Albany at Wells Fargo Conference: Strategic Growth Amid Challenges

On Wednesday, 11 June 2025, Albany International Corporation (NYSE:AIN) presented at the Wells Fargo Industrials & Materials Conference 2025. The company outlined its strategic focus on growth in the aerospace sector and stable cash flow from its machine clothing segment. While Albany sees strong growth potential, it also faces challenges, such as production issues in Salt Lake City.

Key Takeaways

• Albany International focuses on machine clothing and aerospace, leveraging weaving and material science expertise.
• Aerospace growth is driven by 3D woven composites, with a focus on defense programs.
• The company is marginally impacted by tariffs due to regionalized operations.
• Operational challenges in Salt Lake City have led to adjustments in certain programs.
• Albany aims to expand machine clothing margins through acquisitions and productivity improvements.

Financial Results

• Margin Expansion:

- Machine Clothing aims to expand margins through the integration of Heimbach and operational improvements.

- Aerospace focuses on cost control and leveraging technology for high-teens EBITDA margins.

• Organic Growth:

- Machine Clothing sees opportunities in engineered fabrics.

- Aerospace targets hypersonic growth and titanium replacement with 3D woven technology.

Operational Updates

• Machine Clothing:

- Integrating Heimbach acquisition and addressing challenges in Europe and China.

• Aerospace:

- Increasing production of the CH-53K program, addressing issues in Salt Lake City.

- Improving training and reducing turnover at the Salt Lake City facility.

- Reducing exposure to the Gulfstream program due to producibility issues.

Future Outlook

• Aerospace Growth:

- Focus on hypersonics and titanium replacement using 3D woven technology.

- Aiming to secure significant content on next-generation single-aisle aircraft.

• LEAP Engine:

- Potential revenue upside if Boeing increases production rates.

• Hypersonics:

- Plans to industrialize hypersonics over the next 2 to 3 years.

Q&A Highlights

• Gennar Cleveland emphasized the competitive advantage of Albany’s 99% on-time delivery rate.
• The company is exploring regional production adjustments to mitigate tariff impacts.

For more detailed insights, readers are encouraged to refer to the full transcript below.

Full transcript - Wells Fargo Industrials & Materials Conference 2025:

Unidentified speaker: Thank you very much. I’m here with Gennar Cleveland, President and CEO of Albany International. Gennar, thanks for being here.

Gennar Cleveland, President and CEO, Albany International: Glad to be here. Thanks for having us.

Unidentified speaker: Can you start out by providing a brief overview of your two business segments, help people get oriented around the Albany story?

Gennar Cleveland, President and CEO, Albany International: Yes. So we are two business segments, but we are we have a foundation of weaving and material science that one of the businesses grew from. So we have machine clothing, which is a strange word for many, but it is the belts that go on, for example, paper machines. So paper machine clothing, we also have engineered fabrics. The foundation on a lot of these parts is weaving.

But we make the forming belts for paper machines. We make the press to take more water out of the paper, and we make the dryer as well as some specialized belts. Not all of them are woven, but a lot of them are. And a nice way to think of it, our business is we’re the only thing that touch the paper. They need these belts to make the paper.

Also, it is a consumable. So every belt is specifically made for a position on a paper machine or other industrial machines. And they have to be exchanged as they’re making different types of papers or other materials. Now we took this capability of weaving and we brought it into aerospace. The company several years ago partnered with Safran and I’m really proud of the company for taking on the part that they went after in aerospace was the fan blade on the LEAP engine.

So that’s something that the company should be very proud of and something Safran should be very proud of for taking this on. So all of our weaving expertise was used into weaving a three-dimensional shape that we put into a tool and then insert with resin and then cook essentially. And it becomes a near net shape part that is the fan blade on the LEAP engine that goes on the seven thirty seven MAX as well as the A320. In 2019, we showed the capability of building 30,000 blades a year. So it’s something we have industrialized and we have become very, very good at.

