Ampco-Pittsburgh Q2 2025 Earnings Call Transcript

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Provided by Quartr
August 13, 2025

Key Takeaways

  • Negative Sentiment: Amco reported adjusted EBITDA of $8.0 M in Q2, down $2.1 M year-over-year, and a net loss of $7.3 M, including a $6.8 M UK exit charge.
  • Positive Sentiment: Management expects the wind-down of the UK cash roll facility to drive at least a $5 M annualized operating income improvement once complete.
  • Positive Sentiment: The Air and Liquid Processing segment delivered a 15% increase in Q2 adjusted EBITDA and 36% year-to-date growth, its highest performance to date.
  • Negative Sentiment: Forged and Cast Engineered Products plant utilization fell about 10% from last year due to tariff uncertainty pausing customer orders, negatively impacting margins.
  • Positive Sentiment: Amco extended its credit facility through February 2030, ending the quarter with $9.9 M cash and $34.2 M of undrawn revolver availability to support liquidity.
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Earnings Conference Call
Ampco-Pittsburgh Q2 2025
00:00 / 00:00

There are 3 speakers on the call.

Operator

Welcome to the Ampco Pittsburgh Corporation Second Quarter twenty twenty five Earnings Results Conference Call. All participants will be in listen only mode. Please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, press star then one on your telephone keypad.

Operator

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, Gary, and good morning to everyone joining us on today's second quarter twenty twenty five 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 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 its 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 amphcoph.com. With that, I'd like to turn the call over to Brett McBrayer, Amco Pittsburgh's CEO.

Speaker 1

Brett?

Operator

Thank you, Kim. Good morning, and thank you for joining our call. As reported in our press release issued yesterday afternoon, Amco Pittsburgh Corporation reported adjusted EBITDA of $8,000,000 for the second quarter of twenty twenty five. The quarterly results were negatively impacted by a pause in customer orders as they weighed clarity on tariffs. As a result, our forged and cash engineer products group shut down production to adjust working capital through portions of the period.

Operator

A major focus in the quarter was on our UK cash roll facility, where we continue to experience significant losses. Progress on the wind down of this facility has progressed well as we work to accelerate rightsizing our portfolio. Once this action is complete, we expect a minimum of a $5,000,000 operating income improvement on an annualized basis. Our Air and Liquid Processing segment saw a 15% increase in adjusted EBITDA in the quarter versus prior year and the highest year to date adjusted EBITDA in our segment's history. The growth in this business' performance continues to be impressive.

Operator

For further details regarding our segment performance, I'll turn the call now over to Sam Lyon, President of our Forged and Cast Engineered Products segment. Thank you, Brett, and good morning. For the 2025, FCEP reported net sales of $77,900,000 a 3% increase compared to 2024 and a 7.8% increase compared to 2025. Segment adjusted EBITDA for Q2 twenty twenty five was $6,800,000 down $1,500,000 from 2025. Our U.

Operator

S. Forage plant utilization in the quarter was 10% lower than 2024 and fourteen percent lower than 2025, primarily due to lower work rule demand caused by elevated customer inventory positions on forged work rules, partially resulting from a reduction of activity due to the fluid tariff environment. The decrease in plant utilization and lower revenue and margin from forged work rules negatively affected earnings in Q2. FEP demand and shipments were a positive development from the tariffs. We were able to increase pricing on this product line as barriers to imports increased.

Operator

The mix shift from forged rules to FEP reduced overall margins, yet strategically positions us to capture reshoring opportunities in tool steel, distribution bar and block products. Looking at the flat rolled market environment, demand in North America and Europe remains weak with many U. S. Customers postponing roll purchases in Q2 due to tariff uncertainty following the administration's expansion of Section two thirty two duties and unknown levels of base tariffs. For U.

Operator

S. Imports from our Sweden and Slovenia plants, the baseline tariff now stands at 15%, up from 10% in Q2. The cash flow market in North America exceeds domestic capacity, so long term demand for our European cash flows should not be affected by these tariffs. The tariff effect in the short term is reflected in our second half expectations as a temporary shortfall, particularly in North America. Notably, the long term fundamentals remain strong.

