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AirBoss of America reported its Q4 2024 earnings, revealing a mixed financial performance amid challenging market conditions. Consolidated net sales stood at $92 million, marking a slight decline of 0.8% from the previous year, while consolidated gross profit increased significantly to $15.3 million. With a market capitalization of $70.83 million and a beta of 2.02, the stock has shown higher volatility than the market. According to InvestingPro analysis, AirBoss appears slightly undervalued based on its Fair Value assessment, suggesting potential upside for investors. The company maintains a healthy 3.57% dividend yield, having sustained dividend payments for 23 consecutive years.
Key Takeaways
- AirBoss’s defense segment secured over $200 million in government contracts for 2025.
- The company launched a new silicone production line, with initial trials underway.
- Net debt rose to $98.9 million, reflecting increased capital investments.
- Market conditions remain challenging, with softness in customer orders and geopolitical uncertainties.
Company Performance
AirBoss of America faced a challenging Q4 2024, with consolidated net sales slightly declining by 0.8% year-over-year. The ARS segment experienced a 13.1% drop in net sales, while the AMP segment saw a 9.4% increase. Despite these mixed results, the company benefited from a strong performance in its defense products, securing significant government contracts for the upcoming year.
Financial Highlights
- Revenue: $92 million (0.8% decrease YoY)
- Gross Profit: $15.3 million (increase of $10.2 million)
- Net Debt: $98.9 million (up from $88.2 million in 2023)
- Net Cash from Operating Activities: $8.8 million (down from $40.9 million in 2023)
Outlook & Guidance
Looking ahead, AirBoss anticipates volume improvements by mid-2025, driven by its defense segment. While potential tariffs between the US and Canada pose uncertainties, the company’s moderate debt levels and strong liquidity position (as highlighted by InvestingPro’s financial health assessment) provide flexibility for strategic initiatives. The company remains focused on rubber compounding and strategic acquisitions to bolster growth, supported by its solid balance sheet structure and consistent dividend history.
Executive Commentary
"We’re entering 2025 with a significant backlog well over $200,000,000 for the defense products," said Chris Bitsakakis, President and Co-CEO. Gren Schock, Chairman and Co-CEO, added, "Last year was a challenging year. However, the significant cost reductions and strong order backlogs in defense products give us cause for optimism."
Risks and Challenges
- Tariff Risks: Potential US-Canada tariffs could impact production costs and logistics.
- Market Softness: Continued softness in customer orders across sectors may affect revenue.
- Geopolitical Uncertainties: Ongoing geopolitical tensions could disrupt trade and supply chains.
- Debt Levels: Rising net debt may limit financial flexibility for future investments.
- Inventory Reduction: Customers’ inventory reduction strategies could lead to lower order volumes.
Q&A
During the earnings call, analysts focused on the potential impact of tariffs and the company’s contingency plans. Executives emphasized their preparedness to shift production between the US and Canada to mitigate risks. Additionally, the sale of the Kitchener facility was discussed as part of AirBoss’s evolving manufacturing strategy.
Full transcript - Bossard Holding AG (BOS) Q4 2024:
Conference Operator: you for standing by. This is the conference operator. Welcome to the AirBoss of America Fourth Quarter twenty twenty four Conference Call. As a reminder, all participants are in a listen only mode and the conference call is being recorded.
After the presentation, there will be an opportunity to ask questions. I would now like to turn the conference over to Mr. Grin Schock, Chief Executive Officer. Please go ahead, sir.
Gren Schock, Chairman and Co-CEO, AirBoss of America: Thank you, operator. Good morning, everyone, and thank you for joining us for the Airbus fourth quarter twenty twenty four results conference call. My name is Gren Schock. I’m the Chairman and Co CEO of Airbus. With me today are Chris Bitsakakis, our President and Co CEO Frank Antille, our CFO and Chris Figuero, our EVP and General Counsel.