The company wanted to expand their capability in aerospace, so went out and actually made some acquisitions. They bought Harry’s Composites in Utah, Salt Lake City and Texas Composites in Boerne, Texas Salt Lake, which is outside of San Antonio, have since expanded into Mexico as well as an acquisition in Germany, CIRCOMM that does thermoplastics and winding. So that’s the two businesses. But aerospace is growing very nicely, and machine clothing is a bit more stable on the top line but has shown tremendous growth on the bottom line.

Unidentified speaker: That’s great. It sounds like it’s that core capability, that expertise that connects the two. Exactly. You joined the company almost two years ago now. What’s one thing that you’ve learned since taking the job that really surprised you about Albany?

Gennar Cleveland, President and CEO, Albany International: Really, it is how much I like the machine clothing business. I spent a large portion of my six months in the role trying to understand machine clothing, understand our position in the market. And I think what surprised me the most was the enormous amount of technology that goes into creating these belts and enabling them to make our customer be successful in making their product, which 70% of it is paper, but we also make all sorts of help make other sorts of industrial pressed wood and hardy board and things like that.

Unidentified speaker: Yes. And what are some of the secular trends that are impacting both segments of your business?

Gennar Cleveland, President and CEO, Albany International: Well, aerospace secular trend seems to be insatiable. It has a lot of growth in front of it. I think I’m excited to see Boeing get back in the group. I hope they can continue to do that with, on the commercial side, lots of product, long backlog and we’re part of several other programs there. On the defense side, very strong new growth with, for example, the MV75, which is the flare up program, NGAD, CCA.

And then you have this whole new area that is advanced air mobility, where we have engaged with Beta among others, and we see growth there as well. And our latest growth has really come out of space. So the aerospace part of our business has a lot of opportunity and it’s all about harvesting it and growing with it. The secular trends on the paper industry, people tend to focus on the newspaper reduction. And we understand and we see that in publication.

Eventually, there will always be made paper. Eventually, that will flatten off. And if you take paper and you offset it with the growth in packaging as well as tissue, tissue is probably the biggest growth that I see. But you can think of an overall secular trend in paper to be GDP minus ish. So there’s growth there.

We have a very strong position in that market, and we’re okay with slow growth. We’re really focusing on the returns and the phenomenal cash flow we’re getting out of that part of the business.

Unidentified speaker: That’s great. Maybe one more high level question before we drive into the two businesses. A lot of talk around tariffs and obviously some uncertainty there. How do you assess the potential impact to your businesses?

Gennar Cleveland, President and CEO, Albany International: We are very marginally impacted by tariffs, and there’s a couple of reasons for that. We are regionalized. So when we do business in North America, it is covered by USMCA. We have factories in Mexico, U. S.

And Canada. Is continuous movement of parts between the three countries. So as long as USMCA remains stable, we’re in a really good position there. The Europe is similar. And frankly, our acquisition of Heimbach enabled us to be more regional in the area.

And we’ve done some other changes of that business to help their regional footprint. And then Asia, we support mostly out of China. So that enables us not to have impact of tariffs. There are certain parts that we make in The UK and in The U. S.

That we support the whole world with. And so we are looking at whether we need to make changes there or how prices will be affected going forward. But I would say that we’ve been mostly spared.

Unidentified speaker: Good. Glad to hear that. So let’s dive into that Machine Clothing segment. From a customer perspective, what’s the biggest value proposition that Albany offers?

Gennar Cleveland, President and CEO, Albany International: Quality. We are known for having a phenomenal product that help our customers save on their biggest cost input. We are the machine clothing is 1% to 2% of the cost of making paper. Most of the cost comes from the pulp and the energy and water. And we enable our customers to retain the pulp, get the water out of the product, use less water and use less energy.

