Q3 2023 Minerals Technologies Inc Earnings Call
Please standby your conference is about to begin.
Good day, everyone and welcome to the third quarter 2023 minerals technologies earnings call.
Today's call is being recorded at.
At this time I'd like to turn the call over to litigate a couple of head of Investor Relations for minerals technologies. Please go ahead Ms Kopple Oba.
Thank you Melinda and good morning, everyone and welcome to our third quarter 2023 earnings Conference call. Today's call will be led by Chairman and Chief Executive Officer, Doug Dietrich and Chief Financial Officer, Eric I'll Duck following prepared.
Prepared remarks, well open it up to questions.
As a reminder, some of the statements made during this call may constitute forward looking statements within the meaning of the federal Securities laws.
Please note the cautionary language about forward looking statements contained in our earnings release and on this slide.
As I say violence disclosed certain risks and uncertainties, which may cause our actual results to differ materially from the forward. Looking statements was also know that some of our comments today refer to non-GAAP financial measures and reconciliations to GAAP financial measures can be found in our earnings release and in the appendix of this presentation, which are posted on our website.
Now I'll turn it all with the Doc that's thanks, Lydia good morning, everyone and thanks for joining today.
Let me start off by giving you a quick outline for today's call.
First I'll take you through the highlights.
Our third quarter and as part of this I'll provide some commentary on the dividend increase and share repurchase program, we announced last week.
I also want to give you a quick update on various minerals.
I don't want to spend a bit of time going a bit deeper into what drove this quarter's strong performance.
Why I feel it's an indication of how we've positioned ourselves for continued profit improvement.
After that I will give an update on general business conditions and market trends.
Eric will then review the financials and provide an outlook for the fourth quarter.
With plenty of time to take your questions at the end of our comments.
I'm sure you've already reviewed our third quarter earnings press release, So let's go through some of the main highlights.
We had record sales for the third quarter deliver.
<unk> delivered record operating income for any quarter.
<unk> improved margins and increased cash flow.
These results are reflective of how we've positioned ourselves strategically and.
And how we're executing from an operating perspective.
Both of our business segments are performing well.
Each continue to face mixed market conditions through the quarter.
But despite this MTI achieved record third quarter sales.
Let me give you some of the highlights.
Within the consumer and specialty segment.
The household and personal care product line continues to show strength with stable growth across all geographies.
The main highlight being pet care sales, which increased 15% over last year.
In our animal health products growth of 38% from last year as the natural feed additive market continues to develop.
And the specialty additives product lines paper markets in North America, and Europe remains slow.
Although Asia paper markets were stronger in.
And volumes improved due to our newest satellites in the region.
We also saw solid performance from our ground calcium carbonate products in North America in fact, our GCC facility located in the Western U S had a very strong quarter breaking production sales and income records.
In the engineered solutions segment, our high temperature technologies product line delivered especially strong performance.
North America steel and foundry markets remains stable.
On the China foundry market continues to improve each quarter.
This business hit on all cylinders gaining market share.
Training pricing.
Capturing input cost savings and delivering a strong operating performance that production facilities.
And the environmental infrastructure product line wastewater treatment environmental lining systems and drilling products had a solid quarter.
So we continue to see weak activity in the commercial construction waterproofing market.
Next EBIT margins expanded to 14, 1% this quarter.
170 basis point improvement over last year.
Both segments expanded margins significantly.
We captured input cost savings.
Proved productivity in our operations.
Held pricing and in many cases continue to improve pricing.
And leveraged our fixed cost base through disciplined spending and progress with our $10 million expense reduction program.
Strong sales and expanded margins yielded $77 million of operating income, which is a record for any quarter for MTI.
As we expected cash flows improving.
Cash from operations increased 30% sequentially.
And year to date, it has more than doubled over last year to $138 million.
With the stable sales trajectory of our portfolio of businesses.
And the expansion of profit margins, we're confident and stronger cash flow levels going forward.
Our board shares this confidence, which is illustrated by the increase last week and our quarter quarterly dividend from five to 10.
And the authorization of a new $75 million share repurchase program.
Before I move on I want to give you a brief update on where we are with <unk> minerals.
As we've discussed on these calls over the past year cases filed against BMI continued to increase.
As well as the cost to defend itself against these claims.
We believe these claims to be merit listen we've always stood by the safety of Bmi's products.
The reality of the soaring legal costs overwhelmed the small business and as a result on October 2nd BMI announced that it filed for chapter 11 protection.
As a result of this we recorded a onetime noncash impairment charge of the BMI fixed assets.
As well as the charge for the litigation costs associated with the bankruptcy process.
In the fourth quarter, we expect to fully remove this business from our financial results.
We considered several options and decided that using the bankruptcy process was the best path to protect the business MTI and all stakeholders.
Process will take time to fully resolved and.
In BMI will continue to operate per usual throughout.
Be sure to update you as it progresses.
We see this as a significant step in moving forward and ensuring that our corporate energy is squarely focused on achieving our five year growth and performance targets.
I want to take a few minutes to go a bit deeper into our quarter.
Another highlight the numbers as I, just did but rather to illustrate what's behind them, what's driving them and why we're confident this will continue.
Our performance this quarter is a product of several elements that are coming together.
Driven by our strategy and supported by a strong operating model.
It starts with our topline revenue profile.
Made up of our resilient and stable portfolio of businesses.
Our ability to deploy our core technologies.
Combined with our ingrained culture of operational excellence and the advantage we gained through owning unique long term global mineral reserves.
We've talked extensively about how we've now positioned ourselves in higher growth consumer oriented markets like pet care and other consumer specialties, while also establishing strong positions in higher growth geographies.
