Conferencia de resultados del T3 de 2026 de Kadant (KAI): ingresos, BPA y flujo de caja récord

Puntos clave

• Kadant anunció ingresos récord en el tercer trimestre de 2026 de 313,2 millones de dólares, un 15% más en comparación con el mismo periodo del año anterior, lo que incluye un récord en los ingresos por piezas del mercado de repuestos de 218,4 millones de dólares. Los ingresos orgánicos aumentaron un 4%.
• El BPA ajustado aumentó un 21% hasta alcanzar un récord de 3,64 dólares, mientras que el BPA según PCGA aumentó un 26% hasta los 2,96 dólares. El BPA ajustado se situó 0,64 dólares por encima del límite superior del rango de previsiones trimestrales de la empresa.
• El EBITDA ajustado aumentó un 24% hasta alcanzar un récord de 71,7 millones de dólares, con una expansión del margen del 21,4% al 22,9%, respaldado por adquisiciones, control de costes y eficiencias operativas.
• El flujo de caja operativo y el flujo de caja libre alcanzaron récords trimestrales de 62,9 millones de dólares y 58,1 millones de dólares, respectivamente. Kadant amortizó 51 millones de dólares de deuda durante el trimestre.
• Los pedidos del tercer trimestre aumentaron un 23% interanual en los tres segmentos operativos. La cartera de pedidos cerró el trimestre en 316 millones de dólares, compuesta por 167 millones de dólares en equipos de capital y 149 millones de dólares en piezas y consumibles.
• La dirección elevó sus previsiones de BPA ajustado para todo el año a 12,58-12,73 dólares y ajustó el rango de sus previsiones de ingresos a 1.195-1.210 millones de dólares.

Datos financieros clave

El margen bruto disminuyó debido a la mezcla de proyectos de capital. Las devoluciones de aranceles aportaron un beneficio, compensado por la amortización del inventario relacionada con adquisiciones y el beneficio diferido asociado a las ventas intercompañía en Kadant Profil.

Rendimiento empresarial y operativo

Control de flujo: Los ingresos aumentaron un 8% interanual, impulsados por ventas récord de piezas del mercado de repuestos y sólidos envíos de equipos de capital. Manejo de Fluidos se benefició de la demanda en energía, defensa y embalaje. Los pedidos aumentaron más de un 7%, el EBITDA ajustado aumentó un 22% hasta un récord de 31 millones de dólares y el margen alcanzó un récord del 30,7%. La dirección espera una demanda estable, con la solidez en automatización industrial, defensa y energía compensando en parte la debilidad en Europa.

Procesamiento industrial: Los nuevos pedidos alcanzaron los 123 millones de dólares, respaldados por un crecimiento orgánico de las reservas del 12%, adquisiciones y demanda del mercado de repuestos. Los ingresos fueron de 143 millones de dólares, mientras que el EBITDA ajustado totalizó 37 millones de dólares, lo que representa un margen del 26,1%. La dirección prevé una demanda estable en el mercado de repuestos y un aumento potencial en los pedidos de capital a medida que mejore la confianza económica.

Manejo de materiales: Las reservas aumentaron un 13% hasta los 67 millones de dólares, lideradas por la demanda del mercado de repuestos para equipos de manipulación de materiales a granel. Los ingresos cayeron un 4% debido a menores envíos de capital frente a un trimestre récord del año anterior. El margen EBITDA ajustado disminuyó al 22,1%. La dirección citó una sólida actividad de proyectos vinculada al gasto en infraestructuras y a la construcción de centros de datos.

Los nuevos mercados finales, incluidos los sectores de defensa, aeroespacial y automatización industrial, están creciendo más rápido que los mercados tradicionales de Kadant. La empresa registró un pedido aeroespacial de aproximadamente 8 millones de dólares y varios millones de dólares en nuevos negocios de automatización industrial durante el año.

Kadant también anunció que Michael Colwell asumirá el cargo de consejero delegado a principios de 2027. Jeffrey Powell pasará a ser presidente ejecutivo y seguirá participando activamente en el apoyo al equipo directivo y a las iniciativas de crecimiento.

