Albany International (NYSE:AIN) CFO Willard Station said the company delivered a strong fourth quarter in its Aerospace Engineered Composites (AEC) segment, but cautioned that the pace of growth in the period included items that are not expected to recur. Speaking at a JPMorgan event hosted by analyst Chigusa Katoku, Station also provided updates on Albany’s plan to divest its Salt Lake City structured assembly business and discussed the outlook for both AEC and the larger Machine Clothing segment.
AEC fourth-quarter growth: “Think about it in thirds”
Katoku asked Station to unpack AEC’s 45% organic growth in the fourth quarter and differentiate between underlying demand and one-time effects. Station described three primary drivers:
- Program performance across the portfolio, which he said was largely driven by LEAP, BETA, and the Boeing one-piece frame.
- No EAC adjustments or cost growth in the quarter, contrasting with impacts seen in the prior year.
- A material pull-forward that Station said was aligned with the ramp-up underway in the business.
When asked how much growth was attributable to accounting nuances versus demand, Station suggested breaking the quarter “into thirds”—one-third from program performance, one-third from the absence of EAC growth, and one-third from accounting treatment tied to the material pull-forward. He said the company is seeing organic growth from the LEAP ramp and BETA rate increases, but reiterated the “thirds” framing for Q4.
First-quarter pacing and AEC margins
Katoku noted that AEC guidance implied roughly 5% organic growth at the high end for the first quarter, a sharp deceleration from Q4. Station said the first-quarter outlook is “more reflective” of expected program ramps through the year, with a modest start in Q1 followed by stronger growth as ramps progress.
On profitability, Station clarified that comments about 10% margins referred to AEC. He cited AEC margins of about 9.7% in Q3 and 13% in Q4, and said the company expects AEC to run in a 10%–13% range for the full year, absent additional EAC issues.
Looking beyond the Salt Lake City review, Station said Albany expects “better quality of earnings” for remaining programs, though he acknowledged a transition period to work through fixed and stranded costs. After that, he said the company expects AEC margins to be in the mid- to upper-teens.
Salt Lake City divestiture: priority, interest, and stranded costs
Station described divesting the Salt Lake City structured assembly business as the company’s “top priority,” arguing that a sale would drive greater value for shareholders and for the site itself. He emphasized the facility’s capabilities, including “over 11 autoclaves,” automation, and a team he described as operationally strong. While Katoku asked whether a year-end timeline was reasonable, Station said he could not commit to being done by the end of the year but said the company is pushing to divest “as quickly as we possibly can.”
On stranded costs, Station said Albany has hired an accounting firm to identify them and that the firm was in the final stages of its analysis. He said the company intends to begin addressing stranded costs as soon as the analysis is complete, rather than waiting until after a divestiture, in order to be “ahead of the curve.”
Katoku asked whether a renegotiation of the CH-53K contract with Lockheed would be necessary for a sale. Station responded that contractually, no, and said he believed buyers could have interest under the current contract structure, noting eight years remaining on the program and the attractiveness of the site’s installed capabilities.
CH-53K charge and risk profile
Katoku also asked about the significance of the third-quarter charge related to the CH-53K program and whether it was comprehensive. Station explained that under accounting rules, once the program is in a loss position, the company must recognize losses for the duration of the program. He said Albany’s Q3 estimate looked eight years out and was done “in a very conservative way,” removing performance improvements and assuming the company would bear most labor and material cost growth. He said the lack of additional EAC issues in Q4 supported that approach, but acknowledged that additional exposure is still possible in any long-term fixed-price agreement.
Discussing inflation and raw materials, Station said CH-53K is the primary program with a long-term firm-fixed-price structure that limits repricing remedies. For the remainder of the AEC business, he said Albany does not have similar 10-year fixed-price agreements and expects it will generally have contractual ability to reprice if cost pressures emerge. He said the company is not currently seeing signs of pricing-lag issues.
Machine Clothing: equipment failure impact and flat outlook
Turning to Machine Clothing—Katoku noted it represents about 60% of sales—Station said the segment starts fiscal 2026 slowly due to a “significant equipment failure” that affected first-quarter performance. He said the equipment is now running and performing fine, and Albany expects to recover volumes over the remainder of the year.
Station described demand as mixed by geography: stability in North America through Q4 with pressured order intake due to industry consolidations; a strong recovery and signs of stability in Europe; and ongoing uncertainty in Asia, particularly China, due to overcapacity. For fiscal 2026, he said Albany expects Machine Clothing performance to be flat versus fiscal 2025, with cash flow similarly steady.
On cash conversion and capital allocation, Station said overall cash conversion is expected to be slightly below 100% as Albany continues to invest in AEC as its growth business, while Machine Clothing remains a steady cash generator. He also said he is not aware of opportunities or interest for a split-up of the two segments, arguing the businesses share core weaving technology and that keeping them together makes sense strategically and financially.
About Albany International (NYSE:AIN)
Albany International Corp. is a global advanced materials company specializing in engineered textiles and composites. Its business is organized into two primary segments: Process Media and Engineered Composites. The Process Media segment designs, manufactures and services press, forming and drying fabrics used in the production of paper and packaging materials, helping paper manufacturers improve efficiency, quality and sustainability. The Engineered Composites segment produces lightweight composite structures and components for aerospace and industrial applications, serving commercial and military aircraft programs as well as industrial markets that require high-performance, durable materials.
In the Process Media segment, Albany’s products include forming fabrics, press felts and dryer fabrics engineered to withstand extreme moisture and temperature conditions.
