Q2 2022 US Silica Holdings Inc Earnings Call
Greetings and welcome to the U S. Silica second quarter 2022 earnings conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If he would like to ask a question. Please press star one on your telephone keypad, if anyone should require operator assistance.
During the conference. Please press Star Zero on your telephone keypad. As a reminder, this conference is being recorded it is now my pleasure to introduce your host Ms. Patricia Gill Vice President of Investor Relations. Thank you. Please go ahead.
Thank you and good morning, everyone I'd like to thank you for joining us today for U S. Silica second quarter 2022 earnings conference call, leading the call today are our Chief Executive Officer, Brian Chin, and Don Merril Executive Vice President and Chief Financial Officer.
Before we begin I would like to remind you of our standard cautionary remarks regarding the forward looking nature of some of the statements that will be made today.
Such forward looking statements, which are predictions projections or other statements about future events are based on current expectations and assumptions, which are subject to certain risks and uncertainties.
For a complete discussion of these risks and uncertainties. We encourage you to read the company's press release and our documents on file with the SEC, we would not we do not undertake any duty to update any forward looking statements.
Additionally, we may refer to the non-GAAP measures such as adjusted EBITDA segment contribution margin and our consolidated leverage ratio. During this call. Please refer to today's press release or our public filings for a full reconciliation of adjusted EBITDA to net income and discussions of segment contribution margin.
And the consolidated leverage ratio.
And with that I would now like to turn the call over to our CEO Mr. Bryan Shinn.
Thanks, Patricia and good morning, everyone.
We delivered an exceptional second quarter with outstanding sales volume revenue earnings and cash generation across the company by.
By capitalizing on the strength in our underlying markets and improved operational efficiencies, we generated 77% sequential increase in adjusted EBITDA and $88 million of cash flow from operations, we continue to experience robust customer demand during the quarter and we implemented numerous price.
Increases in surcharges across both business units to fight inflationary impacts.
In addition, I'm extremely proud of our organization's execution during the second quarter as we creatively improved international logistics performance increased plant outputs and delivered World class safety performance.
I'm also pleased to report that the positive market conditions are continuing and we expect the momentum to carry over into the second half of the year.
We've already started off strong with our recently announced repurchase of $100 million of debt earlier this month and given that we expect substantial operating cash flow generation in the second half of 2022, we should see continued meaningful reduction in our net debt as planned.
Dan will discuss the details of our Q2 performance in just a moment, but first let's review some of the significant trends that we saw during the quarter.
And our oil and gas segment, the supply and demand balance in the sand and last mile logistics market remains very tight and we were effectively sold out due to strong well completion demand, particularly in wealth in west Texas.
As a result of spot prices were around $50 per ton and our sand and sandbox sales prices and margins continue to move higher.
Given the expectation for a multi year energy up cycle customers have been determined to secure sand supply and are signing attractive multi year contracts, including paying cash upfront.
During the second quarter, we took advantage of operational efficiency gains at key mine sites to maximize production and sold out assets.
For example, we delivered record sand production in West, Texas during the months of April and May and at Sandbox, our last mile logistics business, we realized a new single day record of delivered loads in June .
Overall, our oil and gas segment finished the quarter with strong momentum and we expect further sequential profitability increases in Q3.
In our industrial segment customer demand remains strong across end uses and market segments.
As discussed on last quarter's call. The transitory seasonal issues from Q1 were resolved and we realized a very strong rebound in Q2, driven by price increases and surcharges across all major product lines to combat inflation improved product mix and greater operational efficiencies from initiatives such as leveraging.
Alternate shipping ports and packaging automation.
We also recorded record quarterly shipments at our Millen, Georgia facility, driven by strong demand for our ever White cristobalite and cool roof granules product lines.
And our Vail, Oregon facility also delivered record shipments of diatomaceous Earth during the quarter the.
The main takeaway here is that our industrial segment rebounded substantially during Q2, and we expect further successes in the second half of the year.
Moving to corporate news in mid June we announced that our board of directors concluded their strategic alternatives review for our industrial and specialty products segment.
After extensive extensive evaluation and deliberation the board determined that retaining ownership of the ISP segment represents the best path forward for U S silica and its shareholders and other stakeholders.
