Q3 2019 Earnings Call
First question answer session will follow the formal presentation, if anyone should require operator systems. During the conference. Please press star zero on your telephone Keypad. As reminder, this conference is being recorded.
Now my pleasure to introduce your host Mr. Martin bags and CFO for Balchem Corporation. Thank you Sir you may begin.
Thank you ladies and gentlemen, thank you for joining our conference call. This morning to discuss the results about kind of corporation for the quarter ending September Thirtyth 2019. My name is Martin banks, Chief Financial Officer hosting this call. It with me as Ted Harris, our chairman CEO and President.
Following the advice from our council auditor some of the FCC at this time I would like to read our forward looking statement. That's what he is does contain or likely will contain forward looking statements, which reflects balchems expectation or belief concerning future events.
That will involve risks and uncertainties, we can give no assurance that the expectations reflected in forward looking statements will prove correct. Some various factors could cause results to differ materially from our expectations, including risks factors identified him about comes Form 10-K .
<unk> looking statements are quantified in their entirety by this cautionary statement.
I will now turn the call over to Ted Harris, our chairman CEO and President.
Thanks, Martin Good morning, ladies and gentlemen, and welcome to our conference call.
This morning, we reported quarterly consolidated net sales of $158.6 million.
Which resulted in third quarter net income of $20.7 million or 64 cents per share what a GAAP basis.
Third quarter non-GAAP net earnings of $26.3 million or 81 cents per share exclude tax adjusted non cash amortization and other items as detailed in our earnings release. This morning.
$5.6 million to facilitate comparative evaluation of operating performance versus the prior year period.
These non-GAAP net earnings of $26.3 million were 81 cents per share represent an increase of $2.7 million or eight cents per share compared with the prior year quarter of $23.7 million worth 73 cents per share.
We also delivered quarterly cash flows from operations up $42.7 million for the third quarter 29 team with quarterly free cash flow of $35.8 million.
Our quarterly net sales of $158.6 million were 2.3% higher than the prior year comparable quarter.
We achieved sales growth in three of Air Force segments.
With record third quarter sales in our human nutrition, and health and specialty product segments and healthy year over year growth in our animal nutrition and health segment, which were partially offset by the decline in our industrial product segment, where volumes related to oil and gas fracking remained low compared to prior.
Here.
The impact of foreign exchange tour sales with a negative $1 million due to the weaker euro driving a negative 64 basis point impact to our year over year sales growth.
Our Q3 consolidated gross margin dollars, a $54 million were up $6 million or 12.5% compared with $48 million for the same period in the prior year.
Our consolidated gross margin percent was 34.1% of sales in the quarter up 310 basis points from 31% in Q3 of 2018.
The 310 basis point increase was primarily due to mix certain lower raw material costs and manufacturing efficiencies, partly offset by lower margins in the European Mana gastric business within the animal nutrition and health segment.
Consolidated operating expenses for the third quarter, 2019 were $28 million as compared to $22.5 million in the prior year.
The increase was principally due to incremental operating expenses related to the chemo gas acquisition and the prior year benefiting from the timing of an insurance recovery.
Excluding non cash operating expense associated with amortization of intangible assets of $6.1 million operating expenses were $21.8 million or 13.8% of sales looking forward. We will continue to focus on tightly controlling our operating expenses.
And leveraging our existing SGN a infrastructure.
GAAP earnings from operations for the third quarter were $26 million, an increase of point $5 million or two per cent compared to prior year.
On an adjusted basis as detailed in our earnings release this morning.
Earnings from operations of $33.5 million were up $1.5 million or 4.8% compared to $31.9 million in the prior year.
Adjusted EBITDA of $40.4 million was $1.9 million or 5% above the $38.4 million posted in the third quarter of 2018.
Interest expense for the third quarter, 2019 was $1.7 million and our net debt was $159.2 million with our overall leverage ratio on a net debt basis being reduced to 1.0.
The company's effective tax rates for the third quarter, 2019, and 2018 were 15.4% and 18.3% respectively.
The decrease in the effective tax rate is primarily attributable to discrete items in particular related to European research and development activities.
Consolidated net income closed the quarter at $20.7 million up $1.5 million or 7.6% from the prior year quarter.
This quarterly net income translated into diluted net earnings per share of 64 cents for the current year, an increase over last year's comparable quarterly result of 59 cents.
