Q1 2024 Ampco-Pittsburgh Corp Earnings Call

May 14, 2024

Welcome to the Ampco Pittsburgh Corporation first quarter 'twenty 'twenty four earnings results Conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero.

Operator: Welcome to the Ampco-Pittsburgh Corporation First Quarter 2024 Earnings Results Conference Call. All participants will be in listen-only mode.

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Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, please press star, then 1 on your telephone keypad. To withdraw a question, please press star, then 2. Please note, this event is being recorded. I'd now like to turn the conference over to Kim Knox, Corporate Secretary. Please go ahead.

Speaker Change: After today's presentation there'll be an opportunity to ask questions to ask a question. Please press Star then one on your telephone keypad to withdraw your question. Please press Star then two please.

Please note this event is being recorded.

Speaker Change: I'd now like to turn the conference over to Kim Docs Corporate Secretary. Please go ahead.

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Speaker Change: Thank you Nick and good morning to everyone joining us on today's first quarter 'twenty 'twenty four conference call.

Operator: Welcome to the Ampco-Pittsburgh Corporation First Quarter 2024 Earnings Results Conference Call. All participants will be in listen-only mode.

Kimberly P. Knox: Thank you, Nick. And good morning to everyone joining us on today's first quarter 2024 conference call. Joining me today are Brett McBrayer, our Chief Executive Officer, and Mike McAuley, Senior Vice President, Chief Financial Officer, and Treasurer. Also joining us on the call today are Sam Lyon, President of Union Electric Steel Corporation, and Dave Anderson, President of Air and Liquid Systems 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.

Speaker Change: Joining me today are Brett Mcbrayer, our Chief Executive Officer, and Mike Mcauley, Senior Vice President and Chief Financial Officer and Treasurer.

Speaker Change: Also joining us on the call today are Sam Lyon, President of Union Electric Steel Corporation, and Dave Anderson, President of Air and liquid Systems Corporation.

Speaker Change: 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 corporations plans objectives expectations or intentions.

Kimberly P. Knox: 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.

David G. Anderson: These matters involve certain risks and uncertainties many of which are outside of the corporation's control the.

Corporation Representative: 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.

Speaker Change: We do not undertake any obligation to update or other release, otherwise release publicly any revision to our forward looking statements.

Kimberly P. Knox: A replay of this call will be posted on our website. To access the earnings release or webcast replay, please consult the investor section of our website at AmpcoPGH.com. With that, I'd like to turn the call over to Brett McBrayer, Ampco-Pittsburgh CEO. Brett? Thank you.

Speaker Change: A replay of this call will be posted on our website to access the earnings release or webcast replay. Please consult the investors section of our website at Ampco P. G H dot com.

Speaker Change: 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 our call as reported in our press release net sales for the first quarter of 2024, and $110 $2 million up over 5% compared to the first quarter of 2023.

Brett Mcbrayer: Thank you, Kim. Good morning, and thank you for joining us on our call.

Kimberly P. Knox: 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.

Brett Mcbrayer: As reported in our press release, net sales finished the first quarter of 2024 at $110.2 million, up over 5% compared to the first quarter of 2023. Income from operations for the quarter was $0.1 million versus $2 million when compared to the first quarter of 2023. Significantly impacting our quarter's performance was plant downtime due to a fire in one of our foreign Castro facilities and the associated repair expense, as well as an unfavorable product mix in our air and liquid processing segment.

Speaker Change: <unk>.

Brett Mcbrayer: Income from operations for the quarter was zero point $1 million versus $2 million when compared to the first quarter of 2023 <unk>.

Brett Mcbrayer: Significantly impacting our quarters performance was plant downtime due to a fire in one of our foreign cast roll facilities.

Brett Mcbrayer: And the associated repair expense as well as an unfavorable product mix in our air and liquid processing segment. These headwinds are behind us as we have moved into the second quarter for further comments on our performance I will now turn the call over to Sam Lyon, President of our forged and cast engineered product segment.

Brett Mcbrayer: These headwinds are behind us as we have moved into the second quarter. For further comments on our performance, I will now turn the call over to Sam Lyon, President of our Forged and Cast Engineer Product Segment.

Kimberly P. Knox: We do not undertake any obligation to update or otherwise release publicly any revision to our forward-looking statement. A replay of this call will be posted on our website. To access the earnings release or webcast replay, please consult the investor section of our website at AmpcoPGH.com. With that, I'd like to turn the call over to Brett McBrayer, Ampco-Pittsburgh CEO.

Samuel C. Lyon: Thank you, Brett, and good morning. In our ForgeCast and Engineered Products segments, market conditions have been muted. In 2024, the rural market will be lower overall, with significant reductions in Europe. This reduction occurred as the anticipated recovery was slower than forecasted, resulting in a slight overstocking. We are starting to see improvements in activity and outlook in both North America and Europe. We are optimistic about the second half of the year, anticipating improved order intake for delivery in 2025.

