Albany International(US:AIN)2023-11-05 16:00Revenue Growth - Machine Clothing segment net revenues increased by 8.6% to $166.6 million in Q3 2023, driven by Heimbach's contribution of $15.6 million [111]. - Albany Engineered Composites segment net revenues rose by 6.9% to $114.5 million in Q3 2023, primarily due to growth in LEAP programs and other commercial initiatives [111]. - Total net revenues for the company increased by 7.9% to $281.1 million in Q3 2023, with a year-to-date increase of 7.6% to $824.3 million [111]. - In the Machine Clothing (MC) segment, net revenues increased by 8.6% in Q3 2023, driven by higher revenues in tissue and packaging grades and a contribution of $15.6 million from the Heimbach acquisition [133]. - In the Albany Engineered Composites (AEC) segment, net revenues increased by 6.9% in Q3 2023, driven by growth in LEAP programs, with a 5.7% increase when excluding currency translation effects [140]. Profitability and Margins - Gross profit for the Machine Clothing segment was $79.3 million in Q3 2023, with a gross profit margin decrease from 51.7% in 2022 to 47.6% in 2023 due to higher input costs [115]. - Albany Engineered Composites gross profit increased to $22.6 million in Q3 2023, with a gross profit margin slightly decreasing from 19.8% in 2022 to 19.7% in 2023 [116]. - Operating income for MC decreased to $50.7 million in Q3 2023 from $57.2 million in Q3 2022, primarily due to higher selling, general, and research (STG&R) expenses [122]. - AEC's operating income for the nine months ended September 30, 2023, increased by $6.8 million, driven by higher net revenues and gross profit, despite higher STG&R expenses [145]. - Gross profit for MC remained steady in Q3 2023 at $79.3 million, with a gross margin of 47.6%, down from 51.7% in Q3 2022 due to higher input costs [132]. Expenses and Costs - Selling, Technical, General, and Research expenses rose by 31.8% in Q3 2023, accounting for 21.9% of net revenues compared to 18.0% in 2022 [118]. - Corporate STG&R expenses increased by $15.4 million, primarily due to higher professional fees and acquisition-related expenses [121]. - Changes in currency translation rates increased STG&R expenses by $2.3 million and $5.6 million for Q3 and the nine months ended September 30, 2023, respectively [136]. - The company faces challenges from rising labor, raw material, and logistics costs due to inflation and supply chain constraints, impacting profit margins [106]. Acquisitions and Investments - The company acquired Heimbach on August 31, 2023, enhancing its capabilities in the Machine Clothing segment [109]. - The company invested $133.5 million in the acquisition of Heimbach, a manufacturer of paper machine clothing, on August 31, 2023, funded using cash on hand [149]. Cash Flow and Liquidity - Net cash provided by operating activities increased to $73.8 million in 2023 from $67.3 million in 2022, driven by improved working capital and lower cash outflows related to other liabilities [148]. - Total liquidity as of September 30, 2023, was approximately $510.5 million, consisting of $171.5 million in cash and cash equivalents and $339.0 million available under the Amended Credit Agreement [153]. - Cash and cash equivalents decreased from $276.5 million at the end of 2022 to $171.5 million at the end of Q3 2023, a decline of 38% [147]. - Net cash used in investing activities was $182.6 million in 2023, significantly higher than $52.8 million in 2022, reflecting increased capital expenditures and acquisitions [149]. Debt and Financial Ratios - The net debt as of September 30, 2023, was $319.1 million, an increase from $147.2 million as of December 31, 2022 [169]. - Total debt as of September 30, 2023, was $490.6 million, compared to $439.0 million as of December 31, 2022 [169]. - The net leverage ratio as of September 30, 2023, was 1.28, indicating the company's financial leverage [170]. - The company’s bank debt at the Heimbach subsidiary totaled $29.6 million, with $27.2 million classified as current maturity, indicating potential liquidity needs [155]. Earnings and Shareholder Returns - Net income for the nine months ended September 30, 2023, was $81.1 million, an increase from $78.3 million in the same period last year, representing a growth of 3.4% [147]. - The company paid $23.4 million in dividends during the first nine months of 2023, with no share repurchases made in the same period [156]. - For the three months ended September 30, 2023, the adjusted earnings per share (non-GAAP) was $1.02, compared to $1.15 for the same period in 2022 [168]. Tax and Currency Impact - The effective tax rate for Q3 2023 was 25.3%, up from (41.6%) in Q3 2022, mainly due to favorable discrete tax adjustments in the prior period [129]. - The company reported a foreign currency revaluation loss of $1.720 million for the nine months ended September 30, 2023, impacting earnings per share by $0.04 [168]. - The potential loss in fair value from a hypothetical 10% adverse change in foreign currency exchange rates is estimated at $68.3 million [174]. - An increase of one percentage point in weighted average interest rates would increase interest expense by $1.1 million for the company's variable rate debt [176]. - The company has exposure to foreign currency transactions totaling $98.6 million, with a net foreign currency asset of $17.6 million as of September 30, 2023 [174].