Ampco-Pittsburgh (NYSE:AP) executives said the company took major portfolio actions during the fourth quarter of 2025 to remove underperforming assets, while noting early 2026 booking trends have improved across both operating segments.
Chief Executive Officer Brett McBrayer said the company “initiated and completed the removal of significant underperforming assets” and expects those actions to improve adjusted EBITDA by approximately $7 million to $8 million annually as the company emerges from what management described as a steel market slowdown.
Air and Liquid Processing posts record year, sees strong early 2026 bookings
David Anderson, vice president, chief financial officer, and president of Air and Liquid Systems Corporation, said 2025 was a “record-breaking year” for the Air and Liquid segment, with new highs in revenue and adjusted EBITDA.
In the fourth quarter, segment revenue increased 10% year over year, driven by higher revenue in air handlers and heat exchangers, while full-year revenue rose 7% with growth across all product lines. Fourth-quarter adjusted EBITDA was $3.3 million versus $3.7 million in the prior year, which Anderson said was due to unfavorable product mix. Full-year adjusted EBITDA totaled $15.4 million, the highest in the segment’s history and a 21% increase over the prior year.
Air and Liquid backlog declined $8 million year over year, primarily due to the U.S. Navy’s decision to terminate production of the Constellation-class frigate program. Anderson said $7.1 million of orders were removed from backlog in late 2025, and that costs related to the terminated orders are expected to be paid by the Navy “along with normal profit margins.”
While backlog ended lower, management highlighted strong order momentum entering 2026. Anderson said order activity was up 73% in the first two months of 2026 compared to the prior year period. He added that bookings for the U.S. Navy market were more than $9 million in the first two months of 2026, which he said more than replaced the $7.1 million removed from backlog due to the frigate program termination.
Anderson also described several end markets supporting demand:
- Nuclear heat exchangers: 2025 orders and shipments were the highest in the company’s history, and management said the market has long-term growth potential.
- U.S. Navy demand: Anderson said demand remains strong and is expected to continue as the Navy moves forward with fleet expansion plans.
- Pumps and capacity expansion: Manufacturing equipment installed in 2024 increased pump manufacturing capacity, with additional capacity expansion in process. Anderson said more equipment funded by a Navy program arrived in early 2026 and is expected to begin producing in the second quarter of 2026, with additional equipment expected later in the year.
- Commercial pumps tied to AI data centers: Anderson said demand is being supported by high activity in the gas turbine market due to the need for additional power for data centers. He said 2025 commercial pump bookings were a record.
- Custom air handlers: Management said demand remains strong, citing significant demand in the pharmaceutical market.
In response to an analyst question about margins, Anderson said the fourth-quarter mix was “a little bit of an unusual mix” driven by shipping timing, and that the full-year margin profile was more representative of typical performance. He also said nuclear and Navy markets are “good markets” with limited competition due to high barriers to entry.
FCEP results reflect U.K. exit costs, Sweden ramp, and tariff-related demand pause
Sam Lyon, president of Union Electric Steel Corporation, said the Forged and Cast Engineered Products division reported fourth-quarter net sales of $70.9 million, up from $66.5 million a year earlier. Full-year net sales were $292.6 million compared with $286.6 million in the prior year, which he characterized as a stable top-line result.
On a GAAP basis, the segment posted an operating loss of $44.7 million for the full year. Lyon said the loss was primarily driven by one-time exit costs, including a $41.4 million deconsolidation charge associated with closing the company’s U.K. facility. On an adjusted basis, FCEP generated $24.4 million of adjusted EBITDA for the full year. Fourth-quarter adjusted EBITDA was $2.2 million versus $5.5 million in the prior-year quarter.
Lyon attributed the fourth-quarter decline to fewer operating days in the U.S., higher forged engineered products (FEP) production relative to rolls, foreign exchange headwinds, and ramp-up costs in Sweden. He said the company proactively curtailed U.S. production days in response to temporary softness in roll demand as customers digested steel tariff impacts.
Looking ahead, Lyon said a primary focus is optimizing the Sweden facility, with a roadmap for improvements throughout 2026 that are expected to begin showing in results during 2026 and be “fully realized” in 2027. He said the weakening of the U.S. dollar against the Swedish krona has created a short-term headwind because supplies and labor are in SEK and euros while about 40% of Sweden’s product is sold to the U.S. in dollars. He said the company is adjusting 2027 pricing to account for the change and is moving some European customers to purchase in SEK.