On an adjusted basis and as detailed in our earnings release, our third quarter. Adjusted net earnings were $26.3 million or 81 cents per diluted share up $2.7 million or 11.2% compared with $23.7 million or 73.
Cents per diluted share in the prior year quarter.
We generated record quarterly free cash flow was $35.8 million, an increase of 32.7% compared to the prior year quarter.
And we closed out the quarter was $59.4 million of cash on the balance sheet, which reflects a reduction of revolving debt of $10 million stock repurchases of $20.6 million and capital expenditures and intangible assets acquired of $6.9 million.
Before passing the call back to Martin to cover the detailed results by segment I would like to update you on a few of our important strategic activities and growth initiatives.
Last quarter, we announced the closing of the acquisition of chemo gas envy, a privately held specialty gases company headquartered in Greenberg in Belgium.
The integration of chemicals is progressing nicely with synergies starting to be realized and is on track to meet our expectations.
As previously noted we are focused on leveraging this acquisition to create a global specialty gases business that services, our customers' needs for ethylene oxide and other products worldwide, which we will call Balchem performance gases. We're excited about the opportunities. This acquisition creates for Balchem and are pleased with it.
Integration today.
On September six.
We divested our reading, Pennsylvania manufacturing plant and the associated business dealings with that site, resulting in no gain or loss on the sale of this non core asset.
We continuously evaluate our portfolio to assess strategic positioning fit and value of each of our assets in businesses. The readying facility, primarily told manufactured toddler formula for various companies.
The tolling nature of this business coupled with the lack of strong differentiated position and modest financial contribution made an obvious candidate for divestiture.
And emerging infant nutrition company ultimately acquired this site to become a fully integrated manufacturer and marketer of infant nutrition products.
We believe that are readying site is better off in their hands as they will undoubtedly continue to invest in the site to fully develop their strategic intentions. This divestiture has improved our balance sheet and financial strength and enhanced our ability to focus on progressing our strategic organic growth initiatives.
As indicated on our fourth quarter 2018 earnings call.
We were considering a modest stock repurchase program to both offset the dilution associated with our equity incentive plan and provide a return of capital to our shareholders. We started executing this plan in a disciplined manner in August and completed it in early September largely offsetting the dilution.
By repurchasing approximately 230000 shares at an average cost of $88.58 per share.
This stock repurchase program is one component of our overall capital deployment strategy.
As a reminder, our capital allocation strategy is to invest in organic growth opportunities that provide an attractive return.
To augment our organic growth through strategic M&A, where appropriate.
To pay down debt and maintain a strong balance sheet to retain and grow our dividend to our shareholders and lastly, we will consider stock buybacks for anti dilution purposes as long as it does not compete with our other aforementioned capital allocation priorities.
Within specialty products and specifically in balkin performance gases several users of ethylene oxide for the critical sterilization of medical devices have received ongoing state and local scrutiny for environmental concerns at their facilities, which has received some media attention.
Ethylene oxide enables more than half of all medical devices used annually in the United States over 20 billion pieces to be sterilized and made say for use some devices can only be treated with ethylene oxide has other technologies are insufficient or damaging to the devices themselves.
The situation centers around a new mathematical assessment that was performed by an office of the EPA, which resulted in a more conservative view of the inherent risk of ethylene oxide.
This new assessment has been quite controversial and as the subject of much debate as no new science has been use just simply a change in the approach to the mathematics and statistics. The EPA has not yet use this new assessment to regulate change to existing permissible emissions limits, but it's come contemplating this.
And in some cases in the absence of a definitive EPA regulation change state and local regulators are drawing their own conclusions from the new assessment.
We are actively working with EPA The American Chemistry Council add the med, which is the advanced medical Technology Association that represents the medical device industry and all of the appropriate stakeholders to ensure that EPA carefully considers this new mathematical assessment in conjunction with other.
Assessments available from the Texas Commission on environmental quality and the HCC as the EPA contemplates changes to regulated permissible admissions levels.
There will likely be continued news reports and and uncertainty among state and local authorities as to how to practically respond to the new mathematical assessment.
In the meantime, we will continue to work with all of the appropriate stakeholders to ensure the EPA considers all available assessments to appropriately quantitative ethylene oxide inherent risk. We continue to believe that EPA will ultimately regulate to lower emissions levels based on a combined.
Consideration of the various assessments available as they have in the past and then industry will then be able to adopt practices and procedures to ensure compliance with these new regulations.