Our agenda today will start with a review of the operational highlights for the quarter and year, followed by a discussion of our financial results before we open the conference line to questions. Before we begin, I would like to remind listeners that our remarks today contain forward looking statements, including our estimates of future developments. We invite listeners to review risk factors related to our business in our annual information form and our MD and A, both of which are available on SEDAR plus on our corporate website. Also, we will discuss certain non GAAP measures, including EBITDA. Reconciliations of these measures are available in our MD and A.
Finally, please note that our reporting currency is in U. S. Dollars. Therefore, references today will be in U. S.
Dollars unless we indicate otherwise. With that, I will now turn the call over to Chris for operational review.
Chris Bitsakakis, President and Co-CEO, AirBoss of America: Thank you, Gren, and good morning, everyone. Although 2024 was a challenging year for Airbus, as pronounced economic headwinds impacted each segment to varying degrees and the company continued to navigate obstacles related to market softness and geopolitical challenges, we are particularly encouraged by ARS, which performed strongly and generated improved margins despite lower sales in 2024 compared to 2023 and by the continued recovery within AMP’s defense business. The new Malo contract awarded in the past quarter in addition to isolation gown and bandolier awards announced earlier in 2024 are all building upon the growing momentum for this division as we enter 2025 with over $200,000,000 in government contracts awarded. Looking ahead to 2025, in addition to executing on these contracts, management remains focused on the successful conversion of key opportunities to support the future growth aligned with its strategic plan. However, we need to emphasize that any recovery will be subject to the current global geopolitical climate and the escalating threat of tariffs, duties and other similar restrictions on trade, which could have a profound impact on the global economy and Canada in particular.
A significant portion of the products manufactured by the company in Canada are sold into The United States and in addition, a portion of the company’s products could be subject to tariffs given the cross border nature of the company’s business operations. The company is actively evaluating and executing on contingency plans and reviewing all available options to deal with these potential threats, including rebalancing production on sales between The U. S. And Canada in an effort to minimize the impacts to the company and our customers. Shifting back to 2024.
In Q4 twenty twenty four, ARS saw continued softness carried over from the previous quarter as customers continue to reduce orders and shutter production earlier than anticipated as they focused on reducing inventory levels partially driven by lower demand despite strong performance during the earlier part of 2024. ARS, as well as what was reported by our main competitor, experienced volume reductions across most sectors and saw reduced volumes compared to Q4 twenty twenty three. Despite these challenges and the uncertainties heading into 2025, ARS remains committed to executing on its strategy to deliver strong results with specialized products, expanding production of a broader array of compounds and enhanced flexibility in attracting and fulfilling new business through identified synergies and margin expansion. Our launch of our new silicone line is a testament to our commitment to expanding margins through specialty compounding. A and P experienced an overall volume reduction in the fourth quarter of twenty twenty four, primarily driven by its Defense Products business and offset by continued softness in the Rubber Molded Products business.
The Defense business saw improvements in both revenue and gross profit, mainly driven by new business awards that it executed on in the quarter. The Rubber Molded Products operations were impacted by continued volume softness related to the original equipment manufacturers shuttering production to rebalance vehicle inventory levels, which has been ongoing throughout 2024. The business continued its focus on managing costs and a commitment to drive efficiencies and best in class automation, as well as the diversification of its product lines into adjacent sectors. The Defense business experienced positive traction during Q4 twenty twenty four, which is expected to continue into next year supported by the commencement of deliveries on several previously announced contracts including some recent new awards in addition to the overhead reductions carried out earlier this year to help mitigate the volume softness. Management also continued its focus on operational improvements during the quarter and continued to work with its key customers with the goal of leveraging opportunities aligned with its growth initiatives.
The company’s long term priorities have remained consistent and include growing the Recore Rubber Solutions segment by emphasizing rubber compounding as the core driver for sustainable growth and productivity, on diversifying and expanding its range of rubber molded products, and on executing on the strategic alignment of core versus non core product lines, while targeting additional acquisition opportunities with a focus on adding new rubber compounding capacity. With that, I will now pass the call over to Frank for the financial review.
