Q2 2021 Minerals Technologies Inc Earnings Call
[music].
Please standby.
Good day, everyone and welcome to the second quarter 2021minerals.
<unk> technologies earnings call today's call is being recorded at this time I would like to turn the call over to Eric I'll Duck head of Investor Relations for minerals technologies. Please go ahead and Mr. All day.
Thanks, Lauren good morning, everyone and welcome to our second quarter 2021 earnings Conference call.
Today's call will be led by chairman and CEO, Doug Dietrich and Chief Financial Officer, Matt Garth.
Following Doug and Matt's prepared remarks, we'll open it up for questions.
I'd like to remind you that beginning on page 15 of our 2020.10-K, we list the various risk factors and conditions that may affect our future results.
And I'll also point out the safe Harbor disclaimer on this slide.
Statements related to future performance by members of our team are subject to these limitations cautionary remarks and conditions.
Now I'll turn the call over to Doug Doug.
Thanks for the introduction of Eric and good morning, everyone.
I do appreciate you joining our call.
Got a lot to cover today.
And to take you through the highlights of a very strong quarter and discuss our acquisition of North America.
And.
Matt will then review our financial results in more detail.
And our expectations for the third quarter and after that I'll finish the prepared remarks with the.
The commentary on our 13th sustainably.
The ability to report, which we published this week.
Let me start with a recap of the quarter.
Building on the momentum generated over the past few quarters we.
We delivered a strong second quarter with with several financial and operational highlights that I'll take you through.
First and foremost of this was a record quarter for our company.
With the earnings per share of a dollar and 29.
This milestone and reflects robust demand across our markets.
Strong operating performance by our team.
And continued execution on our growth projects.
For perspective.
Many of our product lines have now reached or exceeded pre COVID-19.
Net sales levels.
But other still have room to improve.
Let me give you a feel for how the demand trends our performance and strategic initiatives across each of our segments led to these results.
And performance materials, our metal casting business continues to perform very well with strong foundry demand globally.
And our broad portfolio of consumer focused businesses and household personal care and specialty remained on their steady growth track.
Specifically sales and our personal care business nearly doubled as we introduced new private label skincare formulations.
And expanded partnerships with major retail brands.
<unk> and other large contributor to the segment's sales growth and the quarter of the rebound and project activity and both environmental products and building materials.
Within our specialty minerals segment, we delivered another quarter of sales growth across all product lines.
Paper demand continues to improve and all regions.
And we're benefiting from the ramp up of our new satellites.
Paper mill operating rates and North America and reached nearly 95%.
And to underscore the current supply and demand situation, 1 of our customers and North America recently announced plans to restart a mill to meet the increased demand.
And our specialty PCC, GCC and talc businesses benefited from a robust activity and consumer automotive and residential construction markets.
The refractory segment also had an impressive quarter marked by steel utilization rates, which are now above 80%.
And we've also.
And there are several new contracts, which will drive growth and the second half of this year and into next for both our refractory and metallurgical wire product line.
The combination of these positive trends and business development actions and our segments yielded sales of $456 million with growth in every segment and geography.
Okay.
We drove these higher sales into operating income of $64 million.
Up 53% compared to 2020.
And margins expanded to about 14% as we expected.
Our teams of disciplined operational execution through pricing actions.
Productivity improvement.
<unk> and strong cost control enabled MTI to deliver these results.
We also navigated challenges related to increased input and logistics costs that accelerated during the quarter.
Our global teams have done a great job maneuvering through a more dynamic supply chain environment, which includes navigating logistic.
As challenges and energy and raw material inflation.
We are well positioned to offset these costs with pricing actions that we have been effectively implementing across our portfolio and.
Matt will discuss this more and his comments.
Generating strong cash flow further strengthening our balance sheet and maintaining.
And flexibility with how we deploy our capital to the highest return opportunities.
Our priorities for us.
Through the first half of the year cash from operations and free cash flow for both up 25% over the last year.
We've been using our cash flow to pay down debt and bolster our liquidity.
And we finished the quarter.
Adjusted our lowest net leverage ratio and the past 6 years.
In addition, we've continued with our returns to shareholders through our $75 million buyback program.
And anticipate fully completing the program under the authorized timeframe.
The financial strength also provides us the capability to pursue acquisitions.
<unk> as we've demonstrated with the purchase of North America.
We advanced our growth initiatives this quarter focused on new product development and geographic expansion, let me highlight a few specific areas.
On previous calls we mentioned several positive trials and interest with our floors or product that addresses.
Quarter with T force contamination and groundwater and them.
I'm pleased to share.
And during the quarter, we were awarded our first major sale for a large scale project at a North American Department of defense location.
And the project has been going very well as floors of efficacy has been demonstrated commercially.
We have several other similar.
Similar type projects and our sales pipeline as well as for waste municipal wastewater treatment sites.
And we have the manufacturing capacity and technical capabilities to pursue them and further grow sales.
On the paper PCC front, we are ramping up production at our new satellites and Asia, which came online at the end of 2020.
<unk> and represent 200000 tons of new capacity on an annualized basis.
We have another approximately 130000 tons of capacity coming online now through the middle of next year.
Including our 40000 ton expansion for our packaging application in Europe.
Where we will begin realizing the volume benefit and the third quarter.
We are finalizing the construction of our 40000 ton satellite in India, which will start up late next quarter.
And we have also begun construction on of new 50000 ton satellite in China, which.
Which should be operational and the first half of 2022.
And finally, we announced the acquisition of North America, This week, which will go.
Through and a moment.
The sum up the quarter and was a very productive 1 with many positive highlights.
And navigated through challenges over the past 18, plus months and created opportunities for ourselves on all fronts.
To put our company and an advantageous position to continue to drive profitable growth going forward.
As I mentioned on the previous slide and.
And the exciting news. This week is our acquisition of North America, and I wanted to spend time discussing who they are.
Why we pursued the transaction and how nor America fits into our global pet care business.
Acquisitions are an important component of how we plan to grow and move MTI to a higher return more balanced portfolio.
So.
And we've discussed our pipeline of opportunities that align with our strategic initiatives.
And our America was 1 of those opportunities as it continues to shift to shift to a more balanced sales portfolio.
And aligns extremely well with our overall growth strategy and pet care.
For background on the America the company was.
Founded in 1992 headquarter.
Headquartered in Toronto, Canada, and is a leading supplier of branded and private label pet care products and North America.
For America is the long history as a well run company with an impressive track record of innovation customer service and profitable growth.
Product portfolio consists primarily of.