Since announcing the strategic review last year, the macro environment has improved dramatically as evidenced by our recent quarterly results and robust outlook for the second half of 2022 with expected increases in profitability cash generation and further strengthening of our balance sheet.
For the rest of my time. This morning, I want to give an update on the exciting growth opportunities in our industrial portfolio and then finish with a summary of our outlook for the third quarter and the second half of 2022.
Innovation in the profitable expansion of our industrial product portfolio remain top corporate priorities during.
During the quarter, we had numerous successes and milestones achieved supporting the expansion of future contribution margin dollars, including delivering record sales from our new West Virginia limestone and aggregates plant in June we reached at 250000 tons per year run rate with line of sight to doubling that in the near term.
We received very favorable customer feedback on our highly specialized treated silica for Houston outdoor coding applications and we expect to begin commercial sales for this product in 2023.
We also wrapped up 300000 tons of new annual sand and clay sales to U S industrial customers under long term contracts for a total of more than $4 million of incremental annual run rate contribution margin.
We closed several new sales of our dissect organic pesticide product and have additional opportunities for use on numerous crops, including cabbage oranges, grapefruits mushrooms and table grapes.
We received very positive customer feedback on our newest white pigment product and we filed a patent application to protect this breakthrough technology.
We're also trialing, our new renewable diesel catalysts filtration product with multiple customers and we are progressing with contract negotiations and finally, we are establishing a pilot plant for the expansion of our research and development efforts.
Our strategic investments in product development, and new technology have helped position our industrial segment as a leader in advanced materials and high value minerals, we continue to.
Make exciting progress executing our industrial growth plan and I look forward to providing additional updates on future calls.
Now, let's turn to our business and market outlook overall.
Overall 2022 is setting up to be very strong for U S. Silica during the second half of this year, we expect a constructive commodity price backdrop, and strong and steady industrial base demand augmented by new product growth and new customer acquisition.
With this expected strong performance, we should generate significant cash flow from operations in Q3, and Q4 and continue to strengthen our balance sheet.
For Q3, specifically, we are extremely well positioned for success, we expect expect both our oilfield proppant and sandbox offerings to remain essentially sold out with sequential tonnes flat to slightly up.
Off a very high volume levels from the prior quarter.
Additionally, we expect to see a competitive but still disciplined market and forecast sequential profit improvements driven by enhanced sand customer contract mix improved pricing and increased sandbox deliveries.
In total we expect third quarter oil and gas segment contribution margin dollars to be up by 4% to 7% sequentially.
Turning to our industrial and specialty product segment, we forecast the demand will remain strong and stable and our base case is that Q3 financials will closely align with what we delivered in our very strong performance in Q2.
And with that I'll now turn the call over to our CFO , Don Merril, who will discuss our financial results in more detail John .
Brian and good morning, everyone as Brian stated, we reported an exceptionally strong second quarter for both segments, driven by robust customer demand higher pricing favorable product mix and operational efficiencies.
Compared to the prior quarter total revenue increased 27% to $388 5 million.
Adjusted EBITDA increased 77% to $93 8 million overall tons sold increased 13% to $4 7 million tonnes in total company contribution margin increased 49% to $123 3 million.
Selling general and administrative expenses for the quarter decreased 13% sequentially to $34 $8 million driven mostly by a supplier contract termination in the first quarter of this year.
Depreciation depletion and amortization expense decreased 8% sequentially to totaled $34 7 million in the second quarter.
Our effective tax rate for the quarter ended June 32022 was 34% including discrete items.
Now let me move on with the detailed review of our operating segment results.
The oil and gas segment reported revenue of $244 2 million for the second quarter, an increase of 39% when compared to the first quarter volumes.
Volumes for the oil and gas segment increased 15% compared to the prior quarter and totaled $3 5 million tonnes, while sandbox delivered loads increased 12% compared to the prior quarter.
Segment contribution margin continued its expansion and increased significantly improving 73% quarter over quarter to $77 $4 million, which on a per ton basis was $21 93.
This is a sequential increase of 50% and easily exceeded our long term benchmark of $10 on a per ton basis.
These results were driven by ongoing strength in customer demand higher volumes and improved pricing for both proppant and last mile logistics.
