Ampco-Pittsburgh (AP) Q4 2025 Earnings Transcript

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Date

Tuesday, Mar. 17, 2026 at 10:30 a.m. ET

Call participants

• Chief Executive Officer — J. Brett McBrayer
• Chief Financial Officer and President, Air and Liquid Processing — David G. Anderson
• President, Forged and Cast Engineered Products — Samuel C. Lyon

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Risks

• The $44.7 million full-year operating loss in FCEP, primarily from a $41.4 million non-cash deconsolidation charge related to the UK facility closure, highlights recent operational disruptions.
• Management cited FX headwinds and "ramp-up costs in Sweden" as contributing to lower Q4 segment EBITDA, and noted that normalized margin realization will not occur until Q3 2026.
• The $11.9 million non-cash asbestos accrual adjustment reflects revised projections of a slower decline in future asbestos-related payments, adding noise to near-term earnings.
• Air and Liquid Processing backlog declined by $8 million, driven chiefly by the Navy’s order termination, temporarily reducing visibility despite subsequent order recovery.

Takeaways

• Consolidated adjusted EBITDA -- $3.2 million for the quarter, down from $6 million, attributed to a pause in Forged and Cast segment orders following new global tariffs.
• Full-year adjusted EBITDA -- $29.2 million, up $1.1 million, marking the third straight annual increase, supported by higher revenue and lower SG&A expenses.
• Air and Liquid Processing segment revenue -- Up 10% in Q4 and 7% for the year; 2025 was a record year in both revenue and adjusted EBITDA.
• Air and Liquid Processing adjusted EBITDA -- $3.3 million in Q4 versus $3.7 million prior; full-year $15.4 million, representing a 21% increase and the highest in the segment’s history.
• Order book acceleration -- Bookings for both operating segments rose 73% in the first two months of 2026 compared to the prior-year period.
• Backlog impact -- Air and Liquid’s backlog fell by $8 million, mainly due to the U.S. Navy’s $7.1 million order removal following the Constellation frigate program termination; new Navy bookings over $9 million offset the decline.
• Forged and Cast Engineered Products (FCEP) net sales -- $70.9 million in Q4, and $292.6 million for the year, nearly flat versus the prior year’s $280.6 million.
• FCEP operating loss -- $44.7 million for the year, with a $41.4 million non-cash deconsolidation charge tied to the UK facility closure.
• FCEP adjusted EBITDA -- $24.4 million for the year and $2.2 million in Q4, down from $5.5 million, mainly due to fewer U.S. operating days, higher ramp-up costs in Sweden, and FX headwinds.
• One-time non-cash charges -- $42.4 million in Q4 and $52.2 million full-year, relating to exits from UK and U.S. steel distribution operations.
• Asbestos accrual adjustment -- $11.9 million non-cash after-tax expense for Q4, with management stating, "The estimate projects we will begin to see our asbestos payments decrease starting in 2027."
• Net sales growth -- Consolidated Q4 net sales were $108.8 million, up $7.8 million; full-year net sales were $434.2 million, up $3.8 million, driven by higher sales in both segments.
• Pension plan status -- Ampco-Pittsburgh’s defined benefit plan reached fully funded status in early 2026 after closing in on that mark at year-end 2025.
• Liquidity -- $10.7 million in cash and $25.5 million in undrawn revolver availability at year-end 2025.
• SG&A expenses -- Selling and administrative expenses fell $2.8 million, or 5%, primarily via reductions in employee-related costs.
• Production shift in Sweden -- Management identified a clear roadmap for improving the Sweden facility, targeting a 20% output increase by 2026, with normalized order book and margin realization starting in Q3 2026.
• Nuclear and data center demand -- Bookings and shipments for heat exchangers in the nuclear market hit record levels, and 2025 commercial pump bookings reached all-time highs on data center-driven power demand.
• Tariff and market changes -- New and increased tariffs in North America and Europe are expected to improve roll demand in 2027, with market consolidation as two competitors begin winding down operations.
• Customer pricing actions -- Pricing adjustments in Sweden are being phased into 2026 and 2027 contracts to mitigate FX impacts, with "further adjustment for 2027" planned.
• Strategic asset removals -- The completed exit from underperforming assets, particularly in the UK, is projected to boost annual adjusted EBITDA by $7 million to $8 million.