Brett Mcbrayer: Thank you, Kim. Good morning, and thank you for joining us on our call.

Samuel C. Lyon: Thank you Brett and good morning.

Samuel C. Lyon: In our forged and cast and engineered products segment. The market conditions have been muted in 2020 for the rural market will be lower overall with significant reductions in Europe.

Samuel C. Lyon: This reduction occurred as the.

Samuel C. Lyon: Anticipated recovery was slower than forecasted, resulting in a slight overstocking.

Brett: We are starting to see improvements in activity and outlook in both North America and Europe.

Samuel C. Lyon: We are optimistic about the second half of the year anticipating improved order intake for delivery in 2025.

Samuel C. Lyon: We have seen some positive movements, with most of our customers experiencing a flat or improving order book across North America in Q2. Our European customers have said that their stocking of their customers is largely complete, resulting in their supply and demand matching up. Despite these challenges, higher pricing is expected to mitigate much of the impact of the decline in shipment volumes for 2024. High inventory levels similarly challenged our FTP market at bar distributors.

Speaker Change: We have seen some positive movements with most of our customers experiencing flat or improving order books across North America in Q2, our European customers have said that destocking of their customers is largely complete resulting in their supply and demand matching up. Despite these challenges higher pricing is expected to mitigate much of the <unk>.

Samuel C. Lyon: Pact of the decline in shipment volumes for 2024.

Samuel C. Lyon: Inventory levels, similarly challenged or a P. P market bar distributors, we appeared to have come off a bottom and shipments in backlog through April have exceeded 50% of 2023 total shipments.

Samuel C. Lyon: We appear to have come off a bottom, and shipments and backlog through April have exceeded 50% of 2023 total shipments. Our primary focus remains on maintaining a strong position in the rural market and enhancing operational efficiencies and reliability with the completion of our capital program. As we look forward to 2025, I am pleased to report strong indications from several of our top customers regarding increased needs for forged and cast rules. This is due to more robust demand in both North America and Europe. In addition, one of our competitors has exited the large cast backup rule market, of which we expect to be a beneficiary.

Samuel C. Lyon: Our primary focus remains on maintaining our strong position in the rural market and enhancing operational efficiencies and reliability with the completion of our capital program.

Speaker Change: As we look forward to 2025 I am pleased to report strong indications from several of our top customers regarding increased needs for forged and cast rolls. This is due to more robust demand in both North America and Europe. In addition, one of our competitors has exited the large cast backup rural market of which we.

Speaker Change: Expect to be a beneficiary.

Samuel C. Lyon: We're at the beginning of negotiations for 2025, and, as stated, are encouraged. Our allocation from one of our largest customers is up over 25% compared to 2024. Many of our other large customers expect to buy more rolls in 2025 by double digit percentages. The steel market is improving, and the aluminum flat rolled market remains strong. Turning to our financials, in the first quarter of 2024, net sales slightly increased to $77.2 million from $76.8 million in the same period last year.

Speaker Change: We were at the beginning of negotiations for 2025 and as stated are encouraged our allocation from one of our largest customers is up over 25% compared to 2020 for many of our other large customers expect to buy more rules and 2025 over double digit percentages. The steel market is improving in the aluminum flat rolled market remains.

Speaker Change: Strong.

Speaker Change: Turning to our financials in the first quarter of 2024 net sales increased slightly to $77 2 million from $76 8 million in the same period last year. The income from operations for the first quarter of 2024 was $1 6 million a decrease from $2 2 million in the first quarter of 2023.

Samuel C. Lyon: The income from operations for the first quarter of 2024 was $1.6 million, a decrease from $2.2 million in the first quarter of 2023. The main reason for the decline resulted from the unplanned downtime and repair costs in our Sweden plant, partially offset by improved productivity in the U.S. and strong performance at our Slovenia forge plant and our China joint venture. While we are facing lower volume in 2024, our pricing actions over the last few years have offset this headway. End-customer demand is improving, and our potential for future orders looks stronger for 2025. Our new equipment continues to perform as expected, and we anticipate reliable production from this investment for many years.

Speaker Change: The main reason for the decline resulted from the unplanned downtime and repair costs and our Sweden plant, partially offset by improved productivity in the U S and strong performance at our Slovenia forged plant in our China joint venture.

Speaker Change: While we are facing lower volume in 'twenty 'twenty four our pricing actions over the last few years have offset this headwind.

Speaker Change: And customer demand is improving and our potential for future orders look stronger for 2025, our new equipment continues to perform as expected and we anticipate reliable production from this investment for many years. Thank you Sam Dave Anderson President of Air and liquid systems will now cover his segment results.

David G. Anderson: Thank you, Sam. Dave Anderson, President of Air and Liquid Systems, will now discuss his segment results.

Brett Mcbrayer: Thank you, Sam. Dave Anderson, President of Air and Liquid Systems, will now discuss his segment results.

