Minerals Technologies Inc.

Hey, Wendy. Today's call is being recorded. At this time, I would like to turn the call over to Lydia Kopilova, Head of Administration Relations for Minerals and Technology. Please go ahead, Ms. Kopilova.

Thank you, Rachel. Good morning, everyone, and welcome to the second quarter 2023 earnings conference call. Today's call will be led by Chairman and Chief Executive Officer Doug Dietrich. Doug and Eric's prepared remarks will open it up to questions. As a reminder, some of the statements made during this call may constitute forward-looking statements within the meaning of the Federal Securities Law. Please note the cautionary language about forward-looking statements contained in our earnings release and on this slide. Our SEC filings disclose certain risks and uncertainties, which may cause our actual results to differ materially from this forward-looking statement. Please also note that some of our comments today refer to non-GAAP financial measures. A reconciliation to get financial measures can be found in our earnings release, which is posted on our website. Now I'll turn it over to Doug. Doug?

Thanks, Lydia. Good morning, everyone. Thanks for joining. Let me give you a quick outline for today's call. I'll begin with the highlights that drove our results for the second quarter and provide some comments and context around our recent announcement on the TELC business and details on the $10 million cost savings program we just initiated. Then I'll take you through our view of general business conditions, the trends that we're seeing across our end markets, and the positive outlook we have for the second half of the year. Eric will then take you through the financial details for the quarter and our outlook for the third. We published our latest sustainability report this past Monday, and we're extremely proud of this year's report and the progress that it shows we're making on all fronts. I'm going to cover some highlights for you later in our presentations. Let's go through a quick summary of the second quarter. We had a solid performance and delivered on what we committed to in terms of operating income, earnings per share, and cash flow. Our teams remained focused on margin improvement, and we expanded margins sequentially in both segments. Let's start with our sales. In the consumer and specialty segment, sales grew 3% over last year, despite facing some mixed market conditions. Our household and personal care product line led the way with pet care sales up 15%, edible oil and renewable oil filtration up 13%, and animal health with 29% growth. The paper and packaging market in Asia was healthier this year, and our PCC volumes there were up 24%, driven by strong pull from our newest satellites. These positive sales areas were offset by lower sales in North America paper and packaging, which were down 18% due to paper customer destocking actions. Slower residential construction markets and lower demand for specialty food additives impacted sales in specialty PCC, which was down 10%. On the engineered solution side, sales were slightly down compared to last year. We benefited from strong metal casting and refractory sales in North America, as well as higher metal casting volumes in China. We also saw significant growth in our remediation and wastewater business, with sales up 86% driven by the continuation of two large sediment capping projects. These areas of strength were offset by continued slow conditions in commercial construction and the European steel markets. Sequential operating income grew by 12%, and operating margin improved by 120 basis points, driven by favorable price-cost dynamics. The pricing actions that we have put in place are beginning to meaningfully offset the raw material inflation we experienced for the past six quarters. Additionally, cash from operations doubled compared to last year. The higher working capital level we experienced due to inflation is beginning to release and convert to cash flow. As mentioned in previous presentations and at our recent investor day, we completed the business resegmentation to focus MTI's energy and capital on our core markets, product lines, and technologies. An outcome of this realignment is an opportunity to streamline our organizational structure and reduce overhead costs. We expected to save $10 million from this program, which will be implemented over the next three to four months. And Eric will discuss the details in his financial section. We also made an announcement that our subsidiary, Barrett's Minerals, Inc., is exiting the talc business. As was outlined in the release, we took a very careful look at all the circumstances concerning the Barrett subsidiary and made the decision to exit the talc market. The relatively small size of the business within MTI needed to be balanced against the outside costs and distraction from the escalating litigation environment that primarily involves other large companies but has nonetheless impacted Barrett's. I want to reiterate that our talc is safe, and we're proud of Barrett's track record of meeting its customer needs with the highest quality products and service. However, we're taking the step to divest its talc business and are now working to determine the transaction structure that best provides value to all stakeholders. Part of this process includes taking the prudent steps required to ensure that any liabilities associated with talc are dealt with both effectively and efficiently. As you can imagine, a number of activities are ongoing while we move this process forward. Our intent is to move quickly so that all our energy can be focused on achieving our core long-term strategic objectives. We'll certainly provide further updates as the process moves forward. So, overall for the quarter, I'm pleased with our performance and the progress we're making with margin expansion and cash flow improvements. I'm also pleased with