Albany International Corporation · NYSE:AIN
Albany International — Investor Day (May 2022)
58 slides from Albany International's investor day presentation, May 25, 2022
Slide 1: Investor Day
Investor Day May 25, 2022 Investor Day 2022 | 1
Slide 2: Today's Agenda
Strategy for Continued Growth 1 Bill Higgins, CEO Machine Clothing 2 Daniel Halftermeyer, President TODAY’S Albany Engineered Composites 3 AGENDA Greg Harwell, President Financial Overview 4 Stephen Nolan, CFO Closing Remarks and Q&A 5 Leadership Team Investor Day 2022 | 2
Slide 3: Safe Harbor
SAFE HARBOR This presentation contains certain items, such as earnings before interest, taxes, depreciation and amortization (EBITDA), Adjusted EBITDA, Adjusted EBITDA Margins, Free Cash Flow and net debt, as well certain income and expense items on a per share basis, that could be considered ‘non-G
Slide 4: Strategy for Continued Growth
Strategy for Continued Growth Bill Higgins President & Chief Executive Officer 2021 | 4 Investor Day 2022
Slide 5: Key Takeaways
KEY TAKEAWAYS Technology Experts 1 Serving Vital Industries Solid Execution sets the 2 Foundation for Growth Secular Trends Support 3 Long-term Growth 4 Strategy For Layered Growth Investor Day 2022 | 5
Slide 6: Who Is Albany International?
WHO IS ALBANY INTERNATIONAL? Founded in 1895 Market Cap $2.5Bn Global operations across 11 countries $929M $48M 4000+ 10% $251M 20 2021 Revenue Net Debt Employees globally 5 Yr CAGR 2021 Adj. Years of consecutive of Adj. EBITDA EBITDA dividend payouts Investor Day 2022 | 6
Slide 7: Technology Experts Serving Vital Industries
TECHNOLOGY EXPERTS SERVING VITAL INDUSTRIES MACHINE CLOTHING ENGINEERED COMPOSITES Engineered product solutions for the Engineered product solutions for Pulp & Paper and other process industries the Aerospace and Defense industries • Consumable, continuous replenishment • Proprietary solutions • Pro
Slide 8: Solutions Powering Global Travel
SOLUTIONS POWERING GLOBAL TRAVEL Our composite solutions not only make … But make the engines themselves more aircraft lighter, improving fuel efficiency … efficient, by reducing rotating weight Wing components Tail structures Fuselage frames Wing skins 3D-woven Fan cases composite blades Rods and s
Slide 9: Global Operational Successes Delivering Powerful Results
GLOBAL OPERATIONAL SUCCESSES DELIVERING POWERFUL RESULTS Critical Customer Market Selection Innovation Operational Excellence Partnerships Geographic and end markets • Deep relationships • Multi-year strategic focus on • Continued investment • Long-term track record with customers the growing MC mar
Slide 10: Albany International's Highly Attractive Investment Opportunity
Long history Leader in PMC with of strong balance proprietary solutions sheet, solid delivering predictable execution, and and strong FCF ALBANY stability prudent capital management INTERNATIONAL’S HIGHLY ATTRACTIVE Differentiated INVESTMENT composites OPPORTUNITY business with ample opportunity to
Slide 11: Delivering Solid Financial Performance
DELIVERING SOLID FINANCIAL PERFORMANCE REVENUE ADJ EBITDA AND MARGIN (millions) (millions) $1,200 $300 30% $1,000 $250 25% $800 $200 20% $600 $150 15% $400 $100 10% $200 $50 5% $- $- 0% 2016 2017 2018 2019 2020 2021 2016 2017 2018 2019 2020 2021 Revenue Adj. EBITDA Adj. EBITDA Margin Investor Day 20
Slide 12: Well-Positioned to Take Advantage of Global Paper Demand Growth
WELL-POSITIONED TO TAKE ADVANTAGE OF GLOBAL PAPER DEMAND GROWTH Growing Global Non-Cyclical Tissue Sustainability & E-Commerce Middle Class Business Environmental Drivers Renewable paper products One component driving Per-capita consumption Tissue demand is resilient are an environmentally secular g
