Albany International (AIN) Q3 2026 earnings review
Albany reworks its helicopter contract, but paper-belt profit falls
Albany's composites business grew fast, and the group reworked its troubled helicopter contract instead of selling the plant that builds it. Excluding a one-time gain from that deal, revenue rose about 10% from a year ago, because composites outgrew the decline in paper belts. Chief executive Gunnar Kleveland said Albany can now "shift from addressing legacy challenges to focusing decisively on future opportunities across aerospace and defense".
| Revenue, excluding the CH-53K contract adjustments | $337.9M +10% from a year ago |
|---|---|
| Profit per share, excluding one-offs and the contract gain | $0.80 $0.71 a year ago |
| Engineered Composites revenue, on the same basis | $168.1M +27% from a year ago |
| Fourth-quarter revenue outlook | $325–335M middle of the range: about 3% growth |
⚖️ Verdict: 🟢 Bullish
The story got better because the largest open risk closed: the review ended with a reworked CH-53K contract and a $44 million reversal of last year's loss, not a forced sale. The bad news: Machine Clothing earned less on lower volume, so without the contract gain group profit stood where it was a year ago, and the fourth-quarter plan puts profit per share below this quarter's underlying level.
The question now is what the reworked CH-53K contract earns from here. Either the helicopter programme runs at a normal margin and lifts composites above their 13% underlying level, or it still runs near break-even and the segment stays there. The fourth-quarter composites margin and the December investor day will tell.
🐂 Bull Case
Composites Grew 27% Without the Contract Gain
Engineered Composites makes woven carbon-fibre parts for jet engines, aircraft frames and missiles. Reported revenue more than doubled, but $11.6 million of that came from the reworked CH-53K helicopter contract. Strip it from both years, and by our math the segment grew 27%.
Volume did the work, Albany said: LEAP engine parts on the commercial side, CH-53K and missile programmes in defense. The presentation shows "LEAP deliveries increasing in-line with the OEM" and missile output rising to meet Department of War demand.
- Revenue excluding the adjustment: $168.1 million, up 27% from a year ago
- Adjusted EBITDA margin on the same basis: 12.6%, against 9.6% a year ago and 13.3% last quarter
- Fourth-quarter outlook: $155–160 million, about 6% below this quarter's underlying level
This matters because the margin, not the growth, decides whether the shift toward composites lifts the group. The underlying margin rose three percentage points from a year ago, but it slipped from last quarter, and the fourth-quarter plan has revenue stepping back without explanation.
What to watch: the segment's adjusted EBITDA margin in the fourth quarter, with no contract adjustments inside it. A reading above this quarter's 12.6% would show the business still earns more as volume scales.
Helicopter Plant Stays, With a Reworked Contract
A year ago Albany booked a $147 million loss on the fixed-price CH-53K helicopter programme and put the Salt Lake City plant that builds it up for sale. That review ended this quarter without a sale. Assets held for sale fell to zero, and the group recorded $11 million of catch-up depreciation on the plant.
Instead, it renegotiated the contract and reversed $44 million of the loss provision. The reversal is an accounting entry, and the release does not say what margin the programme now earns. Chief executive Gunnar Kleveland said the team can now "shift from addressing legacy challenges to focusing decisively on future opportunities".
What to watch: the fourth-quarter composites margin, the first full quarter under the new terms. A margin near this quarter's underlying 12.6% would mean the deal removed the loss, but not the drag.
🐻 Bear Case
Profit Fell Once the Contract Gain Is Removed
Acting finance chief Sean Valashinas said "the underlying performance of the business was solid". The numbers say otherwise. Adjusted EBITDA reached $100.1 million, but $44.4 million of it came from the CH-53K renegotiation. Remove the gain, and the group earned $55.7 million, below both a year ago and last quarter on the same basis.
- Adjusted EBITDA excluding the gain: $55.7 million, against $56.2 million a year ago and $57.8 million last quarter
- Margin on that basis: 16.5%, down from 18.3% a year ago
- Selling and administrative costs: $61.5 million, up 18%, at 17.6% of revenue
- Corporate costs: $11.8 million, up 9% from a year ago
The composites gain was real, but Machine Clothing gave it back. By our math composites added about $8 million of underlying profit while the belts business lost about $8 million, so the group stood still. Overhead rose on higher pay and strategic-review costs, the company said, and the fourth-quarter plan puts profit per share below this quarter's underlying $0.80.
What to watch: fourth-quarter adjusted EBITDA against the $55.7 million underlying figure, with no contract adjustments inside it. A lower number would mean the composites ramp is not yet outrunning the decline in paper belts.
Machine Clothing Volume Falls and Margins Follow
Machine Clothing makes the consumable belts that paper machines run on, and it has long been Albany's cash engine. Revenue fell 3% excluding currency, which the release blames on "cyclical declines in the Americas". The presentation ties that softness to paper mills closing capacity, while Europe and Asia have stabilised.
The margin dropped more than sales. Adjusted EBITDA margin was 27.2%, against 31.0% a year ago, on "volume and geographic mix", the company said. Gross margin lost 2.5 percentage points, so the plants absorbed less fixed cost. Restructuring charges doubled to $7.3 million as the group keeps closing and moving capacity.
Valashinas spoke of "continued stability" in the business, but the margin is now the second-lowest in five quarters. The fourth-quarter plan of $170–175 million keeps revenue about 3% below last year, so Albany's own outlook contains no rebound before year-end.