Operator

Construction spending, automotive production and can sheet demand are all expected to grow at mid single digit rates over the next five years, supporting a return to more normal ordering patterns. As we previously indicated, we have issued formal notice to the union of our intention to wind down operations at our U. K. Cast roll plant. We are engaging with multiple potential asset buyers.

Operator

The current backlog takes us through 2026 and we are reallocating products across the global UES network to ensure continued customer supply while working to wrap up operations as soon as possible. We have stopped taking new orders for The UK. In summary, although tariff related hesitation is reducing near term North American demand for rolls, our pricing discipline, cost control measures and expanding FEP volumes give us confidence going into 2026. As stated earlier, cash flow supply is limited in The U. S, allowing us to be competitive with other European suppliers.

Operator

To date, we have passed on all tariffs costs to our customers. We anticipate full order book for our 2026 at our cash flow plant in Sweden and the closure of The UK operations to provide a meaningful improvement in OI for the segment once complete. Brett, back to you. Thank you, Sam. Dave Anderson, President of Air and Liquid Systems, will now cover his segment's results.

Operator

Thank you, Brett. Good morning. 2025 continues to be a very positive year for Air and Liquid. In Q2, order activity continued to be very good. Our backlog at the end of Q2 was 8% higher than the start of the year.

Operator

The nuclear, military and pharmaceutical markets continue to be strong. Q2 revenue was consistent with prior year. However, the product mix was improved. Revenue for pumps was higher than prior year as we continue to see positive results from the military market. Heat exchanger shipments declined versus prior year due to the timing of some large orders that are expected to ship in Q3.

Operator

Adjusted EBITDA in Q2 was $3,900,000 versus $3,400,000 in the prior year. The 15% increase versus prior year was primarily driven by better product mix. Year to date adjusted EBITDA of $7,700,000 was the highest in Air and Liquids history and a 36% increase over prior year. We continue to see positive activity in the nuclear market for our heat exchanger product line. Orders have already exceeded any prior full year and we expect shipments to also be at record levels this year.

Operator

From restarting legacy nuclear plants to the new small modular reactors, nuclear power has become the preferred power option and our engineering and manufacturing capabilities positions us well as this market grows. There continues to be strong demand from the U. S. Navy and we expect this demand to continue as the Navy moves forward with fleet expansion plans. New manufacturing equipment from the Navy funding program is expected to arrive at our facility by the 2025.

Operator

This is from the Navy approved funding in 2024. In addition to the equipment being delivered this year, we are pleased to announce that Air and Liquid has been approved for another equipment funding from the U. S. Navy. This new funding was approved in May and was approximately $2,000,000 that will be used to purchase additional equipment for our Buffalo manufacturing location.

Operator

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. Tariffs continue to be a major subject in the last few months and the recent copper tariff will impact many products. Copper is a main component of our heat exchangers and we have notified our customers that we will be passing on any tariff costs incurred.

Operator

While there may be some short term fluctuations as the supply chain adjusts, in the long term, anything that results in increased manufacturing in The United States will increase demand for our products. In summary, demand for our products remains strong, backlog is up 8% this year, and year to date adjusted EBITDA increased 36% versus prior year. Thank you, Dave. At this time, Mike McCullough, our Chief Financial Officer, will now share more details regarding our financial performance for the quarter. Thank you, Brett.

Operator

As indicated in both our Form 10 Q and in our press release eight ks filed yesterday, the major headline item for the quarter was The UK exit charge. We recorded $6,800,000 in expenses related to employee severance, accelerated depreciation due to the plant's shortened operating life and certain professional fees associated with the plant closure. As indicated and itemized in Note two of our Form 10 Q, these costs are recorded against the respective cost of goods sold, SG and A and depreciation and amortization expense line items on the consolidated P and L. To reiterate, we expect the following that following the exit from this location, operating income is expected to improve by at least $5,000,000 on an annualized run rate basis. AMCO's net sales for the 2025 were $113,100,000 an increase of 2% compared to net sales for the 2024.