Our industrial and specialty products segment revenues increased 12% sequentially to $144 3 million when compared with the first quarter.
Volumes for the ISP segment increased 5% compared to the prior quarter and totaled a record $1 million 124000 tons and segment contribution margin increased to 21% on a sequential basis due to our inflation offsetting price increases favorable product mix and operational efficiencies.
On a per ton basis contribution margin for the industrial and specialty products segment increased 16% sequentially and totaled $40 85 per ton.
Turning to the cash flow statement during the second quarter, we delivered $88 $1 million of cash flow from operations and we invested $10 5 billion capital primarily for current and new product expansions as well as facility upgrades.
The company's cash and cash equivalents on June 32022 increased significantly compared to the prior quarter rising 30% sequentially from a balance of $312 4 million.
At quarter end, our $100 billion revolver at $0 drawn with $78 $4 million available under the credit facility after allocating for letters of credit.
Given our meaningful levels of free cash flow generated year to date, coupled with our internal projections for future operating cash flow, we seized the opportunity to repurchase 100 billion.
Of our outstanding term loan earlier this month.
Debt was retired at a discount to par utilizing cash on hand.
Looking forward.
We forecast that we will continue to generate robust operating cash flow for the remainder of the year, allowing us the flexibility to further delever, our balance sheet through potential incremental debt repurchases or the refinancing of our term loan.
We remain committed to organically funding our business growth and we will continue to be disciplined in our capital spending managing accordingly, with an emphasis on effectively maintaining operating levels at our facilities and investing in growth projects for the ISP segment to maximize future profitability.
We currently expect capital spending to be in the range of $40 million to $60 million for the full year with balanced quarterly spending in the second half of the year.
We gave full year 2022, SG&A expenses to be up 10% to 20% year over year, primarily due to the supplier contract termination in the first quarter merger and acquisition related expenses for the strategic alternatives review in the first half of the year and other costs, mostly related to increased activity and inflation.
Full year 2022, DD&A expense is still anticipated to decrease approximately 15% due to past investments, which became fully depreciated at the end of 2021.
Our estimated effective tax rate for the full year 2022 is 22%.
In conclusion, our main priority is to continue strengthening our balance sheet by focusing on free cash flow generation.
We are taking pricing actions that are allowing the company to effectively manage the inflation issues further demonstrating the strength and stability of our two business segments.
For the remainder of this year, we aimed to balance our capital investments with cash flow and believe we are on an accelerated track to end the year with net leverage under our goal of three times Levered by year end and with that I'll turn the call back over to Brian .
Okay.
Thanks, Don I'm very proud of the results that our team delivered in Q2 and as you've heard two this morning, we expect a strong Q3 and second half of 2022.
Meeting our commitments in the short term. We also continue to drive numerous initiatives to extend our market leading positions and pave the path to meaningful growth over the next three to five years, while strengthening our balance sheet and expanding our industrial product portfolio and profitability.
Operator will you. Please open the lines for questions.
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The first question is coming from Stephen <unk> of Stifel. Please go ahead.
Thank you and good morning, everybody.
Good morning, Steven.
So a few things if you don't mind.
If we look at the oil and gas side.
Can you talk about what youre seeing in the industry. I mean, clearly you said, you're talking about longer term contract commitments from customers and customers' desire to lock up.
Frac sand.
It doesn't seem like we're seeing significant capacity additions are a lot of these shuttered mines reopening can you just.
Give us your thoughts on what's out there from a capacity perspective, and how do you think it evolves going forward.
Sure Steven.
Very very interesting question and obviously, that's something that we look at quite a lot and in a lot of depth.
I think that.
When I think about it is I look at supply and demand and I think given the market backdrop kind of the macro that we're seeing out there today.
We feel like we're in a multi year up cycle here. So I think most customers that I talked to feel the same way. So let's just to kind of take the demand side off the table and assume demand is going to be there.
So far our industry is staying pretty disciplined in terms of capacity I think we will see some new nameplate capacity come online over the next six to 12 months and as we do the calculations on that and think about what sort of effective capacity might be out in the market incrementally and maybe it's something like 10 million tonnes over the.
Next six to 12 months.
To put that in perspective.