Frank Antille, CFO, AirBoss of America: Thanks, Chris, and good morning, everyone. As a reminder, all dollar amounts presented today are in U. S. Dollars. Percentage changes compare Q4 of twenty twenty four to Q4 of twenty twenty three unless otherwise noted.
To be respectful of your time today, I will be brief in my summary of our Q4 twenty twenty four results. Starting from the top line, Airbus’ consolidated net sales for Q4 twenty twenty four were $92,000,000 a decrease of 0.8% from the prior year due to lower volumes at Airbus Rubber Solutions, partially offset by increased sales at Airbus manufactured products. Consolidated gross profit for Q4 of twenty twenty four increased by $10,200,000 to $15,300,000 compared with Q4 of twenty twenty three. This was primarily the result of an $8,000,000 non cash write down in 2023 related to nitrile glove and isolation gown inventory and improvements in the defense products business, partially offset by decreases in rubber solutions and softness within AMP’s rubber molded product lines. Turning now to our individual segments, net sales at ARS for Q4 of twenty twenty four were $47,300,000 a decrease of 13.1% compared to Q4 of twenty twenty three.
Volume decreased 22.5% with declines across most customer sectors. Tolling volume was down 39% while non tolling volume was down 21.7%. Gross profit within ARS for Q4 of twenty twenty four was $5,900,000 dollars compared with $7,800,000 in Q4 of twenty twenty three. The decrease in gross profit was principally due to lower volumes across most customer sectors and product mix. At AMP, net sales for Q4 twenty twenty four were $48,200,000 an increase of 9.4% compared to Q4 of twenty twenty three.
The increase was a result of higher volumes in the defense products business with decreases across rubber molded product lines driven by production reductions across most of OEMs. Gross profit within AMP for Q4 of twenty twenty four was $9,400,000 compared to a loss of $2,700,000 in Q4 of twenty twenty three. The increase was primarily a result of an $8,000,000 non cash write down in 2023 related to nitrile gloves and isolation gown inventory and improved volumes and product mix in the defense product lines further supported by operational cost improvements in the segment. For the year ended December 2024, net cash provided by operating activities was $8,800,000 versus $40,900,000 as at the end of twenty twenty three and free cash flow was negative $1,800,000 versus $32,500,000 in 2023. For the year ended December 2024, capital investments of $4,400,000 were made by ARS and $5,500,000 were made by AMP.
These capital expenditures were related to cost saving initiatives, growth initiatives and upgrading existing property, plant and equipment. At 12/31/2024, our net debt balance was $98,900,000 versus $88,200,000 at the end of twenty twenty three. We expect to fund the company’s 2025 operating cash requirements including required working capital investments, capital expenditures and scheduled debt repayments from cash on hand, cash flow from operations and committed borrowing capacity. In November 2024, the company entered into two secured credit facilities, an asset based revolving line of credit and a $55,000,000 term loan. The company’s new asset based revolving credit facility provides financing up to $100,000,000 with an accordion of $50,000,000 At 12/31/2024, ’70 ’9 point ’4 million dollars was available under this facility and $52,700,000 was drawn.
The revolving line of credit was modified in January of twenty twenty five to provide financing up to $125,000,000 with an accordion of $25,000,000 With that, I will now turn the call over to Brent.
Gren Schock, Chairman and Co-CEO, AirBoss of America: Brent? Thank you, Frank. In summary, last year was a challenging year. However, the significant cost reductions and strong order backlogs in defense products give us cause for optimism for improvement this year. Obviously, the effects of the current geopolitical and tariff environment on the economy, our customers and our business have the potential to negatively impact us.
With that, I will turn it over to the operator for questions.
Conference Operator: Thank you. We will now begin the question and answer session. And the first question will come from Ahmed Abdullah with National Bank of Canada. Please go ahead.