Previsiones de la dirección

Kadant elevó el límite inferior de sus previsiones de ingresos para todo el año 2026 e incrementó su previsión de BPA ajustado:

La previsión de BPA ajustado para todo el año excluye 2,19 dólares por acción de amortización de intangibles y 0,51 dólares por acción de costes relacionados con adquisiciones. La previsión de BPA ajustado para el cuarto trimestre excluye 0,55 dólares por acción de amortización de intangibles y 0,11 dólares por acción de costes relacionados con adquisiciones.

Las perspectivas para todo el año asumen un margen bruto del 44,0%-44,3%, gastos generales, de venta y administrativos (SG&A) equivalentes al 27,0%-27,5% de los ingresos, un gasto neto por intereses de 19,0 millones a 19,5 millones de dólares, un tipo impositivo del 27,0%-27,5% y un gasto por depreciación de 27,5 a 28,0 millones de dólares.

Riesgos y aspectos a vigilar

• La incertidumbre política y las dificultades económicas continúan alargando el ciclo entre presupuesto y pedido en los grandes proyectos de capital.
• La actividad industrial en Europa y Asia se mantiene afectada por la presión económica, aunque la dirección señaló una mejora en el sentimiento de inversión en Norteamérica y Asia.
• Los proyectos de capital siguen activos, pero el calendario de pedidos es incierto y algunos proyectos podrían trasladarse a 2027.
• El margen bruto del tercer trimestre se vio afectado por la combinación de proyectos de equipos de capital y partidas contables vinculadas a adquisiciones.
• La dirección indicó que los clientes muestran actualmente una disposición limitada a aceptar subidas de precios, lo que convierte a los controles de costes internos y a la eficiencia operativa en las principales palancas del margen.
• El flujo de operaciones de M&A se desaceleró a medida que avanzaba 2026, a pesar de la opinión de la dirección de que las carteras de capital privado albergan un volumen sustancial de empresas que eventualmente podrían salir al mercado.

Puntos destacados del turno de preguntas de analistas

La dirección afirmó que la cartera de proyectos de equipos de capital se está expandiendo, pero los proyectos tradicionales de Procesamiento Industrial de entre 5 y 25 millones de dólares tardan más en convertirse en pedidos. Por el contrario, la actividad inversora en los sectores aeroespacial, de defensa y automatización parece estar acelerándose.

La integración de Kadant Profil avanza a buen ritmo. La dirección espera que los efectos pendientes sobre el inventario derivados de la adquisición para componentes estándar queden superados en su mayor parte para el primer trimestre de 2027. El lastre estimado de aproximadamente 0,20 dólares por acción previsto en 2026 también debería empezar a revertirse en 2027, mejorando el perfil del margen de Procesamiento Industrial en el sector de la madera.

La dirección señaló que algunos clientes se están preparando para volver a invertir tras consolidar instalaciones, especialmente en el procesamiento de fibras. El envejecimiento del equipamiento y varios años de escasa inversión han impulsado la demanda récord de piezas del mercado de repuestos, aun cuando las tasas de utilización de los clientes se mantienen por debajo de los niveles récord.

Transcripción completa de la llamada de resultados

Transcripción completa de la conferencia de resultados

Comentarios de la dirección

Operator

Good day, and thank you for standing by. Welcome to the Q3 2026 Kadant Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Michael McKenney, Executive Vice President and Chief Financial Officer. Please go ahead.

Michael McKenney

Thank you, Stephen. Good morning, everyone, and welcome to Kadant's Third Quarter 2026 Earnings Call. With me on the call today is Jeff Powell, our Chief Executive Officer.

Before we begin, let me read our safe harbor statement. Various remarks that we may make today about Kadant's future plans and expectations, financial and operating results and prospects are forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to known and unknown risks and uncertainties that may cause our actual results to differ materially from these forward-looking statements as a result of various important factors, including those outlined at the beginning of our slide presentation and those discussed under the heading Risk Factors in our annual report on Form 10-K for the fiscal year ended January 3, 2026, and subsequent filings with the Securities and Exchange Commission.

