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| Statement |
|---|
| Markets in the Americas remain healthy |
| Moving to our 2023 performance, I continue to be impressed with our operations and remain confident about the strengths of our company and our long-term growth potential |
| The top end of our range assumes robust markets in the Americas, continued recovery in Asia and improvement in Europe |
| In terms of geography, markets in the Americas are stronger year-over-year, Asian markets are slightly positive, while European markets remain soft |
| Within Machine Clothing, excluding Heimbach, favorable product mix and lower procurement costs drove an increase in gross margins to 51.9% of 270 basis points versus the same period last year |
| While at AEC, gross margins finished with a strong 20%, up 120 basis points versus the same period last year |
| Additionally, Heimbach’s standalone results were better than expected for the quarter |
| This is a testament to the strong management team at Albany, who have stayed a step ahead of global macroeconomic issues and allowed us to deliver our high-quality products on time with excellent financial results |
| We also saw accelerated procurement savings as a result of the team’s efforts to optimize our supply chain, a nice early win from our Heimbach integration |
| Importantly, we grew adjusted EBITDA to $265 million, up 5% over the prior year |
| Segment adjusted EBITDA margins were 37.5%, an 80-basis-point improvement from the prior year |
| I think the best way to describe this is, we have a very strong Machine Clothing business |
| Turning our focus to the segments, our Machine Clothing business excluding Heimbach, continues to be a strong consistent performer |
| From a profitability perspective, we expect to see a positive shift in product mix and a modest improvement in margins |
| During the quarter, a number of factors resulted in us delivering a result well ahead of our earlier expectations |
| AEC adjusted EBITDA was $27.1 million, a 21% improvement over the prior year |
| Margins at AEC were 20.5% of sales, a 170-basis-point improvement over the prior year period |
| We have a strong backlog and we continue to see positive results from our ongoing business development efforts |
| Our Machine Clothing business is well-positioned globally, with an increased share of our customers serving the secularly growing packaging and tissue markets, both of which continued to grow for us on a global basis |
| Overall, we saw a positive impact on our bottomline results from both product and geographic mix |
| Machine Clothing continues to demonstrate world-class execution across its global markets |
| Our balance sheet remains very strong, allowing us to pursue those investments that provide the highest risk-adjusted returns to our shareholders |
| Our continued investment in proprietary and differentiated technologies will translate into meaningful growth over the long-term |
| Our reputation in the marketplace continues to grow and our business development pipeline will provide us with growth opportunities over the medium-term |
| Our balance sheet remained strong with a cash balance of $173 million and over $350 million of borrowing capacity under our committed credit facility |
| Our integration efforts are on track and I have confidence in our ability to meet the financial targets outlined at the time of the acquisition announcement |
| The segment finished 2023 very strong, completing backlog orders and posting better results than we anticipated, especially in North America and Asia |
| The business generates strong cash flows and provides an excellent return on capital |
| Albany International Machine Clothing benefits from a longstanding reputation for reliability, technological leadership that our customers value |
| Turning to our outlook for 2024, we are forecasting another strong year with double-digit topline growth and continued attractive EBITDA margins |
| Statement |
|---|
| The low end of our Machine Clothing guide assumes weaker-than-expected global market conditions and corresponding lower absorption |
| As we think about our guide, the low end of our guide, beyond normal variability, takes into account the potential for lower-than-planned LAEP component demand from our customer or delays in the reward of new programs reflected in our plan |
| We anticipate markets in Europe will remain soft by historic standards |
| Heimbach results reduced GAAP net income by approximately $5 million, largely the result of inventory step-up and initial integration expenses |
| This growth was masked by lower 2023 non-recurring revenues associated with the standoff of the CH-53K Aft Transition production line |
| This was offset somewhat by weaker engineered fabrics demand, particularly in Europe |
| We’ve seen Europe being soft |
| The margin compression was primarily driven by growth in sales at Engineered Composites and the acquisition of Heimbach |
| Together, these items represent a $0.23 headwind to our EPS by 2024 |
| I would like to bring your attention to some Hudson headwinds [ph] impacting our 2024 adjusted EPS |
| Note that for the quarter, we recognize a net unfavorable change in the estimated profitability on our long-term contracts of $1.5 million, compared to a net unfavorable change of $1.7 million in the fourth quarter of last year |
| Higher sales to the packaging and tissue industries were partially offset by contraction in our other end markets, most notably engineered fabrics |
| The high end of the range takes into account the potential for earlier-than-anticipated start on new wins and a higher-than-expected LEAP production |
| We will see higher pension expense in our base business due to the expiration of prior accounting treatment relating to the amortization of prior service costs |
| Corporate expenses came in lower than expected as we were managing controllable expenses |
| I think, if you look historically, we tend to be a little bit lighter in Q1, but I would just say that, when you look at the nature of our business, there really isn’t a seasonality that is really significant |
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