%. And in 2024, it soared another 171% on the year… But what if I told you there was a way to target those types of “peak Nvidia” profit opportunities in 24 hours or less?May 6, 2025 | Timothy Sykes (Ad)Allied Properties: 11.7% Yield Does Not Make It A BuyMay 4 at 1:00 AM | seekingalpha.comAmpco-Pittsburgh Corporation (NYSE:AP) Q4 2024 Earnings Call TranscriptMarch 14, 2025 | msn.comAmpco-Pittsburgh Corp (AP) Q4 2024 Earnings Call Highlights: Navigating Challenges with ...March 14, 2025 | gurufocus.comSee More Ampco-Pittsburgh Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Ampco-Pittsburgh? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Ampco-Pittsburgh and other key companies, straight to your email. Email Address About Ampco-PittsburghAmpco-Pittsburgh (NYSE:AP), together with its subsidiaries, engages in manufacture and sale of specialty metal products and customized equipment to commercial and industrial users worldwide. The company operates through Forged and Cast Engineered Products (FCEP); and Air and Liquid Processing (ALP) segments. The FCEP segment produces forged hardened steel rolls, cast rolls and, forged engineered products that are used in cold rolling mills by producers of steel, aluminum, and other metals; cast rolls for hot strip mills, medium/heavy section mills, roughing mills, and plate mills; and forged engineered products for narrow and wide strip and aluminum mills, back-up rolls for narrow strip mills, and leveling rolls and shafts. The ALP segment produces custom-engineered finned tube heat exchange coils and related heat transfer products for various industries, including OEM/commercial, nuclear power generation, and industrial manufacturing; custom-designed air handling systems for institutional, pharmaceutical, and general industrial building markets; and manufacture centrifugal pumps for the fossil fueled power generation, marine defense, and industrial refrigeration industries. Ampco-Pittsburgh Corporation was incorporated in 1929 and is headquartered in Carnegie, Pennsylvania.View Ampco-Pittsburgh ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Is Reddit Stock a Buy, Sell, or Hold After Earnings Release?Warning or Opportunity After Super Micro Computer's EarningsAmazon Earnings: 2 Reasons to Love It, 1 Reason to Be CautiousRocket Lab Braces for Q1 Earnings Amid Soaring ExpectationsMeta Takes A Bow With Q1 Earnings - Watch For Tariff Impact in Q2Palantir Earnings: 1 Bullish Signal and 1 Area of ConcernVisa Q2 Earnings Top Forecasts, Adds $30B Buyback Plan Upcoming Earnings Fortinet (5/7/2025)ARM (5/7/2025)DoorDash (5/7/2025)AppLovin (5/7/2025)MercadoLibre (5/7/2025)Lloyds Banking Group (5/7/2025)Manulife Financial (5/7/2025)Novo Nordisk A/S (5/7/2025)Uber Technologies (5/7/2025)Johnson Controls International (5/7/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 9 speakers on the call. Operator00:00:00Welcome to the Ampco Pittsburgh Corporation 4th Quarter 2023 Earnings Results Conference Call. All participants will be in listen only mode. Please note Speaker 100:00:30that this conference is Operator00:00:31being recorded. I'd now like to turn the conference over to Kim Knox, Corporate Secretary. Please go ahead. Speaker 200:00:39Thank you, Rocco, and good morning to everyone joining us on today's Q4 2023 conference call. Joining me today are Brett McBrayer, our Chief Executive Officer and Mike McAuley, Senior Vice President, Chief Financial Officer and Treasurer. Also joining us on the call today are Sam Lyon, President of Union Electric Steel Corporation and Dave Anderson, President of Air and Liquid Systems Corporation. Before we begin, I would like to remind everyone that participants on this call may make statements or comments that are forward looking and may include financial projections or other statements of the corporation's plans, objectives, expectations or intentions. These matters involve certain risks and uncertainties, many of which are outside the corporation's control. Speaker 200:01:29The corporation's actual results may differ significantly from those projected or suggested in any forward looking statements due to various risk factors, including those discussed the corporation's most recently filed Form 10 ks and in subsequent filings with the Securities and Exchange Commission. We do not undertake any obligation to update or otherwise release publicly any revision to our forward looking statements. A replay of this call will be posted on our website. To access the earnings release or the webcast