In addition, any forward-looking statements we make during this webcast represent our views and estimates only as of today. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so. even if our views or estimates change.

During this webcast, we will refer to some non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is contained in our third quarter earnings press release and the slides presented on the webcast and discussed in the conference call, which are available in the Investors section of our website at kadant.com. Finally, I wanted to note that when we refer to GAAP earnings per share or EPS and adjusted EPS on this call, we are referring to each of these measures as calculated on a diluted basis. With that, I'll turn the call over to Jeff Powell, who will give you an update on Kadant's business and future prospects.

Following Jeff's remarks, I'll give an overview of our financial results for the quarter, and we will then have a Q&A session. Jeff?

Jeffrey Powell

Thanks, Mike. Hello, everyone. Thank you for joining us this morning to review our third quarter results and discuss our outlook for the remainder of the year. We had an excellent financial performance in the third quarter across a broad range of key metrics. We achieved record revenue, and we're particularly pleased with aftermarket parts revenue in Q3, continuing the record-setting pace from both Q1 and Q2 of this year. As you know, our aftermarket business is a core strategic growth area, and it's encouraging to see this continue to thrive.

Market demand for capital equipment strengthened so political uncertainty and economic headwinds continue to impact the timing of large projects. We are winning new capital projects, but the quote-to-order cycle continues to be extended.

As has been the case throughout 2026, our operation teams around the world delivered exceptional value for our customers and shareholders. I want to thank them for their outstanding efforts and the results they produced in the third quarter as well as our commitment to our operational excellence demonstrated throughout the year.

Turning next to Slide 6. I would like to review our Q3 financial performance. Our Q3 revenue and earnings performance continue to improve sequentially, and I am pleased to report record adjusted EPS performance. Bookings in the third quarter increased 23% and the same period last year with growth across all 3 of our operating segments. Revenue was up 15% to a record $313 million and benefited from outstanding aftermarket parts business and record first half bookings.

Our focus on internal cost control and solid execution contributed to increased operating leverage with record adjusted EBITDA of $72 million and an adjusted EBITDA margin of nearly 23%. We are thrilled to achieve these results in less than ideal market conditions. Adjusted EPS was also a record at $3.64 in the third quarter. And finally, cash flow from operations and free cash flow in the third quarter were records at $63 million and $58 million, respectively, demonstrating the continued strength of our business model.

Next, I'd like to review the performance of our operating segments, beginning with our Flow Control segment. Record aftermarket parts revenue and solid capital equipment shipments drove an 8% year-over-year increase in Q3 revenue. Growth was led by our Fluid Handling product line supported by healthy demand from the energy, defense and packaging markets. Encouragingly, our new order activity was up more than 7%, largely due to the growth in our aftermarket business. Adjusted EBITDA of $31 million was a record and up 22% compared to same period last year, leading to a record EBITDA margin of 30.7%.

Factory automation, defense and energy markets -- end markets continue to show strength, particularly in the Americas, while industrial activity in Europe and Asia reflects the persistent economic headwinds in those regions. As we look ahead to the remainder of 2026, we expect stable demand in our Flow Control segment. The segment continues to benefit from diversified market exposure with improving investment sentiment in North America and Asia, helping to offset some of the softness in Europe.

Our Industrial Processing segment again delivered excellent quarterly results despite challenges in the global capital equipment market. Strong competitive positioning, recent acquisitions and 12% organic bookings growth drove new orders to $123 million. Revenue increased to $143 million, with strong contribution from both aftermarket parts and capital equipment shipments. Operational leverage in our recent acquisitions contributed to our improved margin performance in this segment. Adjusted EBITDA was $37 million and represented 26.1% of revenue in the third quarter. Looking ahead, we believe our aftermarket demand will remain stable and that our capital business will see an uptick in order activity. Our capital project pipeline remains healthy, and we expect orders will move forward as economic confidence strengthens.

