Quaker Houghton

Greetings and welcome to Quaker Houghton's first quarter earnings release conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Michael Barry, Chairman, CEO, and President. Please go ahead, sir.

Good morning, everyone. Joining me today are Shane Hostetter, our CFO, Robert Traub, our General Counsel, and David Will, our Global Controller. We have slides for our conference call. You can find them in the Investor Relations section of our website at www.quakerhoughton.com. A great deal has changed over the past year with the COVID-19 pandemic. For us, our top priority is and has been to protect the health and safety of our employees and our customers, while ensuring our business continuity to meet our customers' requirements. All of our plants around the world are operating, and we are continuing to meet our customer needs despite the increasingly challenging conditions caused by COVID, as well as the current year global supply chain pressures that have impacted raw material availability. I'm very proud of what the Quaker Houghton team has done to continue to service our customers as well as continue with our integration. We are very pleased with our strong first quarter results. Overall, our sales were sequentially up 11% compared to the fourth quarter with all regions and segments showing revenue growth. This was primarily driven by higher volumes as our business continues to come back from the negative impact that COVID-19 had on our end markets. The sequential increase was broad-based with all segments and regions growing between 9% and 12%. I also think it is interesting to look at our revenue changes from the first quarter of 2020, which is just when COVID-19 was starting to impact us. A year ago, We primarily saw the COVID impact in China, and you can see this impact in our current quarter Asian Pacific sales growth of 31%. AMEA and our global specialty businesses also showed strong growth and were up 14% and 12% respectively from a year ago. The Americas were relatively flat in sales from a year ago, if you exclude the two recent small acquisitions that we made. Overall, we anticipated sequential sales growth to play out in the first quarter, but we were surprised by how strong our sales volumes ended up being as we simply just did not expect to see this level of growth so soon in 2021. Some of this growth may be due to our customers replenishing their products in the supply chain and some pre-buying of our products, but it is really difficult to precisely say this was a major impact. I also want to point out that our ability to gain new pieces of business and take market share also contributed to our performance, as our analysis shows that we had total organic sales growth through the net share gains of approximately 3% in the first quarter of this year versus the first quarter of 2020. So we continue to feel good about our ability to deliver on our historical performance of consistently growing 2% to 4% above the market due to share gains. And looking forward, we continue to feel good about these levels of share gains given the opportunities we have recently won or are actively working on. While higher than expected sales were a positive for us in the quarter, a clear negative was the continued increase in our raw material costs. While we knew raw materials were increasing the last time we talked, the increases have continued longer and at a higher level than we expected. Overall, our costs of raw materials have increased over 20% since the end of last year. There is tremendous stress on the supply chain of our raw materials and logistics. Further, the availability of raw materials has impacted us at times, but I'm proud to say that we've navigated through this so far and have ensured that all our customer businesses continue to operate. The increase in raw material costs did put downward pressure on our gross margins in the first quarter, and this downward pressure will continue into the second quarter, just given the sheer magnitude and duration of additional increases and the lag effect we experienced between the time the raw material costs increase and the time we have to fully implement price increases to offset them. So overall, we are pleased with the quarter given the environment we're operating in, and saw a strong sequential improvement in our sales and adjusted deep at that from the fourth quarter. Synergy achievement also was a factor in our results as we achieved $18 million in the current quarter compared to $10 million last year. Relative to liquidity, we did increase our net debt in the quarter due to the small acquisition in the steel market and an increase in our working capital due to the strong sales growth. However, our leverage ratio of net debt to adjusted EBITDA continued to improve from 3.2 times at the end of the year to 3.1 times to the end of the first quarter. And we currently expect to be below three times at the end of the second quarter. As we look forward to the second quarter, we expect short-term headwinds from higher raw material costs and some lower volume impact due to some of the factors I mentioned earlier, as well as the automotive market continuing to have semiconductor shortages. I do see the second quarter as our lowest quarter of the year, both in terms of gross margin and profitability. However, we do expect our margins to sequentially improve in the third and fourth quarters and return to where we expected them to be by the end of the year. As I think about our full year, we are continuing with our previous guidance, which is really a floor or the low end of our expected EBITDA. However, I am more optimistic on our year than I was a few months ago. While we may end up the year in the same place or slightly better based on our strong first quarter, the shape of our year's expected profitability trend has changed. Essentially, we're seeing higher demand for the year, but greater margin pressures in the near term, which is expected to be largely offset by this higher demand. However, the margin and pressures are expected to be short-term in nature once our price increases are fully implemented. So we currently expect to exit the year at better than expected demand for our products and our margins largely returning to our expected levels. So even though we expect to largely end up in a similar or slightly better place as our previous expectations, I feel better about this scenario than the already positive one I had envisioned a few months ago. We will have a step change in our profitability, essentially complete our integration, cost synergies, continue to grow above the market by taking share and reach our targeted net debt to adjust it to even the leverage of 2.5. In closing, I want to thank all of our colleagues at Quaker Houghton whose dedication and expertise helps to create the value for our customers and shareholders and differentiate us in the marketplace. I am so proud of how our team has performed in servicing our customers, meeting their needs, and successfully continuing with our integration execution, which is both critical and difficult for us given the current conditions we are facing this year. People are everything in our business, by far our most valuable asset, and ensuring their safety and well-being is and will continue to be a top priority for us. So I can't help but to reemphasize my pride for our Quaker Houghton team, what we have and will be able to accomplish for our customers and investors both now and going forward. And that concludes my prepared remarks. I'll now hand it over to Shane so that he can review some of the key financials for you for the quarter.