This quarter the stable growth from these areas offset the slowness, we experienced in other end markets like North America commercial construction and European steel.
These stable growth markets gives the company much more balanced than it has in the past.
And as our other markets recover sales will accelerate.
This is the combination that yields meaningfully higher long term growth.
We also outlined for you our margin expansion targets.
There are three main areas that we see driving margins higher going forward.
Improved price cost improved mix from the natural growth in higher margin products.
And our ability and discipline to leverage this growth on our fixed cost base.
All three of these elements contributed to the margin expansion this quarter and we see them continuing to contribute to our margin expansion going forward.
MTI is long term growth potential combined with expanding margins leads to increased cash flow generation.
Our balance sheet is in good shape with net debt around our targeted levels.
Combined with this stronger cash generation, we have ample financial resources to fund capital expenditures pursue M&A as well as support an increased dividend and new share repurchase program.
All of this is consistent with our balanced approach to capital deployment, and specifically our commitment and history of returning cash to shareholders.
Let me wrap up this slide by stating that MTI has a powerful business model one.
One that combines revenue stability and growth potential with operating discipline technological capabilities vertical integration and a strong people centered culture.
This quarter is an excellent example of how those elements came together and how they will continue to provide value in the future.
This is a strong quarter for us, but it had more potential.
We've got a lot more gas in the tank so to speak and we're well on our way to meeting the financial targets, we laid out for you earlier this year.
Okay before I pass it on to Eric Let me take you through.
Our markets and what we're seeing and what we're seeing.
Overall, our market outlook remains similar to what we shared last quarter with the exception that we're entering some seasonal periods for a few of our markets.
Let's start with the consumer and specialty segment.
Overall, we're seeing continued strong market conditions across our household and personal care markets.
There are several near term and long term trends that are driving this strength.
Pet care is entering its seasonally strong period in both North America and Europe over the next two quarters.
But more broadly we continue to see positive demand trends for both private label cat litter in the U S as well as premium offerings in Europe, which is where we're positioned in each market.
Further we see continued demand growth in the Asia pet litter market and we are well positioned to capture this with our mining and production locations.
We also expect other HBC markets, including edible oils renewable diesel animal health and personal care to also remain on their stable growth path in the fourth quarter and through 2024.
In specialty additives, our market outlook remains positive.
So Q4 is typically a seasonally slower period for residential construction, we expect gradual improvement in the North American paper market.
Looking into next year, we will see a boost in volumes from the <unk> paper and packaging satellite ramp ups that are taking place in Asia right now.
We also have a solid pipeline of new packaging business opportunities. We continue our growth in transition as we continue our growth and transition into this market adjacency.
As we look at engineered engineered solutions markets, we see more mixed conditions.
And high temperature technologies, we have a generally positive outlook for both the steel and foundry markets.
We see continued stable conditions for our foundry and steel products in North America, and a continued gradual improvement for the foundry market in China.
We've signed several long term contracts for our laser and refractory application equipment and there is a number of these come on line next year, It will help drive volumes and sales higher.
Moving to environmental and infrastructure, we have a mixed in more cautious view on these end markets.
The market for our environmental lining systems as well as major remediation projects tend to slow in Q4 and Q1.
We don't we also don't expect to see any improvement in the commercial construction waterproofing market, which has been slow all year.
The positive side infrastructure drilling and environmental wastewater markets should remain solid throughout the quarter.
Looking further out our team has been making great strides in gaining attention for our Florida <unk> technology for P fast remediation.
The business currently has over 200 active pilots and trials and we recently presented our technology and unique capabilities that the Gabelli <unk> symposium.
This presentation is available on our website, if you're interested to learn more.
In summary, we see relatively strong markets for us as we head into the end of the year.
More so we've built strong momentum across all product lines, which sets us up for another strong year in 2024.
Now, let me turn it over to Eric to review our financials in more detail Eric.
Thanks, Doug and good morning, everyone, let's start by reviewing our third quarter performance and also provide our outlook for the fourth quarter.
Following my remarks, I will turn the call over for questions.
Now, let's review our third quarter results.
Let me start by saying, we had a strong third quarter marked by records for adjusted operating income and EBITDA significant margin improvement and higher cash flow.
Overall sales were 548 million similar to both the prior quarter and prior year.
You can see in the bridge on the top right that two of our product lines grew sales until were lower reflecting the mixed market conditions. We are experiencing this year.
This bridge is a good representation of the benefits that are higher growth consumer oriented products are having on the overall portfolio.
Providing stability and growth when other markets aren't as strong.
And we are leveraging our sales into significantly higher earnings across both segments.
Operating income excluding special items increased 15% versus last year, and improved 9% sequentially to $77 million.
Our record results for MTI.
And we remain on track to deliver our targeted margin improvement.
Operating margin improved to 14, 1% of sales in the third quarter.
This result was 170 basis points above last year, and 130 basis points higher sequentially driven by the combination of price cost recovery productivity improvements and favorable mix from the growth of higher margin specialty products.
Adjusted EBITDA was $102 million in the quarter and represented 18, 6% of sales.
It's worth noting that this was the first time that the company has generated quarterly EBITDA above $100 million.
Our reported results included two special items in the quarter.
The largest of the two was a noncash $72 million impairment of all the fixed assets within <unk> minerals, Inc.
The second special item was a $13 million charge for litigation costs also related to BMI and its filing for bankruptcy protection.
EPS, excluding special items was $1 49.
To give you some perspective on the lower left we have included our third quarter EPS trend over the last five years.
Which shows a 9% compound annual growth rate since 2019.
And our third quarter EPS, even includes <unk> <unk> of higher interest expense versus last year.
This EPS growth trends might not be so apparent given the significant dynamics at play over the last several years.
