Minerals Technologies Inc.

We stand by. Your conference is about to begin. Good day, everyone, and welcome to the third quarter 2023 Minerals Technologies earnings call. Today's call is being recorded. At this time, I'd like to turn the call over to Lydia Kapilova, Head of Investor Relations for Minerals Technologies. Please go ahead, Ms. Kapilova.

Thank you, Melinda. Good morning, everyone, and welcome to our third quarter 2023 earnings conference call. Today's call will be led by Chairman and Chief Executive Officer Doug Dietrich and Chief Financial Officer Eric Alduck. Following Doug and Eric's prepared remarks, we'll 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 laws. 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. Reconciliation to GAAP financial measures can be found in our earnings release and an appendix of this presentation, which are posted on our website. Now I'll turn it over to Doug. Doug?

Thanks, Lydia. Good morning, everyone, and thanks for joining today. Let me start off by giving you a quick outline for today's call. First, I'll take you through the highlights of our third quarter, and as part of this, I'll provide some commentary on the dividend increase and share repurchase program we announced last week. I also want to give you a quick update on Barris Minerals. Then I want to spend a bit of time going a bit deeper into what drove this quarter's strong performance and why I feel it's an indication of how we've positioned ourselves for continued profit improvements. After that, I'll give an update on general business conditions and market trends. Eric will then review the financials and provide an outlook for the fourth quarter, and we'll have plenty of time to take your questions at the end of our comments. I'm sure you've already reviewed our third quarter earnings press release, so let's go through some of the main highlights. We hit record sales for a third quarter, delivered record operating income for any quarter, significantly improved margins, and increased cash flow. These results are reflective of how we've positioned ourselves strategically and how we're executing from an operating perspective. Both of our business segments are performing well. Each continued to face mixed market conditions through the quarter, but despite this, MTI achieved record third quarter sales. Let me give you some of the highlights. Within the consumer and specialty segment, the household and personal care product line continues to show strength with stable growth across all geographies. The main highlight being pet care sales, which increased 15% over last year, and our animal health products growth of 38% from last year as the natural feed additive market continues to develop. In the specialty additives product line, paper markets in North America and Europe remained slow, although Asia paper markets were stronger and volumes improved due to our newest satellites in the region. We also saw solid performance from our ground calcium carbonates products in North America. In fact, our GCC facility, located in the western U.S., had a very strong quarter, breaking production, sales, and income records. In the engineered solutions segment, our high-temperature technologies product line delivered an especially strong performance. North America's steel and foundry markets remain stable, and the China foundry market continues to improve each quarter. This business hit on all cylinders, gaining market share, maintaining pricing, capturing input cost savings, and delivering a strong operating performance at production facilities. In the environmental infrastructure product line, wastewater treatment, environmental lining systems, and drilling products had a solid quarter, but we continue to see weak activity in the commercial construction waterproofing market. Next. EBIT margins expanded to 14.1% this quarter, a 170 basis point improvement over last year. Both segments expanded margins significantly. We captured input cost savings, improved productivities in our operations, held pricing, and in many cases, continued to improve pricing, and leveraged our fixed cost base through disciplined spending and progress with our $10 million expense reduction program. Strong sales and expanded margins yielded $77 million of operating income, which is a record for any quarter for MTI. As we expected, cash flow is improving. Cash from operations increased 30% sequentially. And year to date, it has more than doubled over last year to $138 million. With the stable sales trajectory of our portfolio of businesses and the expansion of profit margins, we're confident in stronger cash flow levels going forward. Our board shares this confidence, which is illustrated by the increase last week in our quarterly dividend from 5 to 10 cents and the authorization of a new $75 million share repurchase program. Before I move on, I want to give you a brief update on where we are with Barrett's Minerals. As we've discussed on these calls, over the past year, cases filed against BMI continued to increase. as well as the cost to defend itself against these claims. We believe these claims to be meritless, and we have always stood by the safety of BMI's products. The reality of these soaring legal costs overwhelmed this small business, and as a result, on October 2nd, BMI announced that it filed for Chapter 11 protection. As a result of this, we recorded a one-time non-cash impairment charge of the BMI fixed assets, as well as a charge for the litigation costs associated with the bankruptcy process. In the fourth quarter, we expect to fully remove this business from our financial results. We considered several options and decided that using the bankruptcy process was the best path to protect the business, MTI, and all stakeholders. The process will take time to fully resolve, and BMI will continue to operate per usual throughout. We'll be sure to update you as it progresses. We see this as a significant step in moving forward and ensuring that our corporate energy is squarely focused on achieving our five-year growth and performance targets. I want to take a few minutes