Slide 13: Aerospace Segment Poised to Outgrow Global Recovery
AEROSPACE SEGMENT POISED TO OUTGROW GLOBAL RECOVERY Emerging Commercial Aviation Recovery Defense Priorities Opportunities Expect 787 & GE9X Albany's defense Increasing Bizjet growth & production to increase as programs align with DoD production rates for emerging sustainable recovery in internation
Slide 14: Strategy for Continued Value Creation
STRATEGY FOR CONTINUED VALUE CREATION Positive/constructive customer Deep understanding of material relationships based on trust properties in application • Lead time, patience • Unmatched industrial scale • Proprietary next-gen customer weaving expertise technology collaboration & development Opera
Slide 15: Well Defined Capital Priorities That Drive Strong Organic Growth
WELL DEFINED CAPITAL PRIORITIES THAT DRIVE STRONG ORGANIC GROWTH 1 2 Corporate capital Continuous Continuous Capital deployment primarily Investment in Reinvestment in focused on APPLIED RESEARCH BUSINESSES ORGANIC • Targeted business • Internal process & opportunities technology improvements GROWTH
Slide 16: Disciplined Acquisition Strategy
DISCIPLINED ACQUISITION STRATEGY ALBANY KEY M&A ATTRIBUTES ENGINEERED COMPOSITES MACHINE CLOTHING Strategy is Criteria for opportunistic, Customer positions that Technologies that Operational Potential complement/leverage complement/leverage efficiencies not dependent current customer mix current te
Slide 17: Longer Term Evolution of Financial Performance
LONGER TERM EVOLUTION OF FINANCIAL PERFORMANCE Contribution by Business Segment 14% 43% REVENUE MIX 2015 2019 50% 2026 50% 57% 86% 32% 40% EBITDA MIX 2015 2019 2026 60% 68% 100% MC AEC Investor Day 2022 | 17
Slide 18: Experienced and Disciplined Management Team
EXPERIENCED AND DISCIPLINED MANAGEMENT TEAM Bill Higgins Daniel Halftermeyer Greg Harwell Stephen Nolan PRESIDENT & PRESIDENT PRESIDENT ALBANY CHIEF FINANCIAL CHIEF EXECUTIVE OFFICER MACHINE CLOTHING ENGINEERED COMPOSITES OFFICER & TREASURER Investor Day 2022 | 18
Slide 19: Strong Cash Generation in Machine Clothing
Strong Cash Generation in Machine Clothing Daniel Halftermeyer President – Machine Clothing Investor Day 2022 | 19
Slide 20: Key Takeaways
KEY TAKEAWAYS Complex Systems and Robust 1 Technology Differentiators Global Trends are Opening 2 Up Future Opportunities Predictable, Strong, 3 Sustainable Growth and Cash Flow Investor Day 2022 | 20
Slide 21: What Is Machine Clothing Technology?
WHAT IS MACHINE CLOTHING TECHNOLOGY? FORMING PRESSING PROCESS BELTS DRYING • Produce consumable belts that enable production of every paper product in your life • Essential to paper machine operation • Operate continuously in a harsh environment CONSUMABLE PRODUCTS # POSITIONS AVERAGE LIFE HARSH ENV
Slide 22: Providing Highly-Tailored and Technically Demanding Solutions
PROVIDING HIGHLY-TAILORED AND TECHNICALY DEMANDING SOLUTIONS Custom Engineered Machine Clothing belts help produce a broad swath of paper products, including toilet paper, Belts for Process paper towels, cardboard, newspaper, tissue, Industries printing and writing paper, and others Our belts are a
Slide 23: Global Paper Production Continues to Increase
GLOBAL PAPER PRODUCTION CONTINUES TO INCREASE SECULAR TRENDS Global Paper Production ENHANCING DEMAND Volume (Metric Tonnes x1000) 400,000 E-Commerce 350,000 300,000 Sustainability and 250,000 Environmental Drivers 200,000 150,000 Growing Global Middle Class 100,000 50,000 Non-Cyclical Tissue Busine
Slide 24: Globally Positioned to Serve Tier Customers
