Q2 2025 AirBoss of America Corp Earnings Call
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I would now like to turn the conference over to Grand shock chairman and co-ceo please go ahead.
Thank you operator. Uh, good morning everyone. Thank you for joining us for the second Airbus second quarter results conference call. I'm Grant shock. And I am the chairman of Co CEO of air boss with me today are Chris with sakus
Our president anko, CEO.
Frank and Tilly our CFO and Chris vigil.
EVP and general counsel.
Our agenda today will start with a review of the operational highlights for the quarter followed by a discussion of our financial results. Before we open the conference lines for questions.
Before we begin, I'd like to read mind listeners that are remarks today contain forward-looking and statements including our estimates of future developments.
We invite listeners to review risk, factors related to our business, and our annual reform, and our mdna, both of which are available on Cedar and on our corporate website.
Also, we will discuss certain non-gaap measures, including Abbott doll.
Reconciliations of these measures are available in our mdna.
Finally, please note that our reporting currencies and US dollars.
references today will be in US Dollars unless we indicate otherwise
with that, I'll turn the call over to Chris for our operational review.
Grant and good morning. Everyone are boss experience, positive traction and Q2 20225 compared to Q2, 20224, mainly driven by significant increases in airboss manufactured products, defense products business partially offset by reduced volumes on airboss rubber Solutions.
Compared to the Q2 2024 Consolidated. Q2, 2025 results, have shown a 3.4 increase in sales through 3.4% increase in sales, a gross profit increase of 7.7 million, and an adjusted ebit on Improvement of just over 4 million.
Despite the strong, year-to-date results. Airbus has been forced to continue to navigate, obstacles related to economic and geopolitical challenges, including Market softness, tariffs, inflationary pressure, and the corresponding monetary policy, and the potential for further escalating and retaliatory tariffs.
While maintaining focus on risk mitigation plans, including managing costs and targeting continuous Improvement initiatives. This year. Uncertainty and volatility, in the industrial markets, we serve has been creating significant upheaval for industrial output in the US.
On average industrial production of durable goods in the US and May and June was the lowest it has been in the Last 5 Years? While construction spending has been on a steady decline over the last 12 months.
Many of the individual markets that we serve are being affected by these factors which have in turn created a significant short-term pressure on the custom compounding Market as is evident at Airbus rubber Solutions as well as many of our competitors.
the company expects further uncertainty to persist, in the coming, quarters with volume recovery difficult to anticipate as any recovery could be impacted by the imposition of further tariffs duties or other restrictions on trade
The company continues to evaluate and execute on contingency plans and is carefully executing on all available options to deal with these challenges including rebalancing production and sales activities between the US and Canada. In order to minimize the impacts of the company and its customers. Despite the increased economic uncertainty disruption of trade flows and increased costs and strains on Supply chains, resulting from these challenges opportunities may arise for the company to leverage existing us capacity to grow revenues related to the nearshoring of overseas Imports as an example, The Moulding operations of airboss. Manufacturer products has quoted more opportunities in the first 6 months of 2025.
Then we had quoted all of 2024, although difficult to predict how many of those opportunities will turn into new contracts yet, there's certainly, a validation of the made in America strategy, long considered critical to our Moulding operations in the US.
As mentioned earlier, ARS had pronounced softness in Q2 2025 compared to Q2 2024, the segment experience, both Revenue contraction and reduced margins driven by overall softness in most customer sectors, primarily caused by weaker, demand, and the shifting tariff situation.
ARS remains committed to executing on a strategy to deliver strong results by focusing. Focusing on specialized products, expanded production of a broader array of compounds and enhanced flexibility in the tracking and launching new business.
Support enhanced collaboration with customers as an example, the new silicone product line that was launched in November 2020, 2024 has facilitated the complete insourcing of all silicone compound requirements within airboss. While also launching the first of what should be many new third-party customers. Utilizing? Airboss silicon materials.
In terms of amp, we experience notable Improvement in Q2 2025 compared to Q2 2024, primarily due to the defense products business continuing deliveries on previously, announced contracts and additional overhead. Reductions carried out earlier in the prior year to help support profitable growth.
