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Ladies and gentlemen, thank you for standing by. Welcome to the first quarter earnings call of Albany International. [Operator Instructions] At the request of Albany International, this conference call on Tuesday, May 8, 2018, will be webcast and recorded. I would now like to turn the conference over to Chief Financial Officer and Treasurer, John Cozzolino, for introductory comments. Please go ahead.
Thank you, operator, and good morning, everyone. As a reminder, for those listening on the call, please refer to our detailed press release issued last night regarding our quarterly financial results, with particular reference to the safe harbor notice contained in the text of the release about our forward-looking statements and the use of certain non-GAAP financial measures and associated reconciliation of GAAP. And for purposes of this conference call, those same statements also apply to our verbal remarks this morning. And for a full discussion, please refer to that earnings release as well as our SEC filings, including our 10-K. Now I will turn the call over to Olivier Jarrault, our Chief Executive Officer, who'll provide some opening remarks. Olivier?
Thank you, John. Well, good morning, and welcome, everyone, and thank you for joining the first quarter earnings call, also, my first earnings call with Albany International.
We will follow, this morning, a similar format of past calls. I will begin with an overview of the quarter. Then, John will take you through our financial results in more detail. After which, I will provide an update to our 2018 outlook. We will then take your questions. But before I get started, I would like to take a few minutes to share with you my initial observations, my initial impressions of the business. As you all know, I joined the company on March 2. And I have since spent my time learning about our 2 businesses: Machine Clothing, MC; and Albany Engineered Composites, AEC. Meeting some of our key customers, meeting our employees, while visiting several manufacturing sites in the U.S. and in Europe. As I continue to dive deeper, I could not be more impressed and excited about what I have learned so far and more specifically, what I have learned about our people, about our markets and about our technology. First, our people. I am so impressed with the amount of talent of dedication that I have discovered in Albany team members through my site visits. I have only met energized, engaged employees, proud of their company with deep knowledge of their respective industries and all of them focused on growth, focused on innovation and focused on financial performance. And by the way, these common characteristics apply across 2 groups, MC and AEC, and among all disciplines. So I go to our markets. I am excited about the strength of the markets we serve and our leading positions within both the paper machine clothing markets and the specialty composites jet engine and airframe components market. Within the global paper and paperboard industry, excited about the growth of the tissues and towel paper grade and the growth of the board and packaging grade, especially in Asia where we have a strong presence, not just in the market but also with a significant production capacity in China and Korea. But also a booming global aerospace market, with Boeing and Airbus large commercial aircraft order books remaining at record level, 9 years of production at 2017 delivery rates at the end of March. With both single-aisle platforms and associated next-generation jet engine programs production at historic unprecedented ramps. And also, as you know, a strong defense aerospace market with a recent increase in the U.S. defense budget. And as you know, we are on the -- on all the most attractive, highest growth airframe and jet engine platforms. Just to name a few, we're on the LEAP, sooner on the GE9X, we're some of the Boeing 787, we're on the F-35 among many, many others. Finally, on the technology front. I am really, really impressed with the strength of current -- of our current technology portfolio across Machine Clothing and Engineered Composites. Really impressed with our leadership in new product introduction and our leadership in manufacturing process improvement. Therefore, I am very excited about the exceptional growth potential that our innovation leadership will drive in the coming months, in the coming years. And I'm also convinced that our people, our position in our markets and our technology leadership are the real foundation of our future and definitely a steady platform for future profitable growth. Now let's take a look at the first quarter results. Q1 2018 was another strong quarter for Albany International. Both businesses performed well, resulting in growth in total company net sales of 15.4% or 6.6%, excluding the impact of ASC 606 and currency translation effects. Although restructuring charges related to the company's plan to close its MC plant in Sélestat, France contributed to a slight decline in net income compared to the first quarter of 2017, adjusted EBITDA grew sharply to $51 million with a continued stable performance in MC and strong profitability improvement in AEC. MC sales in the first quarter, excluding the impact of ASC 606 and currency translation effects, declined 4% compared to last year, mainly due to continuing declines in publication grade sales and lower sales in tissue and packaging, primarily in North America as Q1 '17 sales were particularly strong in those grades. Overall, the paper and paperboard market trend that we saw last year, growth in the packaging and tissue grades, especially in Asia, with continued declines across all regions in the publication grades continued in the first quarter. Despite continuing inflationary pressure on our operational costs, MC gross margin was strong during the quarter at 47.4%. As expected, gross margin bounced back from the fourth quarter gross margin of 45%, primarily due to improved capacity utilization. Operating income was down compared to last year due to the French restructuring charges. However, adjusted EBITDA was strong and stable compared to Q1 '2017. AEC had a strong quarter with growth in net sales, growth in operating income and growth in adjusted EBITDA compared to Q1 2017. AEC had strong year-over-year revenue growth with net sales, excluding the impact of ASC 606 and currency translation effects increasing 33%, consistent with our outlook communicated in the last earnings release. The increase in sales was primarily driven by several high-growth aerospace platforms, such as the LEAP program as well as key next-generation commercial and defense airframe programs. Our sales of fan cases, fan blades and spacers for the LEAP engines, which represented about 49% of AEC Q1 2018 sales, grew 60% compared to Q1 '17, reflecting the steep, unprecedented ramp up of this jet engine program. Higher sales of Boeing 787 fuselage frames as well as F-35 components also fueled year-over-year revenue growth.
