Q1 2021 Quaker Chemical Corp Earnings Call
Greetings and welcome to Quaker Houghton 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 the star zero on your telephone keypad.
As a reminder of this conference is being recorded I would now like to turn the conference over to your host Mr. Michael Barry Chairman and CEO and President. Please go ahead Sir.
Good morning, everyone joining.
Joining me today are saying and how is better our CFO Rob.
The trial of our general counsel and David well, our global controller, we of slides for our conference call you can find them and the Investor Relations section of our website at Www Dot Quaker Houghton Dot com.
The great deal of changed over the past year with the COVID-19 pandemic for US our top priority is and has been the protect the health and safety of our employees and our customers, while ensuring our business continuity and meet our customers' requirements.
All of our plants around the world of our operating and we are continuing to meet our customer needs. Despite the increasingly challenging conditions caused by COVID-19 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 and continue to service our customers as well of continue with our integration.
We are very pleased but for 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 of it is interesting to look at our revenue changes from the first quarter of 2020, which is just one of COVID-19 was starting to impact us.
A year ago, we primarily use all of the COVID-19 impact in China, and you can see this impact and our current quarter Asia Pacific sales growth of 31%.
And Matt and our global specialty businesses also showed strong growth and were up 14, and 12% respectively from a year ago.
The Americans were relatively flat and sales from a year ago. If you exclude the two recent small acquisition that we made.
Overall, we anticipated sequential sales growth to play out and 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 and 2021.
Some of this growth may be due to our customers replenishing their products and 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 piece of business and take market share also contributed to our performance as our analysis shows that we had total organic sales growth due to the net share gains of approximately 3% and the first quarter of this year versus the first quarter of 'twenty.
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 the share gains and.
Looking forward, we continue to feel good about these levels of share gains given the opportunities we have recently and one or are actively working on.
While higher than expected sales were a positive for us and the quarter a clear negative was the continued to increase and our raw material costs.
While we knew raw materials were increasing and the last time, we thought.
The increases have continued longer and at a higher level than we expected.
Overall, our cost of raw materials have increased over 20% since the end of last year.
There is tremendous stress on the supply chain of of raw materials and logistics.
Further the availability of raw materials has impacted us at times, where I'm proud to say that we've navigated through this so far and have ensured that our customer of businesses continued to operate.
The increase in raw material costs did put downward pressure on our gross margins and 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 experience between the time, the raw material cost increase and the tie.
And we have to fully implement price increases to offset that.
So overall, we are pleased with the quarter given the environment, we're operating and and saw strong sequential improvement in our sales and adjusted EBITDA for the fourth quarter.
Synergy achievement also was the factor in our results as we achieved $18 million and in the current quarter compared to $10 million last year.
Relative to the liquidity, we did increase our net debt and the quarter to do the small acquisition and the steel market and an increase and our working capital due to the strong sales growth.
However, our leverage ratio of net debt to adjusted EBITDA continued to improve from the three two times at the end of the year to 3.1 times for 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 for it for the second quarter, we expect short term headwinds from higher raw material costs, and some lower volume impacts due to some of the factors I mentioned earlier as well as the auto more of a market continuing to have a 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 and 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 and I was a few months ago. While we may end up the year of the same place where slightly better based on our strong first quarter. The shape of our years expect the profitability trends has changed SL.
Essentially of we're seeing higher demand for the year, but greater margin pressures and the near term, which is expected to be largely offset by this higher demand.
For the margin pressures are expected to be short term and nature once our price increases are fully implemented so.
So we currently expect the exit the year at better than expected demand for our products and our margin is largely returning to our expected levels.
So even though we expect the largely end up and a similar or slightly better place as our previous expectations I feel better about the scenario than the already positive one I had envisioned a few months ago.
We will have a step change and our profitability essentially complete our integration cost synergies continuing to grow above the market by taking share and reach our targeted net debt to adjusted EBITDA the leverage of two five.
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 and the marketplace.
And I'm so proud of how our team has performed and servicing our customers meeting their needs and successfully continue and were for our integration execution, which is both critical and difficult for us given the current conditions. We are facing this year.
