Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ampco-Pittsburgh Corp (AP, Financial) reported strong sequential earnings improvement in Q2 2024, with income from operations rising to $5 million from $1.4 million in the same quarter of the previous year.
- The Air and Liquid Systems segment achieved record revenue and bookings, driven by increased shipments of custom air handling units and strong demand in the pharmaceutical and US Navy markets.
- The company has completed the installation of new equipment in its Buffalo pumps facility, which is expected to raise manufacturing capacity and increase efficiencies.
- Net income for Q2 2024 was $2 million, or $0.1 per diluted share, compared to $1 million, or $0.02 per share, in Q2 2023.
- Ampco-Pittsburgh Corp (AP) has reduced its selling and administrative expenses as a percentage of net sales, from 13.1% in Q2 2023 to 12.2% in Q2 2024, primarily due to lower commissions and professional services.
Negative Points
- The Forged and Cast Engineered Products segment saw a slight decrease in net sales, from $77.6 million in Q2 2023 to $75.7 million in Q2 2024, primarily due to lower Castrol shipments.
- The company's backlog decreased by approximately $16.1 million from December 31, 2023, due to the timing of 2025 orders from some customers.
- Interest expense increased by $0.8 million compared to the prior year, primarily due to higher equipment financing debt and higher average interest rates.
- The European steel market continues to face pricing and volume pressures, with lower utilization levels among producers.
- The company anticipates a weaker performance in Q3 2024 for the Forged and Cast Engineered Products segment due to scheduled shutdown periods for European and US operations.
Q & A Highlights
Highlights from Ampco-Pittsburgh Corp (AP) Q2 2024 Earnings Call
Q: How do you feel about the third quarter and continuing the strong sequential improvement seen in Q2?
A: The third quarter is typically weaker due to shutdown periods for our European assets and a smaller shutdown in the US. However, the underlying business fundamentals and efficiency improvements are expected to continue throughout the year. - J. Brett McBrayer, CEO
Q: Were there any extraordinary items in the second quarter results?
A: No, there were no extraordinary items in the second quarter. The results reflect the efficiency from new equipment and strong order books. - J. Brett McBrayer, CEO
Q: Can you achieve better than a 7% operating margin in the Forged and Cast Engineered Products segment?
A: Yes, as volumes increase, the operating margin is expected to improve due to the high percentage of fixed costs. - Sam Lyon, President, Union Electric Steel Corporation
Q: How long will it take to roll off the older, lower-margin orders in the Air and Liquid Systems segment?
A: The majority of the lower-margin orders are expected to be completed in the second half of this year. - David Anderson, President, Air & Liquid Systems Corporation
Q: How has order intake been in the third quarter so far?
A: Order intake remains strong, particularly in the pharmaceutical and US Navy markets. - David Anderson, President, Air & Liquid Systems Corporation
Q: What caused the change in availability from $20.5 million at June 30 to $27.2 million on July 9?
A: The change was due to better receipts and catching up on past dues, reflecting fluctuations in working capital. - Mike McAuley, CFO
Q: Are there opportunities to reduce SG&A expenses?
A: Yes, we have reduced agent network fees and are always looking for ways to manage SG&A expenses. - Sam Lyon, President, Union Electric Steel Corporation and David Anderson, President, Air & Liquid Systems Corporation
Q: What is the plan for debt reduction going forward?
A: We plan to manage debt by financing more working capital and CapEx internally as profitability grows, and by addressing maturing industrial revenue bonds. - Mike McAuley, CFO
Q: Does the new equipment enable entry into new markets?
A: The new equipment allows us to expand in existing markets, particularly nonresidential markets, but not necessarily enter new ones. - Sam Lyon, President, Union Electric Steel Corporation and David Anderson, President, Air & Liquid Systems Corporation
Q: What is the outlook for the Navy business?
A: The Navy business has a long-term plan to increase the fleet size, with orders spanning new ship builds and aftermarket parts, indicating a strong and sustained demand. - David Anderson, President, Air & Liquid Systems Corporation
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