Ahmed Abdullah, Analyst, National Bank of Canada: Good morning and thanks for taking my question. In your remarks around the tariff risk, you’ve highlighted that your sales may be subject to tariffs during the production process. Is that mostly related to the auto sector? Or is there any other segments that we should think about where products would be crossing the border during production?
Chris Bitsakakis, President and Co-CEO, AirBoss of America: Yes. I can’t think of any of our products that go back and forth across the border for us. It’s going to be either going one way and being exposed to a tariff or coming back and being exposed to counter tariff. That’s sort of I think what we meant maybe we didn’t make that clear enough. But we don’t have products that go back and forth multiple times over the border to be finished.
Ahmed Abdullah, Analyst, National Bank of Canada: Okay. That’s helpful. And your sales last year into The U. S. Were about 76% of your full year.
Can you give us that number for 2024 just to have a sense as to where things stand?
Frank Antille, CFO, AirBoss of America: Yes. Amit, it would be similar. Obviously, flexing given the volume drop from ’20 ’4 versus ’23, but proportionately would be roughly in that range.
Ahmed Abdullah, Analyst, National Bank of Canada: Okay. And is there any color you’re willing to provide as to how much of those sales are originating from Canada?
Frank Antille, CFO, AirBoss of America: We’re reviewing right now Amit. I think we’re going to have the ability to provide some more insights in that as things evolve.
Ahmed Abdullah, Analyst, National Bank of Canada: Okay. That’s fair. And just on the comment about volume improvement that you’re expecting in mid-twenty twenty five subject to tariffs obviously. That has shifted from your last comment, which was early twenty twenty five. Are you starting to see a little bit of hesitation from customers in orders or holding off back because of the geopolitical uncertainty?
Or is there any other color that you can give us around that commentary?
Chris Bitsakakis, President and Co-CEO, AirBoss of America: We’re entering 2025 with a significant backlog well over $200,000,000 for the defense products. And we are not seeing any sort of concern or delays from our customers. A lot of the defense products we’re able to make in The U. S. As an example.
So but even the products that are made in Canada, we have not seen any delays because of that. I just think it’s the regular sort of waiting for delivery order or getting it set up. There’s been some turmoil within some offices in the United States government in terms of getting some paperwork flowing back and forth as efficiently as it used to be. But other than that, we’re not expecting any at this point, any major delays on delivering of those products.
Ahmed Abdullah, Analyst, National Bank of Canada: Okay. That’s fair. And just one last one for me. On the new product line, the silicone production line, how has the uptake been by customers in terms of order flow so far?
Chris Bitsakakis, President and Co-CEO, AirBoss of America: It’s a and thanks for asking the question because we’re really excited about it. We launched it late in 2024. And as you recall, Ahmed, the Airbus Engineered Products, the automotive product line that we have there consumes a lot of silicone. And up until now, we’ve been buying the silicone from outside. We’ve qualified our internal silicone production for our own product lines and we are in full production.
So we already have 20% or 30% of the capacity already flowing through there now that we have all of our customer approvals. And we have started trialing the material with outside customers as of January. So based on the plan that we had laid out in terms of what we expected the volume, I’d say we were right on plan and maybe a little bit ahead right now. So it’s already in full production. All of our internal products have already been converted to our own silicone and now we’re doing trials at other customers.
And that particular silicone line we installed in our Michigan plant given the proximity to the molding operation.
Ahmed Abdullah, Analyst, National Bank of Canada: Okay. Thanks. That’s pretty helpful. I’ll pass the line.
Conference Operator: The next question will come from David Ocampo with Cormark Securities. Please go ahead.
David Ocampo, Analyst, Cormark Securities: Thanks. Good morning, everyone. Circling back to some Ahmed’s question about cross border volumes, I guess, I’m just curious how much flexibility you guys have within your existing manufacturing footprint to minimize the impact that may come from tariffs?
Chris Bitsakakis, President and Co-CEO, AirBoss of America: Yes. I mean, already we have a pretty significant amount of our production in The United States, obviously. Airbus manufactured products, which is our defense product lines and our automotive product lines, rubber to metal bonded parts and non automotive as well. It’s all being molded out of Michigan. So, I’d say the one area that we have some concern is on the rubber compounding from Kitchener, Ontario that gets shipped into The U.