Operator

The increase was primarily driven by higher sales of Forged Engineered Products and favorable FX translation, which more than offset lower roll demand. Adjusted EBITDA of $8,000,000 for the 2020 declined by $2,100,000 versus prior year, primarily due to lower margins in the forged and cast engineered products segment for a few key reasons. Unfavorable manufacturing costs relative to pricing and surcharge pass throughs in the current quarter than in the prior year quarter, a lower volume of roll shipments offset by a higher volume of board tension here product shipments led to a weaker margin mix in Q2 twenty twenty five versus the prior year quarter and lower production rates in the current year quarter led to lower absorption of manufacturing overhead costs. These impacts were partly offset by higher profitability during the quarter versus prior year in the Air and Liquid Processing segment due to a better sales mix as Dave described. 2025 year to date adjusted EBITDA of $16,800,000 remains up versus prior year.

Operator

Total selling and administrative expenses declined slightly for the 2025 versus prior year, but are comparable year to date versus prior year. Depreciation and amortization expense for the quarter and for year to date are higher than prior year periods due to the accelerated depreciation piece of The U. K. Exit charge, which was $700,000 Severance costs of $5,900,000 on the Q2 P and L are the employee related severance costs that represent the largest element of the total UK exit charge. Interest expense for the second quarter declined slightly primarily due to lower average interest rates on the revolving credit facility.

Operator

The change in other expense income net was driven primarily by changes in foreign exchange transaction gains and losses. The income tax provision for 2025 is benefiting from a lower statutory tax rate in one of our foreign taxpaying jurisdictions. As a result, net loss attributable to Ampco Pittsburgh for the three months ended 06/30/2025 was $7,300,000 or $0.36 per share, which includes $6,800,000 or $0.34 per share for The U. K. Exit charge.

Operator

At the June, we amended and extended our credit agreement through 02/1930. We restructured the facility into a $100,000,000 revolving credit line backed by eligible accounts receivable and inventory, plus a $13,500,000 term loan backed by certain eligible machinery and equipment. The structure and added capacity provides us greater flexibility to support our global working capital needs. At closing, we fully drew on a term loan to pay down the revolver balance, which significantly increased the corporation's available liquidity. At June 3025, the corporation's liquidity position included cash on hand of $9,900,000 and undrawn availability on our revolving credit facility of $34,200,000 Operator, at this time, we would now like to open the line for questions.

Operator

We will now begin the question and answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Again, if you have a question, please press star then 1.

Operator

Our first question comes from Dennis Ganell with Rudabaga Capital. Please go ahead.

Speaker 2

Yes. Good morning, gentlemen. I was hoping to get a little bit more color on what's going on in the role market from Sam, if I could. Sam, in your conversations with customers and kind of what you saw for the month of July, are they is there some pent up demand? Are they are you seeing either actual orders in July or the promise of orders later in the year coming?

Speaker 2

And is this happening both in The U. S. And in Europe? Or is it really mostly in The U. S?

Speaker 2

Just trying to get a sense of how the back half of the year might look for your business. Yes, Dennis.

Operator

The second half of the year will be lighter shipment on rules than the first half, one, because we have less days and more holidays. And just the overall demand, the lead time on our products is depending where it's shipping. If it's in The U. S, it's three months. If it has to go overseas, it'll take four or five months.

Operator

And vice versa, if they're going to ship from overseas to here, it's five months. So you're kind of in the really back half. We take orders for November, December kind of time frame. And we have seen a slight uptick in order activity from a few of our large customers. What's really happening is there was a pause There was a couple of unknowns in Q2.

Operator

One, what was the tariff rate going to be? It was set at 10% and then it ultimately ended up being 15% for our plant, our plant in Sweden that ships to The U. S. Has no effect on their shipments into Europe, of course. But then the European customers we have didn't know if there was going to be a retaliatory tariff or not until just recently, and now there is not.

Operator

So the future, we would anticipate to be in a pretty good position, one, because the dollar has weakened somewhat, making The U. S. Shipments into Europe more favorable, making our cost position better. So that's that's a positive. And now it's unknown.

Operator

The tariffs are 15%. They're not 20 or 30 or 40. And rules are not subject to the steel tariffs, so it's a total tariff of 15%. It's not 15 plus the 50 for steel. It's just 15.

Operator

Right. So now all that's known, we feel like things start happening again. And specifically, Dennis, where we saw the degradation in ordering was really Europe into The U. S. And U.

