Executive Summary

Q3 revenue declined 5.9% year over year to $96.2M as lower volumes and surcharge pass-throughs in Forged & Cast Engineered Products (FCEP) outweighed Air & Liquid (A&L) stability; operating income was $1.9M (vs. $1.7M in Q3’23) but the quarter swung to a net loss of $(0.10) EPS due to higher interest expense and tax effects from a U.K. valuation allowance .
Sequentially, results reflected normal seasonal plant shutdowns and lower volumes in FCEP vs. a strong Q2; management emphasized pricing actions and efficiency gains from new equipment that are offsetting weak cast roll demand .
Backlog improved sequentially, with total backlog at quarter-end of $383.6M and roll order intake strengthening the 2025 book; management is “positioning for low- to mid-single-digit volume growth in 2025” for FCEP .
A&L secured an additional $4M U.S. Navy funding for production equipment and noted significant pharma order activity; low-margin legacy contracts substantially roll off by year-end, potentially improving mix into 2025 .
Consensus estimates from S&P Global were unavailable at the time of query; we cannot quantify beats/misses this quarter. We attempted to fetch Q3 consensus EPS and revenue but the SPGI API returned a daily request limit error.

What Went Well and What Went Wrong

What Went Well

Pricing and productivity lifted margins in FCEP despite lower volume: “Improved margins in Forged and Cast Engineered Products lead operating results higher than prior year…higher pricing net of surcharges and improved manufacturing cost absorption leading to margin expansion” .
U.S. forged business benefitted from new equipment: “Significant improvement in our U.S. forged business results with the operating efficiencies from our new equipment being a key driver” .
A&L growth drivers and funding: Backlog rose on a “significant order for air handlers” from pharma; additional $4M Navy funding will modernize Buffalo production equipment and expand capacity, supporting multi-year Navy and nuclear opportunities .

What Went Wrong

Interest expense and taxes masked operating improvements: Interest expense rose to ~$3.0M on higher equipment financing, revolver usage and rates; tax expense increased due to a valuation allowance in the U.K., eliminating tax benefits on U.K. losses in 2024 .
FCEP shipment volumes and surcharge pass-throughs were lower year over year; cast roll demand remained cyclically weak, pressuring top line .
A&L operating income declined vs. prior year in Q3 given “unfavorable product mix” and higher SG&A from an expanded sales network and commissions .

Financial Results

Headline results by quarter

Metric	Q1 2024	Q2 2024	Q3 2024
Net Sales ($M)	$110.215	$110.988	$96.166
Operating Income ($M)	$0.082	$5.043	$1.870
Operating Margin (%)	0.1% (derived from )	4.5% (derived from )	1.9% (derived from )
Net Income Attrib. to AP ($M)	$(2.717)	$2.012	$(1.959)
Diluted EPS ($)	$(0.14)	$0.10	$(0.10)
Interest Expense ($M)	$2.757	$3.017	$2.976

Notes: YoY for Q3: Net sales down 5.9% (management) and to $96.2M vs $102.2M; operating income $1.9M vs $1.7M; diluted EPS $(0.10) vs $0.04 .

Q3 2024 vs SPGI consensus

Metric	Actual	SPGI Consensus	Surprise
Revenue ($M)	$96.166	N/A	N/A
Diluted EPS ($)	$(0.10)	N/A	N/A

Consensus estimates were unavailable from S&P Global at the time of request (SPGI API daily limit exceeded). We attempted to retrieve “Primary EPS Consensus Mean” and “Revenue Consensus Mean” for Q3 2024.

Segment performance by quarter

Segment	Q1 2024	Q2 2024	Q3 2024
FCEP Net Sales ($M)	$77.189	$75.713	$67.203
A&L Net Sales ($M)	$33.026	$35.275	$28.963
Consolidated Net Sales ($M)	$110.215	$110.988	$96.166
FCEP Income from Ops ($M)	$1.576	$5.361	$2.456
A&L Income from Ops ($M)	$1.982	$3.174	$3.134
Corporate Costs ($M)	$(3.476)	$(3.492)	$(3.720)
Consolidated Operating Income ($M)	$0.082	$5.043	$1.870

KPIs and balance sheet snapshots

KPI	Q1 2024	Q2 2024	Q3 2024
Backlog ($M, period-end)	$348.8	$360.4	$383.6
Cash and Equivalents ($M)	$10.8	$7.9	$11.8
Undrawn Revolver Availability ($M)	$23.2	$20.5	$20.5
Capex ($M, quarter)	$2.8	$2.7	$2.9 (net $2.4 after grants)
Cash Flow from Ops	$4.5M (Q1)	—	$10.6M YTD (through Q3)

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Capex (net of grants)	FY 2024	“Stable with Q2 run-rate” commentary (no range)	$9–$10M net for FY 2024	Introduced quantitative range
FCEP Volume Outlook	FY 2025	Expect improved 2025 orders; recovery indications	“Positioning… for low- to mid-single-digit volume growth in 2025”	Clarified growth magnitude
A&L Low-Margin Contract Roll-off	2H 2024 → 2025	Majority rolls off in 2H 2024	“Bulk… through end of this year; minimal after” ($0.5–$1.0M impact)	Maintained timing; quantified impact
Strategic Actions (Debt/Restructuring)	Next 12–24 months	N/A	Targeting actions to reduce debt; executing “final solutions” in 12–24 months	New strategic timeline disclosure