What to watch: Machine Clothing adjusted EBITDA margin in the fourth quarter, when management said it would catch up the volume lost to this year's machine failure. A margin back near 28% would show the drop was volume, not price.
Cash Returned, but Working Capital Keeps Growing
Free cash flow turned positive at $36.5 million, up from $25.7 million a year ago. For the nine months it still trails last year by about $12 million, because inventories and receivables grew faster than sales.
- Inventories: $165.5 million, up 36% since December
- Receivables: $277.7 million, up 18% since December
- Net debt: $343.0 million, unchanged since December, with no shares bought back this year
Part of the build is the Salt Lake plant's working capital returning to the books, which the release does not separate from the rest, so one good quarter eases the question without settling it.
What to watch: full-year free cash flow against the $81 million Albany generated in 2025. A fourth quarter like last year's would bring the year to about $70 million, still short of 2025.
Risks This Quarter Didn't Answer
Four standing concerns got no new numbers in the release or the presentation, so each stays where it was until the quarterly filing or the December investor day fills the gap.
- Customer concentration: Safran was about 15% of revenue; the filing's customer note will update it
- Tooling timing: defense tooling that slipped out of the second quarter was due in the second half; the release does not say whether it shipped
- Machine failure catch-up: management promised to recover the lost Machine Clothing volume by year-end; no update
- LEAP revenue: the Safran joint venture's quarterly figure appears only in the filing, so it is not readable yet
👓 Other Themes
Lockheed Hypersonics Deal and 787 Extension Signed
The presentation lists new agreements with no revenue attached yet: a teaming agreement with Lockheed Martin "to Drive Scalable Production for U.S. Hypersonic Programs", a $21.2 million government award for carbon-carbon heat shields, a contract extension to keep making about 300 fuselage frames for the Boeing 787, and a collaboration with A&P Technology on braided composites. None of the others carries a value or a start date.
An Acting Finance Chief Presents the Quarter
Sean Valashinas signs the release as acting chief financial officer. Will Station held the finance chief role through the second-quarter report, and neither the release nor the presentation explains the change or mentions a search. A change at the top of finance during a contract renegotiation, and weeks before a December investor day, deserves a question on the call.
💲 Other KPIs
Capital spending fell to 3.5% of revenue from 7.0% a year ago. It has stayed near that level all year, after running at about 6% through 2025. Albany credits efficiencies from facility optimisation. Lower spending helped free cash flow, but last quarter the chief executive flagged capacity investment for composites, so the rate may rise again.
Net debt was unchanged from December and down from $372.3 million a year ago, as the group repaid $34 million of borrowing during the year while buying back no shares. The quarterly dividend rose to $0.28 a share. Net debt is total borrowing less cash, so it shows what the company owes after using its cash.
The share count is 1.4% lower than a year ago but has not moved since December, because Albany bought back no shares in 2026 after repurchasing about 10% of the company in 2025. With no buyback, profit per share now moves only with profit.
🔮 Guidance
New. The plan has revenue near $330 million at the middle of the range, about 3% above last year's fourth quarter. That is 2% below this quarter once the contract gain is removed. The presentation calls the quarter "broadly consistent with recent trends". By our math, the year would then end near $1.32 billion, up 12% on 2025, though Albany gives no full-year figure.
New. The plan keeps Machine Clothing revenue about 3% below last year's fourth quarter at the middle of the range, and slightly above this quarter. The presentation describes the Americas as moderating on paper-industry capacity cuts, with Europe and China stabilising, so the belts business gets no recovery in the outlook before the year ends.
New. This is the same range the group set for the second and third quarters, and by our math it sits about 6% below this quarter's underlying revenue. Against a year ago it still means about 10% growth. The release does not say why composites step back; the open question is whether tooling shipments landed this quarter. The record on this range is one miss and one beat.
New. The plan has profit per share of about $0.70 at the middle of the range, 8% above last year's fourth quarter. That is below the $0.80 this quarter earned without the contract gain. Adjusted EPS has landed at or above the top of its range for three quarters running, so the company has set each range with room to spare.
Lowered. Albany now sees a 29.5% tax rate in the fourth quarter, down from the 31.5% it had indicated. This quarter's rate came in at 24.9%, well below plan, after two quarters above it. A lower rate adds a few cents to the profit-per-share plan, and the release gives no reason for the change.
❓ Key Questions
What margin does the reworked CH-53K contract now earn?
Albany reversed $44 million of the loss provision but gave no go-forward margin. The programme was booked at zero margin before the deal; whether it now earns a normal component margin decides how far composites profit can rise.
Why does composites revenue step back in the fourth quarter?
The outlook of $155–160 million sits about 6% below this quarter's underlying revenue. If tooling shipments that slipped from the second quarter landed in the third, the step back is timing; if not, something else slowed.
Will the December investor day bring full-year targets?
Albany has given only next-quarter ranges since withdrawing its 2025 outlook, and earlier 2026 targets were never updated or retired. Without a multi-year frame, investors cannot tell what the composites ramp is meant to deliver by 2027.
Why is the finance chief role held on an acting basis?
Sean Valashinas signed the quarter as acting CFO with no explanation of Will Station's departure or of a search. The next year brings the reworked contract's accounting and an investor day, so a permanent appointment matters.
Did Machine Clothing recover the volume lost to the machine failure?
Management promised to catch up the lost volume by year-end, with the relocated machine reassembled by then. The release is silent on both, and the belts margin fell again, so the catch-up is not visible yet.