In general, we have a double digit price advantage to our competition because of our quality of product. And the reason why we have such a good quality of product is we spent 4% of our revenue on R and D. So we’re continuously developing and putting new product into the market. And that’s a position that we intend to stay in.

Unidentified speaker: So when you think about competitive advantages, what else would you say that you’re doing better than some of your peers? Customer service.

Gennar Cleveland, President and CEO, Albany International: Customer service is essential. A paper machine that is not working or not running or has issues is a big drain for our customer. We are our salespeople are also service people, so we are with our customers as much as we possibly can.

Unidentified speaker: And you talked a little bit about the secular trends for that business. What are some of the paths to organic growth?

Gennar Cleveland, President and CEO, Albany International: Organic growth, I think we have opportunity in expanding our portfolio of products. So engineered fabrics is an area where we make or we help make laminate, compressed wood, cement board and so on. It’s an area that I think we can use our technology to grow our presence in that market and is an area that we can expand. The challenge with the paper industry is that it’s really an oligopoly, so you have to be careful about how you operate in that. And also, some of our competitors are also making the machines.

So we operate carefully there, and we believe that our quality will give us the position in the market that we have endured for many years now.

Unidentified speaker: And you talked about the margin and the cash flow profile of that business. What are some of the paths to further margin expansion?

Gennar Cleveland, President and CEO, Albany International: It is amazing how good returns we have on this business. And we are right now able to further expand that through our acquisition of Heimbach. We they were not having the same returns that we have. And we are able to use our know how, knowledge and technology to help them get to a point where they are close to the returns that we have. So even if you’re not seeing growth on the top line over the next several years, the synergies that we are experiencing through our actions around consolidating and improving their productivity will show up in our overall margins.

And so the margins you should see grow throughout this year and next year and beyond that as well. So that’s the biggest opportunity to grow our margins.

Unidentified speaker: That’s great. And it sounds like integration is going well with Heimbach. Are you on target to meet your original synergy targets there?

Gennar Cleveland, President and CEO, Albany International: Yes. This is an opportunity to reach a forward purchase multiple of 3.5 to four, which makes it a great acquisition. We’re absolutely on track to get there. We’ve had a few headwinds. The softer market in Europe last year was challenging and lowered our output of Heimbach, which compressed the margins because of absorption.

That in addition to our a Chinese customer that stopped producing paper and are slowly coming back again right now has had an impact. But we also made decision on some of the product lines that Heimbach made that did not make money to get out of them. And so we’ve had a compression on the top line. But even with that, we see an absolute path to the forward purchase multiple. This is a good acquisition.

Unidentified speaker: That’s great. And do you think M and A will continue to play a strategy for this segment?

Gennar Cleveland, President and CEO, Albany International: There’s very few left, right? Are I think if you have to look at exposure is Southeast Asia. And that is a growth area for both for paper machine as well as clothing as well as engineered fabric. So there might be opportunity there. Whether that’s organic or inorganic, we’ll take a look at.

Unidentified speaker: Okay. Great. Now let’s shift over to the aerospace portion of your business. What are some of the large commercial or defense programs that you’re on?

Gennar Cleveland, President and CEO, Albany International: Yes. So we are tied up with Safran on the LEAP engine, which is our biggest program. It’s great to be on there. Safran is a great partner for us. We spend a lot of time with them.

Obviously, we’re going to Paris next week from Paris Air Show. And I think the LEAP program has potential to get back to 19 volumes now with Boeing producing lately with 38. We hope they continue to do that. That will have impact to how quickly we ramp up again. And so it will remain the biggest program.

The largest program we have is the CH-fifty three ks. CH-fifty three ks is a program that we had some parts on, but took over the empanage from GKN in the middle of the ramp up. It’s been a challenging program for us, but it’s a great program for us over the long haul. By the end of this year or end of third quarter, we will be at the rate of two per month, which we will stay on for the next about eight years. This is going to make us very good at that program, and we can recapture some of the loss that we had during the ramp up, which is not uncommon.