People are everything and our business and by far our most valuable asset and ensuring their safety and wellbeing is and will continue to be a top priority for us.
So I can't help but to reemphasize of my price for our Quaker Houghton team and what we have and we'll be able to accomplish for our customers and investors, both now and going forward.
And that concludes my prepared remark remarks, I'll now hand, it over to Shane and 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 the results for the quarter I'd like to remind everyone. The 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 and.
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.
So I sort of consistent with the press release and culture. It's filed yesterday and also there of reconciliations between the U S. GAAP measures and non-GAAP measures provided in our call charts on pages 10, and 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, well and significant supply chain pressures.
As I begin to discuss our quarterly performance of point, you to slides six and seven and our cultures, 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 three per cent from acquisitions and.
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.
Apex and net sales increase of 31% was the largest increase of the prior year, but this was mainly due to the initial impacts of COVID-19 hitting China and the first quarter of last year versus the rest of the segments being impacted and the second quarter of last year and.
And I also showed strong net sales growth of 14% due to a solid bounce back from COVID-19.
Americas and GSP had net sales growth of four per cent and 12% largely due to higher volumes, including the core of acquisition made in December of last year, which helped to 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 on the other and manufacturing companies and the world right now.
We are facing significant challenges with rising input costs due to the global supply chain disruption.
Gross margins were $36 three per cent for the quarter compared to $35 four per cent in the prior year, but excluding onetime cogs increases related acquisitions. These would've been $36 six per cent.
And $35 five per cent.
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 and the first quarter as you could see and surety our quarterly adjusted EBITDA of $77 1 million grew 28% from the prior year, which drove an 8% increase and our trailing 12 month adjusted EBITDA to $239 million.
These results were really driven by higher operating earnings and each of the companys 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% and 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 per cent for the current quarter compared to 22% last year.
It's of note, we do expect both of our second quarter and full year E. T ours will be and the range of 24, and 5% to $26 five per cent.
So net our net GAAP EPS of two of 11 grew 53 per cent compared to the prior year as.
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.
And we looked at the company's liquidity summarized on chart nine our net debt of $749 6 million increased 32 million and the quarter.
And which was primarily driven by a $25 million acquisition of a pinpoint any business for the steel and market.
Some point 1 million of dividends paid.
And $12 6 million of operating cash outflow.
Related to the quarters out outflow of operating cash the company's major cash requirement is working capital and.
And periods, such as this where our sales and volumes increased dramatically and there was an outflow of cash needed to sustain our day to day operating requirements, which we'll come back to us as our demand trends normalize.
Despite this increase of net debt the company was able to improve its reported leverage ratio to three one 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 and acquisitions that provide growth opportunities, which makes strategic sense.
Oh, while remaining committed to reducing our leverage below our targeted two five times level by the end of this year.
So to summarize Quaker Houghton had a strong quarter that was above our expectations due to continued end market recovery, a pickup and 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 today and will be a bit offset as raw material cost increases take full effect and we see more volume impacts for market variability, including the semiconductor shortage.
Though as Mike mentioned, we still maintain our previous floor guidance that we will see a greater than 20 per cent increase and 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 and Quaker Houghton and I will now turn it back to Michael.
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'd like to ask a question. Please press star one on your telephone keypad.
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Your first question comes from line of Katherine Griffin with Deutsche Bank. Please proceed with your question.
Hi, good morning, Thanks for taking the question and so first I just wanted to touch on the comment around potentially lower volume and Q2 and.
I think you just mentioned and some market variability related to the semiconductor shortage and I was 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 and Q2.
Sure.
Good morning, Catherine we.
It's hard for us to be precise on this the because there's so many factors at play and here, but the way.
We do feel there could events.
Pre buy and the first quarter.
And as well as some of our customers replenishing their change the either the their supply chain.
The products into it and but it's really hard to get at that we've really spent a lot of time and trying to analyze that trying to understand that better and you know like for example, there were there are places that they get out of them.
I think of the United States and the steel industry and the auto industry. They are really running a very hand, the math right now so some of it and other places of world. There could have been some of these other effects. So we think the overall there could be some volume impacted that as well as the semiconductor shortage just continues to.
Continuing on and at least for another quarter here and.