replay, please the Investors section of our website at amcopgh.com. With that, I'd like to now turn the call over to Brett McBrayer, Ampco Pittsburgh's CEO. Speaker 200:02:13Brett? Speaker 300:02:13Thank you, Kim. Good morning and thank you for joining our call. As reported in our press release and 10 ks filing, Ampco Pittsburgh saw top line growth versus the prior year quarter and prior year with Air and Liquid Processing segment sales improving 35% 31%, respectively. Our underlying businesses improved on a non GAAP adjusted basis compared to prior year. Although our U. Speaker 300:02:38S. Forage Roll business performed well and our Air and Liquid Processing segment saw record backlog, record sales and record adjusted operating income during the year. Excess plant capacity coupled with high energy costs in our European cast roll businesses weighed heavily on our 2023 results. With the conclusion of our equipment modernization in our U. S. Speaker 300:03:02Forged roll business and the expansion of capacity in our Air and Liquid Processing segment, we are better positioned to selectively capture market opportunities. The 2023 full year loss of $34,600,000 included a $40,900,000 non cash and undiscounted asbestos related revaluation charge recorded in Q4 of 2023. I'm now going to turn the call over to Sam Lyon, President of our Forged and Cast Engineered Products segment for further comments on his segment's performance. Sam? Speaker 400:03:38Thank you, Brett, and good morning. Q4 of 2023 operating income was about breakeven versus a loss of 1.6 $1,000,000 in Q4 of 2022 on revenues of $75,800,000 $69,600,000 respectively. We focused on reducing working capital across all operations in Q4 and ended the year with 18% lower inventory on flat COGS. These production outages affected our operating income negatively, but improved our working capital in the quarter. In 2023, operating income was $7,600,000 versus $400,000 in 20.22. Speaker 400:04:162023 revenue was 303,800,000 dollars versus 2022 revenue of $299,500,000 Fordrill revenues increased 20% yearly, driven by North American manufacturers' reliance on domestic production to ensure stable supply reliability. Castrol revenues were lower than in 2022 and softness in this market is expected to continue throughout 2024 due to the current steel production levels in Europe. Despite base price increases, revenues were negatively impacted by our pass through to customers of lower energy and raw material costs through surcharges combined with a decrease in FEP demand. FEP revenues decreased in 2023 due to excess distributor inventories at year end 2022 and lower domestic oil and gas drilling in 2023. In 2023, escalating energy prices resulting from the Russia Ukraine conflict retracted and stabilized due to government controls, lower activity in Europe and a mild winter. Speaker 400:05:22In addition, as the post COVID supply chain issues experienced in 2022 stabilized, so did inflation. Core inflation for 2023 was approximately 4% versus 6% in 2022. 2023 operating results benefited from the tailwind associated with deflation, positive surcharge recovery as higher cost inventory was sold through and a one time foreign government energy reimbursement of $1,900,000 partially offset by higher medical costs. 2024 revenue looks to be roughly in line with 2023 as Europe is still depressed. We are starting commercial discussions for the 2025 business and we'll get a better look at the forward market in the coming months. Speaker 400:06:05Q1 of 2024 will be adversely affected by an unplanned 3 week outage at our Sweden Cass plant, resulting in an unfavorable $1,300,000 to $1,600,000 operating income impact in the quarter. All but $500,000 of this will be recovered in the coming quarters. As stated on the last earnings call, the intermediate to long term demand picture for flat rolled steel and aluminum remains strong, and we are well positioned to supply our customers as demand increases. Our North American customers are all bullish on the next decade and are investing in new capacity. Over the next decade, the global aluminum market is expected to grow with estimates of approximately a 5.8% compounded annual growth rate through 2,031 according to Allied Market Research, Next Market Research, Future Market Insights and SkyQuest. Speaker 400:06:55Our strategic capital project for the FCEP segment is essentially complete and we are ramping up the new equipment. The equipment is expected to be in full rate production in the Q3 of 2024. As stated in previous calls, this investment will provide many years of increased productivity, capacity and reduced maintenance spending. Speaker 300:07:15Thank you, Sam. Dave Anderson, President of Air and Liquid Systems will now cover his segment's results. Dave? Speaker 500:07:23Thank you, Brett. Good morning. 