PresentationI would now like to turn the call over to Cecilia Williams, President and Chief Executive Officer. Thank you. Please go ahead.Good morning, and welcome to the Allied Properties REIT Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.Cecilia WilliamsPresident, CEO & Trustee Thanks, Julian, and good morning, everyone. Welcome to our Q4 conference call. Please note that certain statements we make during the course of this conf ...

Ampco-Pittsburgh Conference Call Summary Company Overview - **Company Name**: Ampco-Pittsburgh - **Ticker**: AP - **Founded**: 1929 - **Segments**: - Forged and cast engineered products - Air and liquid processing - **2024 Revenue**: Approximately $400 million - **Employees**: About 1,500 [1][2] Core Business Insights Forged and Cast Engineered Products - **Market Position**: Global leader in forged and cast rolls for steel and aluminum rolling mills, primarily in North America and Europe [2][4] - **Revenue Contribution**: Revenue from rolling mill rolls is estimated at $250-$300 million, with the global market for rolling mill rolls around $2 billion annually [8][9] - **Customer Base**: Major customers include U.S. Steel, Steel Dynamics, and Cleveland-Cliffs [5][11] - **Production Facilities**: Operations in the U.S., Sweden, and Slovenia, with a joint venture in China [6][10] - **Market Dynamics**: The company expects $7-$8 million annual EBITDA improvement from the business reset, focusing on operational efficiencies and growth [3][16] Air and Liquid Processing - **Business Segments**: - Aerofin: Heat exchange products for nuclear power and industrial processes - Buffalo Air Handling: Custom air handling units for specialized environments - Buffalo Pumps: Centrifugal pumps primarily for the U.S. Navy and power generation [17][18] - **Growth**: 55% revenue growth over the last three years, with continued expansion expected [18][19] - **Strategic Importance**: Long-term supplier to the U.S. Navy, with significant investments to modernize facilities [20][21] Financial Performance - **EBITDA Improvement**: Anticipated annualized improvement of $7-$8 million from exiting underperforming assets [23][24] - **Debt Leverage**: Expected to improve as the company modernizes plants and exits unprofitable operations [23][24] - **Pension Plan**: Moving towards a fully funded status, which will positively impact financial health [24] Market Trends and Opportunities - **End Market Growth**: Major end markets projected to grow 3-5% over the next five years, contrasting with previous years of flat or declining growth [15][24] - **Tariff Impact**: Anticipated increase in demand due to tariff changes in Europe, potentially increasing demand by 10%-15% [14][28] - **Nuclear and Navy Markets**: Significant growth opportunities in the nuclear sector and U.S. Navy contracts, with barriers to entry providing competitive advantages [19][21] Risks and Challenges - **Market Demand Fluctuations**: Previous delays in roll purchases due to tariffs and market conditions, but signs of improvement are noted [28][29] - **Competitive Landscape**: Limited competition in the U.S. for rolling mill rolls, but ongoing monitoring of competitors like Villares is necessary [9][34] Conclusion - **Future Outlook**: Positive growth trajectory anticipated, with a focus on improving performance, reducing debt, and capitalizing on market opportunities in both segments [36]