AEC operating income improved to $2.3 million, while adjusted EBITDA more than doubled year-over-year. Adjusted EBITDA as a percentage of net sales improved to 16.5% in the first quarter, as a result of both volume increases and productivity improvement compared to 14.1% in Q4 '17 and 9.2% in Q1 '17. While AEC's profitability could fluctuate from quarter-to-quarter this year, we continue to expect full year adjusted EBITDA at a percentage of sales to show incremental improvement compared to 2017. New business opportunities include further share gains on existing platforms leveraging existing and derivative technologies, in addition to content on potential future commercial and defense programs through the use of new technologies.
Our R&D new product development activities during the quarter progressed in each of these areas, while R&D process improvement projects also supported existing growth programs. Based on this progress, we continue to project that the combination of execution on our existing contracts, along with anticipated new contract wins, provides the potential for AEC to reach annual sales of $475 million to $550 million in 2020. Overall, it was a good quarter for the company with continued strong and stable performance in MC and robust sales growth with increasing profitability in AEC. Now let's go back to John for more details on the quarter. John?
Thank you, Olivier. I'd like to refer you to our Q1 financial performance slides. Effective January 1, 2018, the company adopted ASC 606, revenue from contracts with customers using the modified retrospective or cumulative effect method for transition. Slide 3 displays the first quarter impact on sales and income of adopting this new standard. As you can see on the slide, ASC 606 caused an increase in net sales and income for both businesses, with total company net sales increased by $8.4 million and net income attributable to the company increased by $1.2 million or $0.04 a share. Looking at Slide 4, net sales by segment. As already noted, total company net sales increased 15.4% compared to Q1 2017 and 10.9%, excluding the currency effects. And also, excluding the impact of ASC 606, net sales increased 6.6%. MC net sales in Q1, excluding currency effects, were down 1% compared to last year and down 4% when also excluding the impact of ASC 606.
AEC net sales, excluding currency, grew about 41% compared to Q1 2017 and a little over 33% when also excluding the impact of the new revenue standard. Turning to Slide 5. Total company gross profit as a percentage of net sales was 35.5% in Q1 compared to 38.1% in Q1 2017. Gross margin in the current quarter reflects the change in the business mix due to higher AEC sales. MC gross profit margin in Q1 was 47.4% of net sales, a decrease compared to Q1 2017 but essentially flat compared to the full year margin in 2017. AEC gross profit margin increased to 14.1% in Q1 compared to 12.1% in Q1 2017. Slide 6 provides net income and adjusted EBITDA by segment for the quarter. Adjusted EBITDA for the total company in Q1 2018 was $50.9 million compared to $43.5 million in Q1 last year. MC adjusted EBITDA was $49 million in the quarter compared to $48.3 million in Q1 last year. AEC adjusted EBITDA improved to $13.5 million in the quarter compared to $5.2 million in Q1 last year. Moving to Slide 7, earnings per share. We reported net income attributable to the company in Q1 of $0.32 per share compared to $0.34 per share in Q1 of last year. Q1 2018 earnings per share included charge of $0.18 per share for restructuring expenses, principally due to the company's estimate for severance and outpatient benefits related to the previously disclosed proposal to close the company's MC production facility in Sélestat, France. That proposal was approved by the French Labor Ministry in Q1. Adjustments for restructuring expenses in Q1 2017 as well as foreign currency revaluation losses and tax adjustments in both periods are noted on the slide. Excluding the adjustments, net income attributable to the company was $0.54 per share in Q1 2018 and $0.46 per share in Q1 2017. Lastly, Slide 8 shows our total debt and net debt. Total debt increased about $5 million to a balance of $521 million at the end of Q1. That increase combined with the decline in cash balances of approximately $32 million, resulted in an increase in net debt of $37 million during the quarter.