2023 was a record year for Air and Liquid as sales increased 31% to a record high of 100 and $19,000,000 Even with the record sales, our backlog grew 12% in 2023 as we continue to see growth opportunities. All three businesses achieved at least 20% sales growth compared to prior year. I would like to thank all the Air and Liquid employees for their hard work and dedication to drive the business forward. Speaker 500:07:54Operating income for Air and Liquid declined in the 4th quarter and for full year due to the non cash asbestos related charge in the 4th quarter. Excluding the asbestos impact, operating income in 2023 improved versus prior year due to the higher volume of shipments, offset in part by higher operating costs, including those associated with the sales growth and plant expansions, as well as unfavorable product mix. The additive manufacturing project we are working on with the U. S. Navy at Oak Ridge National Laboratory continues to make progress toward the goal of using additive technology to make parts for the pumps we provide to the U. Speaker 500:08:35S. Navy. This research and design work will allow us to manufacture parts that do not need to go through the traditional foundries that continue to have long lead times and quality issues. While this project is focused on parts for U. S. Speaker 500:08:51Navy pumps, the technology will also be applied to other pumps we sell. We expect to begin using additive parts in the second half of twenty twenty four. As I discussed on the last earnings call, Air and Liquid has received a 1 point $6,000,000 funding grant from the U. S. Navy for the purchase of new manufacturing equipment. Speaker 500:09:13The new equipment is expected to arrive at our facility in the Q2 of this year and will be operational in the Q3 of this year. The equipment will increase 2022. The 1st year of the plan saw our backlog grow substantially as our expanded sales force made an immediate impact on incoming orders. In 2023, we saw those orders turn into shipments as sales surged by more than 30%. We also increased our manufacturing capacity by adding an additional manufacturing location in Virginia and expanding our production workforce. Speaker 500:09:57Air and Liquid entered 20 history. We have seen much success in the last two years and it is just the beginning of what we are capable of doing. Speaker 300:10:14Thank you, Dave. At this time, Mike McAuley, our Chief Financial Officer, will now share more detail regarding our financial performance for the quarter. Mike? Speaker 600:10:24Thank you, Brett. As indicated in our press release and in the corporation's Form 10 ks filed yesterday, Ampco's net sales for the Q4 of 2023 were $108,100,000 an increase of approximately 16% compared to net sales for the Q4 of 2022. Full year sales of $422,300,000 rose approximately 8 percent. The Air and Liquid Processing segment led the growth, increasing their sales by 35% for Q4 and 31% for full year compared to prior year. Prior year due mainly to higher mill roll shipment volumes. Speaker 600:11:10The segment sales were approximately flat for the full year as higher forged roll shipment volumes and higher net roll pricing was offset by lower forged engineered products and cast roll shipments. The corporation reported a loss from operations for the Q4 of 2023 of $41,600,000 which was heavily impacted by a $40,900,000 non cash charge associated with a revaluation of the asbestos liability and related insurance receivables. This charge reflects the net difference between the change in the undiscounted asbestos liability, including estimated defense costs and the change in undiscounted related insurance receivables, which both increased with the new valuation. The main drivers behind the higher valuations are unfavorable recent trends in claims experience, including higher average settlement values and a higher proportion of mesothelioma claims in the case mix, which typically have higher settlement values. As disclosed in the non GAAP financial measures reconciliation tables presented in the press release and in our Form 10 ks for 2023, non GAAP adjusted loss from operations was 0 point $7,000,000 for Q4 2023 as the Forest and Cast Engineered