Management. At A&P also maintained its focus on operational improvements during Q2, 2025 and continued to collaborate with key customers. With a goal of leveraging opportunities, aligned with its growth initiatives.
The defense products business, despite its strong backlog. This year, continues to collaborate closely with its suppliers and government Partners to mitigate the previously announced delays to its Bandelier program and expects Revenue to shift to the right as challenges related to the supply chain, get rectified.
Further updates will will be provided as more information becomes available.
The rubber molded products operations were impacted by continued. Volume softness related to the original equipment. Manufacturers, adjusting production schedules, due to the evolving impact of tariffs in the automotive sector.
This business continued its focus on managing costs and the commitment to drive efficiencies and best-in-class automation as well as diversification of its product lines into adjacent non-automotive sectors.
Despite some of the supply chain upheaval, precipitated by tariffs and counter tariffs, the long-term priorities of company of Remains the Same.
Complex.
We continue uh to focus on our core competencies to drive growth during these challenging times with a strong defense, backlog significant us available capacity to benefit for to benefit from reshoring and the continuing Market strength of our rubber Solutions technology. We expect to navigate these near-term challenges and position ourselves well for the future.
Airboss will continue to focus on our long-term priorities while investing in core areas of the business to expand a solid foundation that will support long-term growth.
I will now pass the call over to Frank for the financial review, right? Thanks Chris and good morning everyone. As a reminder all dollar amounts presented today are in US Dollars, except for dividends per share, which are in Canadian dollars.
percentage changes compared Q2 of 2025 to Q2 of 2024 unless otherwise noted
To be respectful of your time today. I will aim to be brief in my summary of our Q2 2025 results. Starting from the top line Airbus is Consolidated, net sales for Q2 2025 were 98.6 million. An increase of 3.4% from the prior year, the increase was primarily due to higher volumes at manufactured products, partially offset by lower sales at rubber Solutions.
Consolidated growth profit for Q2 20225 increase by 7.7 million to 16.2 million compared, with, Q2, 20224 and Consolidated adjusted ebit off for Q2 20225 increase to 10.2 million from a prior year of 6.1 million. In both cases, the increase was driven by improved volume and mix at manufactured products along with an inventory, right down in the comparative period. Partially offset by volume softness and unfavorable mix at rubber Solutions turning. Now, to our individual segments, net sales at Airbus rubber solutions for Q2 20225 decreased by 13.7%, to 50.9 million from 59 million and Q2 of 2024
Volume decrease by 15.9% with decreases. In most sectors, totaling volume was down 31.6%, while non to volume was down 15.5%
Gross profit at Airbus rubber solutions for Q2, 2025 decreased to 6.6 million from 10.3 million. In Q2 of 2024 gross margin percentage. Decreased to 13% of net sales from 17.4% of net sales in Q2 2024
The decreases were due to unfavorable mix and lower volume driven by market softness and economic uncertainty.
Partially offset by managing controllable overhead costs and continuous Improvement initiatives.
Net sales at manufactured products for Q2 20225 increased by 35.2% to 55 million from 40.7 million in Q2 of 2024. The increase was mainly due to improved sales in the defense products business, partially offset by softness and the rubber molded products business.
Gross profit at manufactured products for Q2 2025 increased to 9.6 million from negative, 1.8 million in Q2 202024.
Inventory rate down for gowns and gloves in the comparative period and improvements in the defense products. Business operational cost improvements and reduced overhead costs partially offset by unfavorable volume and product. Mix in the rubber molded products business.
Turning again to the Consolidated results, free cash flow for Q2 2025 was 11.2 million compared to 7.3 million at the end of Q2 2024.
During Q2 2025 the company invested 1.8 million versus 3.9 million in Q2 202024.
Capital expenditures were related to growth initiatives cost savings and minor plant upgrades within ARs and amp.
By the end of Q2 20225, our net debt balance was 86.3 Million versus 98.9 million at the end of 2024.
We expand the expect to fund the company's 2025. Operating cash requirements, including required working, capital Investments, Capital expenditures and scheduled debt, repayments from cash, on hand, cash, flow from operations and committed borrowing capacity.
The company has a credit facility that provides for a maximum borrowing of up to 125 million with a 25 million accordion.