In our Material Handling segment, we benefited from strong commercial execution in the third quarter. Our bookings were up 13% to $67 million, led by exceptional aftermarket demand for our bulk Material Handling equipment. Revenue was down 4% compared to the record third quarter performance of last year. This decline was due entirely to lower capital shipments compared to the same period last year. While the lower revenue volume -- with the lower revenue volume, adjusted EBITDA margin decreased to 22.1% compared to the record performance of Q3 and last year. We expect demand to be stable in the near term and project activity to remain healthy, particularly in infrastructure spending and the build-out and data centers.

For the remainder of 2026, we expect demand to remain stable with potential upside from capital projects. There remains a lot of activity around new capital projects, and this could become a meaningful contributor though the timing of these projects can be uncertain and could shift to 2027.

Before I turn the call over to Mike for a closer look at our third quarter performance, I'd like to briefly address my upcoming transition to Executive Chairman and Michael Colwell's appointment as CEO. I've had the privilege of leading what I believe is an exceptional company, not just one with great products and innovative technologies by a company whose people come to work every day determined to make a real difference for our customers, communities and all Kadant stakeholders. Over the past 48 years, I've been a part of some great businesses, None, however, compared to Kadant. It comes down to the special qualities that make Kadant unique. I believe our culture of integrity, commitment, accountability and entrepreneurism allows us to serve our customers better, creating lasting value for the shareholders.

Michael takes over at the beginning of the year. I will remain actively engaged in supporting the leadership team and its growth initiatives. I want to thank the employees and shareholders for the opportunity to be part of Kadant legacy, and I'm confident that [indiscernible].

I'll now pass the call over to Mike for his review of our Q3 financial performance. Mike?

Michael McKenney

Thank you, Jeff. I'll start with our third quarter performance. Our third quarter record revenue of $313.2 million [indiscernible] included record aftermarket parts revenue of $218.4 million. Organic revenue increased 4% compared to the third quarter of '25 including a 5% increase in organic capital revenue. Gross margin was 44.7% in the third quarter of 26%, down 50 basis points compared to 45.2% in the third quarter of '25, largely due to a lower gross margin profile associated with the mix of capital projects in the period. We had a benefit in the third quarter from tariff refunds but this was offset by the negative impact from the amortization of acquired profit and inventory and deferred profit associated with intercompany sales at our Kadant Profil acquisition.

SG&A expenses as a percentage of revenue decreased to 26.4% in the third quarter of 2016 compared to 27.9% in the prior year period. SG&A expenses were $82.7 million in the third quarter, 26, increasing $6.9 million compared to $75.8 million in the third quarter '25. This increase includes $6.1 million of operating expenses and $2.3 million in noncash intangible amortization expense from our recent acquisitions. These increases in SG&A expense were partially offset by a $2 million decrease in acquisition-related costs.

Our GAAP EPS increased 26% to $2.96 in the third quarter and our adjusted EPS increased 21% to a record $3.64 in the third quarter of '26. The third quarter '26 adjusted EPS exceeded the high end of our guidance range by $0.64 in part due to higher-than-expected revenue. This included higher-than-expected aftermarket parts revenue at our Industrial Processing segment as well as higher capital revenue at our Flow Control segment.

In addition, our acquisitions performed better than anticipated, and our operating expenses were lower than forecast. This strong performance contributed to a record adjusted EBITDA and record cash flow performance in the quarter, which I'll discuss further in further detail on the next slide. Adjusted EBITDA increased 24% to a record $71.7 million compared to $58 million in the third quarter '25 due to strong performance at our Industrial Processing segment driven by our recent acquisitions and record performance at our Flow Control segment. Adjusted EBITDA margin exceeded the last 4 quarters and rose to 22.9% compared to 21.4% in the third quarter '25. I should note that our businesses have done an excellent job in controlling expenses while optimizing business processes to help drive our record results.

Turning to our cash flows. We had both record operating and free cash flow in the third quarter of '26 at $62.9 million and $58.1 million, respectively. On a year-to-date basis, both metrics are ahead of last year, with free cash flow up 20% over last year. Nonoperating uses of cash in the third quarter of '26 included $51 million of repayments on our debt, $4.8 million for capital expenditures and $4.3 million for a dividend on our common stock.