Products segment experienced unfavorable cost absorption from the plant downtime that Sam described during the quarter. Speaker 600:12:49And the Air and Liquid sales volume growth impact was more than offset by higher operating costs and unfavorable sales margin mix in the quarter. Full year 2023 adjusted income from operations of $4,200,000 improved by $4,500,000 over full year 2022. The Forged and Cast Engineered Products segment led this improvement primarily as a result of improved net pricing and better product mix, overcoming lower shipment volumes of forged engineered products and lower manufacturing cost absorption. Full year selling and administrative expenses were approximately 12 percent of net sales for 2023 compared to 11.2% for 2022. The increase in selling and administrative expense is primarily due to higher employee related costs, inclusive of short and long term incentives, a rise in medical insurance and includes the full year effect of staff added last year to support Aero Liquid's commercial growth. Speaker 600:13:56In addition, the prior year benefited from a change in an employee benefit policy, which reduced 2022 selling and administrative expense by $1,100,000 Interest expense for the quarter increased compared to prior year due to a rise in both interest rates and in total debt. This reflects interest on the sale and leaseback financing transaction and the equipment financing arrangement completed during the second half of twenty twenty two, the latter of which has been funding the equipment modernization project in the U. S. Forged business. And it also reflects higher average borrowings under the revolving credit facility to support growth in working capital and other cash needs in 2023. Speaker 600:14:45Other net improved for Q4 2023, primarily due to lower foreign exchange losses, partly offset by lower pension income. However, other net declined for the full year, primarily due to fluctuations in foreign exchange and lower pension income, partly offset by unrealized gains in the Rabbi Trust investments compared to prior year unrealized losses. The income tax provision for Q4 and full year 2023 includes a $1,300,000 income tax benefit related to the asbestos related charge as well as a $300,000 allowance against valuation allowance against the net deferred income tax assets of the corporation's U. K. Operations, which entered into a 3 year cumulative loss position during the quarter. Speaker 600:15:40Given the higher energy costs it experienced during that time frame in the wake of the Russia Ukraine conflict and the resulting shift in the majority of its production load to another facility. Net income attributable to non controlling interest rose for the quarter and full year due to higher operating results for our majority owned Chinese joint venture. As a result, net loss attributable to Ampco Pittsburgh for the 3 12 months ended December 31, 2023 was $41,800,000 or $2.12 per share $39,900,000 or $2.04 per share, respectively, which include approximately $2 per share and $2.02 per share, respectively, for the after tax impact of the asbestos related charge recorded in Q4 2023. Total backlog at December 31, 2020 3 of $378,900,000 rose approximately 3% from December 30 1, 20 22, with the Air and Liquid segment backlog up by $14,500,000 or 12% based on record order intake for the year. And the Forged and Cast Engineered Products segment backlog was down by $4,600,000 or approximately 2% with lower FEP product demand and lower cast roll orders, partly offset by higher forged rolls backlog and the impact of foreign exchange. Speaker 600:17:16Net cash flows provided by operating activities was a positive $6,600,000 for Q4 2023 and was a use of $3,700,000 for full year 2023. Investment in trade working capital stabilized in 2023 after a significant increase in 2022 in response to a higher level of business activity and higher costs associated with inflation and the impact of supply chain disruptions. Asbestos related settlements funded by the company in 2023 were $10,600,000 We expect asbestos related payments to approximate $9,000,000 in 2024. Capital expenditures for the Q4 of 2023 were $6,300,000 primarily for the Forged and Gas Engineered Products segment, inclusive of the Forged Business's modernization capital program. Full year CapEx of $20,400,000 compared to $16,700,000 in 2022. Speaker 600:18:24At December 31, 2023, the corporation's liquidity position included cash on hand of $7,300,000 and undrawn availability on our revolving credit