Relative to animal nutrition, and health and the first quarter. This year, we discuss the launch of several new products, most notably Aminoshure XM.
Our next generation rumen protected and assignee.
This next generation product offers enhanced bioavailability and superior feed stability that allow it to deliver industry leading value for dairy farmers around the world. We're encouraged by the early and strong interest from the nutritionists and dairy farmers for this new product, which is being further boosted by healthier.
Sorry protein prices.
Our sales of this important nutrient were up 70% in the quarter over the prior year quarter. So we are pleased with the progress to date and the positive response from our customers.
We continue to work hard to progress awareness around coleen and wanted to update you on the progress of several important studies.
Last quarter, we were pleased to report that the preliminary results were presented for the follow on study to the Cornell University Coleen supplementation study during pregnancy to evaluate if the cognitive benefits seen in the first year of life. During the initial study persisted into later childhood.
If you would like to access the abstract of this study as well as other Colins studies that have been conducted by Cornell University. Please go to the Cornell Dot Edu website use the search function to search for Coleen cognition Research group and under publications Select conference.
Abstracts, we continue to be excited about the results from the Cornell studies and look forward to more publications.
Additionally, in the fourth quarter of 2017, we informed you that after Balchem funded a pilot study Dr. Stephen Zisapel director for the University of North Carolina's Nutrition Research Institute Institute received a $2.6 million brand from a unit of the National Institutes of.
Health to develop a test or biomarker to help determine the proper levels of calling in humans.
The NIH funded coleen biomarker study has enrolled about half the target number of subjects and based on the current enrollment rate. This is expected to be fully enrolled in approximately 18 months. While this is a lengthy study good progress is being made and we believe that if a biomarker word of either.
Well it was significantly progress the ultimate supplementation have identified coleen deficiency in humans.
Regarding curemark and their work to develop a unique treatment for autism. We were pleased with the results of their recently completed stage three clinical trial also known as the Bloom trial.
As we just discussed on the last call. These results were presented on May Threerd at the International Society of autism research or in SAR meeting in Montreal for those of you interested the abstract can be easily accessed on the inside our website under the in Saar 2019 annual meeting abstracts.
The title of the abstract is pancreatic replacement therapy with see Matt is associated with reduction in maladaptive behaviors in preschoolers with autism.
Despite the protracted timeline of this initiative, we are encouraged by the progress made over the past few months towards critical milestones and in the meantime, now camera remains focused on air manufacturing and supply chain preparedness for the ultimate launch of the product and the manufacture of additional trial quantities of the encapsulated enzyme.
Im for rollover participants from the various trials.
And lastly, as we've discussed in previous quarters, we have embarked on an important project to consolidate our five ERP systems into one Microsoft dynamics 365. This 12 million dollar initiative is critical for the continued growth and operational efficiency of the company.
After a year or so planning implementation started in April last year first with financial consolidation and then with staged ERP implementation across our businesses and network of manufacturing sites on the last call. We informed you that we had about one third of our users and revs.
The new on the new system.
I am pleased to inform you that we now have approximately half of our users and revenue on the new system and believe we are on schedule to have 100% of our company on the new system by the Middle of next year. We're pleased with the progress of this important infrastructure project.
I'm now going to turn the call back over to Martin to go through the detailed results for each of our segments.
Thank you turned.
For the quarter, our human nutrition, and health segment achieved record third quarter sales of $86.1 million, an increase of point $3 million or 0.3% from the prior year.
The sales increase was primarily driven by higher sales in our human nutrition on pharma business on double digit growth in key late and minerals, partially offset by lower cereal systems volumes are human nutrition and health segment also delivered record third quarter earnings from operations of $13.2 million.
An increase of point $1 million or 0.7% compared to prior year.
Primarily due to the aforementioned higher sales and mix, partially offset by higher operating expenses, resulting from the prior year benefiting from the timing of an insurance recovery.
Excluding the effect of noncash expense associated with amortization of acquired intangible assets of $4.8 million adjusted earnings from operations for this segment were $18 million, a decrease a point $5 million or 2.7 per cent compared to 18 point.
$5 million and the prior quarter.
Sales for our animal nutrition, and health segment were $42.3 million, an increase of 4.6% or $1.9 million compared to the prior to year.
The increase in sales was driven primarily by higher volumes in both the ruminant species and monogastric species markets.
Ruminant volumes were up approximately 10% and we're encouraged by the rice in class three milk prices to levels not seen since 2014.