Earnings Call Themes & Trends

Topic	Q1 2024 (prior)	Q2 2024 (prior)	Q3 2024 (current)	Trend
Steel market & European weakness	Slow cast roll demand; destocking completing; 2025 roll buys expected up	Flat roll demand; EU utilization low; 2025 orders expected	Cast roll demand still soft; petitions for trade action vs. imports; share gains with largest U.S. customers	Gradual improvement expected into 2025
Pricing & productivity (new equipment)	U.S. equipment reliability and productivity improving	First full quarter benefits; FCEP operating income strength	Pricing and cost absorption driving margin expansion; U.S. forged efficiency key driver	Positive, ongoing benefits
Air & Liquid capacity and demand	Lynchburg facility drove 36% air handler sales growth; strong demand	Record bookings/revenue; Navy equipment installed Q3	Additional $4M Navy funding; significant pharma order; nuclear/SMR opportunity	Capacity expanding; robust end markets
Low-margin backlog roll-off (A&L)	Mix headwind; timing	Majority rolls off in 2H 2024	Bulk gone by YE; minimal after; impact $0.5–$1.0M	Resolution by YE 2024
Backlog trajectory	$348.8M at Q1 end	$360.4M at Q2 end	$383.6M at Q3 end; sequential increase; more roll orders	Improving sequentially
Restructuring & debt reduction	—	—	Actions aimed at lowering debt, 12–24 month horizon	New focus highlighted
Energy/Fracking exposure (FEP)	—	—	First small frac block order in ~18 months; distribution markets expected to improve	Early signs of recovery
Aluminum rolling mills exposure	—	—	Aluminum share ~15%; new U.S. mills to support demand	Structural tailwind

Management Commentary

CEO: “Our third quarter earnings reflected our seasonal plant shutdowns… but continue to benefit from pricing actions in the roll business and the margin improvement… in the Forged and Cast Engineered segment… sales order backlog improved sequentially due to roll order intake during the quarter.”
CEO: “Improved margins and operating efficiencies directly related to our recent capital investments… continue to offset weaker cast roll demand… backlog increased for the quarter with recent additions of roll orders for our 2025 order book.”
A&L President: “Approved by the U.S. Navy to receive additional funding… $4 million… will significantly upgrade our manufacturing capabilities… we recently received our first request to quote a heat exchanger for a small modular reactor… a good market potential for us.”
FCEP President: “Backlog increased… positioning us for low- to mid-single-digit volume growth in 2025… pricing strategy, operational improvements… and increased share in key areas are mitigating [headwinds].”
CFO: “Interest expense… increased… due to higher equipment financing debt… higher average revolver borrowings… and higher average interest rates… [and] the income tax provision… increased… due to the establishment of a valuation allowance on the net deferred tax assets of our U.K. operations.”

Q&A Highlights

Restructuring and balance sheet: Management is focused on actions to reduce debt, targeting execution within 12–24 months; debt reduction is “clearly in our focus” given interest burden .
FEP demand pockets: First frac block order in ~18 months; distribution markets expected to improve in 2025; aluminum rolling mill projects (e.g., SDI) supportive with aluminum ~15% of revenue .
A&L mix inflection: Below-market contract impact estimated at $0.5–$1.0M; “bulk… through the end of this year, and then… not much left after that” .
Nuclear/SMR opportunity: Nuclear heat exchangers are typically “at least a 6-figure unit”; capacity can be flexed via welding labor additions; backlog for Navy newbuilds is multi-year with aftermarket supporting shorter-cycle demand .
Working capital and cash: Release of working capital aided positive YTD operating cash flow of $10.6M through Q3 .

Estimates Context

We attempted to fetch Q3 2024 Wall Street consensus revenue and EPS from S&P Global (metrics: “Revenue Consensus Mean” and “Primary EPS Consensus Mean”) but the request failed due to an SPGI daily request limit error at the time of query. As a result, we cannot quantify beats/misses for Q3. We will update when consensus becomes available.

Key Takeaways for Investors

Execution improving underneath macro softness: Pricing and productivity gains are lifting margins in FCEP even as volumes and surcharge pass-throughs remain pressured; A&L demand remains robust in pharma, Navy and nuclear, with added Navy funding as a capacity catalyst .
Backlog momentum into 2025: Backlog rose sequentially to $383.6M, with stronger roll order intake and share gains at top U.S. customers supporting management’s low- to mid-single-digit 2025 FCEP volume growth outlook .
Mix headwinds abating: The below-market A&L contract (~$0.5–$1.0M impact) is largely behind the company by year-end, setting up cleaner margins in 2025 .
Balance sheet focus: Elevated interest expense (~$3M per quarter) continues to mask operating progress; management emphasized debt reduction and potential restructuring actions over the next 12–24 months .
Watch Europe and trade policy: Persistently weak European steel and low-priced imports are headwinds; petitions for trade action could aid domestic utilization and roll demand .
Capex discipline with external funding: FY24 net capex guided to $9–$10M, aided by grants; new funding expands A&L capabilities without proportionate cash outlay .
Near-term trading setup: Without consensus data, headline print shows seasonal sequential step-down and net loss, but sequential backlog growth and structural A&L demand may frame dips as opportunities pending clarity on debt-reduction milestones and 2025 order conversion .

Appendix: Q3 2024 Source Documents

8-K Item 2.02 and Press Release (Q3 2024 results):
Q3 2024 Earnings Call Transcript: –
Related press release: Q3 call scheduling (10/31/24):
Prior quarters for trend analysis:
- Q2 2024 8-K and call: – –
- Q1 2024 8-K and call: –

AMPCO PITTSBURGH CORP (AP)·Q3 2024 Earnings Summary