facility of $25,100,000 In addition, the equipment financing facility has remaining capacity of $3,300,000 as of December 31, 2023, and is sufficient to finance the remaining expenditures of the modernization program, spending on which is expected to be completed approximately by the end of Q1, 2024. Operator, at this time, we would now like to open the line for questions. Operator00:19:23And today's first question comes from Justin Bergner with Gabelli Funds. Please go ahead. Speaker 700:19:30Good morning, Brad. Good morning, Mike. Good morning, everyone else that's on the call. Speaker 300:19:36Good morning. Speaker 700:19:40My first question relates to CapEx. Given the modernization program coming to an end, what's a reasonable number for CapEx in 2024 and should we kind of expect to further step down 2025 when the modernization program is fully complete? Speaker 600:20:01Yes, Justin, we're going to spend a little bit more just to finish it out in Q1, but I mean outside of that, when we think about the forward look for CapEx, we think that we're going to be in the $20 type $1,000,000 range for the foreseeable future. And I think if you think about that, we've been saying and I think it's consistent that for our business, like maintenance level of CapEx is somewhere in that $15,000,000 to $20,000,000 range. So that kind of is representative of pretty much maintenance CapEx going forward. Speaker 700:20:43Okay. As a follow-up there, I mean, you did $20,000,000 this in the year just completed with a fair amount of modernization. What is going to offset the modernization CapEx going away on the upside? Speaker 600:20:59Jason, I misspoke. I was referring to projected depreciation expense. Excuse me. We're more in the line of $10,000,000 $11,000,000 over the next couple of years for CapEx. Sorry about Speaker 700:21:12that. Okay, that's helpful. So is that the maintenance CapEx or is that the total CapEx just Speaker 600:21:16That's the total CapEx and Speaker 100:21:18it's also reflective of a step Speaker 600:21:18down reflecting primarily maintenance CapEx. Of a step down reflecting primarily maintenance CapEx. Speaker 700:21:24Okay. So there's a few million above that $10,000,000 to $11,000,000 this year with the completion of modernization program and then a full step down level. Okay. Secondly, the mix in Air and Liquid Processing, what drove the weaker mix in the Q4 and is the full year 2023 as a whole reflective of a normalized mix for that business? Speaker 500:21:51Dave, do you want to take that? Dave. Yes, I can do that. Primarily in the Q4, Justin, it was related to some older orders going to shipyards. Those orders were taken a couple of years ago and inflation eroded some of the margin there. Speaker 500:22:08So our mix was not so great on that. Same thing during the year, but I would say overall, yes, the year's mix was about correct, slightly unfavorable due to the issue with pumps that I just described. Speaker 700:22:27Got you. And then as we look at 20 24, I mean, does that issue of kind of older backlog dissipate? And does that have the potential to allow for some margin expansion in that business? Speaker 500:22:44In 2024, we'll still have some of it, but my expectation is 2024 is the last of it. So yes, going forward, you'll begin to see that issue will be gone. Speaker 700:22:58Okay. And I don't know if you guys are able to share, but any idea how much your margins might have been weighed down in Air Liquide Processing by that old backlog into 'twenty three or looking into 'twenty four? Speaker 500:23:15I don't have those particular numbers, Justin, but I can look and see. Speaker 700:23:20Okay. Thank you. And then lastly, with respect to Forged and Cast Engineered Products, the modernization program coming to an end in terms of the CapEx, I mean, should we expect a meaningful margin step up in that segment in 'twenty four as things ramp and come 'twenty five as the ramp is complete? Speaker 400:23:47Yes, Justin. This is Sam. In the second half of twenty twenty four, as we're completing training and the people, it's really employee costs come out and some transportation costs go away between plants. So the total savings was in the neighborhood of $3,000,000 So in the second half of the year, we would expect to start seeing that in 2025 fully. The remaining savings that was quoted earlier was really expansion of business, so that will yet to be seen. Speaker 400:24:21So we have more capacity available to expand our business in 'twenty five