And so and we think that will impact things as well so it's hard for us the precisely are telling of our volumes.
Okay. Thanks, and then just on the gross margin and if you could just talk a little bit more about.
And how you expect to improve that and in Q3, and Q4, I think it and of course price increases coming through that and.
Curious if there's other actions that you're taking for kind of take in order to to get for that you know pretty good gross margin guidance.
Sure Yeah.
And we were a good cash.
And I look back of where we were a and the third and fourth quarters of last year, we were for.
It really improved and improving our gross margin through a lot of the the.
And 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 and they started in the fourth quarter.
More came through and the first quarter and more kind of throw in the second quarter of very large increases even between March and April and that.
It really and what we have to do and we are doing is continuing to do.
The price increases and the marketplace.
You know and and we.
And we thought we've done them and those price increases and and the first quarter.
And we're gonna have to do more and are doing more and the second quarter. So it's kind of the catching up we have the lag effect that we talk about that you know there is a period of time between the time I raw materials go up and cost and we get price increases and the marketplace and fully offset that so it's really kind of.
Anticipating that we will be successful and we do believe will be successful and our price increases and that raw materials will begin to stabilize and mid year and and therefore as these price increases get fully into effect, let's say towards the middle of the year, then you'll you'll see the <unk>.
<unk> improvement.
Between the second quarter two of the third quarter and then the third quarter to the fourth quarter.
Thanks very much.
Thank you.
Okay.
Your next question comes from the line of Mike Harrison with Seaport Global Securities. Please proceed with your question.
Uh huh.
Hi, good morning.
Hey, Mike.
Maybe if I could take a little bit of the different tack on the debt.
The the raw material impact you're expecting in Q2.
The consensus EBITDA numbers for Q1, we're kind of in the call it $60 million a realm of 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 if.
We are keep in mind the inflationary impact.
Maybe some of the other puts and takes you're thinking about.
Yeah, we don't give too.
Two specific guidance on that but but the.
Hard to argue and something like that but it's a I would just say that we do feel that it will be the.
The lowest quarter of the year for the reasons, we talked about the margin and and down the line somewhat.
And the.
And we.
Sure.
We have said this when we had a fall of last at the end of last quarter and we.
We have thought that are.
First quarter was going to be the.
The last quarter of the year and that's the best of course, why where analysts sort of guiding for on that and it was really just is higher.
It's a much higher demand and that came through and a quarter and we expect the and then and now the.
The whole raw materials kind of changed it. So yeah. It's it's it's definitely shape change the shape of our.
EBIT, that's going to transpire.
Transpire for the quarters of share.
Alright and.
And maybe a little bit more color on the specific raw materials, where youre seeing and impact you mentioned that overall, you've seen things increase of about 20% since year end I think if we look at crude based.
The materials.
This oil has gone up pretty substantially probably more than that 20% number but can you talk about what you're seeing and your plant based and animal based raws and and maybe also give us some rough idea of how much of your raw material spend is in those three buckets crude base plant base.
Just and animal based.
Sure I mean, one thing I'll, just say all of our raw material groups for the for the most of our really have gone up and it's it's.
Not just constrained for the one area.
They are they they all have gone up a tremendous pressure on that part of tremendous pressure on our supply chain cost free dramas that kind of thing. So just the whole everything is just kind of going up and.
And as far as I don't have the precise numbers in front of me, but certainly when you look at the.
The the key raw materials groupings that we buy the between animal fats vegetable.
And the fats and oils and the base oils that come out of crude they they definitely makeup.
A good part of our raw material spend there's also a whole host of other chemical decade used and attitude, but pretty much across the board. They are all go up.
Alright, and then if I can sneak one more and here.
Looking at the 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 the cycle like this is that the.
Metalworking business recovery is taking place more real time, and then they pull steel and aluminum with it.
And more of a lag.
Not like last year I know, we saw some pretty strong growth coming out like initially out of COVID-19 as we were coming back and our and our metals business and there was more of a lag at that time and metalworking and and maybe this is just catching up or there are some of them.
But I don't think of I didn't quite well and I think about our businesses I don't quite think of it that way I think all of them are.
<unk> are pretty.