Now I'll review the performance of our two segments, beginning with consumer and specialty.
Sales in the consumer and specialty segment were $291 million, 2% above last year and similar to the second quarter.
Sales in the household and personal care product line were 9% higher than last year and 3% higher sequentially.
Growth in pet care remains strong with sales up 15%.
And sales across the other specialty consumer markets in this product line were 8% higher sequentially.
Sales in the specialty additives product line were 2% lower than last year.
While North American paper production improved from the second quarter demand remains below prior year levels in both North America and Europe.
Meanwhile, volumes in Asia improved year over year, driven in part due to the ramp up of our new satellite facility.
And residential construction market market conditions remains mixed with steady demand for our products that are used in remodeling activity, helping to offset the impact of fewer newbuild.
Adjusted operating income for the segment increased 23% year over year to $38 million.
And operating margin was higher by 230 basis points.
Primarily driven by price cost recovery.
Looking to the fourth quarter, we expect continued strength from household and personal care driven by strong pet care sales and continued gradual improvement in other specialty consumer products.
In specialty additives, we expect typical seasonality in construction, partially offset by continued improvement in paper production in North America, and additional volume from our new satellites in Asia.
In total we expect operating income for the segment to be around $33 million in the fourth quarter.
Note that this guidance reflects the deconsolidation of BMI, which means <unk> revenue and profit will be excluded from MTI results going forward beginning in the fourth quarter.
Now, let's turn to the engineered solutions segment.
Okay.
Third quarter sales in the engineered solutions segment were $257 million similar to the prior year.
And high temperature technologies sales were 1% higher than last year as demand for steel and foundry products in North America remains strong and we continue to grow foundry volumes in China.
And environmental and infrastructure sales were 2% lower than the prior year as commercial construction activity remained slow.
Sales for drilling wastewater and remediation applications continued to grow including the completion of another P. Fast remediation project using our Fluoro Sorb technology. This one at a U S Department of defense location.
Third quarter operating income for the segment was $41 million.
12% above last year.
Price cost recovery and solid execution drove operating margin expansion in the quarter, which was 15, 8% of sales an improvement of 160 basis points.
Looking ahead to the fourth quarter for high temperature technologies. We expect continued strong demand in North America, and we expect conditions in Europe to remain similar sequentially.
In Asia, we anticipate the growth trend in China foundry volumes will continue.
In addition, we expect to see a benefit from higher laser measurement equipment sales.
And finally in the environmental and infrastructure product line sales will be lower sequentially as we enter the seasonally slow period for environmental and construction projects.
In total for the segment, we expect operating income will be approximately $35 million in the fourth quarter.
Our guidance includes some limited impact from the UAW strike and we're continuing to monitor the situation.
Now, let's turn to our balance sheet and cash flow highlights.
Cash flow accelerated in the third quarter as we expected, bringing year to date cash from operations to $138 million.
More than double the same period last year.
Capital expenditures were $25 million in the quarter, bringing the year to date total to $71 million.
And year to date free cash flow was $67 million.
For the full year, we continue to expect free cash flow between 101 hundred $25 million.
Our balance sheet remains very strong.
Total liquidity at the end of the third quarter was $458 million and net leverage improved to two two times EBITDA.
With leverage approaching our target of two times EBITDA and cash flow continuing to improve we are well positioned to maintain our balanced approach to capital allocation.
Which includes returning capital to shareholders through our dividends and repurchase program.
Now I'll summarize our outlook for the fourth quarter.
Overall for MTI, we expect another solid performance in the fourth quarter.
In the consumer and specialty segment, we expect continued strong demand from the household and personal care product line and in pet care in particular.
In specialty additives higher sales into the paper and packaging market driven by our new satellites and gradual improvement in North America production rates.
While the offset by seasonally lower construction activity as well as the deconsolidation of BMI from MTI results.
In the engineered solutions segment, we expect continued strength in high temperature technologies, driven by higher laser measurement equipment sales and growing Asia foundry volumes.
Meanwhile, environmental and infrastructure will experience typical season.
Longtime stable supplier, because we own our unique mineral reserves I think customers see that and that enables us to make sure that we're getting the value for our products and I think as you see the consumer business continued to improve.
<unk> to improve in pet care, where youre starting to see the growth in those higher margin specialty products, which are also higher growth. That's part of that margin expansion, yes, I think we can push through.
That 14%, 15% margin I think further though it's going to take that stable growth profile and leveraging our fixed and also getting those new innovative products in the specialty products out on market. Those are higher margin products. Those are year two years out and I think yes. There is the potential to get past, 15%, but we're laser focused on delivering that.
15% like we told you by 2025, so start there I think there is potential for more it's going to come from higher margin products and leveraging our fixed cost base that growth.
Speaker 1: transcript
Speaker 1: Very helpful. Maybe one more, one and a half more, and I'll jump out, but clearly the Tows litigation, you know, despite the announced bankruptcy remains front and center in some investors' minds. So is there anything you can tell us about where we are on the process, what the next steps would be, and you know, maybe just taking a step back.
Very helpful.
Maybe one one more one wanted to have more and I'll jump out, but clearly the Taos litigation.
Despite the announced bankruptcy remains front and center and some investors' minds. So is there anything you can tell us about where we are in the process what next steps would be and more.
Maybe just taking a step back why taking they were out of bankruptcy in your mind should ring fence the liability protect MTX win.
Speaker 1: transcript
Speaker 1: you know why taking the route of bankruptcy in your mind should ring fence the liability and protect them tx when you know if you look at comparable cases and I know there's no apples to apples but
No.
If you look at comparable cases, and I know theres, no apples to apples, but maybe.
Speaker 1: transcript
Speaker 1: you know, maybe whether it be asbestos or others, you know, it hadn't...
