Minerals Technologies Inc.

Welcome to the first quarter 2024 Minerals Technologies Earnings Call. As a reminder, today's call is being recorded. At this time, I'd like to turn the call over to Ms. Lydia Kapulova, Head of Investor Relations for Minerals Technologies. Please go ahead, Ms. Kapulova.

Thank you, Maddie. Good morning, everyone, and welcome to our first quarter 2024 Earnings Conference Call. Today's call will be led by Chairman and Chief Executive Officer Doug Ditcher. and to Financial Officer Eric Alda. 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 these forward-looking statements. Let's 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 in an appendix of this presentation, which I posted on our website. Now I'll turn it over to Doug.

Thanks, Lydia. Good morning, everyone. Thanks for joining today. Okay, let's go over a quick outline for today's call. I'll begin today's presentation by reviewing the highlights from our first quarter. And as you saw in our press release, we posted a record quarter for MTI. and I'll share the actions that drove our strong results. I'll then take a few minutes to give you some insight into the current dynamics of our main markets and also highlight a few growth initiatives that will come into play over the next few quarters. Eric will then take you through the detailed financials and provide an outlook for the second quarter, and then we'll open up the meeting to questions. With that, let's get started. We're off to a strong start this year, with several factors and initiatives that combine to deliver a record quarter. The resegmentation of the company last year, which organized our product lines around our core technologies and similar end markets, and which also streamlined our internal organizational structure, is driving higher levels of performance. Our strategy to move into higher growth, higher margin markets is also delivering. Sales in the consumer and specialty segment continue to grow, and our highest margin products across the company are growing the fastest. Our margin expansion initiatives are ahead of our target pace and we continue to leverage savings from the reorganization, strengthen pricing, and capture input cost savings. Each business is executing well operationally, focusing on safety, variable cost control, and productivity improvements. Combined, These initiatives led to an all-time record quarterly operating income and first quarter records for earnings per share and cash flow. Overall, we're pleased with the performance and the strong momentum we've built. Let me take you through some of the highlights. Sales were $535 million and adjusting for the deconsolidation of Barrett's Minerals were relatively flat compared to last year and up slightly from the fourth quarter. We continue to drive growth across the consumer and specialty segment, with sales up 4% over last year on an underlying basis. Sales in the engineered solution segment were lower compared to last year, primarily driven by pockets of weak market conditions in the environmental and infrastructure product line. Within consumer and specialties, the household and personal care product line remained on its steady growth track and sales increased by 7%. This was driven by continued strong demand for private label cat litter and increases across the board for renewable fuel filtration, animal health feed additives, personal care, and fabric care products. We'll go into a bit more detail on what's driving this in a moment. Underlying sales in the specialty additives product line increased by 2%, driven by a rebound in demand from North America paper and packaging customers and also from strong sales of ground calcium carbonate products in our western U.S. market. Within the engineered solution segment, high temperature technologies product line sales were similar to last year with stable steel and foundry market conditions in our major geographies. We experienced a few foundry customer maintenance outages in North America in January, but volumes rebounded quickly throughout the quarter and demand remained solid. We also saw continued growth of foundry volumes in Asia. In the environmental and infrastructure product line, sales were lower than last year, due to an uncharacteristically slow seasonal period for commercial construction. We're also involved in a couple of very large environmental remediation projects last year, adding to the comparative sales decline. As I mentioned, each business put up a solid operating performance this quarter. They maintained strong pricing, actively secured lower input costs, and remained focused on safe and efficient operations. The savings realized from our internal reorganization last year also contributed to increased profitability. These actions, combined with a strong sales mix, yielded an operating margin of 14.5% and a record $77 million of operating income, a 23% increase over last year. Earnings per share were $1.49, a 31% increase over last year. Cash flow was also strong this quarter at $56 million. This quarter is a good example of the power of our new organization, our focus strategy, and the strength of our business model. For the past few years, we've built a balanced portfolio of leading consumer and industrial businesses that provide stable long-term growth. We're expanding margins through the innovation of higher value products, through operational excellence, and fixed cost leverage. We've strengthened cash flow, increased returns to shareholders, and maintained balance sheet strength and flexibility. Overall, I'm pleased with the start to the year and the positive track we're on. As we head into the second quarter, I want to take a few minutes to give you a bit of color on the current market conditions for each product line and also highlight a few new products that are advancing over the next several quarters. It should give you a sense of the positive combination of market conditions and new business opportunities that we see driving strong results for the second quarter and into the back half of the year. As a general backdrop, the second and third quarters are typically our strongest due to seasonal strength in the residential, commercial construction, and environmental remediation markets. We're also seeing improvement on top of this regular seasonality in a few of our markets compared to last year, which I'll point out as I move through the product lines.