Click based cat litter products, which are manufactured and facilities in Canada and the United States.
North America is about 320 employees and in 2020 generated revenue of approximately $140 million.
Let me give you some more details on the transaction and the rationale.
The.
Combination is highly complementary from a geographic product portfolio of customer and operating perspective.
And our Americas portfolio of branded and private label Bentonite based cat litter products fits well within our North America business.
In addition, and.
The Americas strategically located footprint throughout the U S and Canada.
The combined with our vertically integrated mine to market model.
It gives us a unique position and the pet litter market.
We are now 1 of the largest vertically integrated private label pet litter providers globally with a strengthened position and North America.
We see further benefits as we can provide enhanced value in terms of consisting.
<unk> and quality and are positioned to serve a broader customer base more efficiently.
The purchase price for the transaction was $185 million on pre synergy EBITDA of approximately $20 million.
We will realize synergies from the transaction by leveraging our combined operational footprint and vertically integrated model.
And through the deployment of our business processes.
On a post synergy basis, we expect the transaction to be about 7.5 times EBITDA similar to the <unk> transaction and.
And earnings accretion to begin in the fourth quarter of this year.
We expect to fully integrate the business employees systems and processes.
Over the next few quarters and accretion will ramp up to 5% to 7% on a full year basis in 2022.
And you step back and describe our existing pet care business.
We've been profitably growing this business since the acquisition of AMCOL and 2014.
Our acquisition of <unk> and 2018.
<unk> gave us a differentiated mind the market private label presence in Europe and the.
The Americas and extension of that private label growth strategy.
Pet care sector provides stable growth rates and attractive dynamics as domesticated cat ownership continues to rise globally.
We are uniquely positioned to serve this market.
And have invested and expanding our vertically integrated capabilities and product portfolio globally.
In addition, the strength and resiliency of our pet care business was demonstrated during the past year when demand was at an all time high during a period when our businesses serving industrial markets were impacted.
On the lower left of the.
And can see how our pet care sales have grown organically and inorganically since 2017.
With the addition of North America and <unk>.
Pet care business has grown from 78 million to $350 million and.
And our household and personal care business is now the largest product line and MTI.
This represents.
Resents of significant shifts in our portfolio toward non non cyclical consumer oriented markets.
<unk>, our company to drive growth rates above our historical averages.
And we see opportunities to further balance our portfolio.
And some.
And America is of great strategic fit with our company and this transaction provides many compel.
<unk> opportunities for growth and value creation.
We welcome our newest employees, the MTI and look forward to working with them on a seamless integration.
With that let's turn it over to Matt to go through our quarter performance and more detail Matt.
Thanks, Doug.
I'll review, our second quarter results the performance of our segments.
Well as our outlook for the third quarter and.
Now, let's begin with the second quarter revenue.
Yeah.
Sales and the second quarter were 28% higher than the prior year and 1% higher sequentially as demand remains strong across the majority of our end markets and we started to see higher levels of activity and our project oriented businesses.
As operating income excluding special items was $64.1 million, 53% higher than the prior year and 9% higher sequentially.
Operating margin improved from 13% and the first quarter to 14, 1% and the second quarter.
The sequential margin improvement played out largely how we expected.
As we benefited from the incremental margins of our project oriented businesses.
Our normalized level of corporate expenses and continued pricing actions and productivity.
All of which helped to offset higher than expected inflationary cost pressures.
As you can see and the operating income bridges on the slide we.
And we saw higher costs in the second.
The quarter.
The higher costs were primarily driven by energy logistics and certain raw materials, such as line and packaging.
Our teams have done an excellent job managing through these challenges and we are and the process of implementing additional price adjustments and the third quarter, which will help mitigate the impact on our margins going forward.
Second some cases.
Price increases are contractual as with the pass through arrangements and paper PCC and and other cases. They are negotiated based on the value that our products provide.
Meanwhile, we continued to control overhead expenses with SG&A as a percentage of sales at 11, 3% versus.
And 7% and the first quarter and 13, 1% and the prior year.
Earnings per share excluding special items was $1.29.
A record quarter for the company and.
And represented 52% growth above the prior year and 10% above the first quarter.
Our effective tax rate for.
The level was 18, 9%, excluding special items, and we expect our effective tax rate to be approximately 20% going forward.
And now let's review the segments and more detail starting with the performance materials.
The second quarter sales for performance materials were $238.4 million.
24% higher than the prior year and 3% higher sequentially.
Metal casting sales grew 52% versus the prior year as foundry demand remains strong and North America and China.
Sales were relatively flat sequentially and were only modestly impacted by the global semiconductor shortage, which caused the limited.
Limited number of foundry customers to take downtime and the quarter.
Household personal care and specialty products, our most resilient product line last year grew 17% versus a relatively strong prior year quarter.
Demand for our consumer oriented products has remained strong and growing driven by continued new product.
The development and expansion into new customer channels and geographies.
We also saw higher volumes of our specialty drilling products, which are benefiting from a rebound and construction infrastructure and the oil drilling activity versus the prior year.
Environmental product sales grew 6% versus the prior year.
And we're 53% higher sequentially, driven by improving demand for environmental lining systems water and soil remediation and wastewater treatment.
As Doug mentioned, we also delivered on the first major commercialization of our floors or of technology for <unk> for mediation and the second quarter.
Okay.
Building materials sales grew 17% versus the prior year and were up 12% sequentially on higher levels of project activity.
And North America, we're seeing more commercial construction and infrastructure projects move forward, while in Europe projects have been slower to advance as countries are still in varying stages of reopening.
Operating income for the segment grew 55% from the prior year to $34.7 million and was 16% higher sequentially.
Operating margin was 14, 6% of sales versus 11, 7% and the prior year and 12, 9% and the first quarter as higher volumes and a strong.
Operating performance drove incremental margin improvement.
And looking ahead for the third quarter we.
We see continued strength and household and personal care and foundry demand remains strong for metal casting with lower volume sequentially due to seasonal foundry outages.
Meanwhile, the.
The pipeline for our.
Strong of oriented businesses environmental products and building materials continues to improve and North America and the current outlook for the third quarter looks strong however.
We remain cautious on some of our international projects given the potential for a slower reopening outside the U S due to COVID-19.
The project also like to note that we are seeing higher cost for the plastic and fabric components of our environmental and construction mining systems.
While this presents some near term margin pressure, we expect to fully offset these higher costs for the ongoing efforts of our supply chain team as well as through pricing adjustments.
Overall.