And maybe whether it be.
As fastest or others.
It hadn't.
Speaker 1: transcript
Speaker 1: accomplish that sort of full ring fencing from the parent. So any update there would be really helpful. I appreciate it Doug.
Accomplish that.
We'll ring fencing from the parent so any update there would be really helpful. I appreciate it Doug.
Speaker 2: transcript
Speaker 2: Yeah, well as you mentioned, each of these processes are different and they have different dynamics. You know, we looked at different scenarios, you know, we made sure we really understood what was happening in the landscape. Yeah, as I mentioned in my comments, you know, just the caseload that...
Yes, well as you mentioned each of these processes are different and they have different dynamics, we looked at different scenarios.
Made sure we really understood what was happening in the landscape as I mentioned in my comments, just the case load that.
Speaker 2: transcript
Speaker 2: BMI was being pulled into this tort we feel, just kind of overwhelmed the business. And we felt that look, the best way path forward for, or BMI for MTI and again, all stakeholders, including shareholders was to seek the bankruptcy protection. And that puts it in a very well-defined, structured and transparent process.
BMI was being pulled into kind of this towards we feel.
Just kind of overwhelmed the business and so we felt that look the best way path forward for or BMI for MTI and again, all stakeholders, including shareholders was to seek the bankruptcy protection and that puts it in a very well defined structure and transparent process.
Speaker 2: transcript
Speaker 2: There are a number of dynamics that are going to have to be worked through, so it's really hard to give you at this point in time, at time frame, or how that will play out. It's just right at the beginning of it. I think the next major milestone will be to, you know, selling of the assets, the BMI assets.
There are a number of dynamics that are going to have to be worked through so it's really hard to give you at this point in time, a timeframe or or how that will play out. It's just right at the beginning of it.
I think the next major milestone will be too.
Selling of the assets the BMI assets.
Speaker 2: transcript
Speaker 2: Using that to fund the trust and once we're through that we'll probably have a better idea I've kind of how this is going to play out and the time frame, but so right now it's a bit premature to give you
And using that to fund the trust and once we're through that we'll probably have a better idea of kind of how this is going to play out in the timeframe, but so right now it's a bit premature to give you.
Speaker 2: transcript
Speaker 2: how it will play out, but it is designed to make sure that we ring fence and protect the company and take the steps to protect MCI through the process.
How it will play out.
But it is designed to make sure that.
We ring fence and protect the company and take the steps to protect MTI through the process and that's what we've done.
Speaker 1: transcript
Speaker 1: All right, lastly, as you mentioned, the 2025, you have a longer term targets.
Alright, Lastly, as you mentioned the 2025, you have the longer term targets.
Speaker 1: transcript
Speaker 1: A couple of times in the prepared remarks, so is it fair to say that removal of TALC doesn't have any impact on those targets in your mind?
A couple of times in the prepared remarks, so is it fair to say that the removal of talc doesn't have any impact on those targets in your mind.
No I think.
BMI was.
Speaker 2: transcript
Speaker 2: you know, $50 million business. So it will have an impact and we're gonna probably have to call out the, you know, the difference in year-over-year comparison to next year with the profit and the sales outs. We'll do that, but no, I don't think that that changes things. I think the growth...
$50 million business.
It will have an impact and we're going to probably have to call out.
The difference in year over year comparisons to next year with the profit and sales out. So we will do that but no I don't think that that changes things I think I think the growth the potential growth that we have in front of us across the board.
Speaker 2: transcript
Speaker 2: You know, the potential growth that we have in front of us across the board, you know, will offset that. And I don't think on the scale of, you know, being a target of running an average of 5% growth over the next five years, you know, kind of a 2.6, 2.7 billion dollar revenue target, $50 million is gonna make a big difference. So we will be giving you some comparisons for the next couple of quarters. So you have it bridged right, but, no, I don't think that's gonna change meaningfully our target growth. There are no thanks for the color.
We will offset that and I don't think on the scale of being a target of running an average of 5% growth over the next five years kind of a $2 $67 billion revenue target $50 million is going to make make a make a big difference. So we will be giving you. Some comparisons for the next couple of quarters. So you have a bridge right, but but.
No I don't think thats going to change meaningfully our target growth.
Fair enough. Thanks for the color again, I'll jump back with any follow ups.
Speaker 3: transcript
Speaker 3: If you find that your question has been answered, you may remove yourself from the queue by pressing star two. And we go next to the line of my carousel with Seaport Research Partners. Please go ahead.
Okay Fine that your question has been answered you may remember yourself from the queue by pressing star Q and we go next to the line of Mike Harrison with Seaport Research Partners. Please go ahead.
Speaker 4: transcript
Speaker 4: Hi, good morning. Congratulations on a strong quarter.
Hi, good morning, congratulations on a strong quarter.
Speaker 4: transcript
Speaker 4: Hand a question on the household business. One of the main players in that pet care space had a cyber attack last quarter and led to some significant product shortages. We understand that that dynamic has led many pet owners to switch to a different brand. Can you talk at all about what impact that event may be having on your pet care business?
Had a question on the <unk>.
Household.
So one of the main players in the pet care space.
I had a cyber attack last quarter it led to some significant product shortages.
We understand that dynamic has led many pet owners to switch to a different brand can you talk at all about what impact that event may be having on your pet care business and.
Speaker 4: transcript
Speaker 4: And have you seen any acceleration in consumers switching to private label brisk?
And have you seen any acceleration in consumers switching to private label brands.
Speaker 2: transcript
Speaker 2: Yeah, let me take that. We noted that issue that occurred this past quarter. And we did see a little bit of an uptick and order volume to make up for that. I want to say it's substantial and I think most likely some temporary. But I think the longer term you're right, I think we are seeing we're well positioned to supply the private labels in North America. We've built that position through
Yeah, let me take that.
