Release Date: February 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Albany International Corp (NYSE:AIN) reported record revenues of nearly $1.25 billion for the full year, driven by organic growth and the Heimbach acquisition.
• The company generated strong free cash flow of $59 million in the fourth quarter and $137 million for the full year.
• AIN's balance sheet remains strong, providing the ability to execute growth strategies and return value to shareholders through share repurchase programs.
• The integration of Heimbach is on track, with significant improvements in working capital levels contributing to consolidated free cash flow results.
• The company is positioned for growth in the engineered composite segment, with significant long-term opportunities in programs like CH53K and advanced air mobility.

Negative Points

• Machine clothing revenues in the fourth quarter were slightly below the same quarter last year due to strong comparative periods and consolidation efforts.
• The engineered composite segment faced challenges with additional EAC adjustments impacting revenues and margins.
• The company is projecting lower LEAP revenues for 2025 due to conservative estimates on Boeing's production rates and inventory issues.
• The effective tax rate increased to 28% from 22.6% in the prior year, impacting net income.
• Interest expenses are expected to increase in 2025 due to the expiration of prior interest rate swaps, despite efforts to mitigate the impact.

Q & A Highlights

• Warning! GuruFocus has detected 3 Warning Signs with AIN.

Q: Can you provide an update on the CH 53K and Gulfstream programs and how they are expected to progress in 2025? Also, how do you expect AEC margins to ramp through the year? A: Our plan for 2025 includes current projections for AEC performance. We believe that over time, with adjustments from GIS, we can achieve mid to high 10s in performance. The EAC adjustments taken reflect our best estimate of future margins, which are included in our 13.5% outlook. We have actions in place to improve over time, but the guide reflects our current best estimate.

Q: How should we think about free cash flow for 2025 and beyond, especially as ramp issues are resolved? A: We expect cash flow to range between $90 million and $120 million this year. Our internal targets aim for net cash flow to exceed 90% of net income. The team has done a great job managing working capital, and with new incentive structures, we are focused on cash and balance sheet efficiency.

Q: Could you elaborate on your conservative view regarding Boeing's production rates and how it aligns with potential rate increases? A: There is an inventory function we are working through, and we are cautious about the recovery. While there are positive signs, we are waiting to see actual move rates at Boeing before making adjustments. We are aligned with Safran on our build plan and are prepared for a potential ramp-up towards the end of the year.

Q: How are you addressing challenges with the CH 53K program, and what improvements are expected in 2025? A: In the fourth quarter, we focused on frontline leadership development, employee training, and process improvements. Key areas of focus were supply chain and planning. We have added talent in operational leadership, planning, and supply chain management, which gives us confidence in the program's path forward.

Q: How are you considering tariff risks and trade pressures with China in your guidance? A: We acknowledge high uncertainty but are not reacting to it yet. We have analyzed potential impacts and are prepared to respond once decisions are made. The impact with China is minimal, and we have done the necessary groundwork to be ready.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.