David G. Anderson: Thank you, Brett. Good morning.

Brett: Brett good morning.

David G. Anderson: Air and Liquid Q1 revenue increased 18% versus the prior year, primarily due to increased shipments of custom air handling units. The increase was driven by a higher backlog due to the success of the increased sales force, along with the additional capacity achieved by opening the new manufacturing facility in mid-2023. Backlog declined in the quarter due to capacity being sold out for 2024 in our air handling business unit. However, the backlog for heat exchangers and pumps both increased in the quarter.

Speaker Change: Air and liquid Q1 revenue increased 18% versus prior year, primarily due to increased shipments of custom air handling units.

Speaker Change: The increase was driven by the higher backlog due to the success of the increased sales force along with the additional capacity achieved by opening the new manufacturing facility in mid 2023.

Speaker Change: Backlog declined in the quarter due to capacity being sold out for 2024, and our air handling business unit.

Speaker Change: Backlog for heat exchangers and pumps, both increased in the quarter in April we began to see more booking activity for air handling units as April bookings for air handlers exceeded total Q1 air handler bookings.

David G. Anderson: In April, we began to see more booking activity for air handling units as April bookings for air handlers exceeded total Q1 air handler bookings. However, operating income for Air and Liquid declined in the first quarter versus the prior year, primarily due to an unfavorable product mix in the heat exchanger product line, along with higher SG&A costs due to the expansion of the sales force and higher commission expense due to the increased revenue. The product mix was a short-term issue related to the timing of shipments of higher-margin orders.

David G. Anderson: In April, we began to see more booking activity for air handling units as April bookings for air handlers exceeded total Q1 air handler bookings. However, operating income for air and liquid declined in the first quarter versus the prior year, primarily due to an unfavorable product mix in the heat exchanger product line, along with higher SG&A costs due to the expansion of the sales force and higher commission expense due to the increased revenue. The product mix was a short-term issue related to the timing of shipments of higher-margin orders.

Speaker Change: Operating income for air and liquid declined in the first quarter versus prior year, primarily due to unfavorable product mix in the heat exchanger product line, along with higher SG&A costs due to the expansion of the sales force and higher Commission expense due to the increased revenue.

Brett: The product mix was a short term issue related to the timing of shipments of higher margin orders.

Brett: Higher shipments for centrifugal pumps and air handlers resulted in higher operating income for both of those product lines and partially offset the unfavorable product mix in the quarter.

David G. Anderson: Higher shipments for centrifugal pumps and air handlers resulted in higher operating income for both of those product lines and partially offset the unfavorable product mix in the quarter. Demand for the products we design and build continues to be strong. We have substantially increased our manufacturing capacity in the last two years, yet we continue to sell out that capacity. Multiple projects are in motion to further increase capacity. Those projects include new equipment arriving this quarter at our facility in Buffalo.

Brett: Demand for the products, we design and build continues to be strong.

Brett: We have substantially increased our manufacturing capacity in the last two years, yet we continue to sell out that capacity.

Brett: Multiple projects are in motion to further increase capacity.

Brett: Those projects include the new equipment, arriving this quarter at our facility in Buffalo. This is the equipment purchased with the funding Grant we received from the U S. Navy in 2023.

David G. Anderson: This is the equipment purchased with the funding grant we received from the U.S. Navy in 2023. We also continue our work at Oak Ridge National Laboratory regarding developing additively manufactured parts for the U.S. Navy. Additive manufacturing will provide an alternative to traditional foundries that continue to suffer with long lead times and quality issues. We expect to continue to expand our workforce at the new manufacturing location we opened last year in Lynchburg, Virginia.

Speaker Change: We also continue our work at Oak Ridge National Laboratory regarding developing additive manufactured parts for the U S. Navy.

Speaker Change: Additive manufacturing will provide an alternative to the traditional foundries they continue to suffer with long lead times and quality issues.

Speaker Change: We expect to continue to expand our workforce at the new manufacturing location, we opened last year in Lynchburg, Virginia.

David G. Anderson: This location primarily manufactures air handling units and was the main driver in expanding our capacity, which allowed air handling sales to grow by 36% in Q1 compared to last year. Demand remains strong for all of our product lines, and we continue to pursue opportunities to increase our capacity to meet this demand.

Speaker Change: This location, primarily manufacturers air handling units and was the main driver in expanding our capacity, which allowed air handling sales to grow by 36% in Q1 versus last year.

Speaker Change: Demand remains strong for all of our product lines and we continue to pursue opportunities to increase our capacity to meet this demand. Thank you Dave at this time, Mike Mcauley, our Chief Financial Officer will now share more detail regarding our financial performance for the quarter.

Michael G. McAuley: Thank you, Dave. At this time, Mike McAuley, our Chief Financial Officer, will now share more detail regarding our financial performance for the Corps.