We expect another strong quarter for the segment with organic sales and margins at similar levels to the second quarter.
In addition.
For America is now part of the performance materials segment and.
And the acquisition will contribute 2 months of sequential sales growth to the segment and the third quarter.
As Doug.
Earlier.
We expect modest EPS accretion to begin in the fourth quarter. This year as we move through the integration period.
Up to full run rate accretion over the next 12 months.
And now let's move the specialty minerals.
Specialty minerals sales were $142.7 million.
And the second quarter, 30% higher than the prior year and 3% lower sequentially.
Paper PCC sales grew 31% versus the prior year on recovery and paper demand and the continued ramp up of 3 new satellites.
The specialty PCC sales grew 24% versus the prior year.
Stated our demand from automotive construction and consumer and markets.
Overall, PCC sales were 5% lower sequentially, primarily due to temporary pay per mill outages and India related to COVID-19, and the typical seasonal paper mill outages, we experienced and North America.
Processed minerals sales were 31% versus the prior year.
And 2% sequentially on continued strength in residential construction and consumer and markets.
Operating income for the segment grew 31% to $20 million and represented 14% of sales.
Inflation.
<unk> and impacted this segment, the most primarily driven by line and energy cost increases.
We have the managing the impact with our supply chain team and we have been adjusting pricing throughout the first half of the year Accordingly.
We expect the inflationary cost environment to continue and we will also continue with our price adjustments throughout the second.
<unk> has as Youll recall, the price adjustments for paper PCC are contractual and they follow a predetermined schedule.
And moving to the third quarter.
We expect higher volumes for paper PCC on higher sales in India, and the ramp up of our packaging expansion and Europe.
We also see continued strength.
And specialty PCC and process minerals.
And overall for the segment, we expect the third quarter to be similar to the second quarter.
Sales should increase modestly on a sequential basis. However, we do expect margin pressure to persist due to ongoing higher costs and the timing of paper PCC increases.
Yes.
And now, let's turn to the refractory segment.
Refractory segment sales were $74.5 million and the second quarter, 33% higher than the prior year and 1% higher sequentially.
The steel utilization rates continued to strengthen and the second quarter.
<unk> and operating income was 1 of 11.7 million, 98% higher than the prior year and 3% lower sequentially and operating margin was strong at 15, 7% of sales.
Steel utilization rates have improved to 84% and North America, and 77% and Europe up from.
78% and 72%, respectively, and the first quarter.
The steel production at these levels.
We should continue to generate strong demand for our refractory products and the productivity that they provide for our customers furnaces.
As Doug mentioned, we see growth ahead for this business.
Second we signed 2 additional long term contracts and the second quarter.
We've now signed a total of 7 new contracts worth $80 million over the next 5 years.
Which will provide $16 million of incremental annual revenue ramping up through 2022.
Looking ahead.
The strong March.
The conditions are expected to continue and the third quarter.
We should benefit from a few additional laser equipment sales and the third quarter. However, we expect the bulk of our laser equipment sales to occur towards the end of the year as our teams are able to perform more on site installations.
And overall for the segment, we expect the similar performance sequentially.
And now, let's take a look at our cash flow and liquidity.
The second quarter cash from operations was $67 million versus $64 million and the prior year, bringing year to date cash from operations to $118 million versus $94 million last year. This was a 25% increase.
We deployed $22 million of capital during the quarter on sustaining our operations mine development and other high return opportunities.
The continued to expect capital expenditures and the range of $80 million to $85 million for the full year split evenly between sustaining and growth capital.
Year to date.
We have used free cash.
And both to repurchase $37 million of shares and in total we have repurchased $54 million under our current and $75 million share repurchase program.
As of the end of the second quarter total liquidity was over $700 million and our net leverage ratio was 1.6 times EBITDA.
Cash flow of the acquisition of North America.
And was $85 million of cash on hand, and $100 million of our revolving credit facility.
This will initially bring our net leverage ratio to approximately 2 times EBITDA and our pro forma basis and.
And we expect the pay down the incremental borrowings over the next 12 months.
Our balance.
Sheet remains in a very strong position and the.
The strength provides us with the flexibility we need to continue to invest and high value high return growth opportunities.
We expect strong cash flow generation to continue and the second half of the year.
And we see.
Free cash flow and the range of $150 million for the full year.
And now let me summarize our outlook for the third quarter.
Overall, we see similar conditions and the third quarter across our end markets to what we saw and the second quarter.
For a consumer oriented businesses remain robust and paper demand should continue to improve through the third quarter.
And we will have the typical foundry customer maintenance maintenance outages and our project oriented businesses should continue their recovery.
We continue to watch for potential Covid related shutdowns that may impact some of these projects.
Inflationary cost pressures will continue and the third quarter we.
We are keeping pace with higher costs through <unk>.
Actions some of which we have already implemented and other price adjustments, primarily in the paper business, which.
And which will be implemented contractually through the second half.
Overall for the company, we anticipate another strong performance and the third quarter with a similar level of operating income to that of the second quarter as well as.
And on cash flow generation.
I'll note here again that we also see 2 months of sales from the acquisition of North America, and the third quarter, along with purchase accounting adjustments and integration costs.
Accretion from the acquisition will begin ramping up and the fourth quarter.
With that I'll hand, it back of it over to Doug.
To give you the highlights of our latest sustainability report Doug. Thanks.
Thanks, Matt.
Excuse me before we conclude.
I'd like to take a quick moment to highlight the publication of our 13th annual sustainability report.
The shares reported is a significant step forward in terms of reporting and outlining the significant progress around our broad.
Rod range of sustainability goals.
Youll see and the report that we have already exceeded our reduction goals and 4 of 6 targets are 6 targets related to emissions energy and water and are on pace to achieve the other 2.
In addition, we provided more details regarding our safety culture.
And how we've evolved our product portfolio towards more sustainable solutions and initiatives around employee engagement diversity and inclusion and community outreach.
Very proud of the progress we've made advancing our objectives, which is a direct reflection of our employees involvement and dedication to sustainability of MTI.
I encourage you to review the report which is available on our website.
To conclude I want to extend my thanks to our 3500 plus employees for delivering a strong quarter and also like to welcome our North American employees the MTI.
With that let's open it up for questions.
Thank you if you would like to ask a question. Please signal by pressing star 1 on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to other signal to reach our equipment.
And that of Star 1 to ask a question and we'll pause for just a moment to allow everyone an opportunity the signal.
And we'll take our first question from Daniel Moore with CJS Securities.