Net debt typically increases in Q1 due to incentive compensation payments and high first quarter income tax payments. In addition to those typical cash flow effects in Q1, cash utilized for other working capital increased, especially accounts receivable for AEC. Payments for all capital expenditures in Q1 were about $16 million, which was lower-than-expected due to the timing of required cash payments. We currently expect capital expenditures to range from $20 million to $25 million per quarter through the rest of the year. At that level of spending, we do expect additional quarterly increases in net debt for the remainder of the year, but at significantly lower levels than during the first quarter. Now I'd like to turn it back to Olivier for some additional comments before we go to Q&A.
Thanks, John. Turning now to our 2018 outlook. The MC outlook for the rest of 2018 looks promising. The business appears to be stable going into the second quarter, and we currently anticipate relatively consistent gross margins throughout the rest of the year. Assuming no significant changes in the global economic conditions, we are on track to full year adjusted EBITDA in the upper half of our expected range of $180 million to $195 million. AEC's outlook for the full year 2018 is unchanged from the expectations we stated in the last earnings release. Net sales year-over-year should increase 20% to 30%, while adjusted EBITDA as a percentage of net sales should show incremental improvements in 2018. And beyond 2018, we remain on track toward our goal of 18% to 20% adjusted EBITDA as a percentage of sales in 2020.
So in summary, our outlook for both businesses in 2018 is unchanged, as we continue to expect strong performance by both businesses throughout the balance of the year.
With that, let's go to the line for any questions. Operator?
[Operator Instructions] We'll go to the line of John Franzreb with Sidoti & Company.
And welcome aboard Olivier.
Thank you.
I guess, I'd like to start with the Machine Clothing business. Last quarter, you kind of inferred that -- we -- that we kind of -- we should expect a troughing impact as far as volume is concerned, given the mix as it is these days. But it was still down 4% when you kind of x everything out. Were you surprised by that? Or should we reassess how we think that the change in publication is going to still drag maybe what's going on in packaging and tissue?
Well, John, I would like actually first start with going back to the fundamentals, I would say, of the paper and paperboard market, right? I -- after 2 months being in the business, it took some time only to understand better the dynamics of the market and the impact on the paper machine clothing market itself. So yes, it's clear as my predecessor and John have been sharing with you in the past, it's clear that the global paper and paper industry will continue to suffer from the well-documented declines in consumption of publication grade. And certainly, with estimated steeper decline rates in the present decade due to, of course, digitalization. However, the global industry is still expected, as you know, to grow slightly at an annual rate of approximately 1% to 1.4% per year between '17 and '22. With definitely driven, if you will, by increases in consumption of tissues and towel paper grade. I think we're forecasting about or we see it's forecasting about 2.8% per year of increase in consumption between '17 and '22. And for board and packaging grades, I think, the industry is forecasting about 2.6% increase per year between '17 and '22 in consumption, right? So that's the fact that will happen.
Now in terms of our PMC sale, it's clear, as my predecessor had exchanged and shared with you many times in the past, that we will continue to see our publication grades PMC sales likely to erode at a range of 5% to 10% on an annual rate, right, every year in [volume], so that's going to continue to happen. And actually in Q1 '18 versus Q1 '17, our publication grades PMC sales, as we had expected, did decline actually on the lower side of that range. Now we had -- as I mentioned, we had, more particularly, we are in -- only in Q1 '17, we had some further declines of the packaging grades net sales, driven partially, it's only onetime effect. It's only in Q1, driven partially by the U.S. due to one key packaging customer, with which we had unusually strong sales in Q1 '17. A customer which had production issues in Q1 '17, and we did experience considerable damage to our clothing, which led to a much higher sales. We also saw in Asia, with some factors in Asia where our Q1 '17 sales included a very large new machine startup order. And on the tissues same thing, we had some exceptional new machine startup last year in Q1 '17. So all that explains why in Q1, you saw, once you exclude 606, once you exclude the ForEx effect, you saw a drop of $5 million, $5.5 million or 4% in sales. Now what we expect, we expect to see our Q2, our Q3, our Q4 revenues to be at least flat versus last year. Okay?