timeframe. Speaker 700:24:26Got you. And is the $3,000,000 a full year number just to make sure I'm on the same page? Speaker 400:24:31Yes, it's actually $29,000,000 I think is what we've been quoting, but yes, that's a full year number. Speaker 700:24:36Okay, great. Thank you so much. Operator00:24:45Our next question comes from David Wright with Henry Investment Trust. Please go ahead. Speaker 800:24:54Follow-up there on Justin's question. What kind of an overall operating margin is it's kind of defined in the segment breakdown in the footnotes, are you looking at for 2024? Is it kind of in the 11% to 12% range that we saw in the 2nd and third quarter? Like what's the overall target? Speaker 500:25:25I think it will be similar, David, to what we saw in 'twenty three as we continue to work through some of the older backlog and then we'll start seeing that number move up as we get into the more recent years in the backlog. Speaker 800:25:43So move up from 11% to 12%? Speaker 500:25:47Yes. It will stay it will be in that neighborhood in the 1st part of the year and then we'll start edging our way upward from there. Speaker 800:25:55There had been some number of product for the Navy that was delayed because of delays in the whole submarine program. Are these the pumps that you're referring to presently? Speaker 500:26:11These would be delayed more for the surface ships, but yes, that's what we're talking about is there's been a lot of delays and it's pretty common in any of the work that you see the Navy releasing that they are quite a bit behind on their build schedule. Speaker 800:26:26Right. So this is the list of that you had finished and now as you're shipping it is how it's hitting the P and L. And you've got more of that to ship this year, correct? Speaker 500:26:39Yes, sir. That's correct. Okay. And we expect that will be over this year. Speaker 800:26:47Your backlog in your segment was down around $11,000,000 from Q3 to Q4. You booked a lot of good business last year, I know. What's the booking environment been here in the Q1 for your business? Speaker 500:27:05For Buffalo Pumps and for Aerofin, it's been really good, solid bookings. For Buffalo Air, lower just because we have booked so much that we're pretty far out now as far as using our capacity. Even with the expansion that we did last year, we've been able to sell that capacity quickly. Speaker 800:27:29Okay. Well, that's encouraging. Sam, help me out. The equipment, I guess it was all going to be in by the Q4 and then it was all going to be by the Q1 and then you said something here on the call about you won't be getting the full benefit of it until the Q3. I know that most things take longer than one thinks they're going to, but just help me understand a little better kind of like when what's happening between now and when the company is going to start getting the full benefit from the equipment? Speaker 400:28:07There's really one of 2 things that's going to happen. So we have extra as we were training people on the new equipment, we were carrying extra people across the business. And I'm hesitant to make a change in employment levels pending what we see happening in 2025 kind of business levels, just because of the time it takes to train and get people up to speed and disruption to the business. So that's really so either A, we'll have a pickup in business and the savings will flow through that way or B, we'll have to make an adjustment to staffing and we'll get it that way. So that's really what's happening. Speaker 400:28:56Everything is in with the exception of one last furnace being expectation, but that's the main issue. Speaker 800:29:08So it's basically employee training is getting people up to speed to a level that you're comfortable with is what's determining when the equipment is going to be kind of all fully available and functioning? Speaker 400:29:25Correct. Speaker 800:29:26Okay. And then one more thing will be my last. Company for mill rolls put in surcharges because of inflation, but it took time for them to get into the system. The company raised mill roll prices last year. They were supposed to be good, that we're going help hit in 'twenty four. Speaker 800:29:56So now the surcharges are rolling off, the price increases are rolling in. Is the net effect going to be better? Or is it going to be are things going Speaker 500:30:07to be the same that they were? Speaker 400:30:13We will see. In the Q1, the price increases are delayed probably about half just because of backlog. So we're shipping 