Park-Ohio (NASDAQ:PKOH) executives said strong cost management and productivity improvements helped the company navigate demand volatility and delayed new business launches in 2025, while fourth-quarter cash generation enabled a $40 million debt reduction. Management also outlined 2026 guidance calling for revenue growth and higher adjusted earnings, supported by recovery in several end markets, record bookings and backlog in the industrial equipment business, and continued investment in automation and information systems.
Management highlights: cost controls, investment, and deleveraging
Chairman, President and CEO Matthew Crawford said Park-Ohio’s results in 2025—particularly in the fourth quarter—reflected “strong cost management” and “improved productivity in key locations” that offset demand volatility in industrial end markets tied to tariffs and broader economic uncertainty. Crawford said that uncertainty also delayed new business launches and, in some cases, new business awards.
On deleveraging, management noted the company remains above its target net debt leverage ratio, but said fourth-quarter cash performance and investments made to support 2026 growth (including working capital) position Park-Ohio to make progress.
2025 financing and operational investments
CFO Pat Foos said 2025 actions were designed to support future sales growth, operating margin improvement, and free cash flow. He highlighted several accomplishments:
- Refinancing $350 million of senior notes with new senior secured notes maturing in 2030, and extending the company’s revolving credit agreement maturity by five years.
- Spending more than $12 million on information technology and beginning implementation of new ERP systems in Supply Technologies and the industrial equipment group.
- Breaking ground on a new North American distribution center for Supply Technologies that is expected to be operational in 2026, with aims including lower costs, lower working capital, automated sorting and kitting, and additional value-added services.
- Investing in automation equipment in the fastener manufacturing business to improve productivity and operating margins, with a focus on expanding capacity for “strong demand” in self-piercing and clinch products.
- Winning more than $40 million of incremental annual sales in Assembly Components, expected to launch in the second half of 2026 and continue through 2027, alongside pricing actions and plant-floor improvements.
- Achieving record annual bookings of $217 million in the industrial equipment business, including a record $47 million induction heating order from a leading steel producer; backlog ended 2025 at $180 million, up 24% year over year.
Fourth-quarter cash flow, sales, and profitability
Foos said the fourth quarter was highlighted by operating cash flow of $49 million and free cash flow of $36 million. The company used free cash flow and excess cash to reduce long-term debt by $40 million during the quarter.
Consolidated fourth-quarter net sales were $395 million, up 2% year over year, driven by higher sales in Supply Technologies and Assembly Components. Engineered Products was stable year over year, as growth in industrial equipment offset lower sales in Forged and Machined Products.
Fourth-quarter gross margin was 17.3%, up 70 basis points from the prior year, which management attributed to higher sales and profit improvement initiatives. Excluding special items, adjusted operating income increased 4% to $20 million. The quarter included an $8.9 million non-cash write-off of certain assets in the Forged and Machined Products Group to align tooling and production assets with current business levels.
Adjusted EPS in the fourth quarter was $0.65 versus $0.67 a year earlier, with Foos attributing the decline primarily to higher interest expense.
Full-year 2025 results and segment performance
For the full year, sales totaled $1.6 billion, down 4% from 2024, with the decline occurring primarily in North American industrial end markets. Operating cash flow increased to $42 million from $35 million in 2024, driven by lower working capital usage compared with 2024. Capital expenditures totaled $40 million in 2025.
Full-year gross margin was 17%, comparable to 2024 despite lower sales. The effective tax rate was 12% in 2025, which Foos said was below the statutory rate due to research and development tax credits; he expects a more normalized 18% to 20% tax rate in 2026. Full-year adjusted EPS was $2.70 compared with $3.59 in 2024.
Segment details discussed on the call included:
- Supply Technologies: Fourth-quarter sales rose to $187 million from $182 million, and operating income increased 31% to $21 million. Operating margin improved to 11.1% from 8.7%, driven by higher sales and cost controls. Full-year sales were $748 million versus $776 million, reflecting weaker demand in North American power sports, heavy-duty truck and bus, and industrial and agricultural equipment, partly offset by strong demand tied to data center, electrical, and semiconductor end markets. Full-year operating income was $72 million versus $75 million, with operating margin steady at 9.7%.
- Assembly Components: Fourth-quarter sales increased to $92 million from $90 million; adjusted operating income was about $4 million in both periods. Full-year sales were $381 million versus $399 million, impacted by lower unit volumes on certain auto platforms and production delays on new launches. Full-year adjusted operating income declined to $22 million from $27 million.
- Engineered Products: Fourth-quarter sales were approximately $116 million in both years; industrial equipment sales grew 5% but were offset by lower Forged and Machined Products sales. Fourth-quarter adjusted operating income decreased to $3 million due to lower profitability in the Forged and Machined Products Group. Full-year sales were $471 million versus $482 million, reflecting a small manufacturing closure in 2024 and lower railcar demand affecting the Forged and Machined Products Group. Full-year adjusted operating income was $17 million versus $21 million.
2026 outlook: growth led by volumes and backlog, with free cash flow improvement targeted
Foos outlined 2026 guidance calling for consolidated revenue of $1.675 billion to $1.71 billion (up 5% to 7%), adjusted EPS of $2.90 to $3.20 (up 7% to 19%), EBITDA (as defined) of 8% to 9% of net sales, and free cash flow of $20 million to $30 million.
In Q&A, management said the majority of expected revenue growth is volume-driven. Foos said pricing increases in the guidance are primarily in Assembly Components and represent a “small part” of the increase, while tariff-related pass-through is expected to affect Supply Technologies. He added that roughly 75% of the 2026 growth is expected to come from customers’ production volume increases. Crawford also pointed to multiple “tactical pricing discussions” across the business.
Management declined to provide segment-level profit guidance but said it expects improved flow-through and operating margin improvement in each segment, noting that operating margins in Assembly Components and Engineered Products have been below expectations. The company said Engineered Products is expected to reach record revenue in 2026, supported by new equipment backlog and aftermarket demand.
On free cash flow, Crawford cited improved visibility versus recent years of supply-chain and demand volatility, while Foos said the free cash flow outlook reflects increased profits, lower working capital usage per dollar of sales growth, and the expectation that the company can “harvest” some embedded working capital in 2026.
Management also discussed end-market exposure and mix. Crawford said automotive remains the company’s largest market but is now closer to “about 20%” of the business, down meaningfully from prior years. Foos listed additional major markets after automotive, including heavy-duty truck, semiconductor, power sports, steel, AI data center-related, electrical, and oil and gas, and said no single end market beyond automotive represents more than 15% of revenue. The company said China remained a good market where it generates cash, with a focus on businesses and customers where Park-Ohio can be successful, often supporting global customers seeking global partnerships.
About Park-Ohio (NASDAQ:PKOH)
Park-Ohio Holdings Corp is a diversified industrial company that supplies engineered products and distribution services to a broad array of end markets. Through its two primary operating segments—Engineered Solutions and Supply Chain Solutions—the company delivers metal components, assemblies and value-added distribution tailored to energy, transportation, industrial and commercial applications.
The Engineered Solutions segment provides design, machining, fabrication and assembly of custom metal parts, including heat exchangers, welded assemblies, tubing products and precision-machined components.
