By Kyle Stucker kstucker@seacoastonline.com

ROCHESTER Albany International Corp. anticipates the Rochester arm of its company to record an almost $16 million loss in the second quarter of 2017.

The loss is related to a decrease in demand, and the figure is an anticipated pre-tax charge associated with two long-term contracts with Rochester-based Albany Engineered Composites, said the company in a release.

It was unknown Friday how the losses would impact operations in Rochester because, according to a company spokesperson, Albany is in a quiet period before releasing its second-quarter 2017 financial results on Aug. 2.

However, according to company CEO Joseph Morone, the losses were expected. He said he doesnt consider the programs connected with either contract to be strategic or material to AECs growth prospects, and also said the programs are exposed to the weakest segments in the commercial aerospace market.

We are meeting customer expectations in both programs, but because of very challenging legacy contracts, we lost money on both in Q1 2017 and had been expecting both programs to continue to lose money for several more years before turning profitable, said Morone in the release.

Because of the new and significant reductions in estimated customer demand for these two programs, coupled with changes in our estimates of their costs, we now project that both programs will lose money over the life of their contracts," he continued. "As a result, we are required to record the total projected losses over the life of these two contracts in the current quarter.

About $10 million of the loss is associated with AECs contract that obligates the company to manufacture composite components for the Rolls-Royce BR 725 engine, which powers Gulfstreams G-650 business jet, for the life of the BR 725 program.

The charge is driven primarily by a reduction in the estimated future demand for these components, according to the company. AEC also recorded a charge of $14 million in the second quarter of 2015 for this program, including $11 million for the write-off of development costs for nonrecurring engineering and tooling, and $3 million for anticipated future losses.

The remaining $6 million of the Q2 2017 loss is associated with the composite struts that subsidiary Albany Aerospace Composites manufactures for the Airbus A380 jumbo jet. The company is obligated to supply wing box struts through 2020 and floor beam struts through 2023.

The company said the losses associated with this contract are due to decrease in estimated demand for these components during the contract term, as well as by program inefficiencies.

Despite the losses, AEC is on track for between 25 and 35 percent revenue growth when looking at the full year, according to Morone.

In our first quarter earnings release, I said there is more upside than downside risk to our current estimate of $450 million to $500 million revenue potential by 2020, as well as potential for substantial growth beyond 2020, he said. While the recording of these projected future losses will obviously have a material impact on Q2 results, our outlook for AEC both in 2017 and beyond remains unchanged.

The Q2 2017 earnings will be released during a webcast at 9 a.m. on Aug. 2 on the companys investor relations website, albint.com. A replay of the webcast will be available on the website at around noon that same day.

View post:

Aerospace firm projects $16m loss - Foster's Daily Democrat