Yes. Fair enough. Then the gross margin PMC as you showed in Slide 5, first 3 quarters of last year was 48% and change. Is there any reason that you can't get back to that level? Be it FX, be it mix. Can you just talk to that?
Well, as you saw, I think, last year was about 47.6%, right, of -- for the full year of gross margins, right? You saw a very nice bounce back, right, us bouncing back in Q1 '18 versus Q4 as expected as we were improving our capacity utilization and working very, very hardly on productivity, efficiency and utilization. Again, we will continue to do in the outgoing, in the further quarter Q2, Q3, Q4. Therefore, we estimate at least, right, that our margin -- gross margin should stay, right, at least at the same level, right, as last year. And of course, we'll do everything we can to improve, right? That's basically what we do on a monthly -- on a weekly, monthly and quarterly level. Yes.
Okay. And then just switching over to EC. Could you talk a little bit about how your -- the production ramp is going in the LEAP program? Has there been any kind of problems? Could you just talk about how smooth it's been within any kind of parameters you want to put on it?
No, sure. Listen, as I indicated, I mean, our revenue in LEAP, fan blades, fan cases and spacers increased 60%, right, year-over-year. Listen, you know very well, right? The shape that the state of the aerospace industry, it's a booming industry, right? I was mentioning to you, I mean, the 13,000 order backlog, right, at Boeing and Airbus in large commercial aircraft, right. We know that's about 9 years of production. We know that, that backlog which is very good thing for us. It's mainly driven by single-aisle aircraft. And as you know, right, we have the chance to be on the major engine program powering the [ existing garage ]. You know that the Airbus order backlog is made -- 80% of it is made -- 85% of it is made of A320ceo and neo. If you look at Boeing, it has same -- the same trend, I believe that 80% of the order book of Boeing is 737NG or MAX, right? So you have heard also and read from the latest Boeing and Airbus earnings release that and once again good for us, extremely good for Albany. You have heard that Boeing plans to increase the build rate of the 737 from 52 per month in '18 to about 60 to 63 surge into next year. And Boeing [sic] (Airbus) is thinking very strongly about going to 70, 70-plus, right? And same for Boeing, shooting at 57 next year. So all that creates, of course, demand for engines -- certain engines. And I think that the firm order backlog of single-aisle next-gen jet engine is slightly over 23,000 engines, right? And that's what -- guess what, it's 10 years of production for the engine guys at 2017 delivery rate. So once again, extremely good for us. And in addition to that, the problem that Airbus is having with the GTF on the Geared Turbofan on the neo with some issues. So therefore, the current A320neo new engine order book is really closer to 59% for LEAP, 41% GTF, right? Once again, very good for us. Increasing demand for us versus plan in LEAP engine for the A320 engine. So that being said -- so really unprecedented. You know that wherever your rate, we'll be knowing pretty well the aerospace industry having worked in it globally for the past 20 years. So it's an unprecedented ramp up. So now, that being said, it's extremely good for us. We are ramping up. The ramp up I can only control with, I can control here, which is a production of -- our own production. We are developing -- we're staying focused. It's all about disciplined execution in our floor across all our factories. It's all about monitoring labor utilization, making money during productivity, monitoring the right utilization of our key assets. It's all about hiring and training people, new employees. It's all about making the right investments in the right department, in the right product lines. And we are -- it's basically doing everything we need to do in executing not only, by the way, on the LEAP program but it's also executing on the ramp up of platforms form our Salt Lake City business, for example, on the ramp-up of the Boeing 787. Once again, excellent news for us, right? You know that the 787 will be ramping up from 12 per month to about 14, right, by the end of the decade. So once again, it's another focus that we have in our Salt Lake City operations. We also have to keep focus on ramping up and hiring people and training and getting better at manufacturing for the production of F-35 components, which will also ramping up.
So all that is extremely good news for us. We are -- it's tough, but we're doing it. And we'll keep on doing it and ramping up quarter-after-quarter. And I was always reflecting on it. The aerospace industry today needs strong suppliers who can deliver in shorter lead times, high-quality products on time for their customer, could it be airframe OEMs or engine OEMs. And if and Albany will, but if Albany clearly demonstrates its capability in '18, '19 and '20 to meet our customers' demand, we need us to ramp up for them to ramp up as well. Believe me I've been in that industry for 20 years, customers will remember us. And it will open the door in the out-years in '20 and past '20 to a large set of opportunities of further share gains on new platforms, right? So to summarize, yes, it's tough, but we're doing it. We know how to do it, and you will only see progress quarter after quarter as year goes -- the year goes and the next year and the out-years as well. Okay?