Let me turn next to our EPS results for the quarter. Our adjusted EPS increased $0.63 from $3.01 in the third quarter of '25 to $3.64 in the third quarter '26. This included increases of $0.50 from the operating results of our recent acquisitions excluding associating borrowing costs, $0.29 due to higher revenue and $0.04 due to lower tax rates. These increases were partially offset by $0.15 in higher interest expense, $0.02 due to lower gross margin percentage, $0.02 due to higher non controlling interest and $0.01 due to higher weighted shares outstanding. Our effective tax rate of 26.4% in the third quarter was lower than anticipated, primarily due to discrete tax benefits. Collectively, included in all the categories I just mentioned, was a favorable foreign currency translation effect of $0.02 in the third quarter of '26 compared to the third quarter of last year.

Looking at our liquidity metrics on Slide 15. Our cash conversion days were 133 at both the end of the third and second quarters of 26 compared to 131 at the end of the third quarter '25. Working capital as a percentage of revenue decreased to 17.8% in the third quarter '26 compared to 19.3% in the second quarter of '26. Our net debt, that is debt less cash, decreased $56.4 million or 15% sequentially to $316.6 million. As noted earlier, we paid down $51 million of our debt this quarter, demonstrating our ability to generate strong cash flow globally and efficiently pay down our acquisition borrowings.

Our leverage ratio, calculated in accordance with our credit agreement decreased to 1.49% compared to 1.72% at the end of the second quarter '26. At the end of the third quarter '26, we had $300 million of borrowing capacity available under our revolving credit facility.

Now I'll review our guidance for '26. Despite many challenging market conditions, we delivered strong financial performance in the third quarter and expect to end the year with records in a number of financial metrics, including revenue, adjusted EBITDA and adjusted EPS. We also had record operating and free cash flow in the third quarter as well as the first 9 months of '26. We are raising the lower end of our full year '26 revenue guidance to $1.195 billion to $1.210 billion, revised from our previous guidance of $1.19 billion to $1.21 billion. We are raising our adjusted EPS guidance and now expect $12.58 to $12.73 in '26, revised from our previous guidance of $12.43 to $12.68. Our adjusted EPS guidance excludes $2.19 of intangible amortization expense and $0.51 of acquisition-related costs. Our revenue guidance for the fourth quarter of '26 is $287 million to $302 million and our adjusted EPS guidance for the fourth quarter is $2.67 to $2.82, which excludes $0.55 of intangible amortization expense and $0.11 of acquisition-related costs.

Our full year '26 guidance includes the following assumptions: gross margins of 44% to 44.3%, SG&A as a percentage of revenue of 27% to 27.5%, net interest expense of $19 million to $19.5 million, a tax rate of 27% to 27.5% and depreciation expense of $27.5 million to $28 million.

That concludes my review of the financials, and I'll now turn the call back over to the operator, Stephen, for our Q&A session. Stephen?

Operator

[Operator Instructions] Our first question comes from Ross Sparenblek of William Blair.

Preguntas y respuestas

Unknown Analyst

This is Sam Karlov on for Ross. So organic orders are relatively strong across the board. I'm curious how your capital equipment project funnel has evolved in the past few months in each segment? And then are there any major macro or customer trends that have gotten better or worse for your business over the past few months?

Jeffrey Powell

I think the activity level, the discussion level has improved. And I would say the pipeline is growing, although I can't say there's any particular area where things have really changed. What we're finding is more activity in some of the newer markets that we've gotten into the defense side, aerospace, automation, those areas are growing faster, and they seem to be right now willing to make more investments in those areas. So that's the area that we've seen some nice bookings and a nice growth area. The larger capital projects tend to be associated with our Industrial Processing segment. I'm talking about projects that can be anywhere from $5 million to $25 million. Those, I would say, are still in discussions, but they are taking longer to turn into orders than they have traditionally. So there's still some caution in some of those larger capital projects in some of our older core markets. But the newer markets we've entered into, the investment cycle seems to be accelerating.