Core Viewpoint - Ampco-Pittsburgh Corporation has shown significant stock performance, with a 155.8% increase over the past three months, outperforming both the industry and major indices [1][7]. Financial Performance - The company announced promising third-quarter 2025 results, reporting year-over-year revenue growth and improved profitability, driven by stronger demand and improved margins in the Air and Liquid Processing (ALP) segment [2]. - Performance was supported by pricing and shipments of forged engineered products, which helped offset softer roll volumes [2]. Market Conditions - Management noted steady demand across key end markets and easing supply-chain conditions, expecting recent portfolio rationalization actions to enhance profitability [3]. - Despite challenges such as tariff-related uncertainty and macroeconomic risks, the favorable share price movement suggests the company may maintain positive market momentum [8]. Business Segments - Ampco-Pittsburgh operates through its Forged and Cast Engineered Products and ALP segments, supplying a range of products to a diversified global customer base, with demand supported by various industrial sectors [9]. - The company is benefiting from strengthening demand in the ALP segment, particularly in pumps, heat exchangers, and custom air-handling systems, supported by nuclear power projects and U.S. Navy programs [12]. Strategic Actions - Ongoing portfolio rationalization and strategic exits from underperforming operations are expected to improve profitability and investor confidence [10][11]. - The company has implemented better product mix, pricing actions, and cost control initiatives, contributing to margin expansion and a stable financial outlook [13]. Challenges - Ampco-Pittsburgh faces challenges from tariff-related uncertainties and operational disruptions, which may lead to variability in performance despite supportive underlying demand [14]. Valuation - The company's trailing 12-month EV/Sales ratio of 0.5X is lower than the industry average of 1.9X, indicating that the market has not fully priced in the improving fundamentals [15][18]. - Comparatively, peers Friedman and TechPrecision have trailing 12-month EV/Sales ratios of 0.3X and 1.5X, respectively [16]. Investment Outlook - The company appears well-positioned for future growth, supported by operational improvements and a focused business portfolio, which may attract both existing and new investors [17][20].

Core Viewpoint - Ampco-Pittsburgh Corporation is transitioning from a multi-year reset with a streamlined business model, improved pricing discipline, and increased exposure to resilient end markets, leading to a fundamentally enhanced earnings base [1] Group 1: Business Strategy and Operations - The company has exited unprofitable operations, including the U.K. cast roll facility and a small steel distribution operation, which has improved its earnings outlook by eliminating recurring losses [4][5] - Management has successfully passed tariff-related costs to customers in the Forged and Cast Engineered Products segment, preserving margins despite trade policy uncertainties [2][3] - The Air and Liquid Processing (ALP) segment is benefiting from strong demand in pharmaceuticals, nuclear infrastructure, and defense, providing a more stable revenue mix [6][7] Group 2: Financial Performance and Valuation - Despite operational improvements, Ampco-Pittsburgh's stock valuation remains low compared to peers, trading at a fraction of peer multiples on sales and book value [9][10] - Pro-forma earnings indicate potential for significant growth in adjusted EBITDA as cost savings from exited businesses materialize and ALP performance strengthens [10] - The market has not yet fully recognized the durability of Ampco-Pittsburgh's reshaped portfolio, as valuation metrics have remained near historical lows [9][14] Group 3: Market Dynamics and Future Outlook - The company is positioned to deliver steadier earnings with reduced downside volatility, supported by a focused operating base and strong end-market demand [13][14] - The ALP segment's focus on engineered products tied to long-term investment cycles enhances the company's strategic direction and growth visibility [6][13]

Group 1 - Northbound Returns shows a strong interest in real assets, financials, and insurance sectors [1] - The company has a deep understanding of the Canadian investment universe, having worked for one of the largest Canadian banks in equity research [1]

Core Viewpoint - Ampco-Pittsburgh Corporation (AP) is facing financial challenges but shows potential for undervaluation based on its price-to-sales and enterprise value metrics [3][5]. Financial Performance - The company has a negative price-to-earnings (P/E) ratio of -9.69, indicating ongoing losses [3][5]. - The price-to-sales ratio stands at 0.12, suggesting the stock may be undervalued relative to its sales [3][5]. - The enterprise value to sales ratio is 0.41, further supporting the perspective of potential undervaluation [3][5]. Financial Health - The enterprise value to operating cash flow ratio is 28.99, indicating limited cash flow coverage for its enterprise value [4]. - The debt-to-equity ratio is 2.33, highlighting a significant reliance on debt [4][5]. - A current ratio of 1.84 suggests that the company has sufficient liquidity to meet its short-term obligations [4][5]. Insider Activity - Director McNair Darrell L purchased 3,000 shares at $2.52 each, increasing his total holdings to 63,912 shares, signaling confidence in the company [2][5].