As of June 30th, 2025 the total available borrowing capacity under the facility was 77.2 million with 39.7 million drawn.
With that, I will now turn the call over to Chris Chris.
Thank you, Frank operator. At this point, we can open the line up for Q&A.
Thank you. We will now begin.
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The first question comes from Ahmed Abdullah from National Bank of Canada. Please go ahead.
Hi, thanks for taking my questions um on the amp margin profile, you highlighted that mix has played a role here but can you give us a bit more color because the Q2 Revenue splits look somewhat similar to q1 between defense and auto yet margins of jumps quite a bit?
So, how should we think about the margin profile for the segment going into the second half and into next year?
Yeah, Ahmed thanks. Thanks for your question. I, I mean, again, I I think as a result of some of the deliveries of the new Awards, specifically in the defense products business and the concentration of those specifically around uh Bondo and mallow, I think that's what's really made it. A creative relative to the more historical profile from the GP perspective. However, going forward as Chris had mentioned. Uh, there is some uh challenges with the supply chain related to the Bando which could cause uh some softness there and could obviously bring it back to a more traditional trajectory from a, a gross margin profile.
Okay, that's helpful. So, uh, back half of the year should be a bit more normalized than this 1 time. Kind of timing. Uh, is that how we should kind of understand it?
Yeah, and more timing or scheduling really because that's really the flow of of uh, sort of how the distribution of, of the programs going. Uh, but obviously we'll keep, uh, people informed that as we move forward and we learn more information.
Okay.
And just on the increased activity in the rubber molded product side. I mean traction seems to be growing there despite the choppy backdrop. Um, how are these new production Awards? You highlighted structured as it relates to tariffs, are there some automatic like pass through mechanisms that you can utilize? Or will you have to give up some margins? If tariffs were to rise from current levels,
I mean, we've done a, we've done a pretty good job, uh, ever since, uh, you know, the first Trump Administration in, uh, streamlining our supply chain in the US to utilize as many US raw materials as possible. And so these current these new awards that, um, we've received at, uh, at the rubber, uh, molding business in under amp, uh, have been awards for, uh, us production and, uh, utilizing us raw materials. Um, so, uh,
The latest material cost that we've had uh we've been able to uh, apply the the uh the most recent costs. And uh we have been in conversations with the um the automotive customers about their willingness to offset tariffs. But I'd say in our case, we've done a good job to keep most or all the raw materials localized. Anyway.
That's helpful, thanks for the color. I'll pass the line.
The next question comes from. Tim James, from TD Talon, please go ahead.
My first question is very general I think looking at at at Canada's you know, defense opportunities are you seeing any specific signs at this point of and maybe early days but are you seeing any specific signs of potential Defense work as a result of Canada's recent plans to significantly accelerate defense spending any actual kind of discussions with Canadian Defence officials at this point?
Uh, as you can imagine Tim, we are having ongoing conversations with uh, Canadian Defence officials. We, um, at least once a week, we're meeting with the uh, with staff from the ministry of Defence, and we're talking about multiple opportunities. Um, so there's there's a lot more conversation going on now about, uh, opportunities that we could participate in. Um, the there hasn't been, uh, multiple requests for quote come out yet, but that's always kind of The Next Step. But we're certainly seeing a lot more conversation around the needs of a of the Canadian Armed Forces, and how Airbus can participate in that and and there are ongoing discussions.
At least weekly.
Okay. That's that's helpful. My second question, and forgive me. If you covered this earlier, I, I actually missed a brief part of the call. But, um, can you talk about sort of in, in in rubber Solutions, just kind of mix influences either in the quarter. And as you think about it, going forward, I'm thinking about kind of, you know, um, um, you know, color compounding sort of, uh, product mix. Um, just sort of directionally As you move forward, and I know you've been looking at doing more sort of customized, if I can call it that compounding, that drives higher margins. What, what where do you stand on that? Are you seeing progress? You know what's the Outlook?
