Albany International Corp. (AIN)
Q1 2013 Results Earnings Call
May 2, 2013 9:00 AM ET
John Cozzolino - Chief Financial Officer and Treasurer
Joe Morone - Chief Executive Officer
Jason Ursaner - CJS Securities
John Franzreb - Sidoti & Company
Rick D'Auteuil - Columbia Management
Previous Statements by AIN
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I would now like to turn the conference over to the Chief Financial Officer and Treasurer, John Cozzolino for introductory comments. Please go ahead.
Thank you, Operator, and good morning, everyone. As a reminder for those listening on the call, please refer to our detailed press release issued last night regarding our quarterly financial results, with particular reference to the Safe Harbor notice contained in the text of the release about our forward-looking statements and the use of certain non-GAAP financial measures and associated reconciliation of GAAP.
And for purposes of this conference call, the same statements also apply to our verbal remarks this morning. And for a full discussion please refer to that earnings release, as well as our SEC filings including our 10-K.
Now, I will turn the call over to Joe Morone, our Chief Executive Officer, who'll provide some opening remarks before we go to Q&A. Joe?
Thanks John. Good morning, everyone. As always, I’ll provide a quick overview of the quarter, I’ll amplify what we view is the most important aspect of our recent performance and then we’ll go to your question.
Q1 2013 was another good quarter for Albany and a good demonstration of how our cash and growth strategy is playing out in the short-term, and what it promises for the future. As we have mentioned many time, Q1 is normally our weakest quarter, because of slowdowns at the end of December, shipments flowing into Q1 are usually much weaker than shipments flowing into our other quarters. The Chinese New Year, Carnival and the short month in February compound this seasonal effect.
What this means, is that particularly for our first two quarters, year-over-year comparisons are typically far more meaningful than sequential quarterly comparisons. This year our Q1 year-over-year performance was particularly strong, sales were up 4%, compared to Q1 2012 and adjusted EBITDA was up 32%.
However, keep in mind that Q1 2012 was a weak quarter, so please don’t take carry away by these year-over-year comps. In our mind, the key message to takeaway from this quarter is that both businesses performed well and their performance was in line with our expectation and consistent with our outlook, which as you all recall, it was flat full adjusted EBITDA on machine clothing and continued LEAP driven growth in AEC.
Now, there are few aspects of the quarter that I’d like to the highlight. First of all, In machine clothing, our business in North and South America continues to excel on just about every dimensional performance, our share is growing substantially, and we are the dominant supplier in the growth segment of tissue, pulp and packaging, and are nearly every new machine that has recently been built in the region.
Meanwhile in Europe, machine clothing sales appear to have stabilized, it give you a bit of context, a year ago our Q1 sales in Europe dropped 17% compared to Q1 2011. This year our Q1 sales dropped 2.5% and orders were actually up slightly.
Moreover, the recent wave of contract negotiations in Europe has now been successfully completed, successful in the sense that we maintain if not strengthened our competitive position with our strategic customers.
And so even though the European macroeconomy remains weak and the European paper industry continues to retrench, the evidence available to us suggest that those double digits sales decline in Europe are behind us and that it is reasonable to expect the long-term sectoral trend of a much more gradual erosion to take over from here.
The one area of machine clothing that did not meet our expectation was Asia, where both sales and orders were softer than we had anticipated. Sales in Q1 and for the previous two quarters also were lower than the comparable period a year earlier.
Now, according to Industry Association Data and our own data and observation, we are holding or gaining share in Asia, and our recent order trends show improvement. Nonetheless, our general impression is that the macroeconomic weakness in Europe is taking a toll on Chinese exports, which in turn is slowing down our sales.
Turning to AEC, as I think all of you know by now, the story for 2013 and for the next several year, is all about the LEAP brand. In Q1, AEC sales increased by 22% compared to Q1 2012. Once again virtually the entire increase accounted for by growth in the LEAP program, which remains on schedule.
Our first LEAP production plant in Rochester, New Hampshire is on track for completion in July and for initial very low rate production late this year. Plant 2, in Commercy, France is on track for completion in Q2 of 2014, with initial production to begin -- scheduled to begin in the second half of 2014.