Albany International Q2 Earnings Call Highlights

Key Points

• Second-quarter results improved: Revenue rose 5.8% year over year to $329.5 million, while adjusted EBITDA increased to $57.8 million, or a 17.6% margin. Adjusted EPS exceeded the company’s forecast despite revenue falling modestly below expectations.
• Engineered Composites was the primary growth driver: Revenue reached a quarterly record of $150.8 million, up 16%, and adjusted EBITDA margin expanded to 13.3% as aerospace and defense production rates increased. Albany expects continued growth as LEAP, Boeing, missile and other programs ramp.
• Outlook remains mixed: Machine Clothing demand varied by region and was affected by equipment downtime, leading Albany to expect slightly lower full-year revenue for the segment. The company forecast third-quarter revenue of $320 million to $330 million and adjusted EPS of $0.60 to $0.70.

Albany International NYSE: AIN reported second-quarter revenue growth and its strongest adjusted EBITDA performance in two years, driven by higher production rates in its Engineered Composites business, while Machine Clothing faced mixed regional demand and equipment-related downtime.

Total second-quarter revenue rose 5.8% year over year to $329.5 million. Adjusted EBITDA increased to $57.8 million from $51.9 million a year earlier, producing a 17.6% margin. CFO Will Station said the improvement reflected stronger profitability in Engineered Composites and continued margin performance in Machine Clothing, partly offset by lower Machine Clothing volume.

CEO Gunnar Kleveland said adjusted earnings per share exceeded the company’s forecast range despite consolidated revenue coming in modestly below expectations. He attributed the performance to improved execution, a more focused operating model and a portfolio with less program risk.

Engineered Composites Sets Quarterly Revenue Record

Engineered Composites revenue reached a quarterly record of $150.8 million, up 16% from $130.5 million in the prior-year period. The increase was supported by higher production rates on LEAP, Boeing, CH-53K and missile programs.

Adjusted EBITDA for the segment rose to $20 million, or 13.3% of sales, from $11.1 million, or 8.5% of sales, a year earlier. Station said improved operational execution, higher production rates and favorable aerospace and defense program mix supported the margin expansion.

Revenue was modestly below Albany’s expectations because tooling for a strategic next-generation contract with a defense prime shifted from the second quarter into the back half of the year. The company expects those tooling shipments to benefit second-half results.

Kleveland said the LEAP program continues to ramp alongside production at Boeing, Airbus, Safran and GE. Albany is moving to 24-hour, seven-day operations across three sites during the summer to support output. He said the company expects the program ramp to continue and potentially settle late in 2027, depending on production developments.

The company also cited growing defense opportunities, including demand tied to JASSM, LRASM, solid rocket motors and hypersonic missile applications. Kleveland said Albany is working with Lockheed Martin and the Department of Defense on opportunities to increase output from existing capabilities.

At the Farnborough International Airshow, the company said the Department of Defense met with Albany to discuss how its commercial capabilities, including out-of-autoclave processing technologies, could support faster manufacturing and lighter-weight defense solutions. Albany also said its AEC unit was selected as a collaboration partner in the Aerospace Technology Institute’s Advanced Wing Enabling Ultra-Efficient Propulsion 2 project alongside Airbus and other partners.

Albany also announced a collaboration with A&P Technology combining braiding and resin transfer molding capabilities for current and next-generation aero-engine programs. Separately, Kleveland said the company won a Pratt & Whitney Geared Turbofan contract for resin transfer molded inlet components for two-engine variants. Production is expected to begin in Mexico early next year.

Machine Clothing Demand Remains Mixed

Machine Clothing revenue totaled $178.7 million in the second quarter. Adjusted EBITDA was $50 million, roughly flat from the prior-year period, with a 28% margin.

The segment experienced additional downtime associated with a North American machine that is being replaced. Albany relocated a machine from a closed European facility to the U.S., where reassembly is underway and expected to be completed by year-end. Station said the equipment issue had a modest quarterly impact and that the company expects to recover the lost volume by the end of the year.

Demand conditions differed by region. Europe remained stable and China showed signs of stabilization, while North and South America were softer. The company cited customer facility closures, consolidations, lower inventories and weaker South American demand as factors affecting the Americas.

Kleveland said U.S. paper makers removed older equipment late last year and early this year in response to demand conditions. While those actions created a temporary lull for Albany, he said newer machines tend to operate at higher speeds, where the company has a competitive advantage. He added that the company sees a “pretty healthy order backlog” heading toward the end of the fourth quarter and into next year.

By paper grade, tissue and packaging demand remained favorable, especially in Asia. Those gains were partly offset by long-term declines in publication grades and softer pulp demand in South America. In Asia, Kleveland said overcapacity is being managed through lower machine speeds and output, with the timing of a broader recovery still uncertain.

Cash Flow, Balance Sheet and Outlook

Gross profit was $107.9 million, with a 32.7% margin, compared with 31.3% a year earlier. Operating income rose to $32.1 million, or 9.8% of revenue, from a 7.2% margin in the prior-year quarter.

Free cash flow was a use of $14.5 million, compared with a $17.8 million inflow a year earlier. Station attributed the change primarily to working-capital timing, including inventory growth to support Engineered Composites production ramps and Machine Clothing deliveries during European seasonal shutdowns.

• Cash at quarter-end: $77.3 million
• Total debt: $450.7 million
• Net debt: approximately $373.3 million
• Available capital including revolver availability: approximately $427 million
• Capital expenditures: $11.9 million
• Research and development expense: $11.7 million

For the third quarter, Albany forecast consolidated revenue of $320 million to $330 million and adjusted EPS of $0.60 to $0.70, with an effective tax rate of about 31.5%.

The company now expects full-year Machine Clothing revenue to be slightly lower than in 2025, reflecting customer consolidation and capacity rationalization in parts of the paper industry. Albany expects Engineered Composites to continue growing year over year as commercial and defense programs ramp.

Meanwhile, Albany said its strategic review of its Salt Lake City site is proceeding on schedule. Kleveland said the company received multiple indications of interest and has narrowed the process to eight final candidates, while continuing discussions with Sikorsky. He said Albany expects to finalize bidding in the coming weeks and will select the option it believes provides the best value for shareholders.

About Albany International (NYSE:AIN)

Albany International Corp. is a global advanced materials company specializing in engineered textiles and composites. Its business is organized into two primary segments: Process Media and Engineered Composites. The Process Media segment designs, manufactures and services press, forming and drying fabrics used in the production of paper and packaging materials, helping paper manufacturers improve efficiency, quality and sustainability. The Engineered Composites segment produces lightweight composite structures and components for aerospace and industrial applications, serving commercial and military aircraft programs as well as industrial markets that require high-performance, durable materials.

In the Process Media segment, Albany's products include forming fabrics, press felts and dryer fabrics engineered to withstand extreme moisture and temperature conditions.

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