Brett Mcbrayer: Thank you, Dave. At this time, Mike McAuley, our Chief Financial Officer, will now share more detail regarding our financial performance for the quarter.

Michael G. McAuley: Thank you Brett.

Michael G. McAuley: Thank you, Brett. As indicated in our Form 10-Q filed yesterday and in our press release issued this morning, Ampco's total net sales for the first quarter of 2024 were $110.2 million, an increase of approximately 5% compared to net sales for the first quarter of 2023. The air and liquid processing segment accounted for the growth, increasing their sales by 18% for Q1 over the prior year. Forged and cast engineered product segment sales were approximately flat versus the prior year as higher shipment volumes of forged rolls and higher base roll pricing were approximately offset by lower shipment volumes of cast rolls and lower surcharge pass-throughs.

Michael G. McAuley: As indicated in our Form 10-Q filed yesterday and in our press release issued this morning, Ampco's total net sales for the first quarter of 2024 were $110.2 million, an increase of approximately 5% compared to net sales for the first quarter of 2023. The air and liquid processing segment accounted for the growth, increasing their sales by 18 percent for Q1 over the prior year. Forged and cast-engineered product segment sales were approximately flat versus the prior year, as higher shipment volumes of forged rolls and higher base roll pricing were approximately offset by lower shipment volumes of cast rolls and lower surcharge pass-throughs.

Speaker Change: As indicated in our Form 10-Q filed yesterday and in our press release issued this morning.

Michael G. McAuley: <unk> total net sales for the first quarter of 2024 or $110 $2 million, an increase of approximately 5% compared to net sales for the first quarter of 2023.

Michael G. McAuley: The air and liquid processing segment accounted for the growth increasing their sales by 18% for Q1 over prior year.

unknown: <unk> forged and cast engineered products segment sales were approximately flat versus prior year as higher shipment volumes of forged rolls and higher base oil pricing was approximately offset by lower shipment volumes of cast rolls and lower surcharge pass throughs.

unknown: The Corporation reported a modest positive income from operations for the first quarter of 2024, which was heavily impacted by two temporary issues as Brett indicated.

Michael G. McAuley: The corporation reported a modest positive income from operations for the first quarter of 2024, which was heavily impacted by two temporary issues, as Brett indicated. First, damage from a fire in the foundry at one of our European Castrol facilities, which reduced operating income by approximately $0.9 million due to both repair costs and production downtime, which caused a lack of cost absorption. Second, an unfavorable sales mix effect in the air and liquid processing segment related to the timing of higher margin orders, as Dave indicated.

Michael G. McAuley: The corporation reported a modest positive income from operations for the first quarter of 2024, which was heavily impacted by two temporary issues, as Brett indicated. First, damage from a fire in the foundry at one of our European Castrol facilities, which reduced operating income by approximately $0.9 million due to both repair costs and production downtime, which caused a lack of cost absorption. Second, an unfavorable sales mix effect in the error and liquid processing segment related to the timing of higher margin orders, as Dave indicated.

Brett: First damage from a fire in the foundry at one of our European cast roll facilities, which reduced operating income by approximately <unk> $9 million due to both repair costs and production downtime, which caused lack of cost absorption.

Brett: Second an unfavorable sales mix effect in air and liquid processing segment related to the timing of higher margin orders as Dave indicated.

Dave: In addition, the air and liquid segment had higher SG&A expense in the prior year quarter, given the expansion of the segment sales and distribution network and higher commissions expense given its higher volume of shipments.

Michael G. McAuley: In addition, the air and liquid segment had higher SG&A expense than in the prior year quarter given the expansion of the segment's sales and distribution network and higher commissions expense given its higher volume of shipment. The corporation's total selling and administrative expenses were approximately 11.8% of net sales for Q1 2024 compared to 11.6% for Q1 2023. Interest expense of $2.8 million for the quarter increased by $0.7 million compared to the prior year, primarily due to higher average revolving credit facility borrowing, a higher Equipment Financing Debt Balance, and a higher interest rate.

Michael G. McAuley: In addition, the air and liquid segment had higher SG&A expense than in the prior year quarter, given the expansion of the segment's sales and distribution network and higher commissions expense, given its higher volume of shipping. The corporation's total selling and administrative expenses were approximately 11.8% of net sales for Q1 2024 compared to 11.6% for Q1 2023. Interest expense of $2.8 million for the quarter increased by $0.7 million compared to the prior year, primarily due to higher average revolving credit facility borrowings.

Dave: The corporation's total selling and administrative expenses were approximately 18 11, 8% of net sales for Q1 24 compared to 11, 6% for Q1 2023.

Dave: Interest expense of $2 $8 million for the quarter increased $5 $7 million compared to prior year, primarily due to higher average revolving credit facility borrowings.