2023 orders out in 2024 and then the full effect of the price increases we'll see in Q2, so about half in Q1, half in Q2. The surcharge, it is what it is, it's pass through or not. So that is covered on the majority of our shipments are all surcharge protected. Speaker 400:30:44So it's really just that price increase offset by either the volume being up or down. So we will see it pass through or come through this year, David. Speaker 800:30:55And so are you still feeling that you're going to get the sequential quarterly improvement that you had been looking for previously that it's just going to be a little delayed? Speaker 400:31:09The answer is yes, except for I did mention, we did have an outage in our Sweden facility that affected shipments and absorption that again will recover the majority of that in Q2, Q3, but it will impact Q1. Speaker 800:31:23Okay. A lot of information in the call today. Thanks very much. Talk to you later. Speaker 300:31:29Thanks, David. Operator00:31:31Thank you. And our next question comes from Dennis Cano with Ritterbanger Capital. Please go ahead. Speaker 100:31:37Yes. Good morning, gentlemen. Sam, I was wondering if we could give a little bit more color about 4 gs Engineered Products. I understand the service centers were, I guess, looking to reduce their inventory and I guess that frac business kind of evaporated. I'm just kind of wondering like how much visibility do you have on that business? Speaker 100:32:07Kind of what is the outlook? It does look like the sales really do are pretty darn volatile, both on the upside and the downside. And obviously, recently, we've experienced on the downside. Just, yes, if you can give a little more color on kind of where you think we are in that business and outlook for say 2024 and 2025? Speaker 400:32:30Yes. We it is very volatile and we don't have a lot of visibility. It's more transactional business. And on the frac side of it, we really are in the we're selling the Tier 1s, but the smaller Tier 1s. So the Halliburton's Schlumberger, we don't sell to, so we're selling to Kerr and Gardner Denver and people like that. Speaker 400:32:53And in the short term, we've kind of chosen to not have that business based on working capital requirements. On the distribution bar, normal open die forge kind of other side of that business, we've been really finding where the market is from a pricing perspective. We have seen a recent uptick in order volumes for that kind of business. And that's really a function of finding where the import pricing is and what we have to do to and whether we want to participate at that particular price. Speaker 100:33:36And did I hear you that the pricing is such that it is at a level that you do are looking at to participate more in the service centers in the near term? Speaker 400:33:47Yes. It's definitely positive from a contribution margin perspective. If we were 100% full, then probably no, but where we're at, it's positive business for us. Speaker 100:34:00Yes. Okay. And I think you said that with rolls being up and forge rolls being up and cash rolls down, I guess, particularly in Europe, thinking overall flattish sales. So we should be seeing margin improvement though in 2024 with and I'm thinking particularly in the second half with the investments we've made. Is that a fair kind of assumption? Speaker 400:34:32Yes, it's fair. The only offset would be revenue is flat, but volume is down. So we have an offset in activity in the second half with higher margins on what's going out the door. So yes, we'll see better margin in the second half. Speaker 100:34:46Okay. Yes. And then, then, Dave, obviously, Air and Liquid Products has been just a really nice success story here. But following up on the other the previous questioner's comments, the 4th quarter orders did look really light relative to where we've been. I don't was that all Buffalo Air or was there other things going on or it doesn't look like there's a whole lot of seasonality in the business because last year's Q4, I'm talking 2020, Q4 of 2022 was pretty strong. Speaker 100:35:25So just any more color on the lightness in orders in the Q4 of 'twenty three? Speaker 500:35:32Yes, I can do that. The Buffalo Air, certainly, as I talked about, was one of the impacts. The other one, Buffalo Pumps was light in the 4th quarter, which happens sometimes when you're dealing with government contracts. Sometimes they want to get them placed or don't. While that was slower in the 4th quarter, we saw it pick right back up