Ampco-Pittsburgh (AP) Q3 2026 Earnings Call Transcript

DATE

Tue, Nov 10, 2026

CALL PARTICIPANTS

• Corporate Counsel and Corporate Secretary - Daniel Litwin
• Chief Executive Officer - Brett McBrayer
• Vice President, Chief Financial Officer and President of Air & Liquid Systems Corporation - David Anderson
• President of Union Electric Steel Corporation - Sam Lyon

TAKEAWAYS

• Net Sales -- $111.7 million, increasing 3% primarily due to growth in the Air and Liquid Processing segment.
• Net Income Attributable to Ampco-Pittsburgh -- $0.5 million, or $0.02 per share, representing an improvement from a net loss of $2.2 million in the prior-year period.
• Adjusted EBITDA -- $9.4 million, an increase of 2% year over year resulting from improved manufacturing efficiencies.
• Adjusted EBITDA Margin -- 8.4%, compared to 8.5% in the third quarter of 2025.
• Total Backlog -- $379.5 million, reflecting an increase of $50.6 million since the end of 2025 behind stronger order activity.
• Air and Liquid Processing Revenue -- $42.8 million, growing 17% due to increased demand in the power generation and marine defense markets.
• Air and Liquid Processing Adjusted Operating Income -- $4.8 million, up 9% from $4.4 million in the prior year.
• October Customer Orders -- $31 million, including $21 million specifically from the power generation market for heat exchanger products.
• Forged and Cast Engineered Products Revenue -- $68.9 million, a 4% decline following the closure of U.K. operations and the exit from the AUP distribution business.
• Forged and Cast Engineered Products Adjusted Operating Income -- $7.7 million, rising 9% despite lower sales as Sweden facility performance improved.
• Net Debt -- $111.0 million, reduced by $19.5 million during the quarter through disciplined working capital management.
• Year-to-Date Debt Reduction -- $13.3 million, exceeding the company's full-year 2026 target of $8 million to $10 million.
• Cash Provided by Operating Activities -- $21.8 million, representing a $15.5 million improvement over the prior year.
• Free Cash Flow -- $19.7 million, increasing $15.1 million versus the prior year.
• Capital Expenditures -- $2.7 million, reflecting a moderation in spending following elevated investments during the first half of the year.
• Sweden Segment Growth -- 11% increase in sales when excluding prior-year U.K. results, driven by higher utilization and the transfer of work roll production.
• Air and Liquid Processing YTD Adjusted EBITDA -- $27.1 million, the highest year-to-date level in the segment's history.
• Air and Liquid Processing Backlog -- 29% higher than the 2025 year-end level, fueled by custom air handling and naval expansion demand.
• Liquidity -- $31.5 million, consisting of $9.3 million in cash and available credit under existing facilities.
• Sweden Facility Productivity -- Continued improvement in utilization levels as the site ramps up to meet transferred demand from the U.K. facility closure.

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RISKS

• Management warned that certain production activity in the Forged and Cast Engineered Products segment originally anticipated for 2026 has been shifted into 2027 due to timing of customer requirements.
• Lyon stated that during an inspection of the 5,000-ton forging press, "we found some small issues on the base that needed corrected," which led to an extension of the planned seasonal maintenance outage.

SUMMARY

Ampco-Pittsburgh Corporation (NYSE:AP) reported a return to profitability in the third quarter, supported by record year-to-date performance in its Air and Liquid Processing segment and the complete elimination of losses from its former U.K. operations. Management emphasized a significant strengthening of the balance sheet, having already exceeded its annual debt reduction target through aggressive working capital management and improved customer deposit terms. While seasonal outages and restructuring affected total volumes in the Forged and Cast Engineered Products segment, total company backlog grew 15% since the start of the year, driven by robust demand from the U.S. Navy and the power generation sector.

• CFO David Anderson noted that the company is currently on a record pace for both revenue and adjusted EBITDA within the Air and Liquid Processing segment.
• Management confirmed that working capital improvements are sustainable, citing permanent changes to customer payment terms and increased upfront deposits.
• Lyon stated, "Tariff protections continue to support steel mill utilization in the U.S., which drives roll consumption," bolstering demand for roll products in North America.
• The company is increasing headcount and bringing in new manufacturing equipment to expand capacity in response to growing orders for commercial pumps and heat exchangers.
• The Air and Liquid Processing segment is benefiting from the U.S. Navy funding program, which has provided equipment to meet expected growth in marine defense demand.