Michael G. McAuley: A Higher Equipment Financing Debt Balance and Higher Interest Rate; Other income net declined primarily due to foreign exchange transaction losses recorded in Q1 2024 versus gains recorded in Q1 2023. The income tax provision for Q1 2024 increased slightly year over year, given higher income of the corporation's profitable entities, which have no valuation allowances recorded against their deferred tax assets.

Speaker Change: A higher equipment financing debt balance.

Speaker Change: And higher interest rates.

Speaker Change: Other income net declined primarily due to foreign exchange transaction losses recorded in Q1, 2000 22024 versus gains recorded in Q1 2023.

Operator: Other income net declined primarily due to foreign exchange transaction losses recorded in Q1 2024 versus gains recorded in Q1 2023. The income tax provision for Q1 2024 increased slightly year over year, given higher income of the corporation's profitable entities, which have no valuation allowances recorded against their deferred tax assets. As a result, the net loss attributable to Ampco-Pittsburgh for the three months ended March 31st, 2024 was $2.7 million or $0.14 per share.

Speaker Change: The income tax provision for Q1, 2024 increased slightly year over year, given higher income of the corporation's profitable entities, which have no valuation allowances recorded against our deferred tax assets.

Ampco Pittsburgh: As a result net loss attributable to ampco Pittsburgh for the three months. The three months ended March 31, 2024, it was $2 $7 million or <unk> 14 per share.

Michael G. McAuley: As a result, the net loss attributable to Ampco-Pittsburgh for the three months ended March 31st, 2024 was $2.7 million, or 14 cents per share. This compares to net income of $0.7 million, or $0.03 per share, for the quarter ended March 31, 2023. Total backlog at March 31st, 2024, of $348.8 million, declined approximately 8% from December 31st, 2023. Forge and Cast Engineer product segment backlog decreased from December 31, 2023 by approximately $19 million due to the timing of 2025 orders.

Operator: This compares to net income of $0.7 million, or $0.03 per share, for the quarter ended March 31, 2023. Total backlog at March 31st, 2024, of $348.8 million, declined approximately 8% from December 31st, 2023. Forge and Cath Engineer product segment backlog decreased from December 31, 2023 by approximately $19 million due to the timing of 2025 orders, and most of the segment's major Forge Roll customers are expected in the second and third quarters of 2024.

Ampco Pittsburgh: This compares to net income of $7 million or <unk> <unk> per share for the quarter ended March 31 2023.

Ampco Pittsburgh: Yeah.

Operator: In addition, lower foreign exchange rates reduced the translated value of foreign backlog by about $4 million. The air and liquid segment backlog declined by $6.6 million, and this is primarily due to the strong sales quarter of air handlers in Q1, coupled with lower order activity in that product line due to being at capacity for the balance of 2024, as Dave had indicated. Net cash flows provided by operating activities were a positive $4.5 million for Q1 2024.

Michael G. McAuley: And most of the segment's major forge roll customers are expected in the second and third quarters of 2024. In addition, lower foreign exchange rates reduce the translated value of the foreign backlog by about $4 million. The air and liquid segment backlog declined by $6.6 million, and this is primarily due to the strong sales quarter of air handlers in Q1, coupled with lower order activity in that product line due to being at capacity for the balance of 2024, as Dave had indicated.

Speaker Change: Backlog at March 31, 2024, $348 $8 million declined approximately 8% from December 31 2023.

Supporting cast: Supporting cast engineered product segment backlog decreased from December 31, 2023 by approximately $19 million due to timing of 2025 orders.

Speaker Change: And most of the segment's major forged roll customers are expected in the second and third quarters of 2024.

Speaker Change: In addition, lower foreign exchange rates reduced the translated value of foreign backlog by about $4 million.

Speaker Change: The air and liquid segment backlog declined by $6 $6 million and this is primarily due to the strong sales quarter of air handlers in Q1, coupled with lower order activity in that product line due to being at capacity for the balance of 'twenty 'twenty four as David indicated.

Michael G. McAuley: Net cash flows provided by operating activities were a positive $4.5 million for Q1 2024, while investment in net trade working capital was stable with the prior quarter. Capital expenditures for the first quarter of 2024 were $2.8 million, primarily in the Forged and Cast Engineered Products segment. At March 31st, 2024, the corporation's liquidity position included cash on hand of $10.8 million and undrawn availability on our revolving credit facility of $23.2 million. Operator, at this time, we would now like to open the line for questions.

David Smith: Net cash flows provided by operating activities was a positive $4 $5 million for Q1 2024.

Speaker Change: <unk> in net trade working capital was stable with prior quarter.

David Smith: Capital expenditures for the first quarter of 2024 or $2 $8 million, primarily in the forged and cast engineered products segment.

David: At March 31, 2024 of the corporations liquidity position, including cash on hand of $10 $8 million and undrawn availability on our revolving credit facility of $23 $2 million.

