Ampco-Pittsburgh Corporation (AP) Earnings Call Transcript & Summary

Welcome to the Ampco-Pittsburgh Corporation's Second Quarter 2026 Earnings Results Conference Call. [Operator Instructions] Please note, this call is being recorded. I'd now like to turn the conference over to Kim Knox, Corporate Secretary. Please go ahead.

Thank you, Megan, and good morning to everyone joining us on today's second quarter 2026 conference call. Joining me today are Brett McBrayer, our Chief Executive Officer; and David Anderson, Vice President and Chief Financial Officer and President of Air and Liquid Systems Corporation. Also joining us on the call today is Sam Lyon, President of Union Electric Steel 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. 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-K and in 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 ampcopgh.com. With that, I'd like to turn the call over to Brett McBrayer, Ampco-Pittsburgh's CEO. Brett?

Thank you, Kim. Good morning, and thank you for joining us. The second quarter marked a clear turning point for Ampco-Pittsburgh. Net income was $1.5 million or $0.07 per share compared to a net loss of $7.3 million or a loss of $0.36 per share in the prior year period. Adjusted EBITDA of $9.8 million improved 22% and versus prior year with margin expanding 240 basis points to 9.5% on net sales of $102.9 million. Just as important, demand across both segments is accelerating. Customer orders of approximately $144 million were up 50% versus prior year. and backlog grew $39.9 million from the first quarter to $385.4 million. Air & Liquid delivered record results and the actions we took in forged and cast engineered products, including the closure of our U.K. facility are now flowing through to the bottom line. I'll now turn the call over to David Anderson, our Chief Financial Officer and President of Air and Liquid Systems to discuss the Air and Liquid segment.

Thank you, Brett. Good morning. 2026 continues to be a positive year for Air and Liquid. Q2 revenue was comparable with prior year, while year-to-date revenue increased 9% versus prior year. Adjusted EBITDA in Q2 increased 34% versus prior year. as improved manufacturing efficiencies led to significant margin improvement. Year-to-date adjusted EBITDA increased 43% versus prior year as increased revenue, improved manufacturing efficiencies and positive product mix drove adjusted EBITDA to the highest level in air and liquids history. Backlog increased $23.3 million or 16% in the quarter as customer demand continued to drive order activity to record levels. Backlog is 39% higher than year-end 2025. Data centers are causing increasing demand in the power generation market, which is fueling demand in both our commercial pump and nuclear heat exchanger products. Our commercial pumps are used in gas turbines, which are seeing strong growth while we continue to be the dominant supplier of heat exchangers into the growing nuclear market. 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. The manufacturing equipment installed in 2024 has already increased manufacturing capacity for our pump product line, and there is more capacity expansion in process. Additional manufacturing equipment from the Navy funding program arrived at our facility in early 2026 and is expected to begin producing products in the second half of 2026. more equipment from the Navy funding program just arrived at the end of July. All of this equipment will position us to meet the long-term growth in this market. Demand for custom air handlers remains strong as there continues to be significant demand in the pharmaceutical and health care markets for our custom air handling products. With rising market demand and an increasing backlog, a -- we continue to focus on increasing our manufacturing capacity. We are bringing in new equipment, increasing our head count and improving our manufacturing efficiencies in order to meet the increasing demand. In summary, it was a great first half of 2026, and we are well positioned in markets that are showing significant long-term growth.

Thank you, David. Sam Lyon, President of Forged and Cast and Products segment will now share more details regarding his group's performance.

Thank you, Brett, and good morning, everyone. For the second quarter of 2020, the Forged and Cast Engineered Products segment reported net sales of $67.3 million compared to $77.9 million in Q2 of 2025. Nearly all of that decline came from the exit from both our U.K. facility and our AUP distribution business. Segment adjusted EBITDA of $7.8 million increased 15% compared to the prior year and 36% sequentially. The timing items that affected Q1 reversed as expected, large roll shipments in the use recovered, higher cost inventory from late 2025 flow through the P&L and Sweden returned to profitability due to improved productivity and utilization. Demand has improved, particularly in North America. [indiscernible] have reduced imports and lifted U.S. steel mill utilization, thereby increasing the number of rules consumed. PP orders and margins have also improved. Our backlog grew from year-end on orders for the second half of 2026 and 2027 and the market consolidation we discussed last quarter is presenting us with opportunities for additional business. Looking ahead, the third quarter will reflect our normal annual maintenance outage in the U.S. and the summer shutdowns in Europe. Despite these normal seasonal outages, we expect the second half of the year to be significantly stronger than the first half and continue to be optimistic about 2027. Brett, back to you.