GLOBALLY POSITIONED TO SERVE TIER 1 CUSTOMERS Operations 14 11 8,200+ Plants Countries Paper machines worldwide Halmstad Bury Cowansville that are all unique and Perth Kaukauna St. Junien Zürich require customized solutions Homer Ballo di Mirano Hangzhou Chungjiu St. Stephen Cuautitian Panyu Tier 1
Slide 25: Strategy for Sustained Growth
STRATEGY FOR SUSTAINED GROWTH TIER ONE ATTRIBUTES A focus on Tier One Customers while serving targeted Tier Two Customers in the right grades to capture further business Largest Machines OPERATIONAL R&D EXCELLENCE INVESTMENT Most Sophisticated • Eliminating non-value • New technologies for added act
Slide 26: Consumable Products Powered by Machine Clothing Technology
CONSUMABLE PRODUCTS POWERED BY MACHINE CLOTHING TECHNOLOGY Global share (#1) of fabrics and process belts MARKET LEADER used in the manufacture of all major paper ~30% grades, including tissue and towel, board and GLOBAL PAPER MACHINE CLOTHING MARKET SHARE packaging, and publication All Others Techn
Slide 27: Foundations of Success
FOUNDATIONS OF SUCCESS We continuously optimize Machine Clothing to maintain marketplace leadership Constant optimization Our optimized, global footprint Build stronger Leading products Investment to and LEAN principles provides us access customer relationships as a result of our modernize and to dr
Slide 28: Value to Customers = Consistent Quality, Greater Efficiency, Greater Profitability
VALUE TO CUSTOMERS = CONSISTENT QUALITY, GREATER EFFICIENCY, GREATER PROFITABILITY Design Design Design Design PAPER BETTER ENERGY REDUCE QUALITY MATERIAL USAGE EFFICIENT OPERATIONS DOWNTIME Consistency Wood fiber utilization Sustainable processes Optimize labor Tailored to Lower water Reduced cost
Slide 29: Reliable, Growing Cash Flow Generation as the Market Leader
RELIABLE, GROWING CASH FLOW GENERATION Historical Adj. EBITDA and Adj. EBITDA Margin (Adj. EBITDA in millions) $250 40% 35% Trendline growth in paper and AS THE $200 30% paperboard production sets MARKET $150 25% positive long-term GDP± demand trend LEADER 20% $100 15% 10% $50 Continuing investments
Slide 30: Maintaining Our Profitable, Market-Leading Position
MAINTAINING OUR PROFITABLE, MARKET-LEADING POSITION 1 2 3 >30% Market share in paper and paperboard grades MARKET + CUSTOMER + PRODUCT = Maintain a global Retain and grow with Accelerate launch of presence, but enhance our regional capability our Tier One Partners and capture Tier Two innovative pro
Slide 31: Expanded Growth Opportunities for AEC
Expanded Growth Opportunities for AEC Greg Harwell President – Albany Engineered Composites Investor Day 2022 | 31
Slide 32: Key Takeaways
KEY TAKEAWAYS 1 An Established A&D Supplier Winning New Customers and 2 Major Platforms Investing in R&D to Build 3 Lasting Technology Platform Strong Revenue Growth 4 Expected Investor Day 2022 | 32
Slide 33: Balanced, Accelerated Growth
BALANCED, ACCELERATED GROWTH Specialized engineered PRE-PANDEMIC POST-PANDEMIC composite solutions business with full range of capabilities 2019 2026 Target 10% Delivering on critical jet engine 3% and airframe components, structure and assemblies Globally recognized 25% >$300M Aero & Def player 45%
Slide 34: Shared Technology Solutions Power AEC Growth
SHARED TECHNOLOGY SOLUTIONS POWER AEC GROWTH Through M&A, gained full range of composite process & material technologies Texas Composites (2006), Aztex (2006) Harris (2016), CirComp (2019) LEAP CH-53K Albany – Safran Joint Venture Innovative 3D woven technology F-35 787 Dedicated Research Developmen
Slide 35: Value Proposition Based on Key Differentiators