Pretty consistent had the.
Showing good growth.
Two what we see and the external market for that piece of businesses.
Alright, thanks very much.
Thanks, Mike.
Your next question comes from line of Laurence Alexander with Jefferies. Please proceed with your question.
Good morning, it's been for the one for warrants how's everybody doing.
Good morning, Dan Good morning, and so you mentioned you mentioned, obviously and we talked.
Typically about raw material costs I was just wondering obviously labor and shipping costs are all sort of issue I was wondering to what extent and.
As important and what is how difficult. It is the price on most of course, because people expect what could go higher but I was just wondering what the others. If that's.
More of a conversation with your customers.
And it hasn't it's not and I.
And I would say the the next I guess the impact for US is the besides for raw material for US has been has been the cost of drums and things.
Great and.
Cost as well so it's and notice we consider really just says the same kinds of things as raw materials and when we're having conversations with.
With our customers around price increases.
We will include those and there and those conversations as well.
Okay, and then were there any temporary costs and you took out last year between the response to COVID-19 that are coming back this year that we should kind of be cognizant of.
Well, certainly we did a lot less travel.
Sure Dan you know with the with COVID-19 and the condition and so forth so far and this year and other you know.
There hasn't been too much more of that kind of travel and the fact the comparisons we've probably been more travel last first quarter of last year versus this year.
So as as the sheer progresses and we start to open up more of that could happen, but you're certainly still have a lot of places around the world that are pretty pretty locked down right now in Brazil, and India and so for we're still locked down and the U S and Europe a lot.
And really the place that's kind of back at normal and some other respects right now from that perspective is China. So so.
So overall I would say as we try and for the year we.
We will start to see some of that come back, but certainly not for the levels that we had.
And let's I had in 2019.
Okay and then the final question. So obviously the U S and in Europe or are recovering India is going through a terrible calm right now I was wondering is.
Is that having the second on your production.
The region and to what extent.
Yes.
So far we've been able of every you know it's it's between kind.
COVID-19, and the raw material shortage is really challenged us at times in our plants to meet our customer requirements are but so far we've been able to do that.
We work very closely with our customers and we've been able to satisfy the need so so far it's a.
We've been doing fine and that area right.
Thank you very much.
Thanks, Dan.
Your next question comes from the line of John 10, One Tech with C. J S. Securities. Please proceed with your question.
Good morning. This is the Brendan Pops and non on for John.
And I just wanted to ask real quick I'm on it just alluded to it but just the the impact on your business from from COVID-19 and in areas like Brazil and India.
Yeah.
Sure.
It certainly has impacted us from the perspective of.
And challenging at times when.
And some of our employees have come down and now with COVID-19, but it hasn't impacted us to the extent yet that we've not been able to put a farmer.
And work, we've shut down and customers and I missed it and any kind of major issues that way.
Okay, Great and then and.
And any update on the AR on the CEO search.
None of the search continues as planned and so.
We would expect that the b kind of concluded sometimes we get as we get closer to the end of the year, but right now of that searches are ongoing.
Okay, Great and then just last for me and just how to think about your of your appetite for M&A today and.
And the pipeline, you're seeing you're seeing out there.
Yeah. Good question.
Of we made two smaller acquisitions.
And one of the and December one and February of this year.
And we continue to look at smaller.
Acquisitions.
There's a number of them that are out there that we're looking at and evaluating.
And.
And we hope with the you're able to complete some some of that.
And this year, but it's a telephone was done and it's hard to say.
We've always said that from an M&A perspective.
Well.
And look at anything really large at the stage, because we want to get our debt.
Debt levels down for the point that our net debt to EBITDA is going to be below the two and a half times of market and we think that it'll be by the end of the year. So it's all of the meantime between now and then and we will continue to look at the smaller ones and hopefully bring it out of there.
Okay. Thank you.
Thank you.
Your next question comes from Steve O'hara with Sidoti. Please proceed with your question.
Hi, good morning, Thanks for taking the questions good morning.
David.
Good morning, I, just going back to the.
And I guess, your customer inventory replenishment or kind of higher than expected purchases and the quarter.
And I can't recall, but I mean, what are you guys talking about.