INDUSTRY GLOSSARY

• ALP: Air and Liquid Processing, a segment of the company focused on heat transfer products and centrifugal pumps.
• FCEP: Forged and Cast Engineered Products, a segment producing specialty steel and aluminum rolls.
• Forged Hardened Steel Rolls: High-performance components used in mills to roll and shape various metals.
• Heat Exchanger: A device designed to transfer heat between fluids, utilized in power generation and industrial cooling systems.
• AUP: A small distribution business previously owned by the company that was wound down to improve overall profitability.
• Centrifugal Pump: A mechanical device used to transport fluids by the conversion of rotational kinetic energy to the hydrodynamic energy of the fluid flow.

Full Conference Call Transcript

Operator: Good day, and welcome to the Ampco-Pittsburgh Corporation Third Quarter 2026 Earnings Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Daniel Litwin, Corporate Counsel and Corporate Secretary. Please go ahead, sir.

Daniel Litwin: Thank you, Chuck, and good morning to everyone joining us on today's third quarter 2026 conference call. Joining me today are Brett McBrayer, our Chief Executive Officer; and David Anderson, Vice President, Chief Financial Officer and President of Air & 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 and other statements of the corporation's plans, objectives, expectations or intentions. These matters involve certain risks and uncertainties, many of which are outside the corporate control.

This 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 to 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 now like to turn the call over to Brett McBrayer, Ampco-Pittsburgh's CEO. Brett?

J. McBrayer: Thank you, Danny. Good morning, and thank you for joining us. Our results from this quarter reflect the progress we've made in building a stronger, more profitable Ampco-Pittsburgh. Our third quarter is seasonally our slowest quarter in the Forged and Cast Engineered Products segment. Even so, we generated strong cash flow and put this cash to work, paying down debt and strengthening our balance sheet. Cash from operations improved $15.5 million versus the prior year, and free cash flow improved by $15.1 million. As a result, we reduced net debt by $19.5 million in the quarter alone. Net sales increased 3% versus the prior year to $111.7 million with net income of $0.5 million or $0.02 per share.

Adjusted EBITDA was $9.4 million for the quarter and an 8.4% margin. Looking ahead, our backlog stands at $379.5 million, up by over $50 million this year. For more details on our Air & Liquid Systems segment, I'll now turn the call over to David Anderson, our Chief Financial Officer and President of Air & Liquid Systems.

David Anderson: Thank you, Brett. Good morning. 2026 continues to be a positive year for Air & Liquid. Q3 revenue increased 17% versus prior year, while year-to-date revenue increased 12% versus prior year. Adjusted EBITDA in Q3 increased 9% versus prior year, while year-to-date adjusted EBITDA increased 31% versus prior year to the highest level in Air & Liquid's history. Backlog is 29% higher than year-end 2025. In addition to the backlog at the end of Q3, Air & Liquid saw strong customer orders at the beginning of Q4. An additional $31 million in customer orders was received in October, led by $21 million in orders from the power generation market.

Increasing demand in the power generation market is fueling demand in both our commercial pump and 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 that we have received from the U.S. Navy funding program has allowed us to increase our capacity to meet the expected growth in demand. Market activity remains strong, and we continue to focus on increasing our manufacturing capacity to meet the increasing demand.

We are bringing in new equipment, increasing our headcount and improving our manufacturing efficiencies to meet the increasing market demand. In summary, Air & Liquid is on a record pace for both revenue and adjusted EBITDA, and we are well positioned in markets that are showing significant long-term growth.

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

Samuel Lyon: Thank you, Brett, and good morning, everyone. For the third quarter of 2026, the Forged and Cast Engineered Products segment reported net sales of $68.9 million compared to $71.5 million in Q3 of 2025. The decline reflects our exits from the U.K. facility and the AUP distribution business. Excluding prior year U.K. sales, segment sales grew about 11%, reflecting the planned transfer of work rolls from the U.K. to our Sweden facility and growth in FEP non-roll shipments. Segment adjusted EBITDA was $7.7 million, up 9% from the prior year on lower sales and in line with the second quarter despite our seasonal outages. Sweden performance continued to improve on better productivity and higher utilization levels.

Year-over-year is not a clear comparison for FCEP as we were producing at low rates in the U.K. in Q3 of 2025 and melting had halted, lowering losses as we were evaluating the future of that facility. AUP, our small distribution business was also in the midst of winding down. The losses from the U.K. and AUP are now fully out of the business. As mentioned in the press release, we extended the normal annual maintenance outage on the 5,000-ton forging press at our Burgettstown facility to complete repairs that extend its useful life ahead of an increasing order book. Demand for rolls is improving, particularly in North America.

