AirBoss poised for growth, realigns reporting

NEWMARKET, Ontario—AirBoss of America Corp. is gearing up for growth, some of it in the not too distant future.

Coming off a good but not outstanding first quarter, the company's financial results were below those it posted in 2016's first period but were up from results registered in the fourth quarter.

AirBoss, which is continuing to deal with a volatile raw material environment and a challenging conveyor belt sector, anticipates a stronger performance by its businesses in the second quarter, according to P. Grenville Schoch, chairman and CEO of the Newmarket- based company.

He cited the defense products sector, where a lull in contract activity by federal agencies has impacted product orders for more than a year, as a possible growth sector, noting that it has bottomed out and should be headed up in the foreseeable future. "Defense is very close to doing well," he added.

Schoch said the company is awaiting final approval on new, improved filters for AirBoss' air purifying respirator masks it designed and is ready to roll out, he said. He anticipates that should come in the next few weeks.

Recent global events have resulted in an increase in inquiries across all product lines in AirBoss' defense business, company officials said in the firm's quarterly report. While they have not yet translated into significant orders, officials said the inquiries, coupled with announcements of increased defense budgets, will lead to an upswing in global defense spending.

Among other encouraging developments in the first period was the company's first year-over-year quarterly increase in non-tolling volume in two years, President Lisa Swartzman said in a conference call following the release of the company's first quarter results.

New system

AirBoss, which operates seven plants in the U.S. and Canada and employs about 1,100, recently implemented new financial reporting changes to better reflect the organizational and governance structures of some of the firm's business units.

In early May, the company said that beginning with this year's first quarter, it will disclose financial information for two new reporting segments, Rubber Solutions and Engineered Products, in addition to corporate results.

Rubber Solutions consists of the former rubber compounding segment and the industrial products business line, which previously was included in the Engineered Products segment.

A reorganized Engineered Products segment combines AirBoss' defense operation with its automotive business, which previously was a separate reporting unit.

AirBoss said the changes reflect the firm's focus on increasing and diversifying its portfolio of finished rubber products, while remaining a leader as a rubber-based solutions provider.

Basically, the company is split along the lines of the way AirBoss manages the business—compounding, calendering and the things it does with uncured rubber in the Rubber Solutions segment, and manufacturing, including defense and automotive products, under Engineered Products, Schoch said. "Anything that's cured is in Engineered Products; anything that's uncured is in Rubber Solutions."

In the first quarter, AirBoss recorded overall sales of about $69.9 million, down slightly from the $70.4 million in the like period last year. However, Swartzman noted in the conference call, 2017's results were up 11 percent from the firm's fourth-quarter revenues.

Net income of $2.9 million was down from $4.3 million in first quarter 2016.

Rubber Solutions had sales of about $30.9 million, up 11.5 percent from the comparable quarter in 2016. However, that gain was offset by a revenue drop to about $39.1 million in the Engineered Products segment, an 8.7 percent decrease from the previous first quarter.

While Rubber Solutions' total volume remained relatively flat on a year-over-year basis, Swartzman said, "non-tolling volume increased by 11 percent."

During the period, AirBoss' net debt to total capital was reduced from 40.5 percent to 31.2 percent.

Looking ahead

The new customer and compound development pipelines remain strong, Schoch and Swartzman said in the conference call. They said the company will provide the highest quality service possible while minimizing the timeline from a product's development to commercialization.

Officials see signs of returning demand in some of the firm's traditional sectors as well as demand in new focus areas.

Schoch said new leadership in the company's automotive business is realigning the operation's engineering and sales resources, and expanding anti-vibration and noise abatement product lines for existing and new markets.

Bradley A. Berghouse was named president of the automotive business last November after the retirement of Doug Reid, who remains with the firm as an adviser.

Possible multi-year contracts on the automotive end aren't likely to have much of an impact until the latter part of 2018, Schoch said. Meanwhile, he said automotive likely will remain flat this year.