Thank you, Doug and Matt Good morning, Thanks for taking the questions.
Dan.
Start with North America, really nice to see obviously strategically of great fit can you talk a little bit more in terms of detail on the synergies you expect.
And I'll achieve I assume your supplier of their previously so opportunity to cash.
<unk> margin and are there any revenue synergies over time as well.
Yes, we do see synergies and.
And the largely around and my comments I mentioned.
And the strategic operating footprint that.
Nor America brings to our vertically integrated positions and our mines and also some of those locations. So we see over time.
Leveraging that footprint, which is throughout the United States and Canada to reach.
The broader base of customers.
We do see some integration of business processes.
Processes and yes, there will be also throughout the time, some some clear supply chain synergies through through our <unk> supply so kind of 3 fronts longer term as we look at this as a much we now have vertically integrated positions in Europe, and North America and Asia.
And even in Australia for.
And for private label Pet care and our positions are selling bulk business to branded customers, but also now through.
The packaged product.
Around the world and.
So being able to supply with that type of stability quality and innovation.
And.
Both regional and global set of customers, we think there's opportunity on the sales from there so.
We're really excited about the transaction.
I'm happy to have the 320, new employees joined the company.
And we're excited to get started on growing this business you know as a matter of fact.
We've been growing our pet care Biz.
Business.
About 18% compound over the past 3 years organically. That's organically now I think globally, we can probably keep up the pace of 2 times of the market, which is probably the market of pet care is growing at about 4%.
Globally, we think we can sustain double that so the springs.
Large and.
And growing and very resilient and stable product line of the company. So.
That's why we're excited about debt so more to come but that's where we see getting the synergies.
Excellent.
Beyond North America, I think the biggest positive surprise for at least for me was the pick up and and borrow and construction technologies.
Obviously the contract the floors or maybe discuss the momentum you're seeing there and the sustainability.
So we saw this coming I think last quarter, we projected that we felt that as kind of projects opened up around the world and largely these are international I think they've been moving forward and North America.
But internationally Covid shutdowns of construction sites and and.
And COVID-19 related delays in terms of decisions around new construction sites for what we're seeing for the past 24 months.
And that did start to we saw that and the first quarter of those decisions made sites opening up and product moving and completing those projects.
And I anticipate a similar quarter in the third.
Yes, the only the only caveat is again COVID-19 related shutdowns outside outside the United States is our primary concern the largely and southeast Asia right now so.
Right now we look at for a similar quarter going into the third but.
We and little hesitancy, there to make sure that that keeps going with the COVID-19 variance.
Got it and maybe 1 more.
Beyond the floors or what are the maybe 1 or 2 products technologies. You are most excited about in terms of incremental protect potential as we think about 'twenty 2 'twenty 3 et cetera.
Yes, that's a great question well the first off I was going to say, Florida.
We're really excited about that.
And there's a number and you know what why don't we do this and how 'bout I'm going to I'm going to go round and and just ask each of the the business unit presidents for what they think so to me given the tier why do we start with the.
D.
Jay do you want to.
Yes.
And to Dan's question.
I'll take more and more color on floors. There of 2 I wasn't trying to overlook that.
I'm going to let John do that but how about the T. J give us let's go around DJ you start what do you think and paper and performance 1 of the what are you most excited about.
And boy Doug on.
On the performance minerals side, certainly the specialty PCC that we're launching.
Our exciting we're getting a lot of market pull from the ceilings business on those and.
And then on the paper side.
All of this work we've been doing.
The and penetrate packaging and starting to.
On the show good traction.
And especially on some new products, we just ran a trial.
And brown paper with the with something Thats off of our new yield.
Our platform.
And that looks solid and then we've got a couple of other.
Promotions that were pretty active on.
Products for packaging, so I would say there.
And those are the ones that are most exciting to me.
Thanks P J John.
Dan a couple of things I'll come back to the floors will be the second let me talk about the other portfolio a little bit.
First of all because we produce.
And on new because we're introducing an average of about 30 products per year and we're on track to do that again this year.
You've heard about our bleach business, it's what we call edible oils.
Also supplies and the biodiesel so we continue to innovate more.
Selling that plan out pretty well and looking for ways to expand it for.
And they procure we 1 of the key drivers and Doug mentioned.
The significant growth and personal care.
1 of the drivers of the new formulations, new technologies for dealing with the customers and figuring out new ways to.
To put ingredients into our products that we haven't done before so so again and it's enabling.
And goes to almost double of that business.
Take care of you heard about the eco friendly packaging.
But we also look at the new geographic reach that we have with more Americans and enables us to bring our new innovative products to the southeast U S and California, so pretty exciting there.
I'll just wrap up we've got drilling.
The <unk> products.
New products that are coming out of Taylor for various types of drilling and various types of some of those that are encountered and theyre doing the extremely extremely well.
So let me come back with more of them because I know that was part of your question and the interest as well.
Yes.
We've spent a lot of time developing.
And the product we saw market need of couple of years ago.
We introduced our Gen 1 and.
A little while back and that's what's been selling recently.
We've also got adjourn to the recently commercialized as the patented technologies, so very unique and its double of the efficacy and efficiency of our renewable and P fast, but what gets us really.
And the exciting news.
Correct.
Not only of the size, but also the timing and it's really an affirmation of the technology that we have and the opportunities that we see and.
In addition to that.
Got some really good news.
News published by the Orange County Water District.
And we've talked about clean up of.
Drinking water.
And we see that as a number of markets.
And the floors or who will be able to attack.
And Orange County is really important because they are kind of the model for a line of the water districts around the world and so a lot of people are watching us and the results are showing that we've got a really really good product.
And Thats very.
And I can be very efficient debt removing piece of losses.
So we're excited about it.
And we watch what's happening in the regulatory environment, that's advancing at the national level and also of the state levels also the overseas and so there is there is a lot of opportunity and time will tell how big of weakness can be but again pretty excited about the technology day.
Yeah.
Thanks, John and Brett of our Refractories.
Yeah. Thanks, Doug.
And I'm really if you if you look at what we've done the product portfolio transition.
And our hybrid products that really allow us similar or better durability.
And improved cost I mean this is of this has been really.
So it'd be great for us and taken it to the next step.
We continued it to piggyback off of off of the original Formula is to continue to improve and then then secondly, it's the automation of our application and the laser equipment I think tying these together has been really a great.
Relation for for Us driving those those new new agreements and to promote technology from impact.
Thanks, Brett.
So data of more than you asked for and maybe but.
There's a lot going on.
