Ampco-Pittsburgh Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
May 13, 2025

There are 6 speakers on the call.

Operator

Good morning, and welcome to the Ampco Pittsburgh Corporation First Quarter twenty twenty five Earnings Results Conference Call. All participants will be in listen only mode. Please note this event is being recorded. I would now like to turn the conference over to Kim Knox, Corporate Secretary. Please go ahead.

Speaker 1

Thank you, Wyatt, and good morning to everyone joining us on today's first quarter twenty twenty five conference call. Joining me today are Brett McBrayer, our Chief Executive Officer and Mike McAuley, Senior Vice President, Chief Financial 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 1

The 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 in 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 later today. To access the earnings release or the webcast replay, please consult the Investors section of our website at amphcophgh.com. With that, I'd like to turn the call over to Brett McBrayer, Amco Pittsburgh's CEO.

Speaker 1

Brett?

Speaker 2

Thank you, Kim. Good morning and thank you for joining our call. As reported in our press release and 10 Q, Amco Pittsburgh Corporation reported earnings per common share of $06 for the first quarter of twenty twenty five, an improvement of $0.20 as compared to the prior year quarter. Adjusted EBITDA for the quarter was $8,800,000 compared to $5,100,000 in the first quarter of twenty twenty four. Both segments showed significant EBITDA improvements versus the prior year.

Speaker 2

The quarter was highlighted by record order intake for Air and Liquid and continuing benefits from our new equipment in our U. S. Forge business. We expect to experience some near term impacts in Q2 as markets and supply chains react to the recent tariffs. However, our intent is to protect our margins by passing through to our customers any negative effects.

Speaker 2

We are nearing the conclusion of collective consultation process at our U. K. Facility. We expect to eliminate much of the losses for this business as we move forward. For further details regarding our segment performance, I will start by turning the call over to Sam Lyon, President of our Forged and Cast Engineered Products segment.

Speaker 3

Thank you, Brett, and good morning, everyone. For the first quarter of twenty twenty five, Forged and Cast Engineered Products segment reported net sales of $72,300,000 compared to $777,200,000.0 dollars in the first quarter of twenty twenty four, primarily driven by lower rule volume and unfavorable exchange rates, partially offset by higher base pricing and increased FEP shipments. Segment EBITDA improved significantly to $8,270,000 up from $6,000,000 in the prior year quarter. This improvement resulted from higher pricing, better manufacturing absorption and a lower cost structure. In 2024, we also had $05,000,000 of costs associated with a fire at our Sweden location and a machine failure in The UK.

Speaker 3

As previously announced, we initiated a formal collective consultation process with employees at our UK cash facility in February. We now expect this process to conclude by the May. At that point, we will have clarity on the future of those operations and our definitive actions to dramatically stem our losses at the location. Turning to market conditions. Global steel demand remains soft but stable in our two largest markets, North America and Europe.

Speaker 3

That said, we are closely monitoring the evolving tariff environment. Currently, U. S. Tariffs on rules are limited to the baseline of 10%. For our business, these tariffs apply to rules shipped from our European facilities to The U.

Speaker 3

S. As of yesterday, tariffs on U. S. Produced rules shipped to percent. Our annual shipments to China are small, ranging from 2,000,000 to $5,000,000 per year.

Speaker 3

We have an order scheduled to ship to China in the next two quarters and the reduction from 125% to 10% tariffs on imports from The U. S. Will relieve pressure and enable this shipment. We have worked with our U. S.

Speaker 3

Customers and the vast majority have agreed to pay the cost of the tariffs. Importantly, with The U. S. Cast roll market still underserved, our European operations remain competitive despite the tariffs. To date, only one customer has not agreed to accept this condition.

Speaker 3

This customer has elected to manage orders case by case to see if any trade deals eliminate the tariff. We would also expect the utilization of our U. S. Customers' mills to improve as a result of the more comprehensive tariffs 5% of 25% on aluminum and steel, which will benefit our business. Steel tariffs are also creating a significant tailwind for our domestic FEP business.

Speaker 3

Growth opportunities distribution bar and block products are emerging as imports face these new costs. FEP sales and margins are projected to rise from our 2024 revenue of $11,800,000 In summary, we continue to enhance our profitability through pricing, operational efficiency and disciplined management of external risks, including tariffs and geopolitical uncertainties.