Unknown Analyst

Got it. No, that's super helpful. I guess switching gears for a second. Can you give us an update on the integration of fill and kind of update us on where you are working through that inventory on hand from that business?

Jeffrey Powell

Yes, I'll let Mike discuss where we are. But I would say from an operational standpoint, the integration has gone quite well. As you're aware, we've worked with them for 30 years. Half their business was to us already. So it's been a very smooth, I would say, integration, and we're very pleased with the way things are going there. They're out chasing some new markets and having some success. We announced, I think, last quarter, they've gotten a very large order in the aerospace area. So we're so far quite pleased with the operational integration.

Michael McKenney

Yes. And Sam, on the inventory front, I think as we had forecast, we're going to start to turn the corner here in the fourth quarter. So by the first quarter of '27, that should be relatively behind us for the standard components.

Unknown Analyst

Got it. That's super helpful. And then just before I forget, can you give the split on the backlog for capital equipment versus parts and consumables?

Michael McKenney

Yes. It's -- so the -- we ended with the backlog of $316 million, and the split is $167 million capital, parts and consumables, $149 million.

Operator

Our next question comes from the line of Gary Prestopino of Barrington.

Gary Prestopino

Mike, just going through some of my notes on -- when you made this acquisition of was it Profile KAI, you said it was going to be dilutive this year because of the intercompany transfers, right, about $0.20 per share. Yes. Okay. So as we get into '27, how does that start factoring out? I mean that whole $0.20 drag is going to go away and it should start maybe kind of mimicking the margins that your overall company has or generates or within the segment division that it's in?

Michael McKenney

Yes. That's a good way to think of it, Gary. We're tracking to that $0.20 drag. And right now, as we get right off the bat when we get into '27, we'll, I believe, turn the corner on that, and you'll start to see improvement in the margin profile for the Industrial Processing for specific to the wood sector.

Gary Prestopino

Okay. That's good. And then the previous question asked about the backlog for capital and aftermarket parts. What was the corresponding backlog last year at this time for capital and aftermarket parts?

Michael McKenney

Last year, it was $273 million. And I don't have in with me. I will guess that, that was probably about 60-40, 60% capital, 40% parts. That would be my estimate on that.

Gary Prestopino

Okay. And just any thoughts on that now that this election is over and the uncertainties are gone, at least domestically, what do you think -- what kind of impact do you think that could possibly have on your capital project activity?

Jeffrey Powell

Well, I got to be honest with you. Gary, I have no clue. I mean it's Things have been -- I would say, generally speaking, things have been -- and we said this now for -- actually for quite some time, things have been much softer than we would have expected when you look at the overall state of the economy. And so short of us going into a macro recession, it's kind of -- it would be surprising if things get substantially worse. Could they get better? Absolutely. We think that many of our customers have underinvested now for the last several years. And that's why our parts continue to set new record levels, even though operating rates are actually quite soft. They're nowhere near record operating rates, and yet we just continue to have quarter after quarter of record parts because they're running such old equipment. So they're going to have to start to make some investments. And we're talking to some customers that are now saying, okay, we're starting to put our plans together to start to reinvest in the business. So -- but I wouldn't venture a guess on these election results and how they might impact things. I don't see -- I mean, there's nothing quite obvious that would be highly negative that I can see, but I'm not smart enough to figure out what these guys are going to do.

Gary Prestopino

Okay. That's helpful. You just add a thought there. And then just a comment on the M&A pipeline.

Jeffrey Powell

Yes. It's -- I would say that it's softened a little bit as the year has progressed here. At the beginning of the year, there was some decent deal flow. But recently, the bankers are telling us that we've experienced ourselves a little bit of a slowdown in new deals coming to market. And there's a huge pent-up book of businesses that need to be moved, certainly on the sponsor side. On the private equity side, they've got big portfolios of businesses that they've not brought to market, and they're going to have to do that. But things have -- I would say, have softened a little bit here as the year has progressed.

Gary Prestopino

And best of luck to you in your retirement.

Jeffrey Powell

I'm not going away completely. I'm not going away completely. It's a little less work.

Gary Prestopino

A part-time gig as an adviser, right?