Which is a welcome response from a long period, a poor data economics, creating a healthier environment for us to market our unique line of products for the health and nutrition update brick house.
Gastric volumes were up approximately 5%, but we continue to experience competitive price pressure in Europe , and we expect this to continue in the near term.
The impact of foreign exchange as most notable in our a NH segment with a negative point 5 million dollar impact in the third quarter driving a negative 1.2% impact two year over year growth.
Animal nutrition and health quarterly earnings from operations of $6.1 million were up from the prior year quarter of $5.1 million, primarily due to the aforementioned higher volumes mix and certain lower raw material costs, partially offset by lower margins in the European Mana gastric.
Business as a result of increased competitive activity.
And increased operating expenses driven by investments in sales marketing and research and development in our ruminant business.
The specialty product segment delivered record third quarter sales of $24.9 million as compared with $17.6 million for the prior year quarter.
The increase of 41.2% was driven by higher sales of ethylene oxide for the medical device sterilization market due to both the contribution of chemo gas and higher legacy product sales, partially offset by lower volumes in the plant nutrition business.
The specialty product segment also achieved record third quarter earnings from operations of $6.7 million versus $5.8 million and the prior year quarter, an increase of point $9 million.
Excluding the effect of non cash expense associated with a more to station intangible assets of $1.7 million.
Third quarter adjusted earnings from operations for this segment were $8.4 million compared to $6.5 million and the prior year.
The increase was primarily driven by the aforementioned higher sales, partially offset by mix and higher operating expenses due to the chemo gas acquisition.
In the industrial product segment sales of $5.3 million decreased $5.8 million or 52.5% from the prior year quarter, primarily due to reduced sales of calling and coating derivatives used in shale fracking applications.
We continue to experienced significantly lower demand within the industrial product segment, not only due to slower fracking activity, but also due to operators starting to recycle more fracking fluids as well as eliminating additives where possible in order to reduce costs and preserve cash.
As logistical solutions for oil and gas transportation or being added around the Permian basis pipe basin, we believe that fracking activity will improve as logistical costs are reduced however, we've not seen any indication of that yet and we do believe that continued cost focus among the well operators will remain in place either.
When asked fracking activities increase as such we remain cautious about this historically cyclical market and it's hard to accurately forecast the ups and downs.
Our earnings from operations for the industrial products segment, where point $8 million decrease a point 9 million compared with the prior year quarter due to the lower sales volumes.
Im now going to turn the call back over to Ted for some closing remarks. Thanks Martin in the third quarter, we delivered year over year revenue growth across three of our four segments with record third quarter consolidated GAAP net earnings and all time record quarterly non-GAAP net earnings and record.
Cash flows from operations, while facing the previously noted comparative headwinds within our mana gastric business and challenging market conditions within oil and gas.
We have strong positions within the markets, we serve and we believe we are well positioned to generate healthy growth over the years to come we're pleased with the progress made on our key strategic growth initiatives in Q3, and we'll continue to work on strengthening our company.
Focusing on our core strategies exercising disciplined cost management and seeking value, creating acquisition opportunities I'd now like to hand, the call back over to Martin who will open up the call for questions Martin Thanks Ted.
This now concludes to form a portion of the conference at this point, we will open up the conference call for questions.
Thank you will now be conducting a question answer session.
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Our first question comes from the line Brett Hundley with Seaport Global. Please proceed with your question.
Hey, good morning, gentlemen.
All right Brett.
Hi, guys I just have.
I have a couple of questions on your animal business and then I just wanted to circle back with a question on specialty so within animal.
Your results during the quarter were.
Were solid relative to what we're looking for.
And it really feels like there is.
Some good potential momentum in that business. So one of my first questions on animal relates to the ruminant side. So us dairy protein prices have moved meaningfully higher in recent months.
Are you guys now starting to see better demand for Aminoshure and some of your other encapsulated ruminant nutrients and.
If so are you starting to see a mix benefit.
Within your animal segment as well.
Brent Yeah. This is Ted.
We were really pleased with the animal nutrition results for the quarter with both ruminant volumes up and Monogastric volumes up.
It really was a strong quarter for us and and.
The margin improvement that we saw in.
In that business was primarily driven by.
Just noted that the the fact that ruminant growth was was significantly higher than monarch gastric ruminant margins are higher than than the mana margins. So when we get that growth differential we are going to see.