VALUE PROPOSITION BASED ON KEY DIFFERENTIATORS World class performance • Customer Intimacy • Application Understanding • Tools and R&D Team Technology • Highly Adaptable Solutions Driving Value • Intimate Knowledge AEC • High-Performance Team • Engineering Differentiators • Safety, Quality, LEAN • D
Slide 36: Recovering Market Dynamics
RECOVERING MARKET DYNAMICS Commercial Aerospace Defense Aerospace Business Jets 16-20% ~4% 4-8% Mkt $ CAGR (’21/’26) Mkt $ CAGR (’21/’26) Mkt $ CAGR (’21/’26) • Domestic air travel recovery • Shifting focus to compete • Demand aligned to corporate quicker than International globally profitability •
Slide 37: Layered Growth Strategy Drives 14+% Top Line CAGR
LAYERED GROWTH STRATEGY DRIVES 14+% TOP LINE CAGR BASE BUSINESS NEW BUSINESS Perform on Strong Portfolio of Defense Programs Operational Excellence Opening Doors with New Customers Deliver on Ramping Commercial Narrow Body Build New Technology Strong Potential in Positions Commercial Wide Body ~8% 5
Slide 38: Strong Defense Programs Portfolio
STRONG DEFENSE PROGRAMS PORTFOLIO DEFENSE BUSINESS (5yr Target, 45% of Segment Revenue) F-35 CH-53K JASSM STEADY RAMPING MODERATE GROWTH Other FIXED WING R O TA R Y MISSILE • Top 3 programs comprise 80+% F-35 CH-53K JASSM of defense revenue (ALL VARIANTS) • Defense revenues grow low-double digit rat
Slide 39: Strong Portfolio in Commercial
STRONG PORTFOLIO IN COMMERCIAL COMMERCIAL E A R LY S TA G E S BUSINESS OF RECOVERY (5yr Target, 45% of Segment Revenue) LEAP B787 GE9x + GEnx Other LEAP B787 GE9x/GEnx • All LEAP engine variants; 3D Woven, conventional work • Comm WB revenues grow ’26 REVENUE ’26 REVENUE ’26 REVENUE >20% thru ‘26 (v
Slide 40: Successful Safran Partnership to Continue
SUCCESSFUL SAFRAN PARTNERSHIP TO CONTINUE LEAP Next Gen 20 Year Expanding Partnership, 2000 2021 2046 and Extending and Growing Partnership Exclusive, life-of-program supplier of composite fan blades, fan cases, and spacers for LEAP-1A/C and LEAP-1B Exclusive agreement covering GE9x fan case develop
Slide 41: Securing New Business
SECURING NEW BUSINESS Significant 2021 Wins and Growing Expanding defense mix Pipeline of New Pursuits 2026 New $ in millions Business Target $180 $160 Expanding advanced composite $140 applications $120 $100 $80 Significant 2021 Wins $60 • Expand CH-53K statement of work; key platform partner $40 •
Slide 42: Investing in Next-Gen Technologies for Future Growth
INVESTING IN NEXT-GEN TECHNOLOGIES FOR FUTURE GROWTH Leaders in Driving Advanced Revenue Potential in next 5yrs Composite Innovation Hypersonics • Thermal protection Moving 3D woven Investing in emerging systems development technology beyond LEAP technologies development • Technical collaboration wi
Slide 43: Top Priorities Based on Maximizing Shareholder Value
PRIORITIES BASED ON MAXIMIZING SHAREHOLDER VALUE 1 2 3 MAXIMIZING OUR CONTINUING TO TOP CUSTOMER SOLUTION OFFERING DRIVE TECHNOLOGY DIFFERENTIATION OPPORTUNISTIC M&A PRIORITIES Focus on providing the best value Proliferate 3D woven technology Accelerate readiness propositions and experience with acr
Slide 44: Robust Growth Potential
ROBUST GROWTH POTENTIAL STRONG LINE OF SIGHT TO DOUBLING REVENUE DOUBLING REVENUE IN 5 YEARS IN NEXT 5 YEARS 2x Commercial Aero MARKET RESURGENCE $309m Sustained support and growth of KEY DEFENSE PROGRAMS Further program penetration with STRATEGIC CUSTOMERS 2021 5 Year Target Investor Day 2022 | 44
Slide 45: Operational Success Suggests Strong Financial Profile
Operational Success Suggests Strong Financial Profile Stephen Nolan Chief Financial Officer & Treasurer Investor Day 2022 | 45