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

Operator: Investment in net trade working capital was stable with the prior quarter. Capital expenditures for the first quarter of 2024 were $2.8 million, primarily in the forest and cast engineered product segments. At March 31st, 2024, the corporation's liquidity position included cash on hand of $10.8 million and undrawn availability on our revolving credit facility of $23.2 million. Operator, at this time, we would now like to open the line for questions.

Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the key. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster.

David: Yes.

Speaker Change: Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys.

Operator: We will now begin the question-and-answer session. To ask a question, you may press star, then 1 on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the key. If at any time your question has been addressed, and you would like to withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our roster.

David: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.

David: At this time, we will pause momentarily to assemble our roster.

David: The first question comes from Justin Bergner with Gabelli funds. Please go ahead.

unknown: Good morning, Brad. Good morning, Michael. Good morning, Justin. Anything else on the call as well?

unknown: Good morning, Brad. Good morning, Michael. Good morning, Justin.

Justin Laurence Bergner: Good morning, Brad Good morning, Michael.

Justin Laurence Bergner: Good morning, Justin and I will turn the call as well.

Michael: So thank you I think I missed Mike the comment about the cost of the fire I think you threw out some cost number but I didnt catch it could you reiterate it.

Michael G. McAuley: Yes, it's $900000 in the quarter Justin.

unknown: Yeah, it's $900,000 in the quarter.

unknown: Yes, $900,000 in the quarter just went in.

unknown: Okay, and is that... like the actual cost of repairing the equipment exclusive of the lost production? Is any of that recoverable from insurance?

unknown: Okay, and is that... Like the actual cost of repair, exclusive of the lost production, is any of that recoverable from insurance?

David: Okay and is that.

Justin: Like the actual cost of repairing exclusive of the lost production is any of that recoverable from insurance.

unknown: Yeah, about $500,000 is the cost of repair costs, and that's right about the deductible level of our property insurance policy. So we won't see any more than $500,000 in repair costs. And then $400,000 is the impact of the plant downtime, which meant that we had manufacturing overhead we couldn't absorb into inventory because of the lack of production. Collectively, those two pieces are $900,000, and the Operating Income Impact for the Corp. Great, thank you.

unknown: Yeah, about $500,000 is the cost of the repair costs, and that's right about the deductible level of our property insurance policy. So we won't see any more than $500,000 in repair costs. And then 400,000 is the impact for the plant downtime, which meant that we had manufacturing overhead we couldn't absorb into inventory because of the lack of production. Collectively, those two pieces are $900,000, and the Operating Income Impact for the Corp. Great, thank you.

Justin Laurence Bergner: Yeah, we are at about 500000 as the cost is repair costs and that's right right right about the deductible level of our property insurance policy. So it won't we won't see any more than 500000 and repair costs and then 400000 is the <unk>.

Speaker Change: <unk> for the down the plant downtime, which meant that we had manufacturing overhead we couldn't absorb into inventory because of lack of production.

Speaker Change: Collectively those two pieces are 900000.

Speaker Change: And the operating income impact for the quarter.

unknown: Great, thank you for that detail. I assume that the operating impact is zero or negligible in the second quarter?

unknown: Great. Thank you for that detail. I assume that the operating impact is zero or negligible in the second quarter.

Speaker Change: Great. Thank you for that detail I assume that the operating impact is zero or negligible in the second quarter is that fair correct.

unknown: Is that fair? Correct. Okay. That's behind us. Bigger picture question. So, you mentioned...

Speaker Change: Okay.

Speaker Change: As the hubs.

unknown: Is that fair? Correct. Okay, that's behind us. Bigger picture question. So you mentioned, I guess Sam mentioned, that a competitor in the CAST backup role market in Europe has exited. Could you provide a little bit more detail on that? I mean, how large a share of the market they roughly are? How do you think that will impact sort of the degree of Univolume Growth and Pricing Power? In perspective, is this sort of a minor deal or a major deal?

Speaker Change: Bigger picture question. So you mentioned.

unknown: I guess Sam mentioned that a competitor in the CAST backup role market in Europe has exited. Could you provide a little bit more detail on that? I mean, how large a share of the market they roughly are? How do you think that will impact sort of the degree of Univolume Growth and Pricing Power? In perspective, is this sort of a minor deal or a major deal?

Samuel C. Lyon: I guess Sam mentioned that.

Sam: The competitor on the cast backup rural market in Europe has exited.

Sam: Could you provide a little bit more detail on that I mean, how largest share of the market. They roughly are.

Samuel C. Lyon: How do you think that will impact sort of the degree of.

Speaker Change: Our unit volume growth and pricing power prospectively is this sort of a minor deal or a major deal.

unknown: Just, I would say it's not major, but it's probably, you know, 100 to maybe 150 basis points of revenue, potentially. So it's a smaller portion of the market. But, you know, we generally make about a hundred rules, and we could see upside of 20 of these larger rules or so, but that'll be yet to be seen. But actually, the competitor was a U.S. company that decided to exit that.

unknown: Just I would say it's not major, but it's probably, you know, 100 to maybe 150 basis points of revenue, potentially. So it's a smaller portion of the market. But, you know, we generally make about 100 rules, and we could see upside of 20 of these larger rules or so, but that will be yet to be seen. But actually, the competitor was a U.S. company that decided to exit that.