Yes. I just want to go back. You said the word tough twice. I just want to make sure that the yields and -- are within the tolerances you expected. Or is it -- has it been a little bit tougher maybe than your originally -- original production schedules were?
No, I think -- it's manufacturing, right? It's, as I said, it's all about disciplined execution. It's all about ensuring that you control your productivity, your yields, your quality, your scrap levels will go down day-after-day, and that is continuous improvement. We are driving. We have launched in the past few weeks, we have launched, if you will, key productivity projects, levers, first one being based around, if you will, manufacturing -- what I call, manufacturing productivity based on LEAN manufacturing initiatives. So you will hear me throughout the quarter and the years talking a lot about LEAN manufacturing and deployment, lots of kaizen events to reduce our returns to predefined user flow and to rearrange our flow line. So that's one key element of our manufacturing strategy, which already a couple of kaizen events when it took place across all plants in the past few weeks and that's really helping. And secondly, we have another lever, which is -- which we are starting to deploy as well across all our plants in U.S. and in France, which is, what I call, process productivity through advanced technology initiatives. Once again, we are 1% responsible for that across all the plants, and we're going to see more and more capacity release, if you will, increase through those productivity levers. So we're -- the key -- the many ramp ups in my career in aerospace, the key is to stay on top and to measure, right, our production not on a monthly basis, but to measure it on a shift basis, on a daily basis and to make sure that week after week -- day after day, week after week, and months after months, the production does increase, right, and the productivity increase as well. So now I'm deploying with my team. We are deploying consistent productivity metrics, which we'll review every day actually in the same -- from the same office where I'm talking to you from here today, every day at 2:00, I have a call, [narrow] call with all my plant managers across the world. And we review systematically with discipline all those indicators and take the proper corrective actions, right? And that's all manufacturing. So we know how to do that. Okay?
And next we'll go to the line of Ben Klieve with NOBLE Capital.
So first I'll second John's comment, and just say, welcome to the company, Olivier. It's a really exciting time here. And we're all very much looking forward to see where you're going to take the company here going forward. So welcome.
Yes, thank you very much and thank you for being with us and taking the call. Thank you.
My -- our pleasure here. And kind of related to you coming on board here. I'm curious what you see as your kind of expected period of on-boarding. Should we expect an update to the strategy in coming quarters? Or do you think you've been through the on-boarding process enough that you don't believe we'll see any shift, barring any changes in the market or economy going forward?
Well, listen, I really think that I have been here for 2 months. And I said, I did visit the plants, I -- some plants I have many more actually to visit. I really would like to make the following statements. I mean, the strategy that was set by my predecessor is a very good strategy that paid off, that's paying off today. It's basically, maximizing free cash flow and EBITDA margin generation from the MC business through continuous productivity improvements, which we'll keep on driving on a daily business and reinvesting in the AEC, as you know, in order to grow, right, and to gain share and to develop new technologies and to push, right, which we can do, and I'll come back to that, really push the displacements, I like to call it like it's a displacement of metallic solutions by composite solutions, right? And it's a great future. I can talk to you at length about there's a great future for AEC, not only on airframe structures but also on jet engine for the future. So I think, it's a great -- it's the right strategy. We need to stay focused on it, and I was just saying, my primary goal in the next month, in the next 2 years is really to stay focused on that ramp up, right, on the AEC side, right? It's really ramping up. It's really ensuring that on a day after day, we deliver and meet our customers' needs, improve our capacity, decrease our nonquality costs, decrease our set up times, improve our utilization, improve our efficiency and therefore, improve our productivity. So that's really what we should all stay, all our engineering, manufacturing, quality, HR teams. HR is extremely important here to help us bring and develop our employees, train our employees and bring in additional talent in the team, right? Which is why I'm staying all focused on in the past, and I will stay focused on -- in the next few months and years. So therefore, no change today about the strategy. Okay?
Yes. Very good. That's good to hear you feel that comfortable this quickly. We've seen some CEOs take a couple of quarters. So good to hear how confident you are with the current business just a couple of months into your tenure. One -- regarding the French facility, I'm assuming that, that closure has been in the works for a while and that the timing of it coming under a new CEO is purely coincidental. Is that accurate?