Speaker 2

Brett? Thanks, Sam. Dave Anderson, President of Air and Liquid Systems will now cover his segment's results.

Speaker 4

Thank you, Brett. Good morning. Great start to the year for Air and Liquid. Q1 sales orders were the highest order intake in our history. The order activity was driven by record order intake from the nuclear market along with continued strong order activity for both the military and pharmaceutical markets.

Speaker 4

Revenue was slightly below last year. However, the product mix was substantially improved. Revenue for heat exchangers increased due to increased shipments in the nuclear market. Revenue for pumps was slightly higher than prior year, while air handling revenue declined due to the timing of order delivery dates and revenue recognition. Adjusted EBITDA in Q1 was $3,800,000 versus $2,200,000 in the prior year.

Speaker 4

Similarly, operating income was at 3,500,000.0 in Q1 versus $2,000,000 in the prior year. The increase versus prior year was primarily driven by a much better product mix. We continue to see positive activity in the nuclear market for our heat exchanger product line. We expect both orders and shipments to be at record levels this year. In March, we received our first order for a small modular reactor or SMR project.

Speaker 4

There is a great deal of activity in the new SMR market and we have started working with several companies that are developing these new products. Nuclear power in many ways seems to have become the preferred power option and our engineering and manufacturing capabilities position us well as this market grows. There continues to be strong demand from the U. S. Navy for both new and aftermarket pumps.

Speaker 4

We expect this demand to continue as the Navy moves forward with fleet expansion plans. We still expect to receive the new manufacturing equipment from the Navy funding program by the end of twenty twenty five. This equipment along with the equipment we installed in 2024 will position us to meet the expected growth in this market. Demand for custom air handlers remains strong. From upgrading existing facilities to increasing research and manufacturing capabilities in The United States, there continues to be tremendous demand in the pharmaceutical market for our custom air handling products.

Speaker 4

Of course, tariffs have been a major subject in the last few months, so I wanted to provide some thoughts on how tariffs may impact Air and Liquids businesses. While the tariff situation remains rather fluid at the moment, I do not see significant negative issues. Most of our raw materials and components are excluded from the tariffs as they are either produced in The U. S. Or they are exempted.

Speaker 4

For components that are subject to tariffs, we expect to pass on the majority of the costs in order to maintain our margins. There is some potential for short term supply issues as the world adapts to the new tariffs. We have taken steps to mitigate supply chain disruptions that could occur later this year. If the tariffs do result in increased manufacturing in The United States, then there is potential for significant demand increases for our products as The U. S.

Speaker 4

Is our primary market. Onshoring manufacturing in the pharmaceutical market would only drive air handling demand even higher. Overall, more manufacturing would increase the need for our industrial heat exchangers and would drive higher demand for power generation, which would benefit both our commercial pump line and our nuclear heat exchangers. In summary, demand for our products remained strong. Adjusted EBITDA increased 73% versus prior year and while the tariffs could cause short term supply chain issues, in the longer term they have the potential to increase demand for our products.

Speaker 2

Thank you, Dave. At this time, Mike McAuley, our Chief Financial Officer, will now share more details regarding our financial performance for the quarter.

Speaker 5

Thank you, Brett. Before I begin, I'd like to comment on a change we implemented in our non GAAP measures reporting starting in this Q1 of twenty twenty five. You will note that these new disclosures and reconciliation tables are in both our Form 10 Q and in our Q1 earnings press release from yesterday. Specifically, we've begun reporting adjusted EBITDA, whereas in prior quarters, we provided consolidated adjusted operating income. We added this because adjusted EBITDA increasingly became a key measure used internally and because we believe investors will find this change helpful.