Speaker Change: Just that I would say, it's not major but it's probably.

Speaker Change: 100 to maybe 150 basis points of revenue potentially.

Speaker Change: So it's a smaller portion of the market, but you know we we generally.

Speaker Change: Well you make about 100 roles and you know we could see upside of 20 of these larger roles or so, but yeah that'll be yet to be seen but isn't actually that competitor. There was a U S company that decided to exit that.

Speaker Change: Okay. So when you say 150 basis points of revenue that's in the context of forged and cast engineered products or the whole ampco Pittsburgh.

unknown: Okay, so when you say 100 to 150 basis points of revenue, is that in the context of forging cash-to-interest products or the whole Ampco-Pittsburgh Corp.

unknown: Okay, so when you say 100 to 150 base points of revenue, is that in the context of forging cash-to-interest products or the whole Ampco-Pittsburgh Corp.?

Ampco Pittsburgh: F C P fortunate and cast engineered products.

unknown: FCP, Fortunate Casting Engineer.

unknown: FCP, Fortunate Cast Measure.

Speaker Change: Okay got you and again again again and again, that's you know I don't want to say, that's assuming we pick up our share of it that's not.

unknown: Okay, gotcha. And again, again, again, again, that's, you know, I don't want to say, that's assuming we pick up our share of it. That's not.

Speaker Change: Oh, okay, its not guaranteed but yeah, we should get our share though.

unknown: It's not guaranteed, but we should get our share, though.

unknown: Okay, and then just the components of the flattish revenue in forging cast engineer products, I guess cast rolls down..., forged up, and then passed through up, is that the...

unknown: Okay, and then just the components of the flattish revenue in forging cast engineer products, I guess cast rolls down..., forged up, and then passed through up? Is that the...

Speaker Change: Okay, and then just the components of the flattish revenue in forged and cast engineered products I guess cast rolls down.

Speaker Change: <unk> up and then pass through up is that.

Speaker Change: No it <unk>.

unknown: Forge and cast are both down, cast is down more, but the price increase is mitigating the volume decrease.

Speaker Change: Forged and cast are both down cost is down more but the pricing increases mitigating the volume decrease.

unknown: Okay, and I mean your comments were positive sequentially about orders for forged and cast rolls, and I think North America and Europe. I mean, do you expect us to see volumes up in the second half of 24, or is that hopefully more likely to be a 25 event?

Speaker Change: Okay, and I mean, your comments were positive sequentially about orders in our forged and cast rolls and I think in North America and Europe.

Speaker Change: I mean do you expect us to see volumes up in the second half of 'twenty four or is that.

Speaker Change: Hopefully more.

Speaker Change: Likely to be a 25 event.

unknown: It's more likely, it's 25 is when we'll see the increase. Mike was talking, we're negotiating now with one of our largest customers, we have the allocation, we're negotiating with everybody else, but many of our customers have indicated that the rule bias will be larger next year. So that's what we're going to. That's what we're seeing in the market.

unknown: It's more likely, it's 25 when we'll see the increase. Mike was talking, we're negotiating now with one of our largest customers, we have the allocation, we're negotiating with everybody else, but many of our customers have indicated that the rule bias will be larger next year. So, that's where we're going. That's what we're seeing in the market.

Speaker Change: More likely it's 25 is when we'll see the increase were negotiate as Mike was talking we're negotiating now or one of our largest customers. We have the allocation, we're negotiating with everybody else.

Michael G. McAuley: But many of our customers have indicated that the rule buys will be larger.

Speaker Change: Next year.

Speaker Change: So that's what we're going.

Speaker Change: That's what we're seeing in the market.

unknown: Okay, but would you expect the second half to sort of look better than the first half outside of seasonal factors on the volume front? Uh, no.

Michael G. McAuley: But would you expect the second half to sort of look better than the first half outside of seasonal factors on the volume front for no. It probably be it'll probably be similar were seeing increase on the F.

unknown: No, it'll probably be similar. We're seeing an increase on the... FEP side of the business, so the non-rule side, the rule side's more, I'd say, flattish, if you take into account, of course, the downtime in Europe and seasonal factors that you just mentioned.

Speaker Change: A P P side of the business so the non rural side the rule sides more I'd say flattish.

Speaker Change: Taking into account of course, the downtime in Europe and seasonal factors that you just mentioned.

Speaker Change: Okay. Thank you.

unknown: Yep. Thanks, Justin. Again,

Speaker Change: Yep.

Speaker Change: Thanks, Justin.

Speaker Change: Again, if you have a question. Please press Star then one.