Summary of Ampco-Pittsburgh Conference Call Company Overview - **Company Name**: Ampco-Pittsburgh Corporation - **Founded**: 1929 - **Employees**: Approximately 1,500 - **Annual Revenue**: Over $400 million - **Market Capitalization**: Over $50 million - **Segments**: - Forging, Casting, and Product Segment - Air and Liquid Processing Segment - **Market Position**: - Number one in North America and Europe for forging and casting products - Number one in North America for heat exchangers in nuclear power plants [2][3] Core Business Insights - **Strategic Focus**: - Exit unprofitable assets, resulting in improved EBITDA from $78 million to a stronger position [3] - Growth in Air and Liquid Processing and operational efficiencies [3] - **Market Presence**: - 90% of nuclear power plants in North America utilize their products [3] - Leading producer of pumps for the U.S. military [3] Segment Analysis Forging, Casting, and Product Segment - **Sales Distribution**: 70% of sales in North America and Europe [4] - **Product Types**: - Backup rolls, work rolls, and forged engineered products [4] - 90% of sales are rolls, with a market size of approximately $2 billion [8] - **Tariff Impact**: - Tariffs increased from 25% to 50%, creating barriers for imports and benefiting domestic sales [5][9] - **Competitors**: - Major competitors include Lehigh Heavy Forge, Superior Steel, and Villares [9] - **Market Growth**: - Anticipated growth in steel and aluminum markets will increase demand for rolls [7][13] Air and Liquid Processing Segment - **Key Businesses**: - Aerofin (custom heat exchangers), Buffalo Air Handling (air handling units), Buffalo Pumps (custom pumps) [15] - **Market Growth**: - 55% revenue growth over the last three years, with significant barriers to entry [16][17] - **Key Customers**: - Major clients include Eli Lilly, Merck, Johnson & Johnson, and the U.S. Navy [15][16] - **Nuclear Market**: - Growth driven by the restart of nuclear plants and the emergence of small modular reactors [19] Financial Performance - **Recent Developments**: - Exited underperforming businesses, including a facility in the U.K. [23] - Anticipated increase in adjusted EBITDA by $7-8 million due to the exit of underperforming assets [24] - **Balance Sheet Improvements**: - U.S. pension plan nearing 100% funding, with a roadmap to reduce leverage from 4.0 to 3.0 [26][27] - **Future Projections**: - Expected continued growth in adjusted EBITDA and margins [24][29] Market Trends and Opportunities - **European Market Changes**: - Europe is reducing import quotas and increasing tariffs, which will benefit Ampco-Pittsburgh [12][13] - **End Market Growth**: - Mid-single-digit growth projected in key end markets over the next five years [13] - **International Expansion**: - Active steps to expand into markets outside North America, including partnerships in Australia [38] Additional Insights - **Operational Efficiency**: - Investment of approximately $30 million in equipment modernization to enhance reliability and efficiency [11] - **Customer Base**: - Top 10 customers account for roughly half of revenue, indicating a concentrated customer base [10] - **Margin Improvements**: - Recent pricing increases in the U.S. market for forged rolls, with margins improving significantly [39] This summary encapsulates the key points discussed during the conference call, highlighting Ampco-Pittsburgh's strategic direction, market position, financial performance, and growth opportunities.