S. And also some out of our Quebec plant that gets shipped into The U. S. But that is also the capacity that’s the easiest to move for us because we have similar production lines in The U. S.
To be able to compound our material. We have a contingency plan in place. We’ve spoken to many of our customers about qualifying their material to be mixed either temporarily or permanently in our open capacity that we have in The U. S. We’ve contracted capacity in addition to our existing open capacity in The U.
S. So we have a fairly robust plan to minimize the impact that we’re going to see. However, it’s going it’s not going to be an easy sort of process. For anything moving equipment or molds or that sort of thing would be very difficult, but moving a recipe to be mixed on one side of the border or the other is not that difficult technically. We’ve established the capacity we need to satisfy our customers.
And the customers that are adamant that continue to have their product come out of Canada, we’ve already informed them that they’ll have to be paying for that tariff impact. So we’re not sure exactly how this is all going to play out because as you are following the news like we all are, the story changes every single day. The exemption for the automotive industry, if that goes back into the raw material supply, that would help us significantly by keeping at least the products that we make in Kitchener that go into automotive componentry continue to make them out of Canada and be tariff free. But again, I think none of us will really know the exact impact until there is some sort of agreement finalized in place between the two governments. But in the meantime, we’re planning for worst case scenarios.
Our contingency plans are designed to be able to shift production. It’s obviously not going to be as efficient or easy in terms of what we’re doing now, but we do have contingency plans that we’re relatively comfortable with at this moment.
David Ocampo, Analyst, Cormark Securities: Sorry, Chris. Did you say that the compounds that are being produced in Kitchener at least for this month, they’re going to be tariff free because if they’re going to an automotive supplier that’s USMCA compliant. Is that right? Or am I not understanding that properly?
Chris Bitsakakis, President and Co-CEO, AirBoss of America: I’m actually trying to figure that out right now. Yesterday, the conversation was around automobiles, autos. Then late yesterday, it came out that it included auto parts. So we’re trying to figure out today that because we have a significant amount of rubber out of Kitchener that goes into our own Airbus Engineered Products segment or Airbus Manufactured Products segment that is automotive based. So we’re trying to figure out what’s exempt, what isn’t.
And it’s there’s a lot of confusion right now. What we did when the talk of the tariffs first came up is we positioned inventory out of Kitchener into The U. S, finished goods and Masterbatch to be able to kind of weather the storm between two to four weeks. So as this one day here, one day there and the stories keep changing, we don’t expect a major negative impact because we’ve buffered ourselves for that. If this goes on more than a month, then I think it’s going to be a significant impact, which then we would kick into our contingency planning in full force.
David Ocampo, Analyst, Cormark Securities: Yes. And we talked a little bit about being able to move manufacturing elsewhere. But curious on the labor side, how quickly can you wind things down in one area and pick them up in another just from a labor perspective?
Chris Bitsakakis, President and Co-CEO, AirBoss of America: Yes. I mean, we’ve been planning for this now for about six or seven weeks from the very first moment that Trump started talking about tariffs. So we’ve been addressing the human resource requirements that we’re going to need to scale up. We also have contingency plans on scaling down the human resources in other areas. So we have the plans in place.
On the scaling upside, we’ve kicked those plans in place already because you can’t train people overnight. So we’re carrying some extra labor in our U. S. Facilities right now as they’re training because we’re also qualifying customers to be able to receive materials. So they need like a sample batch, they need to try it, they need to test it.
And so we’ve been in the process of that for the past month or so. So we’ve been scaling up our human resources in our U. S. Plants. We have not been scaling down in our Canadian plants and hopefully we don’t need to do that.
We’re still hopeful that there’s some sort of solution here, but we are prepared on both sides of the border to do what we have to do to shift.
