AirBoss sees sales drop, losses grow in Q3 report

NEWMARKET, Ontario—Airboss of America Corp. saw sales decrease in the second quarter of this year, and that trend has continued through the third quarter.

In its third quarter financial report, the Ontario-based manufacturer saw a 5.9 percent decrease in consolidated net sales to $96.2 million, as compared to the third quarter of last year. The custom mixer and rubber products maker posted an adjusted loss of $3.28 million for the quarter, compared to the $2.59 million loss posted a year earlier.

AirBoss also posted a 11.4 percent decrease in adjusted EBITDA at $6.42 million, as compared to $7.25 million in last year's third quarter report.

For the first nine months of 2024, sales dropped 11.5 percent to $295.1 million. AirBoss posted an adjusted loss of $10.9 million for the first three quarters, compared with a loss of $3.63 million in 2023. The adjusted EBITDA fell 26.1 percent to $16.8 million.

"The company continued to feel the impact of the ongoing industrial economic slowdown occurring in North America during the quarter, and we remain focused on operational execution and cost management to mitigate the effect of these challenges," said AirBoss President and co-CEO Chris Bitsakakis. "We also continued to focus on our strategy to broaden and grow (AirBoss Rubber Solutions) while refocusing on core product lines at (AirBoss Manufactured Products)."

Continued slowdown in industrial manufacturing sectors has been a consistent theme this year throughout North America, and has brought about a few challenges for AirBoss. Still, Bitsakakis is confident in the company's long-term future, due in large part to two key contracts.

Earlier this year, the U.S. chose AirBoss to help fill out the U.S. Strategic National Stockpile with isolation gowns for the U.S. Department of Health and Human Services. Combined with the Bandolier contract worth up to $45 million it secured in April, the future of AirBoss is looking up, Bitsakakis said.

"During the quarter, we were encouraged by the commencement of shipments under the previously announced Bandolier contract, and the awarding of the isolation gown contract from (the U.S. Department of Health and Human Services)," Bitsakakis said in an investors call Nov. 7. "We believe both point to rebounding in our defense product line businesses."

The increase in contract awards is crucial for success at AirBoss, Bitsakakis said. With the two major contracts in play, the company's defense business is expected to hold strong through the rest of 2024 and beyond. The defense sector "experienced some positive traction" throughout the quarter, and focusing in on its core competencies will be key to future profits, officials said.

"Manufactured Products' growth strategy will be focused on diversifying and expanding its range of rubber molded products while simultaneously narrowing the range of defense products through a renewed focus on core competencies," the company said.

Following a tough fiscal year in 2023, AirBoss restructured itself going into 2024. The company dissolved both its AirBoss Defense Group and AirBoss Engineered Products business units. Instead, AirBoss is now split into two segments between AirBoss Rubber Solutions (ARS) and AirBoss Manufactured Products (AMP) to keep up with business challenges.

Gross profit in AirBoss' rubber solutions segment was consistent as compared to the third quarter of last year, the company said. The segment's year-to-date earnings increased by 9.1 percent to $29.6 million, up from $27.1 million in 2023, thanks to a few factors in the segment's short- and long-term production priorities.

"(The year-to-date increase was) primarily as a result of product mix improvements as the company pivots away from tolling and focuses on more specialty compounds while managing controllable overhead costs," the company said in a statement.

Sales for ARS fell 6.7 percent in the third quarter to $54.5 million, and year-to-date decreased 7.7 percent to $179 million.

The company's rubber solution branch saw a "strong quarter in terms of margin expansion" when compared with Q3 2023, AirBoss officials said. Despite performance in that area, the segment still lagged behind expectations after a strong start to 2024, largely thanks to continued volume reduction throughout the business.

The company's manufacturing segment, AMP, also saw a net sales decrease of 5.7 percent in the third quarter to $45.5 million. In its year-to-date report, sales fell 18.8 percent to $128.5 million.

"For the quarter, the decrease was mainly in the rubber molded products business, offset by improved sales in the defense products business," AirBoss said in its quarterly report. "Specifically, the rubber molded products business had lower volumes in SUV and light truck platforms, driven by economic headwinds and increased vehicle inventories, which impacted production schedules across certain OEMs and Tier 1 suppliers in the quarter."

Gren Schoch, chairman and the other co-CEO of AirBoss, said the company is committed to "growing AirBoss as a global market leader in the custom rubber compounding market." Following consistent profit losses throughout 2024, the company is fully focused on completing its strategic transition and honing its core competencies.

"Our priorities remain growing the core rubber solutions segment, a renewed focus on core competencies in the manufactured products segment, and a focus on adding new compounds and products, technical capabilities and geographic reach into selected North American and international markets," Schoch said.