Summary

Ampco-Pittsburgh (NYSE:AP) reported consolidated net sales growth for the quarter and year, with full-year adjusted EBITDA marking its third consecutive annual increase despite significant one-time charges from asset exits. Management finalized the closure of its UK facility, incurred a substantial asbestos accrual adjustment, and realized strong results in its Air and Liquid Processing segment, which achieved record revenue and EBITDA. The company accelerated order activity at the start of 2026, particularly from the U.S. Navy and data center-related commercial pump markets, and began executing a targeted production ramp-up in Sweden, expecting margin normalization by Q3 2026.

• The pension plan reached fully funded status in early 2026, reducing pension risk going forward.
• Significant market consolidation and new tariffs in North America and Europe are anticipated to bolster demand and pricing power for rolls in 2027.
• Bookings in Air and Liquid Processing replaced lost Navy backlog and benefited from historic demand in nuclear and data center sectors, supporting future growth.
• Management expects that recent structural changes and manufacturing investments will yield annualized adjusted EBITDA gains of $7 million to $8 million, as announced in the call.

Industry glossary

• Adjusted EBITDA: Earnings before interest, taxes, depreciation, and amortization, excluding certain one-time or non-operational items to better reflect core operating performance.
• Backlog: The total value of unfulfilled customer orders for products or services to be delivered in the future.
• Deconsolidation charge: A one-time accounting loss recognized when an entity removes a subsidiary or operation from its consolidated financial statements, often following divestiture or closure.
• Section 232 tariffs: U.S. import tariffs levied on certain steel and aluminum products under Section 232 of the Trade Expansion Act for national security reasons, impacting market demand and pricing.

Full Conference Call Transcript

J. Brett McBrayer: Brett? Thank you, Kim. Good morning, and thank you for joining our call. The fourth quarter was a busy quarter for Ampco-Pittsburgh Corporation where we initiated and completed the removal of significant underperforming assets from our portfolio. As we emerge from the slowdown in the steel market, we expect these actions to improve adjusted EBITDA by $7 million to $8 million annually. As reported in our press release, consolidated adjusted EBITDA for the fourth quarter was $3.2 million, down from $6 million the prior year. This anticipated dip in performance was driven by the pause in customer orders in our Forged and Cast segment after the announcement of new global tariffs.

Consolidated adjusted EBITDA for the full year was $29.2 million. This performance is an improvement from the prior year despite the revenue impact FCEP experienced during 2025. With strong demand continuing in our Air and Liquid Processing segment, AOP achieved record revenue and income for 2025. As we shared in a recent press release, bookings for both operating segments have accelerated in the first two months of this year. I am now going to turn the call over to David G. Anderson, Chief Financial Officer and President of our Air and Liquids segment, for further comments on this quarter’s results for Air and Liquid.

David G. Anderson: Thank you, Brett. Good morning. As Brett mentioned, 2025 was a record-breaking year for Air and Liquid as we achieved new highs in both revenue and adjusted EBITDA. In Q4, revenue was 10% higher than prior year, while full-year revenue was 7% above prior year. The Q4 revenue increase was driven by higher revenue in air handlers and heat exchangers, while full-year revenue was higher in all product lines. Adjusted EBITDA in Q4 was $3.3 million versus $3.7 million in the prior year. The decrease versus prior year was driven by unfavorable product mix. Full-year adjusted EBITDA of $15.4 million was the highest in Air and Liquid’s history and a 21% increase over prior year.

Backlog declined year over year by $8 million, primarily driven by the U.S. Navy’s decision to terminate production of the Constellation frigate program, which resulted in $7.1 million of orders being removed from the backlog in late 2025. Costs related to the terminated orders are expected to be paid by the Navy along with normal profit margins. While backlog ended $8 million lower, we did see significant order activity at the start of 2026. As referenced in our press release dated March 10, order activity was up 73% for the first two months of 2026 compared to prior year. Bookings in the first two months of 2026 for the U.S.