Well, listen, you're talking about the Sélestat, France closure. Yes, sure. I mean, listen, the savings from the Sélestat closing relates to both, as we explained, both labor and fixed plant operating costs, right? And of course, the savings contributes to our overall objective to hold our margins and deliver on adjusted EBITDA in the upper half of $180 million to $195 million range, right? So we're still evaluating, if you will, the impact on fixed assets and building. And we could have future restructuring charges related to that analysis later on, right? John, would like to add on?
Okay. And, Ben, we did announce the plan, the proposal, some time ago, before this transition took place. And in France it takes some time to get through the process. So really what -- the key development this quarter was the approval by the French Labor Ministry, which -- that was what then triggered the restructuring charge and now the moving forward on that plan.
Okay. I know there was a conversation. I didn't realize about that this had specifically been announced in the past, and my apologies for missing that. One other question from me is regards to margins. With raw material costs like the derivatives of petroleum and then lots of chatter around aluminum and steel tariffs, I'm curious to what degree your gross margin assumption this year really relies on flat oil and the failure for tariffs that will really take shape. And what risks do you see from a raw material perspective in your margin assumptions for the year?
Well, listen, we have long-term contract, LTA contracts, with our suppliers that really protect us, if you will, number one. Number two, we have a very -- I would qualify benchmarking against the -- what we did in the past, so very solid procurement savings program as well across the 2 businesses. So in relationship to your specific questions on prices and so on, we have not seen much of an impact this year. We are protected, as I just said, but it's definitely something we are monitoring with John and the entire team, but no real [indiscernible] no real impact, no.
Next we'll go to the line of Drew Lipke with Stephens.
I wanted to go back to the LEAP ramp, and can you remind us what your production capacity calls for today in terms of monthly production rates? And if we do see a step up to a rate of 70 per month. Olivier, you've been through a number of aerospace cycles, how do you think about adding incremental capacity today that would come online in 2020 going to the rate of potentially 70 a month and just kind of thoughts on the cycle there?
Well, listen, and I think it's -- we always have to plan ahead as you very well know. So it's not -- I hate in manufacturing productions to overreact and we've seen in 3 or 4 weeks, right, to decide about -- and you do not ramp up in the 4 weeks as you very well know, right, production. So you need to plan for the ramp up. And we are -- I mean, it's not yet given that for sure, right, Airbus has not -- has not said yet that they would formally, for sure, go to 70-plus. They are still has -- and [indiscernible] showed in the release a few weeks ago, he said 70, 70-plus we're making -- we are in the process of studying it, right? You saw the pushbacks, right, of some of the engine guys, right, towards that ramp up. But that being said, I have already, with my team, launched a feasibility study, right, to see exactly what it will require to get there, like 70-plus in terms of increasing our labor capacity. So it's all about -- no, it takes time in our business. It takes at least 6 months to train the operator for new machines, maybe sometimes even a year. So it's very specialized, but I'm used to it [indiscernible] with very specialized as well, as it is on the weaving and braiding side. So it takes 3 to 6 months, let's say, to train operators. We have to find them. We have to train them. We have to -- so we're making that list, right? What would be, by plants, necessary. And by shift, we're looking also at how we could be reorganizing our shifts. I don't want from an efficiency productivity standpoint. I don't -- and safety standpoint, I don't want to run the plants at too much of an overtime, so we're monitoring that as well. So we kept our overtime targets. And also we are also in the process of understanding how many more assets, right, we need to bring in our key plants in order to deliver on that potential ramp up, right? And -- but we have everything that -- we have the space. We have the square footage, right, in our plants. We have just, as you know, we have just opened -- inaugurated our new facility in Queretaro, Mexico, right? So we have to fill it. We have space, right? We have space, and it's a very good problem to have, right? I mean, it's a very good problem to have to have a strong backlog, and to see growth coming out of those plants. So we'll know how to execute on it, right? Okay? It's all about careful planning.
Great. And then Just on the LEAP ramp. How should we think about the sequential progression through the year? I think looking at your previous investor presentations kind of points to LEAP revenues for the year maybe kind of in that $130 million range. And you're, obviously, on an annualized basis, well above that now and we're still seeing the production ramp. So I know you mentioned it would be volatile throughout the year, but how should we think about that specifically?