You know inventory replenishment and and kind of a you know the fact that you thought the your customer inventories were low at the end of the year of last year.
No.
And where.
Okay.
Hum.
And I mean, okay. So.
So I E.
I mean, if if if these inventories are being used to.
Reported.
And as our supply chain.
The online and I guess.
I mean is this.
Something that could kind of keep rolling as you know that process takes time.
Or I mean, I guess I'm, just thinking that maybe that could keep wears maybe higher than you know.
Kind of previously previously expected for longer.
That's the case, but maybe I'm not thinking about it right.
Yeah, I know, what you're asking and I think we of the same question and you have a we don't have really great visibility of that because we don't understand.
Sometimes there's a disconnect between.
Kind of a you know from what we see and.
And the external factors are and what our customers are actually doing but so it's hard for us to really say Ah and in this regard its certainly possible and I.
You know that I I was saying for example, and in the U S. I just see everything is so tight right now for them and the auto industry and the steel in the streets.
You know that that should keep the lager, but there's lots of places around the world that that maybe there are some some of the other stuff has happened as you know the supply chain replenishment or so it's just really hard for us to kind of get out of that but we think there's some there but we just don't know we just don't know if it's for real.
The material amount or not.
Okay. Okay.
And then just kind of go back to the the commentary about Q2.
Was there.
Maybe I missed it but in terms of the.
And you know kind of in the revenue.
Revenue standpoint.
We are you expecting.
And in <unk>.
<unk> and revenue.
Or is it more in just in the operating income because of the cost pressures.
And <unk>.
Definitely going to be and the operating cost pressures, we think our volumes.
We'll 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 some of our raw prices will be higher and the second the second quarter versus.
Versus the first quarter, so that that will be somewhat of a plus for our revenue, but but again, our margins will be down because just the cost to keep the escalating and much higher rate.
So hopefully that gives you the least the variables that we're talking about yeah.
That's helpful and.
And then I mean.
Yeah.
It's right for you.
The pricing.
Is it typically and indexed assess where.
It's clearly visible to customers, where you say.
This went up by the desk this went up by that and.
And here's what it is to and it's going to start ex date.
No other industries kind of.
Pushed customers to accept these and it's and it's more of a negotiation as opposed to you know of Formula.
Sure we definitely have.
Some contracts with some major customers that are more index based debt.
And just 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 and that's where when and as raw materials go up we kind of continually have to have another conversation and say, okay and now we just went up in price and you know.
Recently, but we're gonna have to go up and price again, and here's why and this is what's happening to our various cost and.
And make that case to it so that's some of the majority of the what I would call the the straight negotiation part.
Okay.
And then sorry last one.
Assuming there was.
Inventory replenishment and and that happened in the quarter.
I mean, how long does that typically.
By a customer and user.
Is it kind of of three months.
And.
Do they are they able to kind of store three.
And three months worth of product and kind of assuming economic activity continues to improve globally.
I mean is that and.
And it seems like obviously, you expect <unk> to be.
Lower and then you know trend throughout the year, but I mean is there a way to think about.
The potential how how long that could kind of depressed volumes going forward, if that was the big factor and the first quarter.
Yeah, I mean, most of our customers.
And we ship very frequently and it's kind of more just in time type of things can can and so it's.
We generally don't find that our customers hold months worth of.
The product they generally hold up a couple of weeks or a few weeks and proud of.
And so can they had it can the whole somewhat more yes, you know.
They can do that but but there could be for example that could be maybe producing higher amount of cars or whatever parks theyre, making and.
Of their own and storing their parts there their products and inventory.
The the tried to replenish the supply chain, so that it's more of a probably that aspect as well the.
Could be happening, but we don't have perfect visibility to it.
Okay. Thanks for the time.
Thank you.
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Your next question is a follow up from Mike Harrison with Seaport Global Securities. Please proceed with your question.
Okay.
Hi, just a couple of more for me first of all of the the aerospace business, obviously was impacted by.
The southern and three seven Max and and then the the sharp reduction in air travel.
Any thoughts on the pace of recovery and it seems like the airlines or at least reporting that the travel is starting to come back.