In the Permian for example, every 1 million tons of capacity that comes online can support two frac crews. So said another way, let's say, we have 10 million tons of capacity come online in the next year or so it only takes 20 additional frac crews in service two to soak up that capacity and I think most.
I believe that we will see much more than that come online over the next 12 months or so here. So our call is that things stay very tight in terms of supply and demand for for North American sand out in the oilfield.
Thank you and when you when you think about.
The current sort of mix of yours oil and gas side that is contracted and sort of the pricing that you CNS contracts.
It seems to support pretty stable contribution margin per ton at least over the next few quarters is that fair.
I think thats right and it wasn't that long ago that we were thinking that may be something like $10 contribution margin per ton was kind of the right right number to look at obviously this quarter, we're at almost $22.
Pricing has gone up pretty dramatically. So in Q2, we saw.
<unk> for oilfield sand and our portfolio go up about 28% sequentially and that and that was across all the basins. It wasn't sort of heavily weighted towards the Permian or something like that so I think we're going to see a constructive pricing environment here and.
The margins, obviously strong margins that come with that and just given the contracts that we have and the ones that we're signing today and many of the ones. We're signing are actually at higher pricing than we had in Q2, so I'm feeling really feeling really good about the future margin outlook.
In the oilfield segment.
Okay, great. Thank you and if I could just throw in one more on the ISP side. The third quarter expectations can you just talk a little bit about what youre seeing there and because it felt like we I know theres some seasonality here, but but how that business is evolving and how that growth should look like over the next.
Year year, and a half given given what's gone on the economy and kind of your thoughts there currently.
Sure. So look I think overall, our industrial segment is set up for a really good year here. If you look at Q2. It was the highest volume ever that we've had in our 122 year history in terms of the ISP business and again in our long history as a company. It was the second best quarter, we've ever had for contribution.
Margin so.
The guide for Q3 is to put up something that looks pretty similar to that so we're looking at to sort of back to back historic quarters here.
I'm very very excited about that and I think over the next year or two we'll continue to see the new product pipeline roll in and.
Add on top of whatever sort of market growth that we get across the different segments that we serve across the various industry. So I'm very excited about the outlook for industrials.
Great. Thank you.
Thanks Steven.
Thank you. The next question is coming from Connor Lynagh of Morgan Stanley . Please go ahead.
Yes, good morning.
Good morning.
Given his first conference call since the strategic review concluded I thought maybe you.
You might be able to walk through a little bit just sort of what you guys considered.
Ultimately settled where you did just just on the thought process behind that.
Sure. So I think you kind of have to go back to.
What.
What drove us to decide to conduct that review in the first place.
Our board.
As always looking at how we can improve how we can deliver additional value for shareholders and I would say as we embarked upon that review we all felt like we had a really good kind of base strategic plan. So the idea was to see what the options and alternatives might be out there that could provide even even higher value for <unk>.
Our shareholders and other stakeholders and so.
We did a pretty exhaustive amount of work over eight months or so looking at all kinds of ideas and alternatives.
And what we found is that the base plan was really a good one and we felt like kind of sticking with that was the right path and of course in the meantime, we have seen this tremendous tremendous surge in the in the oilfield side of our company.
We're still on track and doing really well on the industrial side as well, but when you use sort of put those two segments together it's really.
Kind of a macro environment, we're in right now with strength in the oilfield is sort of environment that we designed this current business set up of these two segments.
Thrive in.
As Don mentioned in his prepared remarks, we're just generating a lot of cash right now and my expectation is that we're going to continue to generate cash from the oilfield side of the business that we can invest some of that in industrials, but more importantly, we can.
Channel quite a bit of that into paying down debt and reducing our leverage.
Our sort of internal goal was to try to get to three times net leverage leveraged or lower by 2024, I think we can get to that goal now by the end of 2023, so as I talk to investors.
22, right sorry, so so just to be clear, we thought we'd get there by the end of 'twenty. Three now I think we can get there by the end of 'twenty two.
And as we've talked to investors over the last couple of years, obviously that the debt level that we have is one of the major overhangs on the share.
So to the extent, we can get that debt down.
Put ourselves in a better net leverage position I think thats a great.
A great outcome for us.
And just I can just comment on that.
A little bit.
