ALBANY INTERNATIONAL CORP /DE/ Q1 FY2025 earnings call

Machine Clothing - Consistent strong results, regional setup insulated from tariffs; North America had slight delivery decline but strong order flow; Europe showing recovery; Asia mixed. - Heimbach integration progress with footprint rationalization and operational efficiency, having closed facilities, sold businesses, and restructured operations, expecting synergy benefits to accrue over time. ### Engineered Composites - Progress in AEC operations with EAC adjustments, half driven by CH-53K and Gulfstream. - Growth in advanced air mobility and long-term agreement with Bell on the 525 program. - Streamlining operations and upgrading SAP system with S/4HANA scheduled for go-live next week.

Machine Clothing reported revenues of $175 million with an adjusted EBITDA margin of 28.4%, contributing approximately 60.55% to total revenues. Engineered Composites (AEC) had revenues of $114 million and an adjusted EBITDA margin of 13.5%, contributing approximately 39.45% to total revenues. Machine Clothing's secular trends in packaging remained strong, with North America having a slight delivery decline but strong order flow, Europe showing recovery, and Asia mixed. AEC had revenues impacted by EAC adjustments but saw growth in advanced air mobility and CH-53K platforms.

• Reaffirmed full year guide. - Second half expected to be stronger than the first half due to ramp at AEC and acceleration of Heimbach synergies.

• Tariff fluctuations and potential exposure to sole-source supplied materials and certain highly engineered products manufactured only in the U.S. or the U.K. - Titanium shortages and extended lead times.

Q: Gunnar, you talked about the ability to meet Safran's schedule if rates increase. Can you remind us where things stand regarding LEAP?

A: Right now, there is some use of inventory. Expect to be at that level as we get through the first half of the year. Monitoring how they're pulling and staying with the plan with upside for the back half of the year.

Q: Peter Arment asked about new opportunities in terms of backlog. Can you talk about new opportunities?

A: Definitely seeing opportunities, focusing on technology like 3D woven, braiding, with focus on space, missile programs, and ramping up across Boeing and Airbus engines.

Q: Michael Ciarmoli asked about the 7-year contract with Bell. Can you give more color?

A: Excited about the contract with Bell, took on complex parts from a failed supplier, parts are in Boerne facility, and it's a catalyst to show capabilities with expected high teens returns for AEC.

Q: Michael Ciarmoli asked about LEAP revenues. Can you comment?

A: Q1 expected to be the low point for the year based on full year projection, with upside for the year as the year progresses.

Q: Michael Ciarmoli asked about MC margins and Heimbach integration. Can you comment?

A: Heimbach integration actions are having challenges with moving parts but will accelerate through the year, confident in continued growth.

Q: Jordan Lyonnais asked about ramp for 787 and 777-X. Can you comment?

A: 787 expected to grow slowly this year and accelerate next year; 777 focused on parts for certification.

Q: Jordan Lyonnais asked about second derivative tariff impacts. Can you comment?

A: Monitoring tariff landscape which changes weekly, currently looking relatively flat but will continue to monitor.

Q: Chigusa Katoku asked about confidence in MC despite organic growth issues. Can you comment?

A: Down due to divestitures, but backlog and orders are strong with second and third quarters looking healthy. No pulled forward orders seen.