And John mentioned, we launched 42 products last year.
Here, we are on a similar pace to commercialize about similar number of this year more of them around sustainable solutions for customers and even ourselves and it's broad based and so we've got a lot of things going and the were pretty excited about a number of things.
And I'll take the detail, thanks, and congrats on the momentum and I'll follow up with any of any.
<unk> power of offline. Thank you.
Thanks, Dave.
The next question comes from Silke Kueck with JP Morgan.
Okay.
Good morning, how are you.
So how are you.
Good.
And.
And I.
And I'm also going to start with.
And the America of that's okay. It looks like the EBITDA margin for America <unk>.
14% and what Youre, hoping to get to is it true maybe like 18%.
So maybe just like for a 5 million synergies you can take out and how about the.
The EBIT margin and you talk about the EBIT margin.
And pre and post synergies do you think there'll be like a 100 basis point GAAP tour, and Texas EBIT margin is of 14%.
So I think from a synergy perspective, if you listened to the prepared remarks, you are right what Doug guided to in terms of that.
Of that pre and post multiple would tell you.
And the synergies where project and are in the $5 million to $7 million range.
From an EBIT margin and we're still early days and we're working through the purchase accounting adjustments what I'll tell you is based on the existing DNA in North America, plus the step up that we're projecting and this is just an estimate will give you a better sense of what the real.
And as next quarter, and can think of that and the $8 million to $10 million range.
That's helpful.
Thanks for that.
Okay.
Secondly, I also have the question about.
The Florida.
So the project you said it's used for AB.
And he was with the defense Department, So, it's presumably related to cleaning up of contamination from the firefighting foams can you explain exactly what your product does and.
Youth.
And solely with it used in combination with something else and if you have 1 clean up side I guess the product.
And number of used for a couple of months of free year and what revenue do you expect from this 1 project.
So let me start and just give you kind of the scope of this 1 project, yes Youre right. This is and then I'm going to pass it over to John and give you some more technical detail.
So it.
And the better the history here the cash.
Company has been and and water treatment.
For a long time.
And the products, we have developed around remediation of groundwater.
Applied outside of the people, but also and our energy services product line.
Through the the cleanup of of produced.
For and flow back water from offshore oil.
And of that business started with.
The products that.
And that enables the products of the company developed to enable that type of cleanup to EPA standards. So that we can do this offshore on the platform and insights around the groundwater.
The water contamination, so its really bringing together past practice.
And process knowledge.
The equipment knowledge to be able to to create a product that is specifically.
Attracts the Paphos molecule.
And.
Water, yes. This 1 so we have this product we've been testing it and different applications. Both in you know kind of acute cleanup sites and as you know from the news of the Department of Defense of has been using fire fire foams and this is 1 of those applications.
But also as municipal water companies look to make.
Sure.
And that they can.
Obviously clean water for.
And for drinking purposes.
There are a number of other products that are used.
What I can tell you is.
Our product is.
A very cost effective product it can be used I believe in conjunction with others.
And I'll, let John talk about that but this 1 project and the reason we highlighted it. This time is it's probably a $1.7 million dollar project.
We've had a number of smaller projects.
And moving around and tests and test cases, but 2.2.
The able to demonstrated on this scale is is noteworthy.
Worthy and it also opens the door to some of the things John has mentioned other projects like we have of this type and smaller but also bigger and the pipeline.
So more on how it works or give me some technical details Jon if I wanted to add a couple of technical details on how this 1 project worked and how we're applying it and others.
So silk of the.
The real advantage of floors or is that it is and the.
And absorbent.
That is attractive to both the short gene and long chain molecules and.
And from peoples the fast generation as you know of piece of losses, not and 1 type of material.
And there's a family of materials with a variety of different properties, but when we have found is that our technology has anchor sites.
Where we find.
And those people and some molecules to the surface of of our assortment.
And it ties it up and.
It doesn't let it go.
So, it's really really effective and cleaning up water cleaning up soil and it can be put into and municipal drinking water and municipal wastewater.
It can treat landfill leachate and it can go into in the switching soil and groundwater remediation and we can pump it into the ground and again it can and prevent the.
Integration of any claims that might exist and.
Of the ground.
Like Doug said, we've tested it right now and 1 of them working 75 different projects worldwide.
The results are coming back to the efficacy and years multiples higher than the most common and.
Commonly.
Use the activated carbon.
It's also very cost effective versus Zion and exchange and so we have.
Certainly there are competing technologies and great products, but but our product seems to have a lot of interest because of the efficacy of the ads.
So it binds those molecules and.
And the absorptions to the surface and it doesn't let go.
So, it's a very effective and extraction mechanism.
Okay.
If I can ask for the last question I had do you have to reclaim the absorbing the do you have to dispose of those.
At some point in time, you would have to dispose. So they can be incinerated and they can put it can be put into a.
Landfill.
And again, we're working with and a lot of the landfill operators to understand their needs and requirements, but yes.
You would have to dispose of it can be also used I know part of your question was whether it can be used in combination with other materials, yes, acute and <unk>.
So we find that there are some applications, where they may have as large.
Volume and they use 1 filter and filtration medium first and then they really get the effect of absorption through through the Florida.
So a variety of different ways it can be used.
Thank you for the for the.
Hey, good explanation.
And 2 more questions 1 on refresh.
The large Denise can you remind me how large the refractory businesses.
And in Asia, and in China, and do you think thats the business that over time.
And because my memory is that effectively the very small do you think thats the business over time that your debt.
And you will explore whether you're interested then or.
And frankly with the refractory business in general and something that's.
Long term, that's not going to be core.
Yes.
So, yes, youre right our business.
And China, specifically of small and that's it.
And then that way for a long time.
It's been.
And the challenge the market is different in China. The first off there is a.
A number.
Of different refractory for.
<unk> and providers and many of them by the way are part of the steel producers and so.
It's never been a very large business for us we do have a number of strategic producers therapy.
Strategic producer of steel producers that.
Kind of value of the productivity that our product brings but but I don't think thats. The focus area that we see that's kind of grow for the company. However, India has been a.
Very.
Very good market for our products and it's been growing consistently over the past.
The 10 to 15 years, we also see southeast Asia also from that India business and being able to supply from Japan, which is also a very sizable business for us. So I think overall Asia is about 10% of the refractories business. So it's small, but India South east.
Asia and Japan have continued to grow our main markets for Refractories, and North America and Europe.
Those those 2 markets really kind of value the productivity that we bring a basic oxygen furnace for an electric arc furnace and as Brian mentioned the technologies that we've developed.
