10-Q: Ampco-Pittsburgh Q3 Loss Widens Amid UK Exit, Tariffs

Ampco-Pittsburgh Corporation reported a wider net loss in Q3 2025, driven by significant exit charges from its UK operations and mixed segment performance.

Summary

• Net loss attributable to Ampco-Pittsburgh widened to $(2,211) thousand for the three months ended September 30, 2025, compared to $(1,959) thousand for the same period in 2024.
• Year-to-date net loss attributable to Ampco-Pittsburgh increased to $(8,404) thousand for the nine months ended September 30, 2025, from $(2,664) thousand in the prior year.
• Total net sales increased to $108,009 thousand in Q3 2025 from $96,166 thousand in Q3 2024, and to $325,378 thousand year-to-date 2025 from $317,369 thousand year-to-date 2024.
• Income from operations decreased to $1,123 thousand in Q3 2025 from $1,870 thousand in Q3 2024, and to $1,895 thousand year-to-date 2025 from $6,995 thousand year-to-date 2024.
• The Forged and Cast Engineered Products (FCEP) segment reported an operating loss of $(401) thousand in Q3 2025 and $(459) thousand year-to-date 2025, primarily due to $3,069 thousand (Q3) and $9,819 thousand (YTD) in exit charges related to the UES-UK and AUP closures.
• The Air and Liquid Processing (ALP) segment operating income increased to $4,160 thousand in Q3 2025 and $11,576 thousand year-to-date 2025.
• Consolidated backlog decreased to $344,640 thousand as of September 30, 2025, from $378,884 thousand as of December 31, 2024.
• The Corporation expects to recognize a non-cash impairment charge in the fourth quarter of 2025, ranging between $43,000 thousand and $45,000 thousand, related to its investment in UES-UK.

Sentiment

Score: 3

Explanation: The company reported a wider net loss and declining operating income, primarily due to significant exit charges and struggles in its FCEP segment. While the ALP segment shows growth and some tariff benefits are noted, the overall financial performance is weak, and a substantial impairment charge is expected. Liquidity is deemed sufficient, but the overall picture is negative.

Positives

• Total net sales increased by $11,843 thousand for the three months and $8,009 thousand for the nine months ended September 30, 2025, compared to the prior year.
• The Air and Liquid Processing (ALP) segment demonstrated strong growth, with net sales increasing by $7,579 thousand (Q3) and $6,451 thousand (YTD), and operating income increasing by $1,026 thousand (Q3) and $3,286 thousand (YTD).
• ALP segment backlog increased by $10,441 thousand, driven by strong order activity in the pharmaceutical, nuclear, and U.S. Navy markets.
• The FCEP segment benefited from improved pricing and higher variable-index surcharges, which improved operating results by approximately $4,100 thousand (Q3) and $7,900 thousand (YTD).
• The Corporation received Employee-Retention Credits of $735 thousand year-to-date 2025, with $456 thousand allocated to FCEP and $279 thousand to ALP.
• An income tax benefit of $100 thousand (Q3) and $900 thousand (YTD) was recognized due to the Chinese joint venture qualifying as a high-tech enterprise, reducing its tax rate from 25% to 15% through 2026.
• Net cash flows used in investing activities decreased by $2,150 thousand, primarily due to lower capital expenditures and higher proceeds from asset sales.
• Net cash flows provided by financing activities increased by $4,043 thousand, largely due to proceeds from new Equipment Term Notes.

Negatives

• Net loss attributable to Ampco-Pittsburgh widened for both the three-month (from $(1,959) thousand to $(2,211) thousand) and nine-month (from $(2,664) thousand to $(8,404) thousand) periods.
• Operating income decreased by $747 thousand for the three months and $5,100 thousand for the nine months ended September 30, 2025.
• The FCEP segment reported an operating loss of $(401) thousand (Q3) and $(459) thousand (YTD), primarily due to $3,069 thousand (Q3) and $9,819 thousand (YTD) in exit charges.
• Consolidated backlog decreased by $34,244 thousand, mainly due to a $60,200 thousand reduction in mill roll backlog for the FCEP segment.
• Lower volume of roll shipments and unfavorable manufacturing absorption adversely impacted FCEP operating results by approximately $2,400 thousand (Q3) and $5,300 thousand (YTD).
• An expected non-cash impairment charge of $43,000 thousand to $45,000 thousand will be recognized in Q4 2025 related to the UES-UK investment.
• Net cash flows used in operating activities for the nine months ended September 30, 2025, were $(1,363) thousand, a significant change from $10,576 thousand provided in the prior year.
• Asbestos liability remains substantial at $186,233 thousand as of September 30, 2025, with $20,859 thousand in gross settlement and defense costs paid year-to-date.
• Costs of products sold, excluding depreciation and amortization, as a percentage of net sales, increased to 80.2% in Q3 2025 from 79.4% in Q3 2024.