Tariff protections continue to support steel mill utilization in the U.S., which drives roll consumption. The tariffs also directly support FEP demand, which continues to be strong. Our backlog and momentum for 2027 continues to build. Brett, back to you.

J. McBrayer: Thank you, Sam. I'll now turn the call back over to David Anderson for more details regarding our financial performance for the quarter.

David Anderson: Thank you, Brett. As indicated in both our Form 10-Q and in our press release 8-K filed this morning, Ampco-Pittsburgh reported Q3 net sales of $111.7 million compared to $108 million last year as growth in the ALP segment more than offset the lower revenue caused by the closure of the U.K. cast roll facility in Q4 of 2025. Year-to-date revenue was $322.9 million compared to $325.4 million as the closure of the U.K. facility was partially offset by higher sales in the ALP segment. Q3 adjusted EBITDA of $9.4 million increased 2% compared to prior year, while year-to-date adjusted EBITDA of $27.1 million increased 4% versus prior year.

Q3 backlog of $380 million has increased $51 million or 15% versus year-end 2025. Our cash flow and debt position improved significantly in Q3. In previous calls, we indicated our goal in 2026 was to pay down debt by $8 million to $10 million. At the end of Q3, our debt has been paid down by approximately $13.3 million. So we are now well ahead of our targeted debt reduction for the year. Our continued focus on reducing working capital was the primary driver that allowed the debt paydown in Q3. In summary, Q3 was a successful step forward as we entered Q4 with lower debt and a strong order backlog.

Operator, at this time, we would now like to open the line for questions.

Operator: [Operator Instructions] And the first question will come from Justin Bergner with Gabelli Funds.

Justin Bergner: Nice to talk to you. And I guess a few questions, some of which might just ask for clarification on some of your opening remarks. So the $31 million in Air & Liquid Processing orders in October, of which $21 million were in power generation, which segments of Air & Liquid Processing were they in?

David Anderson: Justin, it's Dave. The $21 million was Aerofin, so heat exchanger and heat exchanger related items. That was the significant order activity.

Justin Bergner: Got you. And then the goal of debt reduction, you said you've done $13 million year-to-date. What was the goal for this year? And are the working capital improvements sustainable? Or are they just temporal based upon timing of receivables collections, and what have you?

David Anderson: The goal we had set was $8 million to $10 million. So at $13 million, we're now ahead of that. And yes, we believe they're sustainable. We don't see them reversing back out.

Justin Bergner: Okay. So you can operate at this lower level of working capital going forward. Was there any action that was taken to, I guess, collect on the receivables? Because it seems like that was the big boost.

David Anderson: Well, there's a few things that we've been working on through this year, and we continue to work on is, number one is improving our terms with our customers, also looking at how we get more cash upfront in customer deposits. So those are really the things that are leaning for accounts receivable.

Justin Bergner: Okay. And would you say that there's further to go on the working capital front? Or you've kind of gotten the 80-20 and it's going to be more gradual improvement from here?

David Anderson: I think more gradual. I mean, we've gotten significant changes, but we still are pushing forward with looking at terms and things that we can improve. I think you can always do a little better is my sense.

Justin Bergner: Sure. And then maybe lastly, the outage on the Forge press, was that unexpected? And is it pretty much behind the company as you get into Q4 or as you get into the second half of Q4?

Samuel Lyon: It's behind us, Justin. We do an outage every summer, and we inspect the press, and we found some small issues on the base that needed corrected. And so we took the opportunity to do that as I stated, next year looks to be busier than this year. So we wanted to make sure that we got that behind us. But it's been operating for several months now. So it's back in business.

Operator: [Operator Instructions] And this will conclude our question-and-answer session. I would like to turn the conference back over to Mr. Brett McBrayer for any closing remarks. Please go ahead, sir.

J. McBrayer: Yes. Thank you. To wrap up, this quarter demonstrates what we've been building toward: stronger cash generation, a healthier balance sheet and a growing backlog. With our order book up meaningfully and positive momentum across our businesses, we're well positioned as we head into 2027. None of these improvements happen without our employees. I want to thank them for the work they do every day to make Ampco-Pittsburgh a stronger company. Thank you to our Board of Directors and our shareholders for your continued support, and thank you for joining us this morning.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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