Operator

S. To U. S. So the activity in The U. S.

Operator

Plant slowed a bit. There's a third factor, and that is that in 2024, we had a pretty high shipment level of forged work rules. And I think our customers were anticipating an uptick in overall deal demand. And the tariffs kind of hurt automotive production and hurt some other the interest rates, the housing market, housing starts are lower. That's offset somewhat by nonresidential construction and data centers being high.

Operator

But there's just a lot of questions around how much are things going to cost, how much is it going to be even on infrastructure projects. So again, now that that's all seems to be settled, we expect things to go back to normal.

Speaker 2

So to the extent that the lack of demand or lack of orders has been a U. S. Event, we could conceivably see increased U. S. Ordering activity and that affecting the '25.

Speaker 2

You said it's like a three month lead time, right? So do you expect that? I mean, as you talk to your customers, are they do they are they still your US customers, do they still have a pretty high inventory of rolls? So so that that that, you know, what I'm thinking of, some orders, you know, maybe in August or September are not gonna materialize. Kinda any any color on that on that standpoint?

Operator

I guess, I'll say, due to lead time of parts and materials and things, again, we we would be shipping we would be delivering in November, December for any incremental new orders. Yes. And and we have seen, you know, a little bit of uptick, but it's hard to say. And each customer is different. Some customers are flushed with cash, and they have more inventory, and they can wait longer.

Operator

And some are not, and they have to order, you know, their hand to mouth that they're ordering to get stuff as soon as they can. So it's variable, actually. Got it.

Speaker 2

And then any other color you can give on the closure of The UK facility in terms of the timing? Like, is that something that will happen kind of '5 and then we get that $5,000,000 incremental operating income bump in '26? Or is this will this drag on longer?

Operator

Well, the end the longest potential endpoint is q one of of twenty six, and we're working to pull that in. So sometime in q four between most likely October and December, the casting will stop, and those costs will stop. So that's the major energy consumer in the plant and about a third of the employees. And then, you know, the rules will progress through to the back end machining. And as as they as the rules get finished, you know, the employees will be will will be attributed, then, you know, costs will continue to come down.

Operator

And at the same time, as those costs are coming down, you're still shipping products. So then you start getting receipts in from the customers. And so that from a cash perspective, it's it's starting to hide, then you start receiving it back in.

Speaker 2

Yes. Yes. Okay. Okay. And you mentioned so do we own the plant?

Speaker 2

And do you have a a sense of potential proceeds if we do actually sell the the facility?

Operator

We do own it, and it's being evaluated right now. It's in a it's in a, I'll call it, a fairly desirable area in Newcastle. But you have to evaluate, you know, spend there for a long time. So what's the demolition cost versus the redevelopment cost? Does the maybe the Gateshead Council wants it.

Operator

We're not sure. The government's interested potentially to develop it. Then there's private people. It's really hard to say. We're not counting on anything, but there could The be next question is from Robert Jensen, a private investor.

Speaker 2

Yes. I'm just

Operator

wondering, in you guys closing UK operations, how is that going to impact your revenues? Yes. This is Sam, Robert. Roughly, it will be down just about $25,000,000 to 29,000,000 roughly 25,000,000 to $30,000,000 I'd say. And then there's some upside to offset that with converting some rules to board rules of 3,000,000 or $4,000,000 So I'd say in the neighborhood of 20,000,000 to $25,000,000 something like that.

Operator

Okay. And the reason it's not larger is we're shipping we are shipping some product to Sweden as well. So Sweden will end up being full. They're running at a lower utilization rate right now. So that would be an offset.

Operator

Yes. Okay. This concludes our question and answer session. I would like to turn the conference back over to Brett McBrayer for any closing remarks. Thank you.

Operator

In closing today, I want to recognize the great work by our employees. I particularly want to highlight the work of our team in The UK who are managing a very difficult situation. I also want to thank our shareholders and Board of Directors for your continued support. Despite the pause in our order book we've recently experienced, tariff clarity and the wind down of our UK operations will position us well as we move into 2026. I'm excited about our direction and the commitment of our team to demonstrate significantly improved earnings for our shareholders.

Operator

Thank you again for joining our call this morning. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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