to go a bit deeper into our quarter, not to highlight the numbers as I just did, but rather to illustrate what's behind them, what's driving them, and why we're confident this will continue. Our performance this quarter is a product of several elements that are coming together, driven by our strategy and supported by a strong operating model. It starts with our top-line revenue profile, made up of our resilient and stable portfolio of businesses, our ability to deploy our core technologies, combined with our ingrained culture of operational excellence, and the advantage we gain through owning unique long-term global mineral reserves. We've talked extensively about how we've now positioned ourselves in higher growth, consumer-oriented markets like pet care and other consumer specialties, while also establishing strong positions in higher growth geographies. This quarter, the stable growth from these areas offset the slowness we experienced in other end markets, like North America Commercial Construction and European Steel. These stable growth markets give the company much more balance than it had in the past, and as our other markets recover, sales will accelerate. This is the combination that yields meaningfully higher long-term growth. We also outlined for you our margin expansion targets. There are three main areas that we see driving margins higher going forward. Improved price costs, improved mix from the natural growth in higher margin products, and our ability and discipline to leverage this growth on our fixed cost base. All three of these elements contributed to the margin expansion this quarter, and we see them continuing to contribute to our margin expansion going forward. MTI's long-term growth potential combined with expanding margins leads to increased cash flow generation. Our balance sheet is in good shape with net debt around our targeted levels. Combined with this stronger cash generation, we have ample financial resources to fund capital expenditures, pursue M&A, as well as support an increased dividend and new share repurchase program. All of this is consistent with our balanced approach to capital deployment, and specifically our commitment and history of returning cash to shareholders. Let me wrap up this slide by stating that MTI has a powerful business model, one that combines revenue stability and growth potential with operating discipline, technological capabilities, vertical integration, and a strong people-centered culture. This quarter is an excellent example of how those elements came together and how they will continue to provide value in the future. This is a strong quarter for us, but it had more potential. We've got a lot more gas in the tank, so to speak, and we're well on our way to meeting the financial targets we laid out for you earlier this year. Okay, before I pass it on to Eric, let me take you through our markets and what we're seeing. Overall, our market outlook remains similar to what we shared last quarter, with the exception that we're entering some seasonal periods for a few of our markets. Let's start with the consumer and specialty segment. Overall, we're seeing continued strong market conditions across our household and personal care markets. There are several near-term and long-term trends that are driving this strength. Pet care is entering its seasonally strong period in both North America and Europe over the next two quarters. But more broadly, we continue to see positive demand trends for both private label cat litter in the US, as well as premium offerings in Europe, which is where we're positioned in each market. Further, we see continued demand growth in the Asia pet litter market, and we're well positioned to capture this with our mining and production locations. We also expect other HPC markets, including edible oils, renewable diesel, animal health, and personal care to also remain on their stable growth path in the fourth quarter and through 2024. In specialty additives, our market outlook remains positive. So Q4 is typically a seasonally slower period for residential construction. We expect gradual improvement in the North America paper market. Looking into next year, we will see a boost in volumes from the three paper and packaging satellite ramp-ups that are taking place in Asia right now. We also have a solid pipeline of new packaging business opportunities. We continue our growth and transition as we continue our growth and transition into this market at JCCC. As we look at the engineered solutions markets, we see more mixed conditions. In high-temperature technologies, we have a generally positive outlook for both the steel and foundry markets. We see continued stable conditions for our foundry and steel products in North America and a continued gradual improvement for the foundry market in China. We've signed several long-term contracts for our laser and refractory application equipment, and as a number of these come online next year, it will help drive volumes in sales higher. Moving to environmental and infrastructure, we have a mixed and more cautious view on these end markets. The market for our environmental lining systems, as well as major remediation projects, tend to slow in Q4 and Q1. We also don't expect to see any improvement in the commercial construction waterproofing market, which has been slow all year. On the positive side, infrastructure drilling and environmental wastewater markets should remain solid throughout the quarter. Looking further out, our team has been making great strides in gaining attention for our Florisorb technology for PFAS remediation. The business currently has over 200 active pilots and trials, and we recently presented our technology and unique capabilities at the Gabelli PFAS Symposium. This presentation is available on our website if you're interested to learn more. In summary, we see relatively strong markets for us as we head into the end of the year. More so, we've built strong momentum across all product lines, which sets us up for another strong year in 2024. Now let me turn it over to Eric to review our financials in more detail. Eric?