Well, I mean, I think you know -- you very well know the '17 actual productions of LEAP engines, I think that CFM produced about 459, right, combined. You know that in '18, particularly just came out, again, a few weeks ago in GE as well basically still confirming the 1,100 to 1,200 engines this year, despite the fact that they were, I believe, about 70 short in Q1. They we are sticking to the 2019 target of 1,900-plus LEAP deliveries going to 2022. So anyway, you saw that we did in Q1, a 60% increase. You can rapidly make the calculations and you see very well what we will be shipping and producing, right, based on those ramp-up, right, from CFM you can, yes, you can project, right, what our increase will be Q2, Q3, Q4, right? But certainly in the order of magnitude of what we saw in Q1, right, okay?
Okay. And then just last one from me kind of big picture. What do you see, after taking a fresh look here, what are the benefits in the synergies of having the Machine Clothing and the Engineered Composites under one corporate roof as it stands today? And how do you think about -- what hurdles those Engineered Composites need to clear before you have confidence that it can maybe operate as more of a stand-alone operation?
Listen, I think, as I said, I mean, I view it only normally, only been here for a couple of months. And I reiterate and restate that the strategy is right to have MC business growing well. I mean, the MC business, as I said, is well stabilized now. We can't keep on thinking about the MC business as a business fighting a market in structural decline, right? I think it has been restructured, right, it's well positioned in the right growth grades, paper grades, right? We just need to keep on working, as I said, on productivity and on [ net mean ], right. And improving our profitability and our cash generation. So all that is good. We know we have a clear program to execute on it. It's also about execution and growing in Asia. And it's basically, we're injecting our cash into AEC to build that aerospace business. That aerospace business in my mind, today, it's still -- it's a goldmine of growth, as I said, it's on the F-35, it's on the Boeing 787, it's on the LEAP engine, and it does not yet take into account all the anticipated share gains and/or acquisition of new content that we're going to be making this year and the next couple of years on other platforms where we're not on today. So it's an incredible growth machine and EBITDA margin machine, right, EBITDA generation machine. But today, it's still relatively small in size, and I really want to grow it, right? Again, share improve, as I -- as we said, the EBITDA margins and deliver -- stay focused on delivering the goal that my predecessor rightfully so said, growth of $0.5 billion organic growth and maximizing EBITDA margin in the 20% range -- 18% to 20%. And then we will see, right? Once we're there, once we're a larger size, everything is possible and we will review any strategic options, right? But it's not the time now, right, to discuss that, right? Okay?
[Operator Instructions] We'll go to the line of Chris Hillary with Roubaix.
I think you answered this question just a moment ago to a certain extent. But I just wanted to ask as you come in and look at the aerospace platform, what types of short-term and medium-term opportunities do you see to supplement the business. I think you talked about add-on market share wins, the are there -- is there some more color that you might give on what the things are that you might be working on in a 1- to 3-year time horizon?
Yes. Sure. But I think you have certainly read the -- access to the deck -- investor deck that we -- that my predecessor and John have been presenting, right, through that market? I think that if I summarize it, right, at the high level, I see 4 major drivers -- levers of organic growth for the AEC business. Two of them, the first 2, really applying between '18, '19, and '20. And the other 2, starting past 2020, but 4 altogether. The first lever is what I like to call, really executing -- I talked a lot about execution this morning, but executing on the continued ramp up of existing programs on which we have secured contractual content and on which we are already well established. So it's clear by that I'm talking about the LEAP engine components. I'm talking about the multiple F-35 airframe components produced not only by our Salt Lake City business, I'm referring to all the sponsons, the tail-rotor pylon, the horizontal stabilizer struts, potential by the way of having $1 million plus, as we said, in '24, with upward potential for foreign sales. But also on the F-35, if I revert back to the engine, you have from Bernie, Texas location, we have all this very sophisticated, highly engineered LiftFan vents, right? Also in the same category, you have the, as you very well know, what I call the Boeing 787 structural airframe components, primarily structure, that the 787-9 [led by France]. And then you have all those -- I mean, the -- all the other [indiscernible], as I said, the F-35 and the Boeing 787, okay. So all that is really existing -- executing on the continued ramp up. Then you have the second lever, the second lever has to do with, what I like to call, the anticipated, right -- anticipated incremental new share gains or sometimes first time content acquisition on existing and ramping up programs. So that's really here, all the -- if you will, all the share gains that we anticipate, that we'll be talking to you about as it develops, but all the share gains that we anticipate to be making in '18, in '19. One example would be [indiscernible] frames from Salt Lake City on the 787-10, all right? You heard that -- you saw last quarter, I mean, that was the first 787-10 delivered, I believe, to Singapore Airlines, right? So that's an example. Could be more anticipated, if you will, share gains from our Salt Lake City business on F-35 wing skins and tooling very much anticipated several share gains on recently launched next-generation jet engines other than the LEAP, right, and I won't mention them now, of course, for confidentiality. Several other anticipated share gains on the structural side, on other platforms that we're not actually -- we don't have any content today, right? So that's really a second lever. And also those 2 levers really drives the growth, if you will, between '18, '19 and '20.