Lyon said the Sweden operation is ramping production and is expected to reach a production level about 20% higher than 2025 by the third quarter of 2026. He added that Sweden is improving its mix by removing some lower-margin rolls originally destined for the U.K. and is finishing lower-margin backlog orders from 2025. He said the order book is expected to be normalized by the end of the second quarter, positioning the business for full margin realization starting in the third quarter of 2026.
On industry conditions, Lyon said European market softness persists, but consolidating cast operations in Sweden should help manage utilization. He also said two competitors have begun winding down operations, which he said could create opportunities for both cast and forged rolls. Additionally, he said stricter European quotas and increased tariffs expected to take effect in the second half of 2026 should raise utilization for customers and drive higher roll demand in 2027. For U.S. forged operations, Lyon said backlog and pricing have increased meaningfully for non-roll FEP due to Section 232 tariffs, providing added backlog diversification.
During Q&A, Lyon said the pause in roll orders in 2025 reflected the time needed for the industry to calculate tariff impacts—particularly for composite rolls—and for customers to determine pricing, which prompted some to temporarily hold orders. He said those issues have largely been digested entering 2026.
One-time charges, asbestos accrual adjustment, and liquidity
Anderson said results in the quarter included “a great deal of one-time, primarily non-cash items” tied to previously disclosed decisions to exit the unprofitable U.K. operations and a small steel distribution business in the U.S. He said deconsolidation and other costs related primarily to the U.K. exit totaled $42.4 million in the fourth quarter and $52.2 million for the full year.
The company also recorded a non-cash $11.9 million after-tax expense in the fourth quarter related to a revaluation charge of its asbestos accrual. Anderson emphasized that the updated third-party estimate “does not mean that we expect our asbestos payments to increase” and said projections indicate payments should begin decreasing starting in 2027, though at a slower pace than projected as of year-end 2024.
Net sales for the fourth quarter were $108.8 million, up $7.8 million year over year, while full-year 2025 net sales were $434.2 million, up $3.8 million. Anderson said both increases were driven by higher sales in both operating segments.
For the full year, Anderson said selling and administrative expenses declined $2.8 million, or 5%, primarily due to lower employee-related costs, partially offset by higher sales commissions in both segments. He also said depreciation and amortization increased due to accelerated depreciation tied to the exit charges. Other expense and income changes were attributed mainly to lower foreign exchange transaction losses and lower pension income following asset allocation changes made to protect the funded status of the U.S. defined benefit plan. Anderson said the pension plan was nearing fully funded status at the end of 2025 and achieved fully funded status in early 2026.
At December 31, 2025, the company reported cash on hand of $10.7 million and undrawn availability on its revolving credit facility of $25.5 million.
Management outlook: recovery signs in roll market, focus on 2026 execution
In closing remarks, McBrayer said the company’s core business is improving following the fourth-quarter actions, and that it anticipates improved profitability as it emerges from the steel market slowdown. Management also said bookings accelerated in the first two months of 2026 across both operating segments and said the roll market is showing signs of recovery as the company enters 2026, with shutdown costs now behind it.
In another Q&A exchange, Anderson said the company has supplied heat exchangers to Westinghouse in the past, including for the AP1000 reactor product, but noted the timing for that particular program’s activity is not yet clear. He said the company generally participates early in the order cycle because customers seek to secure heat exchangers early, and added that the broader nuclear market remains active across multiple areas, including plant restarts and small modular units.
About Ampco-Pittsburgh (NYSE:AP)
Ampco-Pittsburgh Corporation is a U.S.-based specialty metals manufacturer that produces cast and forged components for a range of industrial markets. The company’s primary offerings include custom-designed forged rolls, grinding rolls and specialty bars for the steel and metal processing industries. In addition, Ampco-Pittsburgh supplies precision couplings, gears and die components for original equipment manufacturers in sectors such as mining, power generation and heavy machinery.
The company operates multiple production facilities in North America, where it employs advanced melting, heat-treating and machining processes to deliver components with tight tolerances and enhanced wear resistance.