Thanks, Mike, and good morning, everyone. Before I get into results for the quarter, I'd like to remind everyone that comments made during this call include forward-looking statements which are based on current expectations and are subject to risks and uncertainties that could cause our actual results to differ materially. For further discussion of these risks, please review the cautionary statements regarding forward-looking statements included in our earnings release and our Form 10-Q filed with the SEC. In addition, please reference our risk factors disclosed in our 2020 Form 10-K, as well as our first quarter Form 10-Q for discussion of company risks that could also impact our forward-looking statements. In addition, Mike and I make reference to several non-GAAP measures during this call. Such are consistent with the press release and call charts filed yesterday, and also there are reconciliations between U.S. GAAP measures and non-GAAP measures provided in our call charts on pages 10 to 21 for reference. Looking at our strong start to the year, the quarter really rounded out, as Mike previously summarized. Our performance was driven by record quarterly net sales, partially offset by lower than expected gross margin due to higher raw material costs on significant supply chain pressures. As I begin to discuss our quarterly performance, I'll point you to slides six and seven in our call charts, which provide a further look into our financials. Our record net sales of $429.8 million increased 14% from the prior year, which was primarily driven by higher volumes, including 3% from acquisitions, and increases due to foreign exchange of approximately 3%. This top-line performance was truly a global effort, with each segment contributing nice growth year over year. APAC's net sales increase of 31% was the largest increase in the prior year, but this was mainly due to the initial impacts of COVID hitting China in the first quarter of last year versus the rest of the segments being impacted in the second quarter of last year. EMEA also showed strong net sales growth of 14% due to a solid bounce back from COVID-19. Americas and GSB had net sales growth of 4% and 12%, largely due to higher volumes, including the coral acquisition made in December of last year, which helped offset some of the market pressures we are facing, such as the semiconductor shortage. Net sales were a positive story to the quarter, but similar to all of our peers and most other manufacturing companies in the world right now, we are facing significant challenges with rising input costs due to the global supply chain disruption. Gross margins were 36.3% for the quarter compared to 35.4% in the prior year. But excluding one-time COGS increases related to acquisitions, these would have been 36.6% and 35.5%. Notably, this 1% improvement year-over-year is really the benefit of strong execution of integration synergies offsetting higher raw material costs that we incurred in the quarter. SG&A was up $5.6 million compared to the prior year quarter, as we had additional costs associated with our recent acquisition of Coral and higher SG&A due to the impact of foreign exchange. These were partially offset by additional savings from integration cost synergies, as well as travel and other savings due to the COVID-19 situation. So, the net performance resulted in strong adjusted EBITDA growth in the first quarter, As you can see in chart 8, our quarterly adjusted EBITDA of $77.1 million grew 28% from the prior year, which drove an 8% increase in our churning 12-month adjusted EBITDA to $239 million. These results were really driven by higher operating earnings in each of the company's segments year over year, as the continued recovery of the company's global end markets, the benefit of recent acquisitions, and higher integration cost synergies contributed to a record adjusted EBITDA performance. From a tax perspective, we had an effective tax rate of 24.2% in the quarter compared to a benefit of 31.1% in the prior year. Excluding various one-time items in each period, our tax rate would have been reasonably consistent at 25% for the current quarter compared to 22% last year. To note, we do expect both our second quarter and full-year ETRs will be in the range of 24.5% to 26.5%. So our net gap EPS of 211 grew 53% compared to the prior year, as our strong operating earnings and adjusted EBITDA, coupled with $3 million of lower interest expense due to lower borrowing rates, were partially offset by a slightly higher tax expense. As we look to the company's liquidity, summarized on chart 9, our net debt of $749.6 million increased $32 million in the quarter, which was primarily driven by a $25 million acquisition of a 10-pointing business for the steel and market, 7.1 million of dividends paid, and 12.6 million of operating cash outflow. Related to the quarter's outflow of operating cash, the company's major cash requirement is working capital. In periods such as this, where our sales and volumes increase dramatically, there is an outflow of cash needed to sustain our day-to-day operating requirements. which will come back to us as our demand trends normalize. Despite this increase in net debt, the company was able to improve its reported leverage ratio 3.1 times as of the first quarter, compared to 3.2 at the end of last year. Overall, I want to emphasize we are committed to prudent allocation of our capital. This includes prioritizing debt reduction while continuing to pay dividends, and invest in acquisitions that provide growth opportunities which make strategic sense, all while remaining committed to reducing our leverage below our targeted 2.5 times level by the end of this year. So, to summarize, Wickerhouten had a strong quarter that was above our expectations due to continued end market recovery, a pickup in demand, and good market share gains. As we look to the second quarter and the remainder of the year, we expect our strong Q1 performance and improved volume demand will be a bit offset, as raw material cost increases take full effect and we see more volume impacts from market variability, including the semiconductor shortage. Though, as Mike mentions, we still maintain our previous floor guidance that we will see a greater than 20% increase in adjusted EBITDA in 2021 as compared to the $222 million we achieved in the prior year. That concludes my remarks. Thank you for your interest in Quaker Houghton, and I will now turn it back to Mike.