A margin improvement benefit based on on mix. So absolutely that was part of the story this quarter relative to two earnings.
But the overall volume growth was was it was part of it as well and yes. There's no question the.
Dairy economic environment as much healthier today.
And it was a year ago or even.
Yeah, I want to say six months ago and protein prices as you noted.
I think the last I saw protein prices were over $3 maybe 320.
And that's up a $1.50 or so from from the prior year, so up meaningfully.
And then class three milk prices are up in the 18 $19 range, which is up probably $3 or so from from prior year. So.
We are starting to see.
That result in higher volumes I talked about the Aminoshure XM launch and our business up 70%. The business would have been up something just because of protein prices, but but certainly we think our new.
Next generation assigning product is an important part of that story, but.
We are having healthier discussions with nutritionists and dairies, we're starting to see it and demand.
And feel like it really does bode well for for.
2020 in particular as as we expect to this improved area economy too.
Last four for at least the next few quarters and into 2020.
And maybe I can give you a chance to talk about your your mono business too because I.
I know a lot of investors.
The two are focused on and stuff and China on on across Asia broadly.
Are you.
Or do you think we're at a point now where you guys are starting to see noticeable demand improvement here in the states.
Within the hog and broiler sectors I mean, when we think about the potential for.
China to open back up for Us brother producers.
When we think about some of the data that we're seeing from haagen pig inventories here in a in the U.S., where where mark market hog inventories have started to accelerate into the September data.
Are we at that place now where you are starting to see better incremental demand on the Mano side and a question that we get a lot is.
When do we reached that point in time, where some of those benefits start to.
Offset or dramatically offset some of the challenges that you're seeing in Europe right now that are directly related to what's been happening in China.
So I think that.
The way we would answer that question is obviously, it's complicated we really don't feel like air Q3 results were materially impacted specifically bought by African swine fever outbreaks in China, but there is you know again, we're very pleased with the 5% growth in our mom.
This is part of that honestly is driven by.
By Air we talked a few quarters ago about the launch of air.
New picture liner product selling those products are up meaningfully year over year, but our volumes in our are up in both the U.S. and Europe in and that's a positive sign we we don't think the.
The placement of more hogs in response to the prices in China has driven significant business today, but we do believe that that that is coming and should be a benefit to us and.
Coming quarters, but both on the on the hogs side as well as the poultry side and and as.
Poultry and and.
And swine terrorists are are eliminated in China that will only.
Fuel further.
Opportunity for growth so.
Our perspective is we really haven't seen it yet, but but we.
I do see it at our customers and the placement of new birds, and hogs and think that that.
Well.
Play a role going forward.
Okay. Thanks for that comment and then just one last question for me.
Is on specialty thank you for your comments on Ito.
You know in late October the FDA released.
Statement regarding some.
Some of those medical device sterilization facilities, and some other closures, including a temporary closure in Georgia and then the potential for I guess, a second closure at a BD facility in Georgia, If I can ask Q2 questions on this issue number one.
Are you guys able to manage your supply chain such that.
No.
Additional customer closures, if they happen well have material impacts on your margins.
If that question makes sense and then secondly, what are you seeing on the sale side right now are you seeing.
Customers.
Pull any eo orders forward because their customers are starting to pull orders forward was that a benefit in the quarter can you just describe what you're seeing on the on the sale side right now thank you.
Sure.
Yes, it's very important for us to talk about the evolving ethylene oxide regulatory environment on the call.
And relative to those those specific questions that that you ask me really haven't seen any.
Negative impact relative to our volumes I don't really.
Feel as though we've seen you know orders being moved up what we have seen as that sterilization business at those few sites that have been affected.
By these activities has typically move to other sites. So we've seen yes volume pick ups at other sites as they have picked up this sterilization business.
And so our business I think is staying relatively hole at this point if for some reason.
We saw.
A significant amount of additional sites being impacted that would ultimately negatively impact our business. Some because there's just only so much excess capacity out there and I think at this point in time, it's largely been tapped and the industry as a whole.
Is running at.
At really close to 100% capacity, we don't expect that but if that were to happen. It could start to impact the business. We're very pleased to see the FDA letter come out that really specifically talked about their concern of the safety of.
Patients.
And and the potential.
Lack of availability of certain medical devices.
That could result from.
The current shutdown of of the couple of facilities.
Or if there were more in the future and I think that that was a very welcome letter from the FDA recognition of the seriousness of the situation and so we were pleased to see that come out and I think that it will it will help drive ultimately what needs to happen and that is the EPA.