For the aerospace be a maybe a positive contributor as we start to lap some of the big declines from last year.
Yeah. Good question, I mean, certainly and the first quarter comparison for the first quarter of last year and were down but.
But as but as you said and once things really bottomed out and a lot of ways and aerospace and the second and third quarters of last year.
Are seeing more activity and and aerospace on a sequential basis.
And so we are and kept more encouraged around aerospace.
And as we go for the year of let's say and the second quarter or so for the third quarter.
Versus the prior year comparison, so that will definitely be of positive, but we do feel it will be that's to me. That's a great example of a sector that will be longer coming back to where we work for let's say 2019 type of levels that will and I'll take a few years I think before we get back to those.
Levels, but but it is trending and the right direction right now and it's.
The sequential of positive for us.
Alright, and then over on within the Canning business. It sounds like there's just tons of capacity coming on stream.
Are you winning more than your fair share of that new business and can you maybe talk about how much of a tailwind the.
Canning our industry.
It could be for you and in the quarters to come.
That's been a good business for us the through the one of the better performing businesses as we went through the pandemic here.
And as you mentioned, it's been really tight and I would just say in general.
That's a good example of the business that we have been.
Over the past really two years probably.
Continuing to take share and the marketplace.
And so we've.
We've had a we've really grown and the size of our can business between combining the Quaker has the can business went out and had and then with the Portola acquisition last year. It really strengthened our offering that we can make the customers and we have been picking up a new piece of the business in Canada.
Alright, and then the last one for me is on the Asia Pacific business, and the pricing there or price mix I guess it looks like it was down about 4%.
Even as volume recovered very nicely year on year and it looks like maybe even some sequential.
Volume improvement so what is driving that price lower our price mix and.
And will we see that turn positive as you guys put the.
Price increases and in place to counter the raw material inflation.
Sure.
So I would say in general and are we have lower prices at the you know we have a lot of country mix.
And Asia Pacific are for.
And with pricing for our of different products. So so sometimes when you look for you kind of look at where India lots really being having a tougher time certainly from the cohort perspective, but from the overall business perspective, and that's been doing fine and and but and I think that's been part of the mix issue.
We've had because prices kind of tend to be lower there than maybe other places and Asia Pacific So I view it more.
It is a mix issue between countries and I do.
And really kind of anything happening and lower prices and of course, we're getting price increases everywhere. So it's a so it's it really is more of that mix issue.
And should we expect that the term positive then later in the year.
So from.
Our pricing perspective, I would ask it really depends upon the mix of our businesses again I think in general I think pricing aspects of revenue should we should see sequential improvement and that going quarter over quarter, yet and when you look at some of the gross margins are well.
The more negatively impacted and the second quarter, just because of raw materials of that been Australia and.
Alright understood. Thanks very much thank.
Thank you Mike.
Your next question is a follow up from Steve O'hara with Sidoti. Please proceed with your question.
Hi, Thanks for taking the follow up.
Maybe I was just curious if you could talk about.
The possible impacts from any infrastructure build.
Mike go through or.
How you think about that either.
And from direct or through your customers' businesses.
We will think of would be a positive we have.
Way of quantifying that at this point and it certainly win.
There's a lot more industrial activity happening and.
It should translate into a positive for us.
Okay and is there.
In terms of maybe I don't know.
The last kind of proposal I think it was much smaller but I mean.
Do you of any.
Idea of maybe what any boost you saw last time or I mean, obviously the sizes are much different but I was just kind of curious if theres any.
The recollection from last time.
Yeah.
Yeah.
And it'll be it'll help us, but I don't think of it I don't think of it as something of a major a major event and Ah.
It really depends I guess the magnitude as you mentioned again of what's really going to help us more.
If people buy more of cars and.
You know Theres just the assessment work.
The type of metal type of products that are being sold so the.
It's hard to it's hard for us the really quantify it at this stage.
Okay, alright, thanks, I appreciate the color.
Thanks, Steve.
Good.
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 and given the no other questions. We will end the conference call now and I want 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 and Quaker Houghton.
Ladies and gentlemen. This concludes today's conference you may disconnect. Your lines at this time. Thank you all for your participation.
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Okay.
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And then.
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And.
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