Thanks, Shane. We will now open it up for questions.

Thank you. At this time, we'll be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Your first question comes from line of Catherine Griffin with Deutsche Bank. Please proceed with your question.

Hi, good morning. Thanks for taking the question. So, first, I just wanted to touch on the comment around potentially lower volumes in Q2. I think, Shane, you just mentioned some market variability related to the semiconductor shortage, and I was just wondering if you could provide a little bit more color on, like, what that market variability is and maybe how you expect volumes to trend by region in Q2. Sure.

Good morning, Catherine. It's hard for us to be precise on this because there's so many factors at play in here, but we do feel there could have been some pre-buy in the first quarter, as well as some of our customers replenishing their supply chain products into it. But it's really hard to get at that. We really spent a lot of time trying to analyze that, trying to understand that better, And, you know, for example, there were, you know, places, I think of the United States and the steel industry and the auto industry, they're really running, you know, very hand-in-the-mouth right now. So, but in a lot of places in the world, there could have been some of these other effects. So, we think, though, overall, there could be some volume impact due to that, as well as the semiconductor shortage just continues to... continuing on at least for another quarter here. And so we think that will impact things as well. So it's hard for us to precisely tell on our volumes.

Okay, thanks. And then just on the gross margins, if you could just talk a little bit more about how you expect to improve that in Q3 and Q4. I think it's, of course, price increases coming through, but I'm curious if there's other actions that you're taking or could take in order to get to that, you know, previous gross margin guidance?