Talking about CS-fifty three ks, it’s part of Sikorsky, part of Lockheed Martin. Lockheed Martin is our largest customer. The other programs there is the Joint Strike Fighter, the JASSM, LARASSM and so that’s all very good business for us that we make primarily in Salt Lake City. Other few to mention could be I think GE is coming up as a strong customer for us as well as beta for the AAM market and a space company that we can’t share who is, but is a great customer for us. That’s great.

Unidentified speaker: And what’s your approximate mix between commercial and defense?

Gennar Cleveland, President and CEO, Albany International: We are getting close to fifty-fifty. We’re still a little bit higher on commercial. My goal is for us to get up to 70% of defense to the new single aisle. So this will take a few years because when the new single aisle comes along we believe that we’ll have a significant presence on that program both on the engine as well as the aircraft itself. It will take us back to fifty-fifty, which will be the ultimate goal.

Unidentified speaker: Okay. Appreciate that. And what’s the biggest competitive advantage that this business has relative to its peers?

Gennar Cleveland, President and CEO, Albany International: Three d woven. So there are a lot of composite suppliers out there. Actually, I’m going to tell you several. Currently, we deliver 99% on time. I used to be on the supply chain side of an OEM, Bell Helicopter.

If I had a supplier that delivered at 70%, I wasn’t happy. But I was happy because it was so much better than some of the other suppliers. 99% is unheard of. We are very good at delivering piece parts to our customers and a quality part. That is a competitive advantage.

Right now, I actually think it’s a competitive advantage that we are a public company because so much of this part of the industry has been taken over by private equity and our customers tend to want to work with us, which can make us be a little bit more selective. And I am not opposed to continuing take on work that is structures, but we need to be paid commensurate with our performance. So that’s why I’m saying we’re being a little picky. We do braiding and RTM. That is the future of composites in the aerospace industry.

Two, on the bookends, RTM and three d weaving is something we are very good at. There are other people that do RTM. There’s no one else that does three d weaving. Three d weaving is a way of creating a shape with strength in every direction and with a fatigue capability that is unlike anything else. We are set up with a technology that can replace metals and maybe specifically titanium with a 100% domestically sourced product and a lead time that is very low.

I mean, we’re talking months from when we buy the material until we have a part versus, for example, titanium, that can be years, all domestic. And we have a capability that we have shown that we can industrialize it and make $30,000 a year. There’s no one else that can do that. And I think you asked me earlier what am I surprised about. This is the thing that I’m surprised about.

Why haven’t we expanded that beyond what we’re doing on LEAP, on the blade and the fan case? So all of our effort right now is around how do we expand our portfolio of customers on three d woven RTM parts. You talked a little bit about those programs that you’re on. Do you operate under long term contracts or LTAs? We do.

And we have some that are longer, three ks, and we have some that are more normal within the five years. I like long term contracts. And we have with Chris Stone coming in from Lockheed Martin having been in their Chief Procurement Officer role, we have a capability around contracts with both him and the team that he is building around him that sets us up to be able to make strong primarily five year long term contracts, both with our customers as well as with our suppliers. So that is part of it. Yes, we’re focusing a bit more on operational excellence right now, but more to come.

Unidentified speaker: Yes. It provides good visibility. And are you sole source on the work that

Gennar Cleveland, President and CEO, Albany International: you do? We’re sole source on some. Where we have three d woven, there is nowhere else to go other than if you want to repurpose into metal or hand layup or something like that. Another area that we are expanding in where I think we will have a similar position is on hypersonics. So carbon carbon, our capability to three d weave a form that is near net shape or net shape and pressurize, carbonize into a carbon carbon part is a competitive advantage to others that have to use a lot of machining afterwards.