Yeah, yeah, actually we are seeing progress, of course, you know, the um, the more, uh, customized Solutions, the more specialized compounds. Uh, also tend to be lower volume. So in terms of uh, driving the mix, it takes a little bit longer for that to happen, but you know, we we first uh, you know, launch launched. Our first color mixing line in 2019. Uh, and just a few years ago we bought a solo which is has a, a very strong uh share of the color compounding Market in the US. And um and they've been relatively stable and of course on the more on those more specialty compounds the um the margin profile is higher uh and in November as you know we launched our first silicon line uh which is was the next
Sort of step in our, uh, specialized compounding strategy. And, uh, since then we have insourced all of our own silicon compound requirements. All the, all the silicone molding that was going on at amp. Uh, it used to be utilizing outside outside raw material or outside compounding for the silicone. So, we've insourced all of that silicon and we have multiple customers that we are in trials with to uh, to uh, take more of that work on. Uh, and in this quarter in the last quarter, I should say, uh, we launched our first third-party customer and there's multiple other ones that are in the lab that are being, that are being, uh, ramped up. So, um, that's our next step. We do have more thoughts Beyond, uh, Beyond silicon. But um, as you see the color and the silicone, uh, and other specialty compounds ramp up, you'll see that margin profile, uh, update upwards uh, having said that, uh,
And I mentioned it in the early remarks is um, you know the the custom the the industrial output in the US has been has been relatively uh, low. And so the um, the open capacity has has necessitated us and our competitors to get a bit more aggressive on pricing to defend. And and so that some of that Improvement in the margin profile, as you can see. In this last quarter, uh, has has dropped a little bit because of, uh, because of the slow Market that that we're in. So,
Be back onto that trajectory of, uh, year-over-year improvements in in margin profile. And, uh, and and the Silicon line that we've launched is sort of the next driver of that.
Okay, that's helpful. Actually, I'm going to sneak 1 more question. And if I could um, you cite um
In terms of manufactured products, 1 of the pressures that that the businesses experiencing relates to increased vehicle inventories. I just want to confirm is that is that a a a reference to your customer's or indicating their they've got sort of uh higher inventories and therefore aren't needing as much product from you. Is that the the gist of that?
Yeah, the, the big Auto suppliers, uh, they build to inventory. And when the inventory levels get to a level, that their concern, that the sales won't support them, they then slow down their production, uh, output. So um, we have we have found in the past year. It's been fairly flat to slow and depending on which customer. Like if you look at stellantis, for example, they had a very down year last year. And so once inventory levels gets a certain point, uh, they, they will either uh, take weeks of production out, or shifts out or um, just slow down the production line to kind of uh, regulate that. So we're on. So we're always looking at the vehicle inventories, the sales figures and that kind of gives us a an early indication of where production schedules are.
Are going to are going to land.
Right. Okay, great. Thank you very much.
The next question comes from. Kevin Chang from C, CIBC please. Go ahead.
Good morning. Thanks. Uh, thanks for taking my question. Um, just on the Bandelier. Thanks for the the comments you made in your prepared remarks. Um, but but I guess since, uh, I guess 4 months ago, when, when you announced the delay just just wondering, uh, what, um, uh,
You know, I guess what programs you made is, is it still kind of at a standstill? Now in terms of, in terms of the, uh, in terms of the, um, the delays you're seeing or, or, or do you have visibility on on, on on executing against this program and the targets you put out in terms of delivery by, uh, by the by I guess, by the end of 2026,
Yeah, when we made that first announcement, uh, there, there's there's a, there's a critical raw material ingredient, that's produced in Europe that gets, uh, uh, exported into the US and it's in very, uh, high demand and, and low Supply globally. So, it's a, it's a tricky raw material to get in the first place and, uh, you know, with all the trade concerns back and forth, um, it's been affected by that. Uh, when we first made the announcement on the delays, we were actually able to, uh, find some more of the material, uh, be able to continue shipping. Um, and we, uh, we are now in in a similar position where it's now in tight support.
Apply again. So, um, we have multiple, uh, Avenues to procure more of this raw material. Um, so we we don't, it's actually not at a standstill. Exactly. Um, we, uh, are working with, uh, our customers and our suppliers and, uh, we're finding, uh, opportunities to, uh, reacquire this raw material. And so we're, we're working nonstop on doing that. Uh, we expect things to, uh, slow down and speed up. It's going to be very lumpy as the availability of this raw material kind of comes up and down. And so we continue to just, uh, reiterate, uh, to everyone that, uh, although we, we still expect to complete, uh, this contract. We, uh, it's going to be a little lumpier than we expected as we navigate these, uh, these Global Supply Chain issues on that particular 1, raw material. That's so critical.