Sure. Yeah, you know, we were, if you kind of look back at where we were in the third or fourth quarters of last year, we were, you know, really improving our gross margins through a lot of the synergies that we are achieving through the integration of the company. So we saw that. And then now these large raw material price increases have come through. They started in the fourth quarter, more came through in the first quarter, and more are coming through in the second quarter, very large increases even between March and April. And really what we have to do and we are doing is continuing to do price increases in the marketplace. We've done those price increases in the first quarter, and we're going to have to do more and are doing more in the second quarter. So it's kind of just catching up. We have this lag effect that we talk about that, you know, there's a period of time between our time our raw materials go up and cost and we get price increases in the marketplace to fully offset them. So it's really kind of anticipating that we will be successful and we do believe we'll be successful in our price increases and that raw materials will begin to stabilize mid-year. And therefore, as these price increases get fully into effect, let's say towards the middle of the year, then you'll see the sequential improvement between the second quarter to the third quarter, and then the third quarter to the fourth quarter.

Thanks very much.

Thank you.

Your next question comes from the line of Mike Harrison with Seaport Global Securities. Please proceed with your question.

Hi, good morning. Good morning, Mike. Maybe if I could take a little bit of a different tack on the raw material impact you're expecting in Q2. Consensus EBITDA numbers for Q1 were kind of in the call it $60 million realm and you guys came in at 77 million. Is Q2 from an EBITDA perspective maybe tracking toward that $60 million number that we had been modeling if we keep in mind the inflationary impact and maybe some of the other puts and takes you're thinking about?

Yeah, we don't give too specific guidance in that. But it's hard to argue with something like that. But I would just say that we do feel that it will be the lowest quarter of the year for the reasons we talked about, both margin and down on volume somewhat. And we had said this when we had our call at the end of last quarter. you know, we had thought that our first quarter was going to be the lowest quarter of the year. And that's, of course, why our analysts took our guidance on that. And it was really just this higher, this much higher demand that came through in the quarter than we expected. And now the whole raw materials kind of changed it. So, yeah, it's definitely changed the shape of how our EBITDA is going to transpire through the quarters this year.

All right. And maybe a little bit more color on the specific raw materials where you're seeing an impact. You mentioned that overall you've seen things increase about 20% since year end. I think if we look at crude-based materials, base oil has gone up pretty Substantially, probably more than that 20% number, but can you talk about what you're seeing in your plant-based and animal-based raws and maybe also give us some rough idea of how much of your raw material spend is in those three buckets, crude-based, plant-based, and animal-based?

Sure. I mean, one thing I'll just say, all of our raw material groups, for the most part, really have gone up. It's not just constrained to one area. They all have gone up. Tremendous pressure on that, tremendous pressure on our supply chain costs, freight, you know, drums, that kind of thing. So just the whole, everything is just kind of going up. And as far as I don't have the precise numbers in front of me, but certainly when you look at the key raw materials groupings that we buy, between animal fats, vegetable fats and oils, and the base oils that come out of crude, they definitely make up a good part of our raw materials spend. There's also a whole host of other chemicals that get used in additive, but pretty much across the board, they all go up.

All right, and then if I can sneak one more in here. Looking at the primary metals business as compared to the metalworking business, it seems like metals is kind of lagging. If I just look at the year-on-year growth rates for each of your segments, is that typically what you would expect to see coming out of a cycle like this? Is that the metalworking business recovery is taking place more real-time, and then it pulls steel and aluminum with it on more of a lag?

Like last year, I know we saw some pretty strong growth coming out, like initially out of COVID as we were coming back in our metals business, and there was more of a lag at that time in metalworking, and maybe this is just catching up or there's some, you know, but I don't think, I don't quite, When I think about our businesses, I don't quite think of it that way. I think all of them are, you know, pretty consistent, showing good growth to what we see in the external markets for these businesses.

All right. Thanks very much. Thanks, Mike.

Your next question comes from the line of Lawrence Alexander with Jefferies. Please proceed with your question.