Slide 46: Key Takeaways
KEY TAKEAWAYS 1 Strong Historical Performance 2 Prudent Capital Allocation Strategy 3 Disciplined M&A Strategy 4 Targets / Goals / Outlook Investor Day 2022 | 46
Slide 47: 2021 Financial Highlights
2021 FINANCIAL HIGHLIGHTS REVENUE ($M) ADJ. EBITDA & MARGINS FCF ($M) & CONVERSION* $200 150% $1,054 $983 $300 30% $901 $929 $864 $150 100% $250 25% $780 $200 20% $100 50% $150 15% $50 0% $100 10% $- -50% $50 5% $- 0% $(50) -100% 2016 2017 2018 2019 2020 2021 2016 2017 2018 2019 2020 2021 2016 2017
Slide 48: Strong Revenue Growth
STRONG REVENUE GROWTH REVENUE ($) EBITDA Margin Impact 1.2 -1.3b ~930m MC Stable, high 30s target AEC Growing, low-mid 20s target Investor Day 2022 | 48
Slide 49: Historical Focus on Net Debt and Leverage Reduction
HISTORICAL FOCUS ON NET DEBT AND LEVERAGE REDUCTION NET DEBT* ($M) AND LEVERAGE $350 $332 2.5 $327 $303 $300 2 $250 1.96x $228 1.79x 1.5 $200 1.43x $157 $150 1 $100 0.86x 0.62x 0.5 $48 $50 $- 0.19x 0 2016 2017 2018 2019 2020 2021 Net debt is defined as total principal debt outstanding less cash and
Slide 50: Capital Allocation Framework
CAPITAL ALLOCATION FRAMEWORK Invest in 1 Disciplined M&A employees: Seek businesses we can take to the next talent, retention level in terms of sales and profitability & leadership Internal Investment – Remaining Capital Organic Growth Initiatives Continue re-investing in strategic projects 2 Return
Slide 51: Capital Allocation Framework
CAPITAL ALLOCATION FRAMEWORK Percentage of cash flow from operations Available Cash uses 2017-2021 2022-2026 include 30% 35% 44% 50% 6% Disciplined M&A 15% 16% 3% Cash to Shareholders CapEx Base Dividend CapEx Base Dividend Available Cash Share Repurchases M&A Share repurchase Net Debt Reduction Div
Slide 52: Disciplined Approach to M&A
DISCLIPLINED APPROACH TO M&A Strategy is not dependent on FINANCIAL CHARACTERISTICS acquisitions; we can successfully execute our organic growth strategy without executing any transactions However, selective acquisitions can accelerate our organic growth strategies IRR >> Cost Maintain long-term Str
Slide 53: M&A Priorities
M&A PRIORITIES Driven by technology and effective market positioning MC TARGET CHARACTERISTICS Complementary market positions (strength in geographies or product areas with opportunities) Continued operational scale to drive market- leading cost position Technologies that could further enhance our p
Slide 54: Long Term Targets
LONG TERM TARGETS 2022-2026 Organic Goals LONGER-TERM New engine development expected Mid 20s >5% to kick-in in late-2020s/early-2030s >100% ~$1.3B of net income on average Opportunities for expanded role for 3D weaving on next-generation commercial airliners towards back-end of this decade Continue
Slide 55: Albany International's Highly Attractive Investment Opportunity
Long history Leader in PMC with of strong balance proprietary solutions sheet, solid delivering predictable execution, and and strong FCF ALBANY stability prudent capital management INTERNATIONAL’S HIGHLY ATTRACTIVE Differentiated INVESTMENT composites OPPORTUNITY business with ample opportunity to
Slide 56: Investor Day
Investor Day May 25, 2022 Investor Day 2022 | 56
Slide 57: Appendix
Appendix Investor Day 2022 | 57
Slide 58: Transformation to High-Performing Company with Focused Plans for Accelerating Growth
TRANSFORMATION TO HIGH-PERFORMING COMPANY WITH FOCUSED PLANS FOR ACCELERATING GROWTH 2000 - 2004 2005 - 2009 2010 - 2019 2020 – 2021 2022 & Beyond MC Strategic Focus MC Market & Technology Leadership MC Market & Technology • Secularly Growing Operational Excellence Leadership Grades MC Market & Tech