Ampco-Pittsburgh outlines $5M annual operating income boost following U.K. plant wind-down amid tariff clarity

Earnings Call Insights: Ampco-Pittsburgh Corporation (AP) Q2 2025

MANAGEMENT VIEW

* CEO J. Brett McBrayer reported that "Ampco-Pittsburgh Corporation reported adjusted EBITDA of $8 million for the second quarter of 2025." He noted the impact of a pause in customer orders due to tariff uncertainty, leading to production shutdowns in the Forged and Cast Engineered Products group and a continued focus on winding down the U.K. cash roll facility. McBrayer stated, "Once this action is complete, we expect a minimum of a $5 million operating income improvement on an annualized basis." He highlighted a 15% increase in adjusted EBITDA in the Air & Liquid Processing segment and described the segment's year-to-date adjusted EBITDA as "the highest year-to-date adjusted EBITDA in our segment's history."
* Samuel C. Lyon, President of Forged and Cast Engineered Products, shared that FCEP net sales were $77.9 million, up 3% year-over-year and 7.8% from Q1 2025. Lyon cited lower U.S. Forged plant utilization and reduced work roll demand due to high customer inventories and tariff uncertainty. He identified a mix shift from forged rolls to FEP products and said, "We anticipate a full order book for our 2026 at our cast roll plant in Sweden, and the closure of the U.K. operations will provide a meaningful improvement and OI for the segment once complete."
* David G. Anderson, President of Air & Liquid Systems, reported strong order activity with an 8% increase in segment backlog year-to-date. Anderson said, "Adjusted EBITDA in Q2 was $3.9 million versus $3.4 million in the prior year," and described the nuclear, military, and pharmaceutical markets as very strong drivers. He addressed tariff impacts on copper components, stating, "We have notified our customers that we will be passing on any tariff costs incurred."
* CFO Michael G. McAuley noted, "We recorded $6.8 million in expenses related to employee severance, accelerated depreciation due to the plant shortened operating life, and certain professional fees associated with the plant closure." McAuley added, "Ampco's net sales for the second quarter of 2025 were $113.1 million, an increase of 2% compared to net sales for the second quarter of 2024."

OUTLOOK

* Management expects operating income to improve by at least $5 million annually following the U.K. plant exit. Lyon stated, "Although tariff-related hesitation is reducing near-term North American demand for rolls, our pricing discipline, cost control measures and expanding FEP volumes give us confidence going into 2026."
* Anderson anticipates continued strong demand in the nuclear and military markets, and noted that the backlog is up 8% year-to-date. The company expects to be well-positioned for growth as new manufacturing equipment arrives, supported by Navy funding.
* Lyon referenced a "full order book for our 2026 at our cast roll plant in Sweden."

FINANCIAL RESULTS

* CFO McAuley detailed that expenses related to the U.K. exit charge totaled $6.8 million for Q2, leading to a net loss attributable to Ampco-Pittsburgh of $7.3 million, or $0.36 per share, including $0.34 per share for the exit charge. Net sales reached $113.1 million, a 2% increase year-over-year, while adjusted EBITDA for the quarter was $8 million, which declined $2.1 million versus prior year. Total selling and administrative expenses slightly declined for Q2 versus prior year. At the end of June, liquidity included $9.9 million in cash and $34.2 million in undrawn revolving credit availability.

Q&A

* Dennis J. Scannell, Rutabaga Capital Management LLC: Asked about demand in the roll market and potential order upticks for the second half of the year. Samuel C. Lyon responded that "the second half of the year will be lighter shipment on rolls than the first half" due to fewer shipping days and continued customer inventory overhang. He explained, "now that that's all -- seems to be settled, we expect things to go back to normal" and described the 15% tariff rate as now a known factor.
* Scannell then asked about the timing of the U.K. facility closure and the $5 million operating income improvement. Lyon replied, "the longest potential endpoint is Q1 of '26, and we're working to pull that in. So sometime in Q4, between, most likely, October and December, the casting will stop then those costs will stop."
* Scannell inquired about ownership of the U.K. plant and proceeds from a potential sale. Lyon said, "We do own it and that's being evaluated right now... It's really hard to say. We're not counting on anything, but there could be upside."
* Unidentified Analyst: Asked about revenue impact from the U.K. closure. Lyon answered, "it will be down -- there's about $25 million to $29 million -- roughly $25 million to $30 million, I'd say," with some offset from shifting production to Sweden and converting some rolls.

SENTIMENT ANALYSIS

* Analysts adopted a probing but neutral tone, seeking clarification on market demand, plant closure timing, and financial impacts. Scannell pressed for specifics on order timing and inventory effects, but did not express overt skepticism or concern beyond seeking clarity.
* Management maintained a confident and composed demeanor, emphasizing cost controls, operational improvements, and the expected benefits from the U.K. exit. Lyon and McBrayer both stressed positive outlooks despite current headwinds, and Anderson highlighted ongoing demand strength.
* Compared to the previous quarter, management tone shifted from highlighting broad improvement and record order intake to addressing specific challenges from tariffs and the U.K. wind-down, yet maintained confidence regarding future benefits. The Q&A featured a more active analyst presence this quarter, with direct engagement on strategic changes.

QUARTER-OVER-QUARTER COMPARISON

* Q2 guidance and outlook language shifted to focus on the U.K. facility shutdown, with an explicit $5 million annual operating income improvement target, compared to Q1’s emphasis on operational efficiency and order intake records.
* Strategic focus moved from general margin protection and consultation outcomes in Q1 to concrete actions and financial impacts from the U.K. exit in Q2.
* Analyst questions this quarter centered on timing and magnitude of changes, whereas Q1 had no analyst Q&A.
* Key metrics such as net sales and adjusted EBITDA improved on a year-over-year basis, but Q2 saw a decline in adjusted EBITDA versus the prior year, and the net loss was impacted by the one-time exit charge.
* Management’s confidence in margin protection and future order growth remained, but the language became more specific regarding mitigation of near-term demand disruptions and realization of cost savings.

RISKS AND CONCERNS

* Tariff uncertainty was a major challenge, leading to a pause in customer orders and reduced plant utilization. Management indicated that "tariff-related hesitation is reducing near-term North American demand for rolls."
* The U.K. plant wind-down introduced one-time costs of $6.8 million and temporary revenue headwinds, with Lyon estimating a reduction of $20 million to $25 million in revenues, partially offset by production shifts to Sweden.
* Copper tariffs were noted as a risk for Air & Liquid, but Anderson assured, "we have notified our customers that we will be passing on any tariff costs incurred."

FINAL TAKEAWAY

Ampco-Pittsburgh management expects the wind-down of its U.K. cast roll facility to result in a minimum $5 million annual operating income improvement, with actions underway to reallocate production and maintain customer supply. Despite near-term disruption from tariffs and customer inventory adjustments, the company highlights ongoing strength in the Air & Liquid Processing segment and anticipates renewed order growth as market uncertainty resolves, supporting confidence in improved earnings for 2026.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/ap/earnings/transcripts]

MORE ON AMPCO-PITTSBURGH

* Ampco-Pittsburgh Corporation (AP) Q2 2025 Earnings Call Transcript [https://seekingalpha.com/article/4813181-ampco-pittsburgh-corporation-ap-q2-2025-earnings-call-transcript]
* Financial information for Ampco-Pittsburgh [https://seekingalpha.com/symbol/AP/income-statement]