Speaker 5

Now regarding our Q1 results, as indicated in both our Form 10 Q and in our press release eight ks filed yesterday, Ampco's consolidated net sales for the first quarter of twenty twenty five were $104,300,000 a decline of approximately 5% compared to net sales for the first quarter of twenty twenty four, but about a 3% increase sequentially versus Q4 twenty twenty four. Compared to prior year, the key drivers for the sales decline were lower shipments of mill rolls and changes in rolled product mix, which more than offset higher net pricing in the forged and cast Engineered Products segment and lower sales of air handling units due to timing of shipments in the Air and Liquid Processing segment. Yet Q1 twenty twenty five mill roll sales rose nearly 9% compared to Q4 twenty twenty four, and this was the key driver for Ampco's consolidated sales growth sequentially. Consolidated adjusted EBITDA of $8,800,000 for Q1 twenty twenty five improved by $3,700,000 versus prior year for a few key reasons despite the lower sales. In the Fortunecast Engineered Products segment, higher pricing, net of lower surcharges and related product cost changes, improved the segment's margins significantly.

Speaker 5

In addition, there was improved manufacturing uptime and manufacturing cost efficiency due in part to improved machine reliability and uptime in our cast roll facilities, as Sam described. And in the Air and Liquid Processing segment, as Dave indicated, there was a significant improvement in the product mix sold in Q1 of twenty twenty five compared to the prior year. Corporation's total selling and administrative expenses for Q1 twenty twenty five increased 5% versus prior year due to inflationary increases, higher employee related costs and higher professional fees. Interest expense of $2,700,000 for the quarter was flat with prior year. Other income net was declined slightly versus prior year.

Speaker 5

The income tax provision for Q1 twenty twenty five decreased $400,000 year over year, primarily due to the benefit of reduced tax rate in one of our foreign tax paying jurisdictions. As a result, net income attributable to Ampco Pittsburgh for Q1 twenty twenty five was $1,100,000 or compares to a net loss of $2,700,000 or $0.14 per share in the prior year for a $0.20 per share EPS improvement. Total backlog at 03/31/2025 of $368,500,000 rose $19,700,000 or 6% versus 03/31/2024, with both segments experiencing increases. Compared to 12/31/2025, however, despite the record order intake in Air and Liquid in Q1 twenty twenty five, total backlog declined due to the timing of placement of new orders from some of our larger roll customers, which typically occur later in the year. Net cash flows used by operating activities was $5,300,000 for Q1 twenty twenty five, reflecting primarily capital.

Speaker 5

The corporation also made a pension contribution of $800,000 during the quarter. Capital expenditures for the first quarter of twenty twenty four were $2,200,000 At 03/31/2025, the corporation's liquidity position included cash on hand of $7,100,000 and undrawn availability on a revolving credit facility of $28,600,000 Operator, at this time, we would now like to open the line for questions.

Operator

Thank you. We will now begin the question and answer session.

Speaker 2

Question

Operator

Our first question will come from Ronald with Van Ske Holdings. Please go ahead.

Speaker 3

I did not register for a question.

Operator

Apologies for that. I will remove you. With no questions, this will conclude our question and answer session. I would like to turn the conference back over to Brett McBrayer, CEO for any closing remarks.

Speaker 2

Thank you. I want to recognize the strong performance by our employees in Q Q1 as they continue to drive positive improvements throughout our businesses. Thank you for your great work. I also want to thank our shareholders and Board of Directors for your continued support. Despite the uncertainty in our markets, we remain focused on delivering significant improvements in our businesses as we move forward.

Speaker 2

Thank you for joining our call this morning.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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Key Takeaways

  • Ampco reported Q1 FY25 EPS of $0.06, up $0.20 year-over-year, and a consolidated Adjusted EBITDA of $8.8 million versus $5.1 million the prior year, driven by improved product mix and operational efficiencies.
  • Forged and Cast Engineered Products saw net sales decline due to lower roll volumes and FX headwinds, but segment EBITDA rose to $8.27 million thanks to higher pricing, better manufacturing absorption and cost reductions, with a UK facility consultation aiming to eliminate losses.
  • Air and Liquid Systems achieved its highest ever Q1 order intake—led by nuclear, military and pharmaceutical markets—with improved product mix driving adjusted EBITDA up 73%, and secured its first small modular reactor order.
  • Management expects near-term tariff headwinds in Q2 but plans to maintain margins by passing costs to customers, noting most raw materials are exempt and that long-term tariffs may spur US onshoring and boost demand across both segments.
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Earnings Conference Call
Ampco-Pittsburgh Q1 2025
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