Risks

• Inability to maintain adequate liquidity to meet operating cash flow requirements, repay maturing debt, and meet other financial obligations.
• Economic downturns, cyclical demand for products, and insufficient demand, particularly in the steel industry due to excess global capacity.
• Inability to successfully restructure operations, exit U.K. operations, and/or invest in operations that will yield long-term value to shareholders.
• Changes in the global economic environment, inflation, the ongoing impact of tariffs, elevated interest rates, recessions or prolonged periods of slow economic growth, global instability, and actual and threatened geopolitical conflict.
• Liability of subsidiaries for claims alleging personal injury from exposure to asbestos-containing components historically used in certain products.
• Inability to obtain necessary capital or financing on satisfactory terms to acquire capital expenditures that may be necessary to support growth strategy.
• Inoperability of certain equipment on which the Corporation relies.
• Increases in commodity prices or insufficient hedging against increases in commodity prices, reductions in electricity and natural gas supply, or shortages of key production materials.
• Inability to satisfy the continued listing requirements of the New York Stock Exchange.
• Potential attacks on information technology infrastructure and other cyber-based business disruptions.
• Fluctuations in the value of the U.S. dollar relative to other currencies.
• Changes in the existing regulatory environment.
• Consequences of pandemics and geopolitical conflicts.
• Work stoppage or another industrial action on the part of any of the Corporation's unions.
• Failure to maintain an effective system of internal control.
• Risks and uncertainties related to the insolvency proceedings of Union Electric Steel UK Limited (UES-UK), including actions of administrators, interpretation of U.K. insolvency law, potential claims by creditors, ability to recover assets, and broader impact on financial condition and strategic plans.

Future Outlook

The Corporation expects to recognize a non-cash impairment charge of $43,000 thousand to $45,000 thousand in the fourth quarter of 2025 due to the UES-UK insolvency, with future cash expenditures associated with this insolvency expected to be insignificant. Management anticipates sufficient liquidity from funds on hand, future operations, and the revolving credit facility to finance operational requirements, debt service, and capital expenditures. There is a reasonable possibility within the next 12 months that sufficient positive evidence may allow for the reversal of some portion of the valuation allowance on deferred income tax assets in Sweden. Tariffs on steel and aluminum are expected to continue to be passed on to customers, and the U.S.'s onshoring of additional manufacturing capabilities could potentially increase demand for the ALP segment's products.

Management Comments

• "The U.K. operations have been impacted by unpredictable and high energy costs compared to its foreign competitors, lower demand for its products manufactured in the U.K., and increased imports of rolls and flat rolled steel into Europe from low-cost countries."
• "The Corporation expects to recognize a non-cash impairment charge in the fourth quarter of 2025, ranging between $43,000 and $45,000, based on estimates as of September 30, 2025."
• "The Corporation is actively monitoring, and will continue to actively monitor, changes prompted by the U.S. government, repercussions from the Middle East conflicts and similar geopolitical matters, economic conditions, and other developments relevant to its business."
• "The Corporation believes the segment's remaining European cast operations are approximately on equal footing with its competition with respect to tariffs."
• "Tariffs on steel product also have been a tailwind for the segment's FEP products resulting in increased order volumes."
• "The U.S.'s onshoring of additional manufacturing capabilities would potentially increase demand for the segment's products."
• "Funds on hand, funds generated from future operations and availability under the Corporations revolving credit facility are expected to be sufficient to finance the Corporations operational requirements, debt service costs and capital expenditures."

Industry Context

The FCEP segment operates in a challenging global steel industry characterized by excess manufacturing capacity and soft but stable demand. Increased imports of low-priced steel products into the U.S. and Europe have negatively impacted local demand. Tariffs imposed by the U.S. government on steel and aluminum imports have created a mixed impact, acting as a tailwind for FEP products and potentially leveling the playing field for U.S. cast roll producers, while also causing uncertainty and order deferrals. The ALP segment, conversely, is benefiting from increased demand in the power generation and U.S. military markets, aligning with broader trends in infrastructure and defense spending. Both segments continue to face increasing production costs due to inflation, which the company is attempting to mitigate through price increases.