Did that.
That issue that occurred this past quarter, and we did see a little bit of an uptick in order volume to make up make up for that I don't I want say it's <unk>.
Substantial and I think most likely some temporary but but I think the longer term youre right I think we are seeing.
We're well positioned to supply the private labels in North America, we've built that position through.
Speaker 2: transcript
Speaker 2: couple of acquisitions as you know and uh... and yeah we're seeing that you know as the category grows uh... petlet or grows in north america the category of private label is growing a bit faster than the average
A couple of acquisitions as you know and and yes, we're seeing that as the category grows.
Pet litter grows in North America, the category of private label is growing a bit faster than the average.
Speaker 2: transcript
Speaker 2: And so, you know, with our locations, with our mining assets, and, you know, kind of being that private label provider, that's what's driving the growth in North America. And yes, we've benefited a bit from, you know, folks looking for private label brands when a branded product had trouble. So, but I think that's a temp.
So with our locations with our mining assets and kind of being that private label provider.
And yes, we benefited a bit from.
Folks looking for private label brands when a branded product had some trouble so but I think thats temporary.
Speaker 4: transcript
Speaker 4: Okay, so you don't see, you don't envision that there's gonna be some permanent switching. I guess I think a cat litter is something that consumers try to stick with one brand and if something becomes unavailable, that would maybe ignite a switch that could end up being more permanent. You don't see that happening. Well, look, I...
Okay. So you don't see you don't envision that there's going to be some permanent switching I guess I think of cat litter is something that.
Consumers trying to stick with one brand and if something becomes available that would.
Maybe switch that could end up being more more permanent you don't see that happening.
Well.
Look I guess I don't want to.
Speaker 2: transcript
Speaker 2: Yes, I agree with you. There is some brand loyalty and I understand that when a brand has a hiccup, you might, you know, inflict that loyalty. But...
Yes, I agree with you there is some brand loyalty and I understand that when a brand is a hiccup you might inflect.
Take that loyalty, but.
Speaker 2: transcript
Speaker 2: So I guess I'm answering the question as we benefited from a little bit from that fiscal quarter and that volume because it wasn't available in the shelf.
So I guess I'm answering the question as we benefited from a little bit from that this quarter and that volume because it wasn't available on the shelf.
Speaker 2: transcript
It remains to be seen whether that's going to be sticky, but I will tell you that in general outside of just the one instance, like that in general I think the demand for private label is outgrowing the demand for other and I think that is a long term trend regardless of a one.
Unfortunate incident that happened.
Speaker 2: transcript
Speaker 2: to a company, I think that's a long-term trend that's going to benefit our base growth rate going forward.
Due to our company I think that's a long term trend that's going to benefit our base growth rate going forward.
I can answer it that way.
Speaker 4: transcript
Speaker 4: Yep, no, that's fine. And then just quickly, where do you guys think we are in terms of realizing the $10 million worth of cost actions? Are we still pretty early in that process? Or do you have kind of a run rate of where we were as of the end of the third quarter?
Yes, no that's fine.
And then just quickly.
Where do you guys think we are in terms of realizing the $10 million worth of cost actions are we still pretty early in that process or do you have kind of a run rate of where we were as of the end of the third quarter.
Yeah.
Speaker 5: transcript
Speaker 5: Yeah, Mike, this is Eric. We're about two thirds of the way through from a savings perspective through the third quarter on a run rate base.
Yeah, Mike. This is Eric we're about two thirds of the way through from a savings perspective through the third quarter on a run rate basis.
Alright.
Speaker 2: transcript
Speaker 2: All right, Mike. We're going to get the full run rate by the beginning and next year, first half next year. So we're well on track with those savings.
Then I have a couple of running at full run rate by the beginning of next year first half of next year. So we're well on track with that with those savings.
Yeah.
Perfect Okay.
Speaker 4: transcript
Speaker 4: And then a couple of questions for me on capital allocation. With the increase in your dividend, just curious, is that expected to just be the new rate going forward 10 cents a quarter? Or is the board considering future increases maybe in line with earnings growth? Maybe any comments you could provide on the new approach to dividend policy and other returns to shareholders?
And then a couple of questions for me on capital allocation.
With the increase in your dividend just curious is that expected to just be the new rate going forward.
Quarter four is the board considering future increases maybe in line with earnings growth maybe.
Any comments you can provide on the new approach to dividend policy and other returns to shareholders.
Speaker 2: transcript
Speaker 2: So yes, that is a permanent 5 cent increase to the quarterly dividend of 10 cents. I do think that as we go forward, the board is going to continue to look at how we allocate that capital. As you know, we've preferred using Sherry purchases because there's some flexibility that gives us the opportunity to make sure that as M&A comes up, we're able to steal steer capital to if something is one of the higher.
So yes that is a permanent <unk> increase to the quarterly dividend to <unk> 10.
I do think that as we go forward. The board is going to continue to look at how we allocate that capital as you know we've preferred using share repurchases. Because there is some flexibility that gives us the opportunity to make sure that as M&A comes up we were able to steal steer capital to if something is one of the higher what we think are higher.
Speaker 2: transcript
Speaker 2: what we think of higher value use for that cash. And so I think the board will continue to look at dividend policy going forward.
Will you use for that cash and so I think the board will continue to look at dividend policy going forward.
Speaker 2: transcript
Speaker 2: And but where we are now is at 5th and increase and that is a permanent increase. So the board will, you know.
And but where we are now is that <unk> <unk> increase in that is that is a permanent increase so.
The board will.
Speaker 2: transcript
Speaker 2: look at dividend increases going forward, but that's where we are for it now.