Core Viewpoint - Ampco-Pittsburgh Corporation (AP) has demonstrated significant financial improvement in its third-quarter 2025 results, with a notable stock performance that outpaced the S&P 500 Index, indicating strong market confidence in the company's strategic direction and operational efficiency [1][2]. Financial Performance - Net sales increased by 12.3% to $108 million from $96.2 million year-over-year, driven by higher shipment volumes in the Air and Liquid Processing (ALP) segment and improved pricing in the Forged and Cast Engineered Products (FCEP) segment [2]. - Adjusted EBITDA rose 34.9% to $9.2 million from $6.8 million, with the adjusted EBITDA margin expanding to 8.53% from 7.10% in the prior year [2]. - Adjusted earnings per share improved to $0.04, a $0.14 increase from a loss of $0.10 per share in the previous year [3]. Segment Performance - The ALP segment achieved a revenue increase of 26.2% to $36.5 million, with adjusted EBITDA rising 31% to $4.4 million, supported by strong demand in nuclear, naval, and pharmaceutical markets [4]. - In the FCEP segment, net sales were $71.5 million, a 6.3% increase from $67.2 million, although sequentially lower due to typical summer shutdowns [5]. Cost Management - Company-wide selling and administrative expenses decreased by 4.5% year-over-year, attributed to lower employee-related costs [6]. - Interest expenses remained stable, and the income tax provision decreased due to a reduced statutory tax rate in one foreign jurisdiction [6]. Management Insights - Management highlighted that the strengthened operating performance and strategic exit decisions position the company for sustainably higher profitability, with expectations of increased adjusted EBITDA by $7 million–$8 million from the U.K. exit [7]. - There is growing momentum in multiple end markets, particularly in nuclear power and pharmaceutical manufacturing, which are expected to drive long-term demand [7]. Future Outlook - The company anticipates gradual normalization in roll ordering patterns and expects to benefit from broader industrial trends, including construction spending and automotive production [8]. - The accelerated exit from the U.K. cast roll facility and the planned exit from a small steel distribution business are expected to materially improve profitability starting in the fourth quarter of 2025 [12]. Restructuring Actions - Key restructuring actions included placing the U.K. cast roll plant into administration to halt further losses and initiating the exit from the Alloys Unlimited steel distribution business [13]. - The liquidation of the U.K. facility is expected to generate $8 million–$9 million in proceeds to reduce revolver borrowings [13].

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Financial Data and Key Metrics Changes - Consolidated adjusted EBITDA for Q3 2025 was $9.2 million, up 35% from the prior year, driven by strong performance in the Air and Liquid segment [4] - Adjusted earnings per share for Q3 2025 were $0.04, an increase of $0.14 from the prior year [4][25] - Net sales for Q3 2025 were $108 million, a 12% increase compared to Q3 2024 [20] Business Line Data and Key Metrics Changes - In the Forged and Cast Engineered Products (FCEP) segment, net sales were $71.5 million, $6.4 million lower than Q2 2025 but $4.3 million higher than Q3 2024 [6] - FCEP segment-adjusted EBITDA was $7.1 million, $0.3 million higher than both Q2 and Q3 2024 [6] - Air & Liquid Systems Corporation reported a 26% increase in Q3 revenue compared to the prior year, with year-to-date revenue nearly 7% above the prior year [13] Market Data and Key Metrics Changes - Tariffs on imports from Europe are expected to have a neutral impact on roll demand in North America, while negatively affecting Canadian and Mexican customers [8] - The cast roll market in North America continues to exceed domestic capacity, indicating strong long-term demand [9] - Construction spending, automotive production, and canned sheet demand are expected to grow at mid-single-digit rates over the next five years [9] Company Strategy and Development Direction - The company is accelerating its exit from the U.K. facility, which is expected to improve full-year adjusted EBITDA by $7-$8 million [5][19] - The decision to wind down the Alloys Unlimited steel distribution business is aimed at improving profitability [10] - The company is focusing on addressing underperforming assets to enhance overall profitability [41] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong underlying performance and the strategic actions taken to transform the company [4] - The exit from the U.K. facility is expected to position the company for improved profitability moving forward [5] - Management highlighted the positive long-term growth potential in the nuclear market and strong demand from the U.S. Navy [14][16] Other Important Information - The company recorded charges totaling $3.1 million in Q3 2025 related to the exit of the U.K. cast roll business and Alloys Unlimited [18] - The liquidity position at September 30, 2025, included cash on hand of $15 million and undrawn availability on the revolving credit facility of $28.2 million [25] Q&A Session Summary Question: Clarification on U.K. closure and debt implications - Management confirmed that the insolvency process is exclusively related to the subsidiary and does not affect other segments of the company [27] Question: Pension plan evaluation - Management indicated that an evaluation of the pension plan will be conducted annually [30] Question: Capacity expansion and demand from pharmaceutical companies - Management stated that they can significantly increase throughput and are addressing this through various improvements [31] Question: Monetization from liquidation of properties - Management expects to receive approximately $8-$9 million in net proceeds from the liquidation process, which will reduce bank debt [35][36]