In terms of.
Our new hybrid products, which are higher performing at a similar price for our customer tying that with even more automated application and the laser technology.
Improves not only performance and EAA for furnace, but also the safety.
The associated with the application and being able to move people out of the way of that furnace and so for.
Wrapping that technology of applications of the product efficacy and the laser technology that we bring those 3 things of whats really and and largely whats behind the $80 million of business that Brett. This is secured for the next 5 years.
And so.
And that's where this business has moved but that value proposition plays a little bit more and North America and Europe with producers.
And the.
And of productivity requirements and cost requirements that we have here.
Yeah.
Thank you and.
And last question is just about right.
Deep.
And the general performance of the businesses that aspect of it looks like the middle of the business of refractive business the performance materials for all operators.
And at that.
And then like you said and like you know of pre Covid level very similar to it and the only area that's.
And then behind of PCC and I understand you.
Capacity do you think that sales and profitability levels for PCC.
You can get back to 2019 levels in.
In 2021 of what you think it's more of an event for 2022.
Yes, I think so there's a couple of areas that are still a bit behind.
I think paper demand.
And is going to continue to improve.
I think with a bit of return to office and schools will start to drive some of that demand higher and I think youre starting to see that with the announcement.
Of the <unk> opening reopening their Ashdown mill.
Probably in the first quarter of next year.
And I also.
Our environmental products business and in the energy services has still room to rebound in terms of offshore.
The project oriented businesses are through the second quarter, just starting to collect so theres. Some theres. Some other pockets in the company that have yet to rebound that I think provide.
Continued sales and.
Earnings growth.
And the second half of second half of the year.
That said, we're also watching we add some shutdowns and India with paper PCC due to Covid, we're still watching some of those project oriented businesses. So we're not through this yet outside the United States.
And.
Sorry.
Yes.
So sort of silica I think theres some room to grow now Ken Ken paper PCC get back I think it's probably a 2022 event at this point that we move back toward those types of margins.
I think we will see the demand growth and with the demand growth here and the United States coming back and the first quarter plus we also have 3 new.
New satellites that will be online and the first half of next year and the continued ramp up of the ones we put in.
Further out so I will tell you that what D. J mentioned in terms of our packaging.
Opportunities.
We are seeing traction and our new technologies like new yield in the packaging plus packaging.
Securities and our pipeline I think those.
And as they become more near term actionable.
They are actionable now, but as they become more real and the near term debt that will drive and that probably into next year that will drive those margins higher as well.
Thank you very much.
Yes.
Our next question comes from David of Silver with CLK.
Yeah, Hi, good morning.
So I wanted to start with the <unk>.
A question for them.
And your PCC business and.
And you guys.
Great job and the prepared remarks kind of doing the new capacity walk I appreciate that but.
But I did want to and maybe just as D. J a couple of things first with the new with the restart I guess of the dome Tar plant.
Could you just characterize that maybe and size and also.
We have done and what's required from from U D. J, the kind of be ready to service that debt restart and in other words is this the case, where you have an existing plant that was on the site that was shut down and you just restart the do you have to build something from scratch and large something thats already.
The on site and and is that the kind of thing where you anticipate being ready to go day, 1 when the restarted mill turns on and the.
And then the second thing would be the comment about the customer outages and India tied to COVID-19.
And.
And you know I had not heard about that but obviously theres a lot of discussion globally about the.
And then as well as the original the Iris.
And I'm thinking of your capacity, maybe and the emerging markets in particular, but.
From your perspective, how widespread.
Spread would be COVID-19 related another round of a double dip of.
Covid related customer outages at your at your Asian, or other satellite plants and maybe if you could just bracket that situation.
I'd appreciate it whether thats.
The 1 off thing or whether it may.
Persist and India or may be spread to other.
Countries, where you have.
A lot of your satellite operations there. Thank you.
Okay.
P. J you want to take that.
Absolutely.
So thanks, David first let.
Just 2.
To frame up the the downside of discussion dumped or the facility that is.
And I've got a restart of 1 of their paper machines and Ashdown, Arkansas, We do have a PCC satellite.
At the location.
We have kept the running at a relative.
Let me try the reduced rates because we had a couple of.
Off site customers that we service from that location and we are and the process of transitioning those customers to another location, but now we have stopped that we will continue to service them as required and we will be in a position to <unk>.
Service.
Relative to the Ashdown facility.
Mediately all of it.
The pace basically is just refreshing or <unk>.
Contractual relationships with with the <unk> I might also point out the non par sold their paper business to paper excellence.
The paper excellence is.
Service the weighted with a P T who's been a.
Great.
Partner and customer for of decades with us and.
And so we're we're excited that the downpour is starting this up and we look forward the hearing from.
From a P P and paper excellence.
<unk>.
The ultimate plans are so we can start it immediately and the way to think of that David for that and machine is probably something in the neighborhood of 30000 tons per year.
Sort of an opportunity so that's the.
The other part that I think I wanted to expand on it just a little bit on this is that Doug mentioned.
The U S is at 95% operating rates for these grades right now.
I think that.
This a restart of that paper machine is showing.
And what the general market attitude is towards the viability of that of that volume I think the.
The the.
General industry consensus is debt.
Is that machine comes on the market will be well served and and should be pretty stable. So we're excited about that.
With regard to India. The the biggest the fact that we're seeing is that.
The the new capacity that we've put on last year, we put on.
About just under 300000 tonnes.
A big part of that is in China, and that's still ramping up and that's only been mildly affected by Covid, India's where we brought on 3 locations and alternative.
Startups have been slowed down.
By the by Covid and just the general.
Our inability of our customers to get labor to properly produce the paper as the as the best way I can describe it.
Do see them coming back online now.
And and those bills that we finished our.
As far as the satellite goes we're ready to supply those customers as soon as their machines are ready to operate.
The the 130000 tons that we've got coming on in the.
The next 12 months or so.
We've got you.
You know part of the what Doug and addressed is in packaging and that'll be unaffected, that's Europe, but 40000 tons in India that satellite was delayed about a quarter.
So we will start seeing that towards the.
And of the third quarter beginning of the fourth and we had originally projected.
And that that would be starting up and the second quarter.
So what would the effect of of yet.
Yet another.
And you know double dip or triple dip of the pandemic and I can't tell you.
And for sure I would say that we saw pretty low levels.
And this last quarter.
And I can't project that much much different and saying that I'd imagine the what we saw this quarter would be what we would see going forward because it was it was pretty bad there and they're starting to come out.