Good morning. It's Dan Rizawan for Lawrence.

How's everybody doing?

Good morning, Dan. Good morning. So you mentioned, obviously, we talked extensively about raw material costs. I was just wondering, obviously, labor and shipping costs are also an issue. I was wondering to what extent, and as important, how difficult it is to pass on those costs? Because people expect raw to go higher, but I was just wondering with the others if that's more of a conversation with your customers. Yes.

It hasn't. It's not. I would say the next biggest impact for us is, besides raw material costs, has been cost of drums, I think, freight and costs as well. And those we consider really just the same kind of things as raw materials. So when we're having conversations with our customers around price increases, we will include those in those conversations as well.

Okay. And then were there any temporary costs you took out last year in response to COVID that are coming back this year that we should kind of be cognizant of?

Well, certainly we did a lot less travel last year, Dan, you know, with COVID and the conditions and so forth. So far in this year, you know, there hasn't been too much more of that kind of travel. In fact, the comparisons, you know, we probably did more travel last first quarter of last year versus this year. Um, so as, as this year progresses and we start to open up more, um, that could happen, but you certainly still have a lot of places around the world that are pretty, pretty locked down right now in Brazil, India, and so forth. We're still, um, locked down in the U S and Europe a lot. Uh, and really the place that's kind of back at normal in some respects right now from that perspective is, is China. So, so, um, So overall, I would say, you know, as we trend through the year, you know, we will start to see some of that come back, but certainly not to the levels that we had, let's say, had in 2019. Okay.

And then the final question. So obviously the U.S. and Europe are recovering. India is going through a terrible problem right now. I was wondering, is that having an effect on your production in that region and to what extent?

So far we've been able to, you know, between COVID-19 and the raw material shortage, it's really challenged us at times in our plants to meet our customer requirements. But so far we've been able to do that. We've worked very closely with our customers and we've been able to satisfy needs. So, so far we've been doing fine in that area.

Thank you very much.

Thanks, Ben.

Your next question comes from line of John and one tag with CJS securities.

Please proceed with your question. Good morning. This is a Brendan Pops and on, on for John. Uh, just want to ask real quick, um, on just allude to it, but just the, the impact, uh, on your business from, from COVID and areas like, uh, Brazil and India.

Sure. Uh, it certainly has impacted us from the perspective of, uh, been challenging at times when some of our employees have come down with COVID, but it hasn't impacted us to the extent yet that we've not been able to perform or at work we've shut down customers or had any kind of major issues that way.

Okay, great. And then any update on the CEO search? No, the search is

continues as planned. Um, so, uh, we would, uh, expect that to be kind of concluded, you know, sometimes we get, as we get closer to the end of the year, but right now that search is, uh, ongoing.

Okay, great. And then, um, this last for me, um, just had to think about your, your appetite for M&A today, um, and, and the pipeline you're, you're, you're seeing, you're seeing out there.

Yeah, good question. Um, you know, we've, uh, We made two smaller acquisitions in December and one in February this year. We continue to look at smaller acquisitions. There's a number of them that are, you know, out there that we're looking at and evaluating. And, you know, we hope we'll be able to complete some of that this year. But until the fund is done, it's hard to say. We've always said that from an M&A perspective that, well, we won't look at anything really large at this stage because we want to get our debt levels down to the point that our net debt to EBITDA is going to be below the two-and-a-half times mark, and we think that will be by the end of the year. So in the meantime, between now and then, we'll continue to look at these smaller months and hopefully bring something home there. Okay, thank you.

Thank you.

Your next question comes from Steve O'Hara with Sedoti. Please proceed with your question.

Hi, good morning. Thanks for taking the question.

Morning, Steve.

Morning. Just going back to the, you know, I guess your customer inventory replenishment or, you know, kind of higher than expected purchases in the quarter. I mean, I can't recall, but were you guys talking about inventory replenishment and kind of the fact that you thought that your customer inventories were low at the end of the year or last year?

No, we weren't.