And then you have a third lever of growth, right, which is really, what I'd like to call, it might be difficult, but I'd like to confer to call that new contract wins on future and potential future commercial and defense platforms, right? So one example of it already well is in the pipeline is, of course, the revenue growth on the GE9X [indiscernible] on the Boeing on the 777X-9, right? So it's the new platform. While it is not yet being produced, it will be -- EIS is entering service. It's planned in '19, and you have ramp-up past '20, but definitely a very good example of growth engine past '20. Then, of course, as you very well know, you have the questions about the past '20, you have the overall question in the aerospace market about the NMA, right, the Boeing 797. You know what will happen, will it be launched or not. If it happens in 2025. And, of course, if it does happen, the Boeing, which is actually confirming -- which has confirmed a week ago, that the EIS will be in '25, if it happens, it opens the door using our existing technology and maybe quick derivative technologies to position ourselves properly not only on the fuselage, on the structural elements but also, of course, on the engine. Now the big question is what type of engines will that 15,000 pounds thrust high bypass ratio engine, will it be the CFM engine or will it be another technology, we don't know. But regardless, I mean, it does offer a very attractive growth opportunity as well past '20. And then there are other opportunities also on definitely past '20 that we're already working on using new technologies on the defense side, the land, sea, air and space applications. Then you have the last lever, last but not least, which could start already applying in '20, and which will do certainly past '20, is a potential strong diversification outside aerospace. I know that my predecessor shared that with you, but you have [indiscernible] or any other, and that's where our 3D operating technologies would apply with a potential, I think, John and Joe shared with you about $5 million, right, in '20. And further R&D potential definitely past 2020. Even thought for the time being, there are so many opportunities within the aerospace market that I'm encouraging my team to stay focused, right, on the growth, right, on the aerospace side, right. But that, I'll be happy to share that with you in more details when we meet together and later on. But I mean, that's really summarizing at a high level, right, the 4 levers of growth, right, on the aerospace side. Okay?
Sure. And then one quick follow-up. There's been some unfortunate headlines on metal fatigue. Do you think that implies that there's -- there has been some unfortunate headlines on metal fatigue in aerospace? Do you think that implies there's more opportunities for your woven composites to find other applications or more usage within aerospace?
Well, listen, I think we have an excellent value proposition coming from the metallic side of the business. I knew very well the extraordinary growth potential of composite solutions, both on jet engines and on the airframe. As you know, it all has to do with fuel efficiency, again. It all has to do with improved performance. It all has to do with being more environmentally friendly. It all has to do with fatigue improvement, fatigue resistance. It all has to do with damage, tolerance improvement. It all has to do with [indiscernible] plus improvement. And definitely, I do think that in the cold section of the engine and in the even moving towards the hot section of the engine, you will see more and more composite solutions displacing metallic solutions, right. So that's what I would have to leave it at and you have the same -- you have exactly the same drivers on the structural side, right -- on the airframe side. So definitely -- it's a -- our business, it's definitely from a weight reduction, from an improved performance standpoint is a growth engine, right? We just need to stay focused on the R&D and push our technologies and keep on displacing metallic solutions.
And there are no other questions. You may continue.
Well, thank you all for attending the call today. I did enjoy meeting with all of you, at least by phone, and I once again, I reiterate, I would like to meet with you soon face-to-face, I enjoy speaking with you. And let's -- I'm looking forward, as I said to meet with you in the future in person. Thank you. Bye-bye.
Ladies and gentlemen, a replay of this conference call will be available at the Albany International website beginning at approximately noon, Eastern Time, today. That does conclude our conference for today. Thank you for your participation and for using AT&T Executive Teleconference Service. You may now disconnect.