And I hope that helps Doug I don't know if you wanted to add anything and it does yeah, it's hard to predict what well obviously with Covid is going to do but what I can tell you is.
So we still have all protocols in place at our plants.
Keeping our plants the safest possible.
Done a great job of employees have done a great job just maintaining the safe practices and so keeping our plants ready to go.
They are dedicated to making sure that we're ready to go for ready to go for our customers.
As the letting them operate at that that's what we're doing.
There are other things like TJ mentioned with customers and it's hard to predict that.
And our workplaces and our and our folks are doing a great job keeping.
Keeping everybody safe.
Okay.
Okay, and if you don't mind I, just do want to follow up maybe on 1 more.
And keep the Cc question and that would be with the new yield and.
And you know.
And this is kind of a rhetorical question, but I'm kind of scratching my head and I'm wondering why the uptake on that particular, new technology Hasnt been a little quicker.
I mean from my perspective.
I mean, it does seem to tick all the boxes. These days in terms of economic benefit and from the customer side I think they have a new marketing opportunity right to market of product. It's made from reclaimed paper plus you know the ability to reduce waste and so I'm sounding like.
The spectra.
The new yield salesman and the world here, but you know D. J from your perspective I mean are you have you been at all are frustrated by maybe the pace of the uptake and.
And maybe is it just the and exceptionally long selling process to convince someone just maybe some color.
Color on in our ESG sensitive environment and why that.
Particular, Lee seemingly very valuable.
The product option for your customers hasn't seen more uptake.
So good question, David Let me give you a sense of of how.
The word for it.
I do wish it was faster and the.
The promotional process and the selling process from from getting the concept to try and demonstrate the value is has been moving along pretty well, but then you get into how do you go about demonstrating it so the trial.
And looking lessees have been.
Have been long.
The the part of the reason for that is that the customer is that theres a couple of components of it. The first 1 is that we are using and converting a waste product from the customer's process. So 1 of the.
Price elements that the customer needs too.
Really be sure of is how reliable and predictable is that production of waste and.
And that has been a bigger challenge for.
Of our customers than what we thought it might be now once we pass that hurdle.
And we go into.
For a series of trials, where the customers then.
And and look at the.
Economical performance of the product as well as the the pay per performance of the product and then they'll they'll go test it with their customers interestingly enough David most of our customers are not.
Key are choosing not to promote this as a different kind of paper what they are choosing the marketing that is their decision is pretty much.
Debt they want to capture the savings and reduce the environmental.
The footprint there environmental waste exposure.
And they're keeping that relatively quiet as they convert and they are trying to do what I would call a minimal.
And they're doing minimal broadcast.
What I highlighted earlier, though for.
For of Dan's question was that we did have a trial with new.
New yield and this is where the the paper group has been shifting some of their attention and the packaging.
This is pretty exciting, but it's also going to take some time the the excitement is but it's in brown packaging and therefore that brown packaging.
Create some operational freedom for us with regard.
The large to the color of properties of what our of our pigment is and.
But the challenge is that people, who make brown boxes don't typically put anything but fiber into them. So we've got some technical challenges. So this the fact that we had this first successful.
Trial.
And Brown box on that platform is something that I view as significant and.
And we believe that while the printing and writing grade qualification process has been slow mostly because of.
The stability and quality concerns that the customers of working through trying to keep that up.
And conversion quiet in the marketplace, we think that the brown box people would be in a position to move quicker having said all of that David It still requires the deployment of our manufacturing capabilities. So from every time, we get a thumbs up to a customer.
Will require some sort of and expansion or.
Satellite. So so there will come a time, where I announce another new yield.
Out of light.
But then you can expect that there'll be some some time from the announcement until that converts into sustainable long term revenues just as we get the manufacturing site built I hope that provides the color.
And you were looking for.
And I'll David.
Yeah, No that was very helpful. Thank you very much and I'm going to get back in queue. Thank you.
Our next question comes from Mike Harrison with Seaport Research partners.
Yeah.
Hi.
And news and afternoon was wondering and and the metal casting business can you quantify the amount of impact of.
And volumes of revenues that you saw related to the chip shortage and and some foundry customer outages.
And talk about whether you're expecting.
<unk> got to kind of be of a similar level as we get into the third quarter and are there any other product lines outside of the metal casting.
Where maybe you saw some impacts from customer supply chain disruptions.
Yeah.
Yeah, Hi, Mike.
So we have seen a little bit of impact.
Cash on metal casting says they are products that we supply of foundry.
It is agnostic as to whether it's automotive or industrial or heavy equipment right. It's the green sand bond that the customer decides to use for any of those markets and so we've probably seen a million dollars of sales impact from from the.
Pac motive.
Bit of and automotive slowdown, but that's the that's really small and I think it's because the foundries we serve.
Supply of broad base of industrial markets and so we've seen continued really strong demand maybe it could've been a million of higher because of the automotive, but we're still at very high levels.
For the autumn and and filling these plants with other markets heavy truck off highway agriculture industrial products and that includes the same and in China. So.
It's a minimal impact.
And so far.
Alright, and then within the specialty minerals.
Business that's.
The demand and I called out the margin impact and.
Raw materials versus pricing.
And maybe the biggest concern maybe just comment and a little bit more detail of what your expectations are for raws and pricing as we get into the third quarter and.
And you know are there.
And where you can the other impacts we need to keep in mind in terms of cost versus price in and the other 2 segments.
Yeah.
Let's start at the at the higher level Youre right and specialty minerals, that's where you saw the most acute impact from those inflationary factors, but across the company.
Look let's.
There is sales of our strong demand is strong and you've heard Doug talk about the fact that many of the product lines are seeing demand levels and sales levels of pre pandemic levels. So that is that is very good to see that demand allows for a constant conversation with our customers.
Round for the value of our product and what.
Set it up to do where we're seeing key pieces of inflation and the energy has been the biggest factor. So far this year and that is hitting across the board, but most acutely again in the the <unk>.
Processed minerals businesses.
But we've also seen raw material inflation, taking place across the board and that's really what's going to accelerate.
Celebrate and the second half as those raw material factors some of them energy related. So you could say oil price was moving higher and thats going to affect some of our textiles that we buy for our mining systems and the like others are going into the packaging and pieces like that so youre getting.
And we're trying and more raw materials as we move into the second half of the year and then logistics has been tight and we will continue to be tight.
The first half and also moving into the second half.
So the teams have been.
And then working aggressively both on the supply chain perspective, and from a commercial perspective overall as you saw.
