Albany International Corp reported that Eclipse Aviation, a significant customer of Albany Engineered Composites (AEC), has indicated that it was substantially reducing production of the Eclipse 500 jet, and planned purchases of components from AEC and other suppliers, for the remainder of 2008 and the first half of 2009.
Based on information provided to date by Eclipse, purchases of AEC components are thereafter expected to return to and then exceed previous levels.
Sales to Eclipse have accounted for a significant portion of AEC's 2008 revenues, as well as a significant portion of production at AEC's facility in Boerne, Texas.
The Company has earlier indicated that the near-term annual sales growth potential of AEC was approximately 35 percent, and that AEC had reached break-even profitability at the end of the second quarter of 2008.
While the Company expects that aggregate revenues for 2008 will still exceed 2007 revenues by 35 percent or more, lower sales to Eclipse will reduce Q3 and Q4 sales growth significantly.
Profitability of AEC, which had become positive at the end of Q2 2008, is now expected to fall below break-even and remain below break-even until Q1 or Q2 2009.
The delayed sales are also expected to reduce the rate of 2009 revenue growth substantially. The Company still expects substantial growth in non-Eclipse AEC revenues in 2009, but an overall 2009 compound annual growth rate of 35 percent over the base year 2007, while still achievable, is now less certain.
The Company will provide an update of management's view of AEC's near-term growth prospects in future earnings releases. In the meantime, these developments have not diminished management's continued belief in the previously expressed long-term growth potential of the AEC business.
Albany International Corp
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