Navy market were over $9 million, which more than replaced the $7.1 million from the Constellation frigate program termination. We continue to see positive activity in multiple markets across our product lines. 2025 orders and shipments for heat exchangers in the nuclear market were the highest in our history as this market continues to show long-term growth potential. There continues to be strong demand from the U.S. Navy, and we expect this demand to continue as the Navy moves forward with fleet expansion plans. The manufacturing equipment installed in 2024 has already increased manufacturing capacity for our pump product line, and there is more capacity expansion in process.

Additional manufacturing equipment from the Navy funding program arrived at our facility in early 2026 and is expected to begin producing products in 2026. There is additional equipment expected later this year. This equipment will position us to meet the expected growth in the market. We are also seeing significant demand for our commercial pumps due to the AI data center market. Our commercial pumps are used in the gas turbine market, which is seeing extremely high demand due to the need for additional power for data centers. Bookings for commercial pumps were at a record high in 2025.

Demand for custom air handlers remained strong, as there continues to be significant demand in the pharmaceutical market for our air handling products. In summary, 2025 was the best year in Air and Liquid’s history, and we are well positioned in markets that are showing significant long-term growth potential.

J. Brett McBrayer: Thank you, David. Samuel C. Lyon, President of Forged and Cast Engineered Products, will now share more details regarding his group’s performance.

Samuel C. Lyon: Thank you, Brett, and good morning, everyone. For 2025, the Forged and Cast Engineered Products Division, FCEP, reported net sales of $70.9 million compared to $66.5 million in the fourth quarter 2024. For the full year, we achieved total net sales of $292.6 million, representing a stable top-line performance compared to $280.6 million in the prior year. Our operating results reflect the strategic transformation of our footprint. On a GAAP basis, the FCEP segment reported an operating loss of $44.7 million for the full year. As Brett mentioned, this was primarily driven by one-time exit costs, including a $41.4 million deconsolidation charge associated with the closure of our U.K. facility.

Given these large one-time charges, we believe adjusted EBITDA provides a clearer picture of our underlying performance. For the full year of 2025, FCEP generated $24.4 million in adjusted EBITDA. In the fourth quarter, adjusted results were $2.2 million compared to $5.5 million in the prior year. This Q4 decrease was primarily driven by fewer operating days in the U.S. than in 2024, higher FCEP production relative to rolls, FX headwinds, and ramp-up costs in Sweden. In the U.S., we proactively curtailed production days in response to temporary softness in roll demand driven by the digestion of steel tariffs. With the U.K. closure behind us, one of our primary focuses is optimizing our Sweden facility.

We have a clear roadmap for improvements in Sweden throughout 2026 that will begin to materialize in our results this year and be fully realized in 2027. The recent weakening of the dollar to the SEK has created a short-term headwind, as supplies and labor are in SEK and euros, while approximately 40% of our product is sold to the U.S. in dollars. We are adjusting 2027 pricing to account for this and moving some European customers to purchase in SEK. We are executing a production ramp-up in Sweden and expect to reach a production level approximately 20% higher than 2025 by 2026.

Sweden is also improving its mix by removing some lower-margin rolls originally destined for the U.K. and is currently finishing lower-margin backlog orders from 2025. We expect the order book to be fully normalized by the end of Q2, positioning us for full margin realization starting in Q3 2026. Our North American customers remain optimistic about 2027 and expect improved volumes, which will translate into higher demand for our rolled products. While European market softness persists, consolidating our cast operations in Sweden allows us to better manage utilization. Further consolidation is occurring globally. Recently, two competitors have begun winding down operations, creating opportunities for both cast and forged rolls.

Additionally, stricter European quotas and increased tariffs set to take effect in 2026 should meaningfully increase utilization for our customers, driving higher roll demand in 2027. For our U.S. forged operations, our backlog and pricing have increased meaningfully for our non-roll FCEP as a result of the Section 232 tariffs, which have provided additional diversification in our backlog. In summary, 2025 was a pivotal year. With the U.K. facility closure, the operational roadmap for Sweden, and tariff protection for our U.S.-made products shipping to U.S. customers supporting pricing, we are well positioned for significant margin expansion in 2026 and full year 2027.

J. Brett McBrayer: Thanks, Sam. I will now turn the call over to David G. Anderson, our Chief Financial Officer, for more detail regarding our financial performance for the quarter. Dave?