Jeffrey Powell

Well, I'm actually still to be an employee through all '27. So I don't come off the payroll to '28.

Operator

Our next question comes from the line of Walter Liptak of Seaport Research.

Walter Liptak

Congratulations, Jeff, on a really good run. I wanted to ask a question about the comment that you made on the first question about some of the pivot into defense, aerospace, automation growing faster. I wonder if you could give us a little bit more color about sort of what that funnel looks like and maybe the magnitude, like if you are seeing more capital orders there, like what percentage of revenue do those sectors make up?

Jeffrey Powell

Yes, I don't have that exact number. Of course, it's a new market for us. So it's a smaller percentage. It's just that a lot of it is new business that we didn't have before. So it is impactful from that standpoint. It is growing. Probably I think this year, I think our biggest order in a new market was on the aerospace side. I think it was about an $8 million order.

Mike, is that right?

Michael McKenney

Correct. Yes, about $8 million order. We mentioned that on the factory automation side that we picked up several million dollars worth of business this year that was new business to us, and that continues even recently, I think we've continued to book some nice factory automation projects with some big well-known names. So it's all kind of incrementally new business for us, and it's markets that we're putting a lot of focus. strategically, we're focusing on those because we do know they're new business for us and also growing faster than some of the older markets. So it's encouraging to see that we're having some good success there.

Walter Liptak

Okay. And the $25 million order that you referenced, is that in the papermaking sector?

Michael McKenney

Well, I just talked about project sizes in the industrial processing side range anywhere from $5 million to as much as $25 million. We have booked $25 million order in the fiber processing side in the past. That tends to be -- our single largest projects tend to be on the fiber processing side.

Walter Liptak

Okay. Okay. And then, yes, I guess as we're thinking about 2027, it seems like some of the sectors have been consolidating here for a little while. Based on your experience, is there like a point at which the recapitalization starts as they invest in the remaining facilities, updating them and things even before sort of the sectors start changing? Or is there something that we're -- we should be thinking about for when some of the more traditional capital orders start picking up?

Michael McKenney

Yes. I think that some of our customers have started to talk and announce that they're going to start to reinvest in the assets that they kept online. As you know, there was a fair amount of consolidation, particularly in the fiber processing side. And when that happens, of course, they spend their time focused on which assets are going to shutter and which ones they're going to invest in because overall demand for the product globally, at least has not gone down. It continues to go up. So you've got to replace that -- if they shut down a plant somewhere, somewhere else, it's got to be picked up. And so some of our customers have announced and are talking about an investment cycle starting up as they now have rationalized their combined operation and are ready to start trying to improve efficiencies and get ready for, I think, the economies as they start to reaccelerate. So we do expect to see some of that and have had some discussions along those lines.

Walter Liptak

Okay. Great. And then just last one for me. The margins look pretty good kind of across the board with the exception of some of the noise from acquisitions. But the -- how are you feeling about price cost and just selling price increases and being able to deal with the inflationary pressures?

Yes. I mean what we primarily focused on is internal cost control and internal initiatives. I mean the market isn't very excited about price increases right now with the economies in some areas still being somewhat soft. But where we can make an impact and where we have focused and got benefit from is really operational efficiencies and cost controls internally within our organization. So we have some some fairly global, I would say, global-wide initiatives we're working on right now to bring our -- to continue to bring our costs down and become more efficient. And so that's really where we're seeing the benefits from less so on pricing and more on our internal efficiencies and cost control.

Operator

Okay. I am showing no further questions at this time. I would now like to turn it back to Jeff Powell, CEO, for closing remarks.

Jeffrey Powell

Thanks, Stephen. So before wrapping up the call today, I just want to leave you with a few takeaways. 2026 is expected to be a record-setting year for Kadant despite the economic pressures and geopitical challenges around the world. Strong performance in the first 3 quarters of 2026 along with the numerous operational improvements we've achieved through our 80/20 performance system and other initiatives that position us well for the remainder of the year. We look forward to sharing our successes with you on future calls, and we want to thank you for joining us today.

Operator

Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.