Getting more inflation has been pretty manageable and what we're doing in terms of working with our customers putting through price adjustments and having a very good dialogue transparent dialogue at that lays the groundwork for us to catch up on those inflationary factors and really for the full year, we're expecting to offset that through pricing. So.
And a good position seeing some acceleration and inflation and the second half of the year for the full year looking at about 2% inflation on our overall cogs, but it and a good position overall to offset that with pricing and some of the other things you need to think about Mike. We are vertically integrated that does help us from an overall perspective.
<unk> with the majority of what we use and producing our products.
That we have that in house and manage with our own factors is putting us in a good position. The last thing I'll comment on is like we've said time and time again, we are pricing.
On the value of our products, which is very good to see and that allows us.
The have the constant conversation on pricing adjustments as we move through the year. The caveat that we'll speak to and that I spoke about and the prepared remarks were that pricing lag that takes place and paper PCC. So we have line of pricing that goes up we capture that.
On a basis that has lagged.
And it could.
As long as 6 months.
Yeah.
Alright, thanks very much.
Thanks, Mike.
Our next question from Daniel Moore with CJS Securities.
Make it short and sweet I, just want to make sure I heard correctly, Matt 5% to 7%.
<unk> earnings or EPS accretion in fiscal 'twenty 2 for North America is that the right way to think about it.
That's the right way to look at it so it's 5% to 7%.
EPS accretion in 2022 also what I said was about $5 million to $7 million of synergies that we're looking at look just a follow.
On the 1 thing about margins, we do see this being a strong contributor to margins as we move forward as well.
That is perfect. Thank you.
Our next question comes from Rosemarie, <unk>, Gabelli with Gabelli and company.
Thank you and good morning.
And.
Oh I'm sorry for you.
I am good. Thank you how are you.
I wish I was wondering if you could touch on the size of the pet business in North America because.
Cause you bought the people medics and was based in Europe, but and now you Hot you are adding non.
America. So if you could give us out of the 351 million of revenues for the segment.
You know what is North America, and the rest of the world.
Of the $350 million I'd say, North America of about $220 million $225 million Rosemarie thereabouts.
And when you're the.
Yeah I'm sorry.
And then I was kind of saying.
And part of that is growing.
And with smaller piece of debt is Asia, but that's probably growing growing the most quickly.
And I'm sorry to interrupt.
No no no. It's alright gently there is some kind of a lag between when you're talking when I.
You talked of.
I'm sure that if we look at the profitability of is it as profitable as the in the U S or is it more profitable in Europe. Since you seem to be focusing on for these people and magic was focusing on the hire of premium type of of a pet litter.
Yeah, the profitability of similar around the World I would say of differences, we have different cost positions and North America, and Europe and in terms of our mines transportation costs, but.
In total there is similar the growth rates are different.
I would say North America growth rates, probably more.
And with you know GDP plus in terms of cat ownership, it's pretty established I think in Europe with as you mentioned that premium product.
That is what's the romantic makes has been growing faster than North America.
And I think our business and.
And Asia.
And line has been growing, albeit at the smaller base at the fastest rate.
Now we've been entering some new channels as well so it's not just.
Supplying major outlets now we've been developing and.
And both Europe, and North America online channel. So we are now selling products through.
Asia Your typical online shopping.
And I would say that in Asia. The predominance of sales is through online.
I think the the buy.
Buying the consumer behaviors and Asia, particularly in China is probably more online and.
And.
And that's also driving higher growth rates so.
Profitability similar of rounds.
A little bit different cost positions, but we see growth rates being and that kind of 8 plus percent. If we can keep that going for the next few years. So.
I hope that helps give you the dimension of the sizes and the <unk>.
The threats.
Yes. It does thank you and.
You are adding North America, and obviously you are going to supply them, we've been tonight from your own mine.
Do you what type of free tariffs do you have and I am sure. It is somewhere in the in the and the K, but if you didn't mind reminding me of what type of how the launch of reserves.
And where the having these additional and all.
And demand is going to shrink for them.
Uh huh.
No we have of Paul.
T of reserves, we do we have.
Historically sold nor America portion of their claims supply anyhow. So.
We've got a we've got long lived reserves and Wyoming, and Montana, and we've got a proven reserves out 2000.
30 years, we've got other indicative reserves and pockets of land that we own.
And the Wyoming area that are further out than that so we've got good supply positions here and the United States to supply of both the.
Combined.
And business for the foreseeable future.
And so this is adding to CEO of consumer oriented business, which frees. This acquisition was about 25% of total I think with.
And I got a target of 50%, so where do we stand now.
And what do you need to get to the 50%.
The planning in divesting some pieces of operation should that are non cash suite consumer operate I.
I mean oriented and therefore that would boost of the ratio of almost immediately.
Well I mean, let me address the target for us.
I don't know if we've publicly stated that of targeted 50% I think we've had some questions on this call perhaps from you that and said where can this go well with the possible that it goes there I think I think really of what we're what we're doing is looking at where we have you know of real.
Capability to serve we kind of call of this.
And the market well this is mind the shelf and.
And I think that we're uniquely positioned to supply of this type of market.
Inc.
And a market that is.
A different and non cyclical different type of growth rate.
And that involved the innovation product development. So this.
This meets really everything that minerals technologies is and so I think it's a great fit I think theres opportunities to continue to expand into more consumer oriented products. We are always going to have and industrial sides of the company. So whether we are right now brings us to 30%.
Proximately Rosemarie.
We think there's some other <unk>.
And <unk> and as these grow at the rates that ive been mentioning.
I think with with our personal care growth with our pet pet care growth with our edible oil purification growth I think it will naturally become a bigger part of the company and I think inorganically, there's some other opportunities of whether we get to 50% specifically.
And the state that but what we are.
And what we're doing here is providing more balanced and industrial consumer and the company and a more sustainable higher level of growth rates and perhaps that you've seen historically and I think this is of a transaction that moves us in that direction.
From an operating standpoint, having the mine.
And are already and the ownership I think that provides the margin growth as well. So I think it's just a good story around providing really good shareholder value, especially and this transaction.
I appreciate the.
And congratulation.
Thank you.
And at this time I would like to turn the call back to Mr. Dietrich for any additional or closing remarks.
Well, thank you very much for.
Joining today I appreciate all the questions and I appreciate you hanging and therefore for a few extra minutes, we'll talk to you again at the end of the third quarter take care of the till then thanks.
And that does conclude today's conference. We thank you for your participation you may now disconnect.
Okay.