And the carbon is very, very expensive. So we have a cost advantage there. We’ve also done all of the investment on this on our own so far because we have a way to do that with our strong cash flow coming out of machine clothing. Going forward, going to see if we can get some help to truly industrialize that part of the business. But hypersonics or carbon carbon high, high temperature parts is an area that where I think you’ll see a lot from us in the next two to three years.

Unidentified speaker: Great. And you talked earlier about Boeing getting the rate up on July. What impact does that have on your business as both Boeing and Airbus continue to increase rate?

Gennar Cleveland, President and CEO, Albany International: So the LEAP program, we obviously see the increase, and we’re managing through that. The other area is 7 87. We make the frames there. And so that’s good work for us. It’s not been a great place to be with the lower volumes.

So the higher volumes is going to improve our position as well as profitability on that. We have parts on all of Boeing’s aircraft that are composites. We have some. So all of this will be positive for us.

Unidentified speaker: You projected lower LEAP revenue this year. What’s your outlook for that going forward?

Gennar Cleveland, President and CEO, Albany International: So we are I met with Safran last week, and I’m meeting with him next week, and we will announce something after that at the latest at the next earnings call. We took a very conservative approach coming in this year, because we were more aggressive and optimistic in 2024, which put us in a position to have to step back significantly and put us in an inventory position. We’re past that. So if Boeing continues as we expect there’s upside there.

Unidentified speaker: And what were some of the drivers of the programs behind the EAC adjustments over the past few quarters? And what’s the latest on those if you could share some updates?

Gennar Cleveland, President and CEO, Albany International: Yes. So we have two programs. And if you look at it, the whole company is doing very well. And we’ve had some issues in 1 of the factory in Salt Lake City. So all of our EACs are coming from Salt Lake City and the CS53K and the Gulfstream program.

To start with Gulfstream, the Gulfstream program, I have announced that we are reducing our exposure to that program. We will announce something further on that shortly, but it’s an area where we see a part that is not producible and it needs significant changes for us to continue to make it. So I think that is a story that is wrapping up. On the CH-fifty three ks, it’s a little bit more of a complex story. The CH-sixty three ks is a very large helicopter.

And we have the sponsons, the empennage and the tail for that aircraft, which is bigger than most helicopters, just that part. It is also very different from what Albany normally makes. And we took it over in the middle of a ramp from a supplier that Sikorsky elected to move out of. So we had a much faster ramp on a very complex aircraft where we didn’t have the capability specifically in planning and supply chain. This is a large portion why I brought Chris Stone in while he brought in talent that we have worked with before that knows how to do planning for 4,000 parts and do procurement of two fifty, two seventy suppliers and managing that.

So you’re seeing the EACs getting better because we are getting better. The other area that we’re also getting better in is the turnover of personnel. Because we were growing so fast, there wasn’t enough training for our new employees. A new employee comes into a factory. They want to do a good job.

If they don’t have the training, they’ll make a mistake. A mistake turns into a quality issue. A quality issue gives them not the confidence of making that part. And it’s a vicious cycle, and they decide to leave. So we had up to 40% turnover, which we have corrected tremendous change at Salt Lake City by bringing people in, training them, giving them follow-up, and then also spending time with the right supervisors and giving them coaches.

This is an area where we have spent money, which is money that is affecting our EACs, but to get the right skill level at the floor to lead these rapidly growing employee base. So it’s not easy. It’s complex, but it’s not that hard either. And we have the right team in place to do it. So you should expect to see it getting better and better.

Unidentified speaker: I’ve heard you talk a little bit about the different organic growth opportunities that you had. I just want to spend a little bit time there because it seems like you have a lot of opportunities. Can you talk a little bit more about the specific ones you’re currently looking at and evaluating?

Gennar Cleveland, President and CEO, Albany International: Yes. So organic as in within aerospace, The biggest one is with our hypersonic growth opportunity. And I mentioned that earlier. Another one is really around how do we take this technology and we say we have an alternative to titanium. And we use that very specifically on new programs.