Look at look I didn't dividend increases going forward, but thats, where we are right now.
Speaker 4: transcript
Speaker 4: All right, and then in terms of M&A, just kind of curious, you guys did a transformative deal back in 2014 when you acquired AMP call. And you were looking at another major deal a few years ago, just wondering if you can provide some updated thoughts.
Alright, and then in terms of M&A.
Just kind of curious you guys did a transformative deal back in 2014, when you acquired AMCOL.
And you were looking at another major deal a few years ago. Just wondering if you can provide some updated thoughts on your appetite for a larger more transformative deal.
Speaker 4: transcript
Speaker 4: on your appetite for a larger or more transformative deal. What criteria would it need to meet? And how much would you be willing to lever up the balance sheet versus that 2.0 times, not that the EBIT target leverage in order to complete a larger transaction?
Criteria would it need to meet.
And how much would you be willing to lever up the balance sheet versus that.
2.0 times net debt to EBITDA target leverage.
In order to complete a larger transaction.
So let me start by answering it this way we have M&A as a stated part of our growth strategy.
Speaker 2: transcript
Speaker 2: Let me start by answering it this way. We have M&A as a stated part of our growth strategy. We've demonstrated that through four bolt-on acquisitions over the past four, probably going on now five years. We see that as an opportunity to pull in valuable pieces and, as I said, build positions that make sense for the company.
We've demonstrated that through kind of four bolt on acquisitions over the past four probably going on now five years. So.
We see that as an opportunity to pull in valuable pieces and as I said build positions that makes sense for the company.
Speaker 2: transcript
Speaker 2: And in each of our product lines, I'll also note the four product lines we have both good organic opportunities that we have capital to fund, and each of them have some inorganic opportunities.
And in each of our product lines I'll also note.
The four product lines, we have both good organic opportunities that we have capital to fund and each of them have some inorganic opportunities and so it's set up that way.
Speaker 2: transcript
Speaker 2: And so we're going to look at that going forward. And I think there's a nice pipeline in each of the product lines for some additional bolt-ons to help continue and actually accelerate some of the growth targets that we've given you in the past.
And so we're going to look at that going forward and I think there's a nice pipeline in each of the product lines for some additional bolt ons to help.
Can continue and actually accelerate some of the growth targets that we've given you in the past as.
Speaker 2: transcript
Speaker 2: As far as a transformative acquisition, there are some of those in our portfolio that we're looking at.
As far as a transformative acquisition there are some of those in our portfolio that we're looking at.
Speaker 2: transcript
Speaker 2: But those are things that we look at on a number of different elements. And so how much we're willing to lever up.
And but.
But those are those are things that we look at on a number of different.
Elements and so how much we're willing to lever up.
Speaker 2: transcript
Speaker 2: depends on the environment, what we see, how we're, you know, the synergies available to it, where we are in a capital markets environment, and the risks associated with it as we go forward.
Depends on the environment, what we see how were the synergies available to it.
Where we are in our capital markets environment and.
The risks associated with it as we go forward I would say.
Speaker 2: transcript
Speaker 2: I would say, you know, where we were with AMCALL, it's a four and a half times before. I would think that our leverage targets would probably be lower than that.
Where we were with them call, let's say four five times.
Before I would think that our leverage targets would probably be lower than that.
Speaker 2: transcript
Speaker 2: But I will say, you know, when we go into these deals, we in the past, we would look at them from all angles and making sure that both risks are understood.
But I will say when we go into these deals.
In the past, we would look at them from all angles, and making sure that both risks are understood that the cash flow was understood that the synergies are very well understood.
Speaker 2: transcript
Speaker 2: that the cash flow was understood, that the synergies are very well understood.
Speaker 2: transcript
Speaker 2: and that the debt paydown happens very rapidly. So, and I think we demonstrated that and our ability to deliver with the AMCulture Injection. I think anything we would do of size would have that same type profile. We would look at it.
And that the debt pay down happens very rapidly so and I think we demonstrated that in our ability to delever with AMCOL transaction I think anything we would do of size would have that same type profile. We would look at it its risks first and foremost the benefit to the company the value created and the and the rapid debt Paydown. That's how we look at these so.
Speaker 2: transcript
Speaker 2: risks first and foremost, the benefits of the company, the value created, and the rapid death paydown. That's how we look at these. So I can't answer how high we'd go. It really depends on the target, and what we see at the time.
I can't answer how high we would go it really depends on the target and what we see at the time.
All right very helpful. Thanks, very much.
Speaker 3: transcript
Speaker 3: Our next question or comment comes from the line of Steve Farazani with Sedodian company. Please go ahead. Good morning. This is
Thanks next question.
Our next question or comment comes from the line of Steve Farris, Donnie with Sidoti and company. Please go ahead.
Good morning. This is Alex had been on for Steve.
Speaker 3: transcript
Speaker 3: My first question is around the flyback. Given the size of the flyback announcement, they're still room to reduce dead and generally how do you prioritize share purchases and debt reduction.
My first question is around the buyback given the sizeable buyback announcement, if there is still room to reduce debt and generally how do you prioritize share repurchases and debt.
Debt reduction.
Sure so our kind of the policy and the.
Speaker 2: transcript
Speaker 2: Sure, so our, you know, kind of the policy and the way we look at our capital allocation is we take, we look at free cash flow, which is, you know, typically around $150 million a year, kind of average, and we see that continuing to grow with our growth and profit expansion.
The way, we look at our capital allocation as we take we look at free cash flow, which is typically around $150 million a year.
Kind of average and we see that continuing to grow with our growth and profit expansion.