We ended the quarter at $312 million with the cash we used $100 million of that to pay down debt and as we sit here today.
We're over $200 million two in a quarter of cash and we do expect to continue to grow that so it will it will give us the flexibility to delever the balance sheet and as Brian said continue to invest in ISP. So the world is a different place today than when we started the strategic review because the options and the flexibility.
Are there for us today.
Yes, it makes sense.
Shifting gears here, but just wanted to quantify sandbox, how much is that driving the growth youre expecting in the third quarter. If you could just speak to the general volume and pricing expectations on that portion of the business I appreciate it.
Sure. So look sandbox is having a great year as is the rest of our oilfield business. So if you look in in Q1.
Delivered loads were up about 12% and we saw a big increase in margin per load as well.
And as we look at Q3, we think we're going to see a continued improvement in sandbox profitability. We don't have a specific guide for that we don't we don't talk and guide to sandbox, specifically, we just talked about the whole segment, but I think sandbox will be a meaningful tailwind for us in Q3.
Alright, thanks very much thanks.
Thanks Connor.
Thank you. The next question is coming from Derek part Heizer of Barclays. Please go ahead.
Hey, good morning, guys.
Morning, Derek.
So I found it interesting looking at your price per ton you return to the 2019 levels yet contribution margin per ton outperformed can you talk about the operating leverage you have in the oil and gas business now that would drive contribution margins on back to the 2018 levels seemed like you wouldn't have to reach those 2018 pricing per ton levels.
So as I think about the kind of leverage that we have going forward in the sand side of the oilfield business.
To me, it's really all around price right now.
Pretty much tapped out in volumes.
On any given month or any quarter, maybe you squeeze out a few more tonnes just by hitting the top end of your kind of average operational ranges, but I think the story in our oilfield sand business is about continuing to increase price and as I mentioned earlier pricing was up about 28% in Q2.
And our expectation is that we're going to be up again not that much in Q3, but with the guide that we have.
Sort of 4% to 7% growth I would say almost all of that is pricing. So we will continue to see that and do well on the pricing side of the equation.
And I do think that from an operations perspective, especially in West, Texas, We are seeing lower cost per ton with some of the investments that we've made not a lot of investments but enough to.
Put some things in the in West, Texas, that's driving that's driving the cost down as well. So we're really kind of working on both sides of that equation.
Got it no. That's helpful. And then just looking ahead at 2023 can you maybe give us some some guideposts for the Capex outlook.
Youre balancing deleveraging the balance sheet refocusing on the combined company actually to strict strategic reviews over I think Brian you mentioned last quarter to 120 million to under $30 million from 22% to 24 to support the new products growth, but maybe can we get a refresh on that is there any inflationary pressure on that capex are now that youre going forward is.
Combined company, maybe you are leaning in to some growth whether it's in the oil and gas part or the ISP part, but just a refresher on the capex outlook would be helpful.
Sure. So I think we will still be on an annual basis for the next couple of years and that kind of $40 million to $60 million per year, Capex range, which is where we are today, obviously a lot of that will be dictated by the success of our new products on the industrial side and how fast those come online and how fast they can.
Ramp up and.
The teams there are doing a fantastic job.
Wanted to several key milestones that were hit.
On my on my prepared remarks earlier.
But it is challenging in this environment.
We find that a lot of our customers are very busy with their own issues.
Trying to keep their operations running and worrying worrying about their own inflationary issues and other things.
It's always hard to tell how that plays into it but I think from our side. We've got the technology, we have a lot of new interesting products.
We'll continue to to invest in those I also feel like.
We'll balance that off with how much we want to continue to reduce our net leverage and so the good news is we have optionality between those two really attractive uses of cash and just depending on where interest rates go and how fast some of these new products come online, we can sort of pivot between those two.
Great returns and great value either way we go.
Got it okay, great I appreciate the color I'll turn it back.
Derek.
Thank you. The next question is coming from Samantha Hoh of Evercore. Please go ahead.
Hey, guys congrats on the great quarter.
Good morning.
And maybe just to stay on the ISP side first.
Thats, great to hear that Millen had record output.
I'm just kind of wondering if youre starting to see any sort of signs of a slowdown in demand for housing related products.
Yes.