in January February. Speaker 500:35:55So I think that for pumps, it was just a timing issue. For Buffalo Air, it's an issue of a bit of a product of our success in bookings that we have simply sold out a lot of our capacity. Speaker 100:36:08Yes. Okay, great. And then just for clarity, the grant from the U. S. Navy for manufacturing equipment, is that for additive manufacturing or is it for a different process? Speaker 500:36:22It's for a different process. These are CNC machines. This is separate from the funding they provided for the additive work we're doing with them. Speaker 100:36:30Got it. Okay, great. Thank you. And then just, Mike, thinking about cash flow for 2024, it was very helpful that first questioner on kind of separating out the maintenance cap spending because that 15 to 20 was a lot higher than I had been penciling there. Speaker 600:36:50Yes, sorry about that. Speaker 100:36:51Yes. No worries, no worries. It's sharpened draw of breath, but I feel better now. But for 2024, it's going to be higher than that $10,000,000 to $11,000,000 I'm guessing we have $4,000,000 left in the forged businesses capital program. So would we expect it closer to $15,000,000 or $16,000,000 or am I being too pessimistic there? Speaker 600:37:17Well, first of all, we're probably going to spend about $18,500,000 on the Forest and Cast modernization program, not the full 20. That's one piece. That's how much we're going to use on the equipment financing facility. So that's one piece. And it's funded. Speaker 600:37:42So yes, we'll have CapEx. Our original business plan was something in the range of $10,000,000 $11,000,000 It might creep a little higher than that, Dennis, but it's going to be it's not going to be much higher than that and it's definitely a big step down from 2023 where we had a lot of the spending going on for the major program. Speaker 100:38:07Absolutely. No, that's great. And working capital, would you think that would be a source of cash in 'twenty four, particularly kind of no growth on the roll business? Speaker 600:38:19That's kind of the yes, that's kind of the thought process for the construction of our 2024 outlook is that we're expecting that working capital doesn't at least provide additional pressure in terms of cash flow from operating Speaker 100:38:36equity. Great, great. And then just one last thing, and I know on the asbestos issue, and I know these calculations are really are very complicated. But just looking at your reported results, when you talk about the cost per case settled, it's actually gone down. It was like 22,000 in 20 20 20 20 21 and in 20 23, it was under 19,000. Speaker 100:39:01Just kind of curious, so the but your the actuaries or whomever are doing these calculations are saying, no, we're expecting that to go higher going forward. Speaker 600:39:11Yes. Usually, Dennis, that's a very good question, Dennis. But usually, we don't do revaluations every year. We do them every couple several years because you hate to jump and do a whole revaluation and then suddenly things change in variables and some of the most sensitive variables in the entire valuation are average settlement values and the claim mix. And those are the two things that have caused the increase here. Speaker 600:39:46If you think about when we did the last valuation a few years ago, we were looking at a rolling average that pulled in multiple years prior to the current data. And those values were more in the range of 14, 15 ish kind of numbers. And now that they've stepped up, that's kind of the rationale. Speaker 400:40:15Yes, got it. Speaker 100:40:15Okay. Okay. I think I understand. Great. That's all for me. Speaker 100:40:19Good luck for a strong 2024. Thank you. Speaker 600:40:23Thanks, Dennis. Thanks. Operator00:40:25Thank you. And this concludes our question and answer session. I'd like to turn the conference back over to Brent McBrayer for any closing remarks. Speaker 300:40:34I continue to be encouraged by our strengthening operational performance as we work to mitigate the headwinds in our European casserole business. We're very optimistic with the opportunities we see for stronger financial performance moving forward. I want to thank our employees for their tremendous hard work and dedication to the business. They've done an outstanding job and continue to do so. I also want to thank our shareholders. Speaker 300:40:58Thank you for joining our call this morning. Operator00:41:02Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.Read morePowered by