Ampco-Pittsburgh Corp. Small-Cap Virtual Conference

Hello, everyone. My name is Brett McBrayer, the CEO of Ampco-Pittsburgh. Also joining me today is David Anderson, who is the CFO of Ampco-Pittsburgh, as well as a segment president for Air and Liquid Systems, and Sam Lyon, who is the president of Union Electric Steel. As John stated, we are a holding company. We have four distinct and unique businesses, very separate, different customer base. It is a holding that we have had in our portfolio for basically probably the last 20 plus years. A little bit about the business. If you look at revenue mix, the segments, Union Electric Steel or Forged and Cast Engineered Products, as we call it, has two-thirds of the revenue, and about a third of that comes from the Air and Liquid System processing group. You can see the revenue for 2025, a little over $430 million.

Adjusted EBITDA margins around 6.7%. Backlog at the end of June of this year was around $385 million. The market cap at the end of June was roughly $180 million. If you look at the customers we serve, we are either number one or top tier in all the segments or customer bases we play in. The next slide, please, Dave. So why invest in Ampco-Pittsburgh? I think there are several things happening right now. First of all, you look at the Forged and Cast Engineered Products group, Sam's segment. We are just seeing a lot of interesting and positive dynamics happening in the marketplace. We are seeing the industry recover.

The Section 232 tariffs, which were put in place in the first Trump administration, maintained during the Biden administration, and then really improved upon, in our view, during the second Trump administration, has really driven steel and aluminum production growth in North America in particular. We are watching what Europe is doing, where they recently tried to copy our tariff system to protect their steel industry, come into effect at the end of July of this year, and we are starting to see the impact of that tighter quota system and higher tariffs starting to revitalize that industry. Although, in Europe, it is happening much slower than it is in the U.S. But some positive dynamics there. The other piece is the Air and Liquid Systems segment. The products we serve are in really, produce are in really, I would say, hot markets right now.

We're in a position where we can sell everything we make, and our challenge right now is how do we make things faster? How do we grow that business even more so than it has grown in the past several years? With the restructuring that we've recently done, we're seeing improvement in balance sheet and cash flow performance. If you look at the business from evaluation and strategic optionality, we think there's a lot of good plays with AP. Again, we're four very distinct businesses, and we have some options in the future on how we may choose to optimize our portfolio for further growth. A little bit about the strategic roadmap, and it's somewhat truncated. I've been with AP for 8 years now. We've done a lot over the past several years of really trying to right-size the business.

Back in 2016, before I came on board, the prior administration, if you will, we had a lot of cash on the balance sheet, and the goal was to go out and buy our largest steel producing competitor in the marketplace and try to take share and command higher prices in the marketplace, and that strategic play did not work out. Unfortunately, it left us with a lot of businesses that were underperforming, underutilized, and losing a lot of cash. It's been a very slow process for us as cash has been tight in the past, and we've been slowly picking away and tearing out the parts of the business that didn't make sense.

The last big, heavy lift that we did has occurred actually last October, almost a year ago, when we exited our U.K. cast roll facility that was losing significant money, as well as a smaller distribution business in the U.S. As we look forward, it's all about capturing the impact of really the changed portfolio. We haven't really seen it fully hit the P&L yet. We'll start to see the full impact. We're seeing bits of it now, but we'll see the full impact in the fourth quarter of this year. This $7 million-$8 million of annualized EBIT improvement will start to show up and be reflected in our numbers.

We're seeing continued growth in Air & Liquid Systems, as I said before, in that segment, and we really want to focus on strengthening our balance sheet, getting our debt back in line, and we'll talk a little bit more about that in the upcoming slides. Future state is really just capturing the growth opportunities that are out there. We're excited about the opportunities that exist. Now I'm going to turn it over to Sam, who's the President again of the Forged and Cast Engineered Products segment.

Thank you, Brett. Just to expand a little bit on what Brett said. We are the number one Forged and Cast mill roll supplier in North America and top tier in Europe. We were number one in Europe prior to closure of the U.K. Still a critical supplier over there. One thing that is not on the slide that I think is important to know is that our products are consumables. As you roll steel, the mill roll actually wears out, and they have to be replaced. So 95% of what we make is replacement product, and 5% supports new project builds, new steel mills, new aluminum mills, and things like that. We are very well known in the industry. Customers all know us for our quality and customer service. As Brett said, the tariff structure is very favorable right now in North America and in Europe.

They have realized that they are going to lose a lot or most of their steel industry if they did not do something. As of July 1st of this year, they cut their quotas in half that they allowed to come into Europe tariff-free, and they doubled their tariff from 25% to 50%, and also implemented, just as the U.S. did, a melt and pour requirement. The steel has to actually originate in Europe. The expectation of that is that the mills will go from 65% utilization to north of 80%, which is a significant increase, which in turn will drive more demand for rolling mill rolls. The short-term focus is on asset utilization. By closing the U.K., we transferred product to Sweden and greatly increased their utilization, thereby increasing their profitability, which is important to our future profitability and growth.

One other comment on this slide is the Forged Engineered Products segment. That is our non-roll product used in automotive, plastic injection molding, oil and gas, general industrial. That has traditionally been a very small slice of the business. You can see it was 6% in 2025. That will be growing several percentage points closer to 10% moving forward. That is mainly due to the tariff structure. There are tariffs that prevent, or not prevent, but make the U.S. manufacturing base much more competitive against what used to be largely imports. So we are seeing a growth in both the volume and the profitability of that segment of our business. You can see on the bottom of the page all the major customers that we have across steel and aluminum. We can move to the next slide. If we look at our revenue, 2021 was a low point. It has been pretty steady.

The one comment I will make about 2025 is that number being or 2026 number is going to be similar to 2025, and that is mainly due to growth in the U.S. and then also transfer of product from the U.K. to Sweden. So despite closing U.K. and the exit of our small distribution business, our revenues remained fairly close to where it was in 2025, and we expect it to grow pretty significantly by mid to higher single-digit percentage points in 2027. The one comment that I think Brett made, or if he did not, the closure of the U.K. and our small distribution business results in a direct improvement to our bottom line of $7 million to $8 million. Look at the next page.

It's just a look at the end markets that our customers serve, and we can see that the estimates are a little bit down from the last time that I stated, but they're still positive. This is different from the last five or six years where only really North America construction spend was up. Everything else was zero or negative in those kind of ranges. We still see demand increasing. Actually, Europe is looking like a recovery, particularly in the canned sheet demand and their construction output turning positive. Right now, the interest rate structure is not very favorable for automotive. Should that turn around in the future, that'll be another tailwind for us. I already spent a lot of time talking about tariffs, but the end result of that is that they're delivering as intended. Overall flat-rolled imports decreased over 40%.

Since the introduction of Section 232 tariffs, that's directly resulted in investment in the United States. Steel Dynamics has invested in a new mill in Sinton, West Virginia. Nucor has a new mill in West Virginia. Multiple galvanizing lines have gone in. There's a new aluminum smelter being built in the U.S. for the first time in over 30 years. Steel Dynamics is building a new aluminum mill, as are several others. That gives us confidence that the current landscape is here to change. The whole goal of the tariffs was to bring work to the United States and also bring investment, which is occurring. It's a very positive backdrop for the United States from an overall production perspective.