And just curious.
Construction and whatnot.
So we really haven't.
<unk> seen a slowdown in any of our sectors. So we're watching that very carefully.
And this kind of environment Theres, a lot of noise out there and that we have to be careful because we are pretty far back in the chain in some cases as kind of a first step raw material that creates.
Goods and services that we all might buyout it.
Very sort of retail outlet. So we're watching it carefully we're in close communications with our customers, but as of right now we really haven't seen much of anything in terms of slowdowns.
Okay, and then looking to see.
Onto that like is there any discussion with them.
And then also get access to any of these.
Income tax form filing Bob Walter Hill production capacity, starting this fall.
It's really interesting you say that I was just looking through this latest.
Proposal that may be coming through Congress here and.
There are definitely some areas that in and around where we play. So we'll investigate that I think it's a little too early to know exactly what's in the bill yet I'm not sure everybody's even even read it quite honestly.
So we'll look at that I feel like there are a lot of places to the extent that sort of moves over into infrastructure.
Some of the original kind of build back better elements around all the sort of repairs and rebuilding of various infrastructure from roads with a new limestone product too.
Redoing airports and schools and things like that any sort of construction type projects.
We definitely have.
Have opportunities to see some upside for that.
Okay cool.
Maybe shifting to oil and gas.
Curious how the industry is dealing with some of the supply constraints that really.
Hello.
Okay.
How are we going to be able to add 10 million tonnes of potash.
And there's still so much labor and trucking.
Yeah.
That's just the point right and so.
You'll hear people talk about we're at it maybe going to add this much capacity or that much capacity, but.
Our experience from a practical standpoint.
There is all kinds of things that sort of get in the way and especially when you think about west, Texas and the constraints.
Theres weather issues. There is all sorts of inefficiencies in the supply chain or labor Theres trucking. There is maintenance there is spare parts and all those things are still really big challenges for our industry and I think sand is still plus or minus a gating item for well completions I think <unk>.
And in horsepower are pretty tight supply right now and I know on the sand side anyway, most of the energy companies out there before they will sort of give the final approval to mobilize to go a complete a well they want like rock solid assurances that the sand is lined up so things are very tight.
I think we're all working through it and.
Doing our best to keep our customers supplied in a time that brings a lot of challenges from a supply chain perspective.
Thank you I'm sorry.
But can you address actually.
The headline is that kind of came to you last quarter.
Yeah.
Shovels and I'm kind of curious as to how youre dealing with just like the heat in Texas and water shortage faster and just all that kind of stuff.
Yes, so the.
<unk> rule is an interesting one I think at the end of the day.
The bottom line is it's really not going to have much of an impact for us, but just for folks on the call. So <unk> is an acronym stands for mine safety and health administration, so they're kind of like the osha equivalent of four mining companies like ourselves and so our facilities for the most part are <unk>.
Regulated and governed by <unk> regulations, not Osha and <unk> looking at like particulate dust kind of.
Levels in various mining operations and their <unk>.
Thinking about proposing some more stringent regulations that would be more in line with what the Osha did a couple of years ago now the good news is that we're already in compliance at a lot of our mine sites.
Won't take much in the way of Capex or are sort of small changes for us to get into compliance.
Some of our competitors, who haven't been doing this for a long time like we have and perhaps didn't build their minds with these kind of considerations may have some more issues, but for us it's going to be a non event.
Thanks, So much Greg I think that Ryan.
Congrats again guys.
Thanks Samantha.
Thank you. The next question is coming from John Daniel of Daniel Energy Partners. Please go ahead.
Good morning, guys.
Sure.
So I got some softballs for you.
First I'll wait a minute that never happens from you John .
It must be a Trojan horse question somewhere actually I'm feeling generous just Friday morning.
Okay.
It might be a silly one, but how would you compare contrast, it a little bit of a follow on to Samantha just compare contrast, the ability to find people in oil and gas versus ISP.
Any noticeable differences.
So I think.
In the ISP areas.
Our minds tend to be pretty remote and.
So they're kind of small towns in the middle of nowhere, where usually the.
The best employer in the area. So it's a little bit easier there may be for us to find talent, that's not universally true but.
I would say generally we tend to be the employer of choice within 50 miles or something.