Okay. I mean, okay, so I mean, if these inventories are being used to you know, replenish supply chains, you know, downline, I guess. I mean, is this something that, you know, could kind of keep rolling as, you know, that process, you know, takes time? Or, I mean, I guess I'm just thinking that maybe, you know, that could keep orders maybe higher than, you know, kind of previously expected for longer if that's the case. But maybe I'm not thinking about it right.

Yeah, I know what you're asking, and I think we have the same question that you have. We don't have really great visibility of that because sometimes there's a disconnect between kind of from what we see in external factors and what our customers are actually doing. So it's hard for us to really say in this regard. It's certainly possible, and I you know, that I, I would think, for example, in the, in the U S I just see everything's just so tight right now. Um, uh, from the auto industry and the steel industry, you know, that, that should keep the longer, but you know, there's other places around the world that, that, that maybe there are some, some of this other stuff has happened, this, you know, supply chain replenishment or stuff. It's just really hard for us to kind of get at that. Um, but we think there's some there, but we just don't know. We just don't know if it's a real material amount or not.

Okay, okay. And then just kind of going back to the commentary about Q2, was there – maybe I missed it, but in terms of the, you know, kind of from a revenue standpoint, are you expecting a dip in – in revenue or is it more just in the operating income because of the cost pressures?

It's definitely going to be in the operating cost pressures. We think our volumes will be somewhat down from the first quarter. Again, hard to predict that for the reasons we just talked about. We are getting price increases as well. So our raw prices will be higher in the second quarter versus the first quarter. So that will be somewhat of a plus for revenue. But again, our margins will be down because just the costs keep escalating at a much higher rate. So hopefully that gives you at least the variables that we're talking about.

Yeah. No, that's helpful. And then, I mean... Throughout your pricing, is it typically an indexed process where it's really visible to customers where, you know, you say, you know, this went up by this, this went up by that, and, you know, here's what it is to do, and it's going to start the next date? Or is it, you know, other industries kind of have to really push customers to accept these, and it's more of a negotiation as opposed to, you know, a formula?

Sure. We definitely have some contracts with some major customers that are more index-based that adjust every three months, for example, based on what's happening with raw materials. But I would say the majority of our business is really just negotiated pricing, and that's where when as raw materials go up, we kind of continually have to have another conversation and say, okay, I know we just went up in price recently, but we're going to have to go up in price again, and here's why, and this is what's happening to our various costs, and make that case to it. So the majority is what I would call the straight negotiation part.

Okay. And then, sorry, last one. You know, assuming there was some inventory replenishment and that happened in the quarter, I mean, how long does that typically, you know, buy a customer? I mean, is there a, you know, is it kind of a three-month, you know, are they able to kind of store, you know, three months' worth of product? And, you know, kind of assuming... economic activity continues to improve globally. I mean, is that, you know, I mean, it seems like obviously expect 2Q to be lower and then, you know, trend throughout the year. But I mean, is there a way to think about, you know, the potential, how long that could kind of depress volumes going forward if that was a big factor in the first quarter?

Yeah, I mean, most of our customers, you know, we ship very frequently, and it's kind of more just-in-time type of things. And so we generally don't find that our customers hold months worth of product. They generally hold a couple weeks or a few weeks of product. So can they hold somewhat more? Yes, you know, they could do that. But there could be, for example, they could be, maybe producing higher amount of cars or whatever parts they're making of their own and storing their parts, their products and inventory to try to replenish the supply chain. So it's more probably that aspect as well that could be happening, but we just don't have perfect visibility to it.

Okay. Thanks for the time.

Thank you. As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. One moment, please, while we poll for more questions. Your next question is a follow-up from Mike Harrison with Seaport Global Securities. Please proceed with your question.

Hi. Just a couple more for me. First of all, the aerospace business obviously was impacted by the 737 MAX and then the sharp reduction in air travel. Any thoughts on the pace of recovery? It seems like the airlines are at least reporting that travel is starting to come back. Could aerospace be maybe a positive contributor as we start to lap some of the big declines from last year?