David Ocampo, Analyst, Cormark Securities: And then just last one for me. Do you guys have an update on the potential land sale at Kitchener? And do tariffs ultimately alter your decision on where you relocate to? Because I remember before you wanted to stay in the KW region, but maybe tariffs alter that slightly. Any commentary on that would be great.
Chris Bitsakakis, President and Co-CEO, AirBoss of America: Well, I mean, the Kitchener plant, as you know, is a really large scale facility. But we do have some fairly significant customers in Canada as well. So we certainly are still on track to market the building in Kitchener. In fact, we should be launching that later this month officially. At the same time, we would be remiss not to try and understand where we want to position the capacity.
However, our intent is still to produce a large scale state of the art plant in Ontario that we can continue to provide our Canadian customers with rubber compound and also assuming we can get this USMCA agreement straightened out, continue to do that in the future. But yes, we’re certainly trying to identify where we want to keep more capacity and the more regional you are the better. And so we are certainly facing that reality right now, but our path and our plan for that operation hasn’t changed. The question is the scale of it and how we address that. Okay.
That’s perfect. I’ll hop back in the queue. Thanks guys.
Conference Operator: The next question will come from Alex Klugan with CIBC. Please go ahead.
Alex Klugan, Analyst, CIBC: Hi, good morning. I just have a question on the with the changes in The U. S. Administration and focus on cutting government spending. How do you think that impacts your pipeline of opportunities?
Have you seen a change in the bidding environment?
Chris Bitsakakis, President and Co-CEO, AirBoss of America: We have not seen a change in the bidding environment and the significant traction we got last year coming into this year, we don’t expect any concerns around that, because we’re as we are in either in early production or mid production or whatever the case may be on in terms of those earlier announced contract awards. If anything, we don’t expect defense spending in general to go down. In fact, we are seeing significant increase in governments in Europe and throughout the world planning for additional defense spending, which should bode well for what we do. So from that perspective, we don’t expect any concerns on the defense product side. We only expect upside really in terms of all the other countries in the world increasing their spending on defense.
That should be positive for us and other defense contractors. And we don’t really expect The U. S. To be taking significant money out of the defense budget. But if that happens, certainly the types of products that we do that are related to soldier protection are normally quite important to keep flowing through.
Alex Klugan, Analyst, CIBC: Thank you. That’s helpful. Another question I have is, can you please provide an update on restructuring efforts and any opportunities to sell your Kitchener facility?
Chris Bitsakakis, President and Co-CEO, AirBoss of America: So the Kitchener facility will be officially put on the market sometime this month. And as I mentioned on the prior question, our intention is to build a state of the art plan in the region to be able to focus on both Canadian and depending on how this tariff conversation goes, U. S. Exports. However, if U.
S. Exports are limited, there is also significant rubber compounds that are exported from The U. S. Into Canada. And we have sent a letter to the Minister of Finance of Canada, informing him that as part of the counter tariffs, the rubber compound imported into Canada should be included in that.
So it’s going to be interesting to see how it plays out. I’m assuming for now that there’s some sort of solution on this new USMCA and we’ll be able to continue to export to The U. S. But if we can’t, we have a good significant base of Canadian customers already. And the ones that we don’t have, I think will be a much easier target for us if we’re able to get those countermeasures in place.
So it’s all going to flow in the end in such a way that we will be flipping that property. We will continue to have facility in Canada and Ontario and Quebec And we’ll try and find a way to expand that depending on the economic climate that we see at that time.
Alex Klugan, Analyst, CIBC: Thank you. That’s all my questions.
Conference Operator: This concludes our question and answer session. I would like to turn the conference back over to Mr. Chris Vitakakis for any closing remarks. Please go ahead, sir.
Chris Bitsakakis, President and Co-CEO, AirBoss of America: Thank you, operator, and thanks again to everyone for attending today’s call. Please feel free to reach out to us directly or through our Investor Relations team if you have any questions on our results or in general at all. Thank you, and goodbye, and have a great day.
Conference Operator: This brings to a close today’s conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.
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