David G. Anderson: Thank you, Brett. As indicated in both our Form 10-Ks and in our press release 8-Ks filed yesterday, there was a great deal of one-time, primarily non-cash items recorded in the quarter related to the previously disclosed decisions to exit the unprofitable U.K. operations and the small steel distribution business in the U.S. In mid-October, we issued a press release and filed a Form 8-Ks, which detailed the accelerated exit from our U.K. cast roll facility through a structured insolvency process. The mostly non-cash deconsolidation and other costs related primarily to the U.K. exit totaled $42.4 million in Q4 and $52.2 million full year.

We also recorded a non-cash $11.9 million after-tax expense in Q4 related to a revaluation charge of our asbestos accrual. All of this certainly causes a great deal of noise in our Q4 results, which, when we move to discuss adjusted EBITDA, it becomes much easier to see the core business, how it performed in 2025, and expectations of what it looks like going forward. I do want to provide some details on the non-cash asbestos expense, what it means, and, perhaps more importantly, what it does not mean. At 12/31/2025, we had a third party evaluate our asbestos accrual and provide the adjustment needed based on their projection of payments in the years ahead.

This does not mean that we expect our asbestos payments to increase in the years ahead. It is quite the opposite. The estimate projects we will begin to see our asbestos payments decrease starting in 2027. The reason for the increased asbestos accrual at 2025 is because their projection shows the decrease will be slower than what they projected as of 12/31/2024. Ampco-Pittsburgh Corporation’s net sales for Q4 2025 were $108.8 million, an increase of $7.8 million compared to net sales for Q4 2024. Full-year 2025 net sales of $434.2 million were an increase of $3.8 million compared to prior year. The increase in both Q4 and full year was driven by higher sales in both operating segments.

As shown in our press release yesterday, Q4 adjusted EBITDA of $3.2 million was lower than prior year primarily due to reducing the number of operating days in our FCEP facilities due to the temporary lower roll demand caused by the tariffs. Full-year adjusted EBITDA of $29.2 million was $1.1 million higher than prior year and has increased for the third consecutive year. The higher adjusted EBITDA was driven by increased revenue and lower SG&A expenses and was partially offset by lower overhead absorption caused by reducing the operating days.

Total selling and administrative expenses declined $2.8 million, or 5%, for full-year 2025 versus prior year and were lower primarily due to lower employee-related costs, partially offset by higher sales commission expenses in both segments. Depreciation and amortization expense for the quarter and for full year are higher than prior year periods due to the accelerated depreciation portion of the exit charges associated with the U.K. operation and the steel distribution business. The change in other expense (income) was primarily driven by lower foreign exchange transaction losses, but also lower pension income given the lower expected long-term asset returns due to the asset allocation changes made to protect the higher retained funded status of our U.S. defined benefit plan.

At the end of 2025, our pension plan was nearing fully funded status and, in early 2026, did achieve fully funded status. At 12/31/2025, the corporation’s liquidity position included cash on hand of $10.7 million and undrawn availability on our revolving credit facility of $25.5 million. As I mentioned at the beginning, there was a great deal of noise in Q4 and full-year 2025, including the U.K. and steel distribution business shutdowns, and the impact to our overhead absorption caused by the pause in roll orders due to the tariff impact. However, as we enter 2026, the roll market is showing that it is recovering, and the shutdown costs are behind us now.

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

Operator: Thank you. We will now begin the question-and-answer session. To ask a question, you may press star. The first question will come from Justin Bergner with Gabelli Funds. Please go ahead.

Justin Bergner: Good morning, Brett. Good morning, Sam. Good morning, David. I just want to delve a little bit more into the Air and Liquid Processing margins. Could you just re-review the mix dynamic in the fourth quarter? And should I think of the mix for the full year and the margins for the full year as being more representative of Air and Liquid Processing as the company grows off of the 2025 base in that business?

David G. Anderson: Yes. I would say the full year is definitely more representative of what we would typically see. Q4 just was a little bit of an unusual mix for us, and it is really timing of just what orders are shipping when into which markets, but it is just a short-term Q4 issue. I think the full year is much more representative of typically what you would see.

Justin Bergner: Okay. Any color you can give on what sort of incrementals this business should generate as it grows? If you do not want to go there, I totally understand, but figured I would put that out there.