Operator: Again, if you have a question, please press star then 1. The next question comes from John Baer with Ascend Wealth Advisors. Please go ahead.

Speaker Change: The next question comes from John Bair with ascend wealth advisors. Please go ahead.

Speaker Change: Good morning.

John Bair: Morning, John.

John Baer: Morning, John. Hey, thanks for taking the call here. Question on the exit of the competitor in Europe, are you able to pick up any of.., their facilities or Are you looking at doing anything along those lines?

John Baer: Good morning, John. Hi. Thanks for taking the call here. Question on the exit of the competitor in Europe. Are you able to pick up any of their facilities or are you looking at doing anything along those lines?

John Bair: Thanks for taking my call here question on the the exit of the competitor in Europe are you able to pick up any of them.

Michael G. McAuley: Their facilities or.

Speaker Change: You're looking at doing anything along those lines.

Speaker Change: No and its not an exit.

unknown: No, and it's not an exit. One of our competitors exited a portion, a small particular portion of the market. So they didn't go away. And again, it was a US company. But no, there will not be any asset pickup or anything like that. It would just be a transfer of production product.

John: One of our competitors exited a portion a small a particular portion of the market. So they didnt go away and again it was a U S. It was a U S company.

Michael G. McAuley:

Speaker Change: But no. They there will not be any asset pick up or anything like that would just be a transfer of.

Speaker Change: A production product okay, Okay, and then as far as it sounds like the majority of your.

unknown: Okay, and then as far as capital expenditures for upgrading plants and so forth are pretty much behind you, so how does that look going forward relative to the past couple of years?

Speaker Change: Capital expenditures for upgrading plant and so forth is pretty much behind you. So.

Speaker Change: How does how does that look going forward relative to the past couple of years.

Speaker Change: Well number one the equipment reliability is the biggest factor in its greatly improved so we were had.

unknown: Well, number one, equipment reliability is the biggest factor, and it's greatly improved. So we had, you know, assets that were decades old, and this has modernized that. And then we're also seeing higher productivity and better performance out of the equipment. So it's operating as expected, I would say, which we had high expectations for, but it's running well.

Speaker Change: So assets that were decades old and this is modernized that and then we're also seeing higher productivity.

Speaker Change: Activity better performance are out.

Speaker Change: Out of the equipment. So it's operating.

Speaker Change: As as expected I would say.

Speaker Change: Which which we had high expectations, but it's running well.

Speaker Change: Okay.

Speaker Change: And what about the men on the domestic order side are you seeing a pick up there.

unknown: And what about on the domestic orders side? Are you seeing a pickup there?

Speaker Change: Four for 2025, everybody's, indicating higher a higher role boss. So and then you know these things lag a little bit what listening just.

unknown: For 2025, everybody's indicating higher rule buys. So, and then, you know, these things lag a little bit.

unknown: What I'm listening to, just quoting earnings calls from our major customers, Steel Dynamics, Nucor, US Steel, Cleveland Clips, they're all either citing slightly improved demand in Q2 or flat demand. So everyone's expecting to stay where they are or go up. And then, you know, that ends up translating into higher need for our products.

Speaker Change: Loading earnings calls from <unk>.

Speaker Change: Our major customers steel dynamics Nucor, a U S steel Cleveland cliffs. They are all either citing a slightly improved demand in Q2 or flat demand. So everyone's expecting to say stay where they're at or go up and then you know that that ends up translating into higher need for for our products.

Speaker Change: Okay.

John Baer: Okay, great. Thank you very much for taking the call, or questions rather. Thank you.

Speaker Change: Okay, great. Thank you very much for taking the call.

Speaker Change: Questions, rather [laughter]. Thank you though.

Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Brett Mcbrayer for any closing remarks.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Brett McBrayer for any closing remarks.

Brett Mcbrayer: Thank you, Nick. As we progress through the remainder of the year, we will continue to explore options to improve profitability in our cash flow division. The continuing investments in steel and aluminum in North America, as well as the continuing trends in nearshoring, present a favorable outlook for our forged roll division. As David Anderson mentioned, expanding our output in the air and liquids segment is a priority. In the near term, we believe we have good momentum heading into the second quarter. I want to thank our employees for their great work and our shareholders for your continued support. Thank you for joining us on our call today.

Nick: Thank you Nick as we progress through the remainder of the year, we will continue to explore options to improve profitability in our cast roll Division.

Speaker Change: The continuing investments in steel and aluminum in North America as well as the continuing trends in near shoring present, a favorable outlook for our forged rolled division.

Speaker Change: As David Anderson mentioned, expanding our output in the air and liquids segment as a priority in the near term. We believe we have good momentum heading into the second quarter I want to thank our employees for their great work and our shareholders for your continued support thank you for joining our call. This morning.

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

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

Conference Host: [music].

Conference Host: Yeah.

Q1 2024 Ampco-Pittsburgh Corp Earnings Call

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