Yeah, good question. I mean, you know, certainly in the first quarter comparison to the first quarter last year, we're down. But as you said, and once, you know, things really bottomed down in a lot of ways in aerospace in the second or third quarters of last year, we are seeing more activity in aerospace on a sequential basis. And so we are more encouraged around aerospace as we go through the year, let's say the second quarter and so forth, third quarter, versus those prior year comparisons. So that will definitely be a positive. But we do feel it will be, to me, that's a great example of a sector that will be longer coming back. to where we were to, let's say, 2019 type of levels. That will take a few years, I think, before we get back to those levels. But it is trending in the right direction right now. It will be a sequential positive for us.

All right. And then over within the canning business, it sounds like there's just tons of capacity coming on stream. Um, are you winning more than your fair share of that new business? And can you maybe talk about how much of a tailwind, uh, the canning, uh, industry, uh, could be for you in the quarters to come?

Yeah, it's been a good business for us, uh, through the, um, one of the better performing businesses as we went through the pandemic here. Um, and as you mentioned, it's been really tight. I would just say in general, um, That's a good example of a business that we have been over the past, really two years probably, continuing to take share in the marketplace. We've really grown the size of our can business between combining what Quaker had as a can business, what Houghton had, and then with the Coral acquisition last year, it really strengthened are offering that we can make the customers, and we have been picking up new pieces of business in Canada.

All right, and then the last one for me is on the Asia-Pacific business. The pricing there, or price mix, I guess, looks like it was down about 4%. even as volume recovered very nicely year on year and looks like maybe even some sequential volume improvement. So what is driving that price lower or price mix? And will we see that turn positive as you guys put price increases in place to counter the raw material inflation?

Sure. So I would say in general, you know, our We have lower prices. You know, we have a lot of country mix in Asia Pacific with pricing for our different products. So sometimes, you know, when you kind of look at where India, that's really been having a tougher time, certainly from the COVID perspective, but from an overall business perspective, it's been doing fine. And I think that's been part of the mix issue we've had because, prices can tend to be lower there than maybe other places in Asia Pacific. So I view it more as a mixed issue between countries than I do, you know, really kind of anything happening lower prices. And, of course, we're getting price increases everywhere. So it really is more of that mixed issue.

And should we expect that to turn positive then later in the year?

So from a pricing perspective, it really depends upon the mix of our businesses. Again, I think in general, I think pricing aspects of revenue, we should see sequential improvement in that going quarter over quarter. Yet when you look at some of the gross margins, we'll definitely be more negatively impacted in the second quarter just because raw materials have been outstripping them.

All right, understood. Thanks very much.

Thank you, Mike. Your next question is a follow-up from Steve O'Hara with Sedoti. Please proceed with your question.

Hi, thanks for taking the follow-up. Maybe, just curious if you could talk about, you know, possible impacts from any infrastructure bill that might go through or, you know, how you think about that, either from direct or through your customers' businesses?

We would think it would be a positive. We don't have a way of quantifying that at this point, but certainly when there's a lot more industrial activity happening, it should translate into a positive for us.

Okay, and is there... in terms of you know maybe I mean the last kind of proposal I think was you know much smaller but I mean do you have any idea of you know maybe what any boost you saw last time or I mean obviously the sizes are you know much different but I just kind of curious if there's any you know recollection from last time

Yeah, it will help us, but I don't think of it as something as a major event. It really depends, I guess, the magnitude, as you mentioned. Again, what's really going to help us more is people buy more cars, and there's just more type of metal type of products that are being sold. So it's hard for us to really quantify it at this stage.

Okay. All right. Thanks. Appreciate the call.

Thanks, Steve.

Ladies and gentlemen, we have reached the end of the question and answer session, and I would like to turn the call back to Mr. Michael Barry for closing remarks.

Okay. Given no other questions, we will end the conference call now, and I'm going to thank all of you for your interest today. Our next conference call for the second quarter will be in late July or early August. And if you have any questions in the meantime, please feel free to contact Shane or myself. Thanks again for your interest in QuakerHall.

Ladies and gentlemen, this concludes today's conference. You may disconnect your lines at this time. Thank you all for your participation.