In the oilfield when I look at our Crane in Lamesa sites, we're competing with the service companies for talent in all of the other folks out there that support the oilfield, so particularly for more highly technical folk so maintenance technicians electricians instrument mechanics things like that which are in short supply already.
It is really a challenge to define that kind of talent.
Out in West Texas.
Okay.
Fair enough.
The other one in your press release, you made a comment which piqued my interest you talked about creatively improving international logistics performances.
Can you elaborate a little bit on that.
Sure so.
We ship a lot of our industrial products that go outside the U S from the West Coast Port of Oakland, traditionally and that ports become a bit of a disaster over the last couple of years for a variety of reasons. So.
Our team did a lot of different things. So for example, instead of just shipping from our mine site.
Directly to the port like we've done for decades and decades, we hired contractors in a warehouse and other things that are close to the ports. So we've pre stage material there. So that's.
Much more likely to get get on the ship.
As opposed to having to ship it all the way from our sites. We've also started to ship through alternative ports. So we're going through a long beach port of Houston doing some through New Orleans, and even even shifting things back by rail to the East coast to go out of Savannah, and the good news is that our customers are basically paying the additional cost.
For that.
But just to give you a sense of how crazy things can get particularly in the industrial side, we had a customer a couple of months ago that actually chartered a jet for $1 million to pick up some of our materials. So they could keep operating over in.
In Africa. So we're seeing those kind of things all the time, there's still a lot of logistics challenges out there and our team is working to solve problems daily on that front.
Okay got it and then the last one for me and this is just my failure to paid close enough attention to ISP.
So apologies, but can you elaborate on some of the.
The more exciting opportunities within that segment, and then just timing and potential magnitude of those opportunities over the next few years.
Sure sure. So I think the cool thing about the industrial opportunities is that we have everything from.
Singles and doubles to sort of home runs and beyond that.
So for example, one of the things that's taken off very quickly here is starting to sell a limestone out of our Berkeley Springs, West Virginia site.
Ramp that up very quickly and I think we'll over the next couple of years have a kind of a multimillion dollar profit stream for that if you look at our Millen, Georgia site would be a cristobalite this going into the the countertops and the cool roof granules of kind of solar reflective energy efficient granules for.
Roofing, that's going really well.
We've got a new ever white pigment product, which I think might be our overall sort of biggest product, which is is replacing more traditional white pigments as additives into a variety of formulations I had mentioned in the prepared remarks.
<unk>, we've got organic insecticide, which is actually taking off based on diatomaceous Earth. So so it's quite a large portfolio of products.
Advancing through the system here and.
I think what youre going to see over the next couple of years as tens of millions of dollars of additional contribution margin coming from that and.
Just given the margin profile and the specialty nature of these products I would expect that.
They would.
Help.
Not just boost our industrial contribution margin, but kind of really bolster the fact that the multiples associated with that should continue to expand because once you get specced in for these kind of products, it's very hard to get to get to.
Taken out.
I mean you guys.
Notwithstanding potential slowing here of the economy that are highest.
<unk> quarter ever for ISP. It seems like this is going to be repeatable.
You will surpass that just my opinion, but I mean.
All the stuff you've got going on it sounds pretty exciting there so.
Got it.
Exciting John .
Okay. Thanks for including me guys. Thanks.
Thanks, John Thanks, John .
Once again, ladies and gentlemen that is star one for any additional questions at this time.
Were showing no additional questions in queue at this time I would like to turn the floor back over to management for any additional or closing comments.
Thanks, operator, so as we bring the call to a close today I want to conclude with a few key thoughts first I believe that we're very well positioned and on track to deliver an outstanding year with strong sales profitability and cash generation as we've discussed this morning.
Second we are firmly committed to market and capital discipline, and we expect to continue to sustainably generate positive free cash flow from operations and further strengthened our balance sheet here in 2022 and beyond.
And finally as we look ahead, we remain confident that our industry, leading business segment's robust product portfolio focused strategy and best in class execution will create substantial value for our shareholders and other stakeholders.
Thank you again for joining our call today, and we look forward to speaking with you all again next quarter stay safe and be well everyone.
Ladies and gentlemen, thank you for your participation. This concludes today's event you may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.
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