These growth opportunities come from a capability that we have today that is not that well known in the industry. I would say that I didn’t know it well before I came here. And these two together, we’re talking an opportunity. We’ll talk a little bit more about it later in the year as we put our arms around how big this opportunity is. But it’s significant.

And probably our biggest growth opportunity outside of an acquisition in the next two to five year period. If you look at other opportunities that are organic, we do have this capability of weaving. We’re very good weavers. And we can weave in three dimensions. So where else is it that we can take this capability and bring a value to a customer.

I have announced that we have a Chief Technology Officer who’s at the leadership team that oversees our research and development and our innovation process. He’s paired up with someone who’s looking at new business ventures, whether that’s inside of machine clothing, inside of aerospace or outside or adjacent. I think our organic opportunities now are significant. It’s finding the right ones and growing them. The inorganic opportunities are kind of tough because the market is there’s a lot of money out there.

And while we have looked at some and considered some, we don’t agree with the price. So we pull out, but there might be opportunities as well.

Unidentified speaker: Disciplined approach, which is always fair. Absolutely. From a profitability standpoint, what path to further margin expansion do you have within the aerospace business?

Gennar Cleveland, President and CEO, Albany International: It is a combination of cost control, but also bidding correctly and also growing our technology, growing to differentiated technology. Where we have a differentiated technology, we have an competitive advantage, and we should charge for that. So we’ve said that we absolutely have the capability to be in the high teens EBITDA, and that is our goal. And we’ll update that as we continue.

Unidentified speaker: That’s great. I have a couple more questions, but let me open it up to the audience if anyone has any questions. Okay. Otherwise, I’ll keep going. As composites continue to make up a greater portion of the aircraft, I know you mentioned earlier the next gen single aisle, how should people think about that opportunity and what it means for Albany?

Gennar Cleveland, President and CEO, Albany International: I wish it was closer because it is big opportunity for Albany. I think it is very clear that the new single aisle is going to be mostly composite. It is also clear that there’s not enough capacity autoclave capacity in the world to support a new program with the traditional composites. So auto autoclave capability and RTM, we make the largest RTM part in aerospace. It’s the case to the 777X engine, the fan case.

It’s an engineering beauty. We’re very good at RTMs. We can make large parts and that has given us an in working with Airbus and working with Safran and GE on these new programs. So I think we’ll have opportunity on the engine, on the wing, on the empennage and on the fuselage with our technology. We will try to primarily that that will primarily be automatically.

Unidentified speaker: And you talked a little bit earlier about potentially replacing titanium. Can you expand upon that? Yes.

Gennar Cleveland, President and CEO, Albany International: From my time at the OEM, titanium has always been a scarce resource. The suppliers have performed poorly and they have been very highly priced. When there is a domestic alternative, This should be easier than what I think it might be, because engineers tend to if you have been designing a certain part in titanium, you continue to design it in titanium. Our ability to actually help design and show the effect of our parts in the use they’re looking for is path for us to get titanium as part of our growth path. It’s not titanium, but it’s a good example.

The lift blade on Beta, they needed help with making the blade work better. And our team, together with Beta, designed a blade that has a core or a spar that is three d woven. We put foam in and then we overbraid and we RTM resin transfer mold apart, all the things that we’re very good at. And we have made a part that is exactly what Beta makes. So when we can get involved into the design process, we can be more effective with solving the solution for our customers.

And I know whether you’re Boeing or Airbus or Bell, Textron, GE, you name it, they all have issues with titanium.

Unidentified speaker: And with that, Gennar, I think we’re actually out of time, but

Gennar Cleveland, President and CEO, Albany International: I appreciate you coming today. I can talk about titanium replacement all day.

Unidentified speaker: A lot of exciting opportunities ahead. So look forward to connecting again next year to hear about the latest.

Gennar Cleveland, President and CEO, Albany International: Thank you.

Unidentified speaker: Thank you. Appreciate it.

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