You know, making a decision relative to the various assessments out there as to how they're going to regulate going forward.
So.
No real impact on the business today, we're pleased with the FDA letter and as far as margins go.
You know again, I don't think Theres really been any major.
Impact on on margins relative to.
This situation at this point.
Thank you to.
Thank you. Our next question comes from the line of Ram Selvaraju.
Please proceed with your question.
Hi, Thanks, very much for taking my questions can you hear me.
Yes.
Hi, Rob.
Okay. So.
Just wanted to go over a couple of quick.
In particular.
On the Bill that people are talking about with respect.
Where it seems as though the policy.
That they can significantly restrictive not completely turned off.
By 2022.
Just wanted to know if you had any commentary specifically on that I know you've talked about the current political landscape, but just wanted.
Any detailed thoughts on that specific bill right now.
So what Ramos talking about is the bill and the kind of Hill, Illinois legislature that.
Did pass the Howson has not yet been voted on and they in the Senate.
And obviously around we are disappointed to see that as we really feel like it's it's.
Based on poor data and poor assessment.
Of.
The Iris.
Assessment, and really speaks to what I said before and the absence of the federal EPA deciding how they're going to regulate going forward Ito.
Local authorities are coming to their own conclusions and that has driven this activity and.
In Illinois, so yet to be seen ultimately whether whether its past.
And.
It would have an impact on the use of Eo really for all applications and of course.
Medical device sterilization is a very very very small part of the overall ethylene oxide market. So it would have an impact on the use of ethylene oxide for many different applications.
Illinois, So we're watching that closely.
We you know again believe ultimately that EPA will come out with their conclusion, which will ultimately reduce emission levels to a point that that industry can manage to and and.
Work toward and and a lot of this.
Reaction from localities and and states will.
Go away as the federal EPA comes in and it makes a decision.
Okay. Thank you for that also I wanted to ask about.
Regional questions regarding ethylene oxide, obviously, we've talked before about the situation in Illinois, It looks as though the situation in Louisiana.
In particular.
Plants coming online.
Charles.
And I was wondering whether.
They're likely to be.
In Louisiana.
In any way similar comparable to what.
Happen noise and also if you could maybe talk to how youre business might potentially be well position.
Two.
And some of these changes that may or may not occur course.
Cause of the chemo got stuck with it.
Right.
So you know I guess I want to say you know I really hope this does not become a.
No I kind of a region by region state by state.
Community by community regulated product I really do think that the EPA the federal EPA ultimately needs to decide how they're going to regulate and that we all then.
Abide by that and work toward toward that it would be.
Disappointing F F.
All of the ethylene oxide activities word to move to states like you mentioned, Louisiana, or Texas, or our Mexico or.
One country over over another I think that that ethylene oxide is something that that has been regulated for many years and can be regulated at appropriate levels going for forward. So that's our expectation and and we hope that that.
It is how it turns out, but but you're correct in that yes, the chemo gas acquisition really does make us.
A global player and.
Our ability to to service.
Customers around the world, whether its Central America South America.
The Middle East Europe Asia, we now have a network of sites in a supply chain that really can.
Satisfy our customers almost want to say no matter, where where they move if that were too.
To be the case.
You know there have always been different regulatory.
Perspectives in environments by country around.
Around the world.
The current activities in Illinois.
Also say, Georgia.
Our are a bit unique to this country at this point and.
And though those areas. So I hope it doesn't come that way, but yes, I think that we are relatively well positioned to.
Manage that with our supply chain, if it were to occur and moved from one part of the country or stage or or region to another.
Okay, Great London couple of questions regarding tracking.
Were seeing kind of conflicting story.
There appears to be a slow down within the United States on.
Fracking front, but the other home.
Yes.
For the practice to maybe step things up, especially considering what.
So just wondered if you could provide us with.
Sure.
When we might.
Sort of pressures are based on.
Fracking front with respect to.
The products that you so.
Yes.
So it obviously is complicated and I think what why.
Martin in the prepared remarks talked about we remain.
Cautious about this this business given the difficulties that we.
We have in forecasting as you know I mean, there's no no no, arguing with the fact that rig counts are down 20% year every year.
And the fact that our volume is down.
50%.
Year over year and that ducks, the drilled uncompleted are up about 10%.
And also that the pipelines are being built and and.
Some have actually been completed and others.