Yep, that's that's helpful. I, I guess with, with, with the, with the US and and EU having
Come to a trade agreement. Does that, at least from your perspective, does, does that help the the procurement of this or is it is a primarily? Um, uh, I guess, uh, a capacity issue on, on the production of this.
This uh, this this input and and I get to the extent that as you're procuring, this, uh, this, this this this product, which seems to be in short supply, like are there mitigating factors? I'm assuming that that may be inflationary relative to the
to the costs that you you assumed, when you when you, when you put this bit forward, originally
It's more. So just the availability of that of that material. And um, it's definitely a capacity issue because it's a, it's a, it's in tight demand globally. However, I think with the initial, uh,
You know concerns between the European Union, European union and the and the us there was some, you know, unwillingness, let's say to, uh, to direct more of that raw material here given that it was in such high demand all around the world. So, uh, I think now that there is a trade deal, I think it does help us in a way from, uh, you know, um, a strategic standpoint. But it's still in, in short supply and we're not sure of their contracts have been awarded to to pick up that Supply. We are working on a us, um, uh, supplier for this material, although it is it's in tight demand in the US as well. So, um, I'm relatively optimistic that, you know, we're going to, we're going to find a a workaround for that. Uh, but it's going to be a lot lumpier than we expected.
Okay. Um I I mean just last question for me, it it it sounds like, you know, you you're you're you're you're you're looking at your
I guess your your production options. It's just given the the trade uncertainty out there is that is that Weighing on on your cost profile at all in terms of, you know, I guess. Um, shifting production between Canada and the US as you I guess as you think about trying to mitigate potential tariffs is, is that
Is that burdening your cost structure at all? Or maybe could burden your cost structure when you decide to make a specific decision on on where you produce some of your goods in order to to mitigate the Tariff situation.
Well, certainly did impact our cost structure in q1 and Q2 because, um, you know, uh, all of our us customers that receive material exported from Canada, uh, we had to re-qualify all those materials, uh, out of our plants in the Carolinas. And so, you know, we had to Bear much of those costs for for trials. Uh, you know, for for formulation, uh, adjustments and all the things that we need to do to make sure that the material, you know, works the same way off of our lines, you know, in in the US as they do in Canada. So we certainly uh, had some costs there. Of course, all the material that we make in Canada is covered under usmca. So from that perspective, as long as the umca stays intact, we shouldn't see any additional tariff costs. Although there is, you know, concern, uh, out of the US related to, um, uh, buying from Canada and then overnight, having some massive new tariff, uh, applied to it. So, I think a lot of that uncertainty, uh,
Is, is creating a little bit of concern. Um, our plants in the Carolinas are are quite efficient, so I don't think it's a matter of, you know, it costing that much more to produce down there. Uh, it's it's, uh, it's more so, uh, about the fact that we're not 100% sure where this is all going to end up, uh, in terms of protecting the usmca. So, if the usmca is protected, we should be able to continue on business as normal. Uh, I think we think that once, uh, all these tariff concerns are kind of brought to a, uh, to a a conclusion. Uh, we think the the industrial output in the US will settle down because what we're seeing is people are building up inventory, uh, of their Imports prior to deadlines and then working away that inventory. And in any, as you know, Kevin manufacturing is not designed for, you know, puts in and starts constantly. And so it's creating a lot of havoc in in the industrial output and with our customers.
But as all those things get settled, we think it's going to settle out and uh we should be able to get to back to business as normal um and whatever uh transfer we have to make to the us. We don't expect a major uh Drop Inn in margins because of that specific thing.
That's helpful. Thank you very much.
This concludes the question.
Back over to Chris, the takus for closing remarks.
Thank you, operator. And, and thank you everyone for attending our call today. Uh, we appreciate, uh, your support and we're always, uh, available for any, uh, follow-up. Uh, questions. Thank you again, have a great day.
This brings to a close today's conference call, you may disconnect your lines, thank you for participating and have a pleasant day.