how our consumer-oriented businesses continue to perform well through mixed economic conditions, providing the balance that we expected to our portfolios. Now that you're more familiar with our new segments and product lines, I'd like to share how we see the markets playing out for them over the balance of the year. Overall, we have a positive view of our positions, market conditions, and momentum going into the second half. Let's start with the consumer and specialty segments. In household and personal care, we expect demand to remain strong across the majority of our consumer-oriented product portfolio. Our pet care business is experiencing significant growth across all regions, and for the remainder of the year, we see this demand continuing. In other consumer businesses, like animal health and bleaching earth for edible oil and renewable fuel purification, our customers are expanding production capacity and have new facilities coming online. This is creating new supply opportunities for us, and as a result, we're projecting to remain on our current strong growth trajectory. Our personal care business has been experiencing lower volumes for most of the first half of the year due to customer destocking actions. Indications are that this will continue through the third quarter, but they will begin to see an increase in order volume in the fourth. The specialty additives product line, we expect the North American paper market to improve from a rather lackluster first half as our paper customer destocking activity concludes, and for the European paper market to remain stable for the balance of the year. We started up one new paper PCC satellite in India earlier this year, and we'll start up three additional satellites, one in India and two in China, over the next three to four months. which will support continued volume growth in Asia. Additionally, we just announced a new agreement with one of our customers in Brazil for our new New Yield LO product. This technology leverages our crystal engineering platform to recycle a paper mill waste stream and offer our customers a more sustainable filler particle for manufacturing paper. We expect this facility to be operational by this time next year. Elsewhere in specialty additives, markets are mixed. In North America, we see a strong pull for pharmaceutical and automotive sealant additives for the remainder of the year, though demand for our specialty food additives is expected to remain soft through the third quarter but pick up in the fourth. Let's talk about the market trends in engineered solutions. In high-temperature technologies, we expect the North America and European steel markets to remain at similar levels for the second half. Refractory sales will improve in the second half versus last year as we begin to benefit from the new ScanTrol laser and application systems we've been deploying. Speaking of which, this quarter, we signed another contract for this technology worth $10 million over five years. This is our 11th contract like this, demonstrating that this technology is truly unique and valuable to the electric steel furnace market. The North America foundry market was strong for the first half, driven by relatively robust auto, heavy truck, and agricultural equipment demand. We expect these conditions to remain through the second half and translate into continued strong metalcasting volumes for the remainder of the year. In China, our metalcasting volumes have steadily improved each month this year, albeit at a slower pace than what we expected at the beginning of the year. In the second quarter, volumes grew 10% over last year despite this slower rebound. This is largely due to the growth and penetration of our latest blended technologies. Current sales from our foundry customers in China are that volumes will continue to increase through the remainder of this year. In environmental and infrastructure, our outlook is mixed. We see stable demand for wastewater and water remediation, as well as for our drilling products throughout the balance of the year. Project activity for both our environmental lining and commercial construction waterproofing systems is expected to remain soft. Before we move on, I'd like to make a couple of comments on the China market. There's been a lot of commentary recently on China and how their potential transition to a lower growth economic phase will impact companies who do business there. I've already made a few comments on our second half outlook in China for specific product lines, but I thought I'd give you a longer-term perspective on our business position. China represents about 8% of our overall global sales. We primarily participate in three markets in China, the foundry, paper and packaging, and pet litter. Changes in economic growth rates there will have an impact on our metal casting and PCC sales, but growth in these two product lines is driven more by the introduction and penetration of our new technologies and the substitution of existing products in the market. For pet litter, the market is in the early stages of development, and given its current size compared to the more mature pet litter markets in the U.S. and Europe, we see a long growth path ahead of us. China is still a relatively small region for us, but given our current market positions, we see being able to continue to grow sales at our historic rates despite potentially slower economic growth conditions there moving forward. To sum up our market outlook, I have a positive outlook for the second half of the year and am pleased with the momentum we have going into it. We're making a great deal of progress leveraging our core technologies and expertise to enhance our positions in key areas. We see continued margin and cash flow growth in the second half and feel we're well positioned to deliver on the targets we recently laid out for you. Now I'll hand it over to Eric to provide more financial details. Eric?