David G. Anderson: The margins are generally good. What I can tell you is in the growth markets that we are seeing—nuclear, the Navy markets—those are all good markets for us. There is very limited competition because there are a lot of barriers to entry. It is very difficult to supply into those markets. So that is favorable for us.

Justin Bergner: Okay. Fantastic. And with respect to forged and cast rolls, help me understand the inflection from the headwinds in 2025 to the strong orders in 2026. I mean the tariffs were in place in 2025. So what is changing in terms of behavior or market behavior?

Samuel C. Lyon: Justin, there was a lot of noise because, first of all, the tariffs had to be calculated. On the cast side, almost all the rolls we make are composite, so part of them is cast iron and part of them is steel. You have to calculate what the tariff is, and we and the whole industry had to figure out what the tariff was going to be. So you did not even know what your pricing was going to be. So a lot of customers, particularly in the U.S., were paused in what they were doing, what they were taking, until that was figured out.

And just on the large roll side, which is our most profitable product line, the demand for those kind of slowed down as well as people digested what was happening. So now that is all digested, and you can see that the U.S. continues to raise pricing on hot-rolled coil as an indicator. Nucor is above $1,000 a ton now, and demand has been slowly increasing in the U.S. One other thing I will mention is another thing happened when the U.S. increased tariffs. Canada and Mexico reduced their material coming into the U.S. They have since put tariff protections in place as well to support their markets.

And so we are seeing everybody kind of follow the model of the U.S., which should all be positive for us, as our biggest markets are North America and Europe.

Justin Bergner: Okay. And one more follow-on Forged and Cast Engineered Products. With respect to the costs in euros and the revenue in dollars, I think you said that is 40%—a certain percentage—of Sweden only.

Samuel C. Lyon: Yes.

Justin Bergner: Okay. So 40% of Sweden incurs costs in euros and revenues in dollars. Will that get resolved this year or next year in terms of pricing?

Samuel C. Lyon: Pricing will be 2027, but we have already seen a recovery from the low point. SEK to the dollar was as low as 8.8, 8.9. It is 9.3 this morning. So it is already, you know, it kind of—well, we do not know what it is going to do—but right now it is kind of reverting to the mean a little bit. But we run almost all exclusively on yearly contracts. So there was some adjustment in 2026. There would be further adjustment for 2027. It has not been as significant in euro to dollar, but there has also been a decrease there. And so our competitors will be in the same boat as us from a pricing perspective.

Justin Bergner: Thank you for taking all my questions.

Samuel C. Lyon: Thanks, Justin.

Operator: The next question will come from John Bear with Ascend Wealth Advisors LLC. Please go ahead.

John Bear: Good morning, gentlemen. I have a question. I saw an article not too long ago about Westinghouse’s AP1000 reactors. I was wondering if you are involved in supplying any components there or any involvement with that?

David G. Anderson: John, it is Dave. I can answer that. The short answer is yes. We have supplied to Westinghouse in the past, and we have supplied to that particular product. So that would definitely fall under our heat exchangers. We do not know the timing yet of when they are expecting those, but we have certainly seen some of the same indicators that they are expecting to ramp up a lot of building those. So that is a positive for us for sure.

John Bear: How much of a lead time is there in that? I mean, I am sure it is a long build cycle, but where would you fit into the order cycle of that?

David G. Anderson: We usually fit in fairly early because they want to secure things like heat exchangers fairly early in the process. So once they have their timetable, then we will start to see activity from them.

John Bear: Is there very much of inquiry in that regard, or is that just kind of out in the distance at this point?

David G. Anderson: Still a little bit in the distance for that particular—the Westinghouse, the AP1000s. We are certainly seeing continued nuclear market activity though across—from the plant restarts to all the other things that I have talked about on some of the other calls—the small modular units. The nuclear market continues to be quite active.

John Bear: Very good. Thank you.

David G. Anderson: Thank you.

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

J. Brett McBrayer: Thank you, Nick. In closing, I want to thank our employees who are making the positive improvements you heard about today. With the actions taken in the fourth quarter, our core business is improving. We anticipate improved profitability as we emerge from the slowdown in the steel market. We are excited to demonstrate the improved results for these strategic actions in 2026. I want to thank the Board of Directors and our shareholders for your continued support and for joining our call this morning.

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

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