AIN's $14.5M Cash Burn on Inventory Buildup — Supply Chain Impact

Inventory builds and production ramps are straining supply chains. Albany International’s Q2 earnings reveal a $14.5 million free cash outflow, largely due to inventory accumulation for upcoming program deliveries, even as the company achieved record composites revenue. For supply chain professionals, this highlights the delicate balancing act between meeting aerospace OEM demand and managing working capital.

Albany International reported second-quarter 2026 results that underscored the accelerating momentum in its Engineered Composites segment, even as its legacy Machine Clothing business held steady. Consolidated revenue of $329.5 million represented 5.8% year-over-year growth, slightly below internal expectations, but adjusted earnings per share surpassed the forecast range, thanks to stronger gross profit and operating leverage.

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Looking forward, Albany provided third-quarter revenue guidance of $320 million to $330 million and adjusted EPS of $0.60 to $0.70.

The standout was Engineered Composites, which posted a quarterly record $150.8 million in revenue, up 16% from a year ago. The growth was driven by ramping production rates on the LEAP engine program and Boeing platforms. The LEAP engine, produced by CFM International (a GE-Safran joint venture), is the exclusive powerplant for the Boeing 737 MAX and an option on the Airbus A320neo family—both of which are seeing sharp demand recovery and production rate increases. Boeing’s efforts to stabilize and ramp its 737 production, combined with Airbus’s rate hikes, are flowing directly to Albany International’s top line.

Machine Clothing, which supplies engineered fabrics and belts to the paper and pulp industry, generated $178.7 million, roughly flat as volume consistency was offset by equipment downtime in North America. The segment maintained an impressive 28% adjusted EBITDA margin through strict cost management and operational efficiency, generating $50 million in adjusted EBITDA. In contrast, Engineered Composites’ adjusted EBITDA jumped to $20 million, with the margin expanding from 8.5% to 13.3%, reflecting higher production rates and improved factory utilization.

Consolidated adjusted EBITDA reached $57.8 million, up from $51.9 million, yielding a 17.6% margin. Gross profit grew to $107.9 million (32.7% margin vs. 31.3% last year), and operating income came in at $32.1 million. The earnings beat was driven by these margin improvements and a favorable mix shift toward higher-value composites work.

Despite the robust segment performance, free cash flow swung to a net use of $14.5 million, compared to a gain of $17.8 million in the prior-year period. Management attributed the cash outflow to deliberate inventory builds in preparation for upcoming delivery schedules and seasonal plant shutdowns. This is a classic pattern for aerospace suppliers as they scale to meet surging demand, but it also highlights the working capital strain that accompanies rapid growth. Net debt at quarter end stood at $373.3 million, comprising $77.3 million in cash and $450.7 million in total debt. While leverage is manageable, investors will watch how quickly inventory converts to cash in the second half.