It will continue to to take time, there's no question in my mind that oil prices were too to spike up yeah, we would see more fracking activity and we would see more demand for coal and because calling is still being used in the market just to.
A lesser extent, but.
Our bigger concern I would have to say is just around the.
Yeah, the learnings that the industry has had around cost reduction through this.
Difficult period, and the recycling of process.
Water and and.
The fluid that fluids that are used in fracking the.
Reduction in additives that that seems to be impacting us and that's probably are bigger question.
As you know if oil prices did pick back up if OPEC curtailed.
Production.
And pick back up would our volume.
Pick back up commensurately and would what that that shift toward.
Maximizing cash and reducing costs would that would that go away and that's that's very unclear to us.
And I think that that.
We believe that that at least to some extent that's going to continue and to negatively impact our business, but it's so hard for us to tell if.
OPEC does the opposite and and produces more you know that should obviously have an impact overall on prices and and.
Could negatively impact the business as well, but but.
Again, we just are cautious about this this market our business has been very significantly impacted as you can see and the results.
But we still have a healthy share in the market, it's still an important market to us and.
We're continuing to try to find ways to sell the value of calling and in the market.
Okay and that I, just wanted to ask about the kinetic.
Hello.
Driven by the.
Cornell study data and in particular, whether you're already starting to see.
Back to that.
As well as well.
The profitability.
That data that information being included in some kind of formal guideline.
Rob.
Yes.
That could potentially drive.
Further and then two other very quick question.
Maybe.
More visibility into how you expect stock repurchases to evolve to occur in the future and also just wanted to ask whether you have any clarity at all.
Our meeting data.
Publication. Thank you.
So maybe I'll go go from.
You know the last question.
We do not know when the in Saar data will be well.
Being appear publication, we are pleased that it was presented in.
As the in Saar meeting in Montreal, and at least we can see the the abstract on the inside our website, but we're not aware of any intention to put it in a peer reviewed.
Journal relative to stock buybacks.
Obviously, we had talked about that consideration of a modest stock buyback program, primarily focused on anti dilution, but also to provide a return of capital too.
Our shareholders and we will continue to do that.
I think when it really on an annual basis.
Look at the dilution of era.
Equity programs and seek opportunities too.
Offset the dilution of those programs.
But you know our primary focus really is on the deployment of capital towards our organic and M&A activities as well as maintaining and continuing to grow our dividend and paying down debt.
Relative to the the Colins studies at Cornell were some some people at asked how can they get their hands on them and that's that's why we share that information on the call but.
Again, we're really pleased with.
The outcome of these studies and you'll actually find on there. If you go there there are some other studies that we really haven't even talked about in the past.
And we do think that it it.
Is starting to impact the business and also as I've talked about in the past the.
The world of prenatal vitamins I think really is involving to include coli and several years ago. There are very few prenatal vitamin regimens that included coleen.
Today, that's different there are quite a few prenatal vitamins out there that include coleen and I think that.
Going forward, there will even be more and that's really where we're seeing the immediate benefit in that part of our businesses is up.
Isely as a results of the inclusion of of Coleen and prenatal vitamins now.
What we're not seeing is enough colina included in these prenatal vitamins and partly it's just because of.
Real estate issue within the the tablet.
But.
Firstly lets get it it included and if it's included at 55 milligrams, but we think it should be in there at 450 milligrams or even more.
We'll focus on that secondarily, but the.
American Association of Pediatrics came out to your point around where you get any any support and they did come out recently and say that prenatal vitamin should include coleen.
We don't see any.
Additional besides FDA already coming out with.
Labeling changes and a recommended daily intake on calling in EFSA doing that in Europe were not necessarily expecting any other body to come out.
With those kinds of mandates or positions, but the fact that they came out with support coli being included in prenatal vitamins was very positive and we're starting to see that along with the Cornell studies.
And the reporting out of those studies.
Changing the discussions that we're having with his prenatal vitamin companies and starting to impact our volumes.
Thank you very much for those.
Thanks.
Thank you we have reached the end of our question and answer session I'd like to turn the call back over to Mr. Harris for any closing remarks.
Yes. Thank you very much and really just once again I'd like to thank everybody for joining our call today and maybe more importantly for your continued interest in our company. We're really pleased with the Q3 results in the progress that we're making on our key growth initiatives and look forward to reporting out Q4 and full year results early now.
Next year. So thank you again.
Thank you. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.