Speaker 2: transcript
Speaker 2: Over history, we typically allocate about 50% of that back to shareholders and typically in the form of a share repurchase program. And so at this point in time, you know, a dividend increase plus the $75 million share repurchase program is around half of that kind of free cash.
Over history, we typically allocate about 50% of that back to shareholders and typically in the form of a share repurchase program and so at this point in time.
Dividend increase plus the $75 million share repurchase program is around half of that that kind of free free free cash flow, but that still gives us half of that free cash flow to be able to.
Speaker 2: transcript
Speaker 2: But that still gives us half of that free cash flow to be able to delever. And again, we usually look at this kind of capital allocation when we're at our target leverages, which is around two times. So if we have an acquisition, the past year we've been up around 2.8, three times, we're going to look to make sure that we get the balance sheet back down to around two. Free cash flow then gets steered toward shareholders.
To Delever and again, we usually look at this kind of capital allocation when we're at our target Leverages, which is around two times. So if were have an acquisition in the past year, we've been up around $2 eight three times, we're going to look to make sure that we get the balance sheet back down to around to free cash flow, then gets steer towards shareholders and usually with share.
Speaker 2: transcript
Speaker 2: and usually with sherry purchases, we have the flexibility you know if an M&A transaction that's sizeable comes around. So...
Our repurchases so we have the flexibility.
If an M&A transaction thats sizable comes around so yes. The answer to your question is we have sufficient capital and we see sufficient capital going forward for both the dividend increase for the share repurchase the one year share repurchase and reserving capital to both put to <unk> to debt reduction or on the balance sheet for potential <unk>.
Speaker 2: transcript
Speaker 2: Yes, the answer to question is we have sufficient capital and we see sufficient capital going forward for both a dividend increase.
Speaker 2: transcript
Speaker 2: for the share repurchase, the one-year share repurchase, and reserving capital to both put to debt reduction or on the balance sheet for potential bolt-on M&A.
On M&A.
Speaker 2: transcript
Speaker 2: I think that's the flexibility that we're trying to describe. With our stable sales, with our expanding margins, it generates, it's a company that generates, we've historically generated 7% cash conversion to sales. And that type of capital gives us a lot of options, gives us a lot of flexibility, keeps the balance sheet in good shape, and returns to Cheryl.
And I think that's the flexibility that we're trying to describe with our stable sales with our expanding margins. It generates it is a company that generates we've historically generated 7% cash conversion to sales.
And that type of capital gives us a lot of options gives us a lot of flexibility keep the balance sheet in good shape and return to shareholders.
Speaker 3: transcript
Speaker 3: Thank you. Appreciate the color there. And speaking of capital allocation, given the size of opportunities you've laid out previously and PFAS remediation that we've talked about today, do you expect significant additional investments in the business?
Thank you I appreciate the color there.
And speaking of capital allocation, given the sizable opportunities you'd laid out previously in <unk> remediation and we've talked about today.
Do you expect a significant additional investments in the business.
Investments in in the yes organic investments. So we are continuing to invest if I answer your question if I understood. It properly we invest in R&D we've got.
Speaker 2: transcript
Speaker 2: Investments in in the yes organic investments So we are continuing to invest if I answer your question if I understood it properly we invest in R&D. We've got a sizable pipeline of new products
A sizable pipeline of new products.
Speaker 2: transcript
Speaker 2: We've gone back to talk about how we've increased the revenue from new products that we're making investments in.
We've gone back to talk about how we've increased the revenue from new products that we're making investments in.
Speaker 2: transcript
Speaker 2: You know, we used to be around 5% of sales. We're now approaching 12, 13, 14% of sales. We'll get you a number this year. We've accelerated the new product development. We've cut the time in half to bring them to market and we've doubled the impact.
We used to be around 5% of sales.
We're now approaching 12, 13, and 14% of sales, we'll get you a number.
This year, we've accelerated the new product development, we've cut the time and have to bring them to market and we've doubled the impact.
Speaker 2: transcript
Speaker 2: $300 million of our sales are coming from new products each year and that was much less than half About five years ago. So we are investing in new technologies. We're investing in new technologies that yield higher margin products
$300 million of our sales are coming from new products, each year and that was much less than half about five years ago. So we are investing in new technologies, we're investing in new technologies that yield higher margin products. We're.
Speaker 2: transcript
Speaker 2: We're working very closely with customers to build what we call roadmaps, and so looking out four or five years with them and seeing what their needs are and building new product and technology roadmaps with our customers that guides what goes into our innovation. And then, yes, we're investing in our plants to make sure that we have sufficient capacity to make those products. But that all is coming through our normal capital expenditure program. That's about 4% of our sales.
We're working very closely with customers to build.
What we call Roadmaps and so looking out four or five years with them and seeing what their needs are and building new product and technology roadmaps with our customers that guides what goes into our innovation and then yes, we're investing in our plants to make sure that we have sufficient capacity to make those products. So.
But that all is coming through our normal capital expenditure program.
That's about 4% of our sales.
Speaker 2: transcript
Speaker 2: And yet we still have, as we my previous question, have excess capital on free cash flow after that to be able to keep the balance sheet straight and
And yet we still have as we my previous question have excess capital on free cash flow after that to be able to keep the balance sheet strength and and.
Speaker 2: transcript
Speaker 2: return to shareholders. So yes, we are investing in many ways in ourselves. And I think we find that investing in ourselves is one of the best investments to be on.
<unk> returned to shareholders. So yes, we are investing in many ways and ourselves and we I think we find that investing in ourselves as one of the best investments to be honest with you.
Speaker 3: transcript
Speaker 3: Absolutely. And just one quick clarification on that. I had meant to focus a little bit more specifically on P-Files remediation and some of the additional investments you might have in that line of business.
Absolutely.