Corporate Governance

Legal Proceedings

• Asbestos litigation: Claims alleging personal injury from exposure to asbestos-containing components historically used in some products manufactured by predecessors of Air & Liquid. Total active claims at September 30, 2025, were 2,794. Gross settlement and defense costs paid in the period were $20,859 thousand.
• UES-UK Structured Insolvency: On October 13, 2025, UES-UK filed a Notice of Intention to appoint administrators, formally appointed on October 14, 2025. This action is confined to UES-UK exclusively and does not affect the Corporation or its other subsidiaries. The Administrators will manage UES-UK's affairs, business, and property, likely leading to an orderly wind-down and asset sale.

Related Party Transactions

• ATR (59.88% indirectly owned joint venture) has sales to and purchases from its minority shareholder and affiliates, and sales to a shareholder of one of the Corporation's other joint ventures in China and its affiliates.
• Purchases from related parties totaled $2,657 thousand for Q3 2025 and $6,669 thousand for YTD 2025.
• Sales to related parties totaled $4,261 thousand for Q3 2025 and $13,471 thousand for YTD 2025.
• Accounts receivable from related parties were $2,166 thousand as of September 30, 2025.
• Accounts payable to related parties were $502 thousand as of September 30, 2025.
• ATR leases land from its other partner, with variable lease payments. Rent paid was $31 thousand for Q3 2025 and $94 thousand for YTD 2025, included in purchases from related parties.

Stakeholder Impact

• Shareholders: Negative impact due to wider net loss, expected significant impairment charge, and declining overall backlog. Potential for future value from ALP segment growth and successful restructuring efforts.
• Employees (UES-UK, AUP): Significant impact due to severance charges and job losses resulting from the exit of UES-UK operations and the closure of AUP.
• Creditors (UES-UK): The Administrators will manage UES-UK's affairs and propose distributions to creditors according to the Insolvency Act 1986.
• Lenders (Ampco-Pittsburgh): Credit Agreement covenants were in compliance, but a temporary modification to the Trigger Period definition was made in anticipation of UES-UK insolvency. An estimated $7,000 thousand to $9,000 thousand is expected to be returned to lenders under the Credit Agreement from UES-UK assets.
• Customers (FCEP): Potential disruption from the UES-UK exit, though the company is working to transfer orders to other facilities. Tariffs create uncertainty regarding total cost but are largely passed on.
• Customers (ALP): Benefiting from increased demand and market share in power generation, U.S. military, pharmaceutical, and nuclear markets.
• Insurance Carriers (Asbestos): Continue to bear the majority of settlement and defense costs for asbestos claims, subject to the terms and conditions of settlement agreements and overall coverage limits.

Next Steps

• The Administrators of UES-UK will set out their proposals to UES-UK's creditors, likely including an orderly wind-down of financial affairs and sale of assets.
• The Corporation expects to recognize a non-cash impairment charge in the fourth quarter of 2025, ranging between $43,000 thousand and $45,000 thousand, related to its investment in UES-UK.
• The Corporation is currently evaluating the impact of ASU 2024-03 (effective 2027/2028) and ASU 2025-6 (effective 2028) on its future financial disclosures and accounting.
• The Corporation is currently evaluating the impact of the One Big Beautiful Bill Act (OBBBA) on its condensed consolidated financial statements.
• The Corporation intends to continue to evaluate the Asbestos Liability, related insurance receivable, and underlying assumptions on a regular basis.
• Commitments for future capital expenditures approximating $8,600 thousand are expected to be spent over the next 12-18 months.
• The Corporation may from time to time consider alternatives, potential transactions, and other strategies in an attempt to enhance its liquidity.

Key Dates

Recommendation

The company reported a significant widening of its net loss and a substantial decline in operating income, primarily driven by considerable exit charges and an expected large impairment charge related to the UES-UK insolvency. While the Air and Liquid Processing segment shows some positive momentum, the core Forged and Cast Engineered Products segment is struggling with lower volumes and unfavorable manufacturing absorption. The overall backlog has decreased, and net cash flows from operations turned negative year-to-date. These factors indicate significant operational challenges and financial deterioration, suggesting a 'sell' recommendation for a seasoned investor.

Keywords

Specialty metal products, Engineered products, Forged steel, Cast rolls, Air handling systems, Heat exchange coils, Centrifugal pumps, SEC filing, 10-Q, Financial results, Q3 2025, UES-UK, Insolvency, Exit charges, Tariffs, Asbestos liability, Manufacturing, Industrial