Just one quick clarification on that.
I had meant to focus a little bit more specifically on <unk> remediation and some of the additional investments you might have in that line of business.
Speaker 2: transcript
Speaker 2: Yeah, so we are, we have in part of that environmental infrastructure is a host of water remediation technologies. They are a host of environmental type technologies. We laid this out hopefully at a chance to look at our investor day.
Yeah. So we are we have in part of that environmental and infrastructure is a host of water remediation technologies.
There are a host of of environmental type technologies. We laid this out hopefully had a chance to look at our investor day from groundwater remediation and slurry wall to sediment capping.
Speaker 2: transcript
Speaker 2: from groundwater remediation in slurry wall to sediment capping to wastewater remediation and even drinking water remediation. And so we have a number of new technologies and we have plenty of capacity currently installed to be able to ramp up.
Two.
Histoire remediation and even drinking water remediation.
And so we have a <unk>.
New technologies, and we have plenty of capacity currently installed to be able to ramp up.
Speaker 2: transcript
Speaker 2: to satisfy areas like PFAS remediation. And we also have targets to be able to invest to make sure in new capacity, make sure we cover that. So look, it's a slow ramp, but we're keeping an eye on it. We understand the capacities of our plant, the capabilities and the technologies, and certainly willing to invest when we see the inflection points for PFAS specifically going forward.
Just to satisfy areas like P fast remediation.
And we also have targets to be able to invest to make sure and new capacity to make sure. We cover that so look it's a slow it's a slow ramp.
But we're keeping an eye on it we understand the capacity at our plant the capabilities and the technologies.
And certainly willing to invest when we see the inflection points for <unk>, specifically going forward.
Speaker 1: transcript
Speaker 1: Perfect, very helpful. Thank you. And last question from me, I just around it out. You know, we've discussed the growing mix of industrial and consumer technologies.
Perfect very helpful. Thank you and last question for me just to round. It out we've discussed our growing mix of industrial and consumer technologies.
Speaker 6: transcript
Speaker 6: for everyday life. I can talk about how you evaluate the existing product portfolio and any opportunities you might see for pruning.
For everyday life.
Can you talk about how you evaluate the existing product portfolio and any opportunities you might see for pruning.
Well I think in our.
Speaker 2: transcript
Speaker 2: Well, I think in our, you know, we've been building in the consumer business. And so I don't see, I think there's continued investment in broadening that portfolio, or at least strengthening that portfolio of product lines.
We've been building in the consumer business.
And so I don't see I think there is continued investment in broadening that portfolio or at least strengthening that portfolio of product lines, we see a lot of growth potential.
Speaker 2: transcript
Speaker 2: We see a lot of growth potential and a number of them like
A number of them like.
Speaker 2: transcript
Speaker 2: in our filtration business which goes into edible oil purification and
In our filtration business, which goes into edible oil purification and biodiesel in the animal health personal care pet care. So those I think we're going to continue to build there are other areas that we'll look at that if they don't have the growth potential or if we don't see that.
Speaker 2: transcript
Speaker 2: and biodiesel and animal health, personal care, pet care. So those I think we're gonna continue to build, you know, there are other areas that we'll look at that if they don't have the growth potential, or if we don't see that, you know, the contribution or the capital allocation to those, we would consider pruning. So we do go through the process of looking at our portfolio and making sure that we're steering that capital to the ones that are gonna be the highest value and highest growth and highest...
The contribution.
Or the capital allocation to those we would consider pruning. So we do go through the process of looking at our portfolio and making sure that we're steering that capital to the ones that are going to have the highest value and highest growth and highest profits.
Speaker 2: transcript
Speaker 2: and we will consider taking steps for those adults.
And we will consider taking steps for those that don't.
I appreciate it thank you very much.
Speaker 3: transcript
Speaker 3: Once again, if you'd like to ask a question, please press star one. We'll take our next question from David Silver with CL King. Please go ahead.
Once again, if you'd like to ask a question. Please press star one.
We'll take our next question from David Silver with CL King. Please go ahead.
Okay.
Yes, hi, good morning, Thank you.
Speaker 7: transcript
Speaker 7: I think my first question, I'll ask a few questions and they're all gonna be somewhat related to the idea that
I think my first question.
So I'll ask a few questions and they're all going to be somewhat related to the idea that.
Speaker 7: transcript
Speaker 7: revenues were up a smidge in you know year over year but the operating
Revenues were up.
Smidgen year over year, but.
Okay, but the operating.
Speaker 7: transcript
Speaker 7: Income and the margins had improved, you know disproportionately.
Income in the margins had improved.
Disproportionately.
Speaker 7: transcript
Speaker 7: First thing I'd like to ask you about is maybe if you could highlight the trends in Asia and your Asian activities in particular, so I guess foundry.
Firstly I'd like to ask you about is maybe if you could highlight the trends in Asia and Eurasia activities in particular, so I guess foundry.
Speaker 7: transcript
Speaker 7: and PCC amongst them. But is it fair to say that those businesses are still trending, let's say below year earlier levels, but they've probably improved sequentially through this year. And then if that is the case, I mean, how close would you say they are to, let's say, being fully recovered?
In PCC.
But is it fair to say that those businesses are still trending let's say below year earlier levels, but they've probably improved sequentially through this year and then.
That is the case I mean, how close would you say they are too.
Let's say being.
Fully recovered in your mind.
Speaker 2: transcript
Speaker 2: So Dave, is your question specifically around Asia across the board, or is it just kind of a question on mix of...
So David your question specifically around Asia.
Across the board or is it just kind of a question on mix of <unk>.
Speaker 7: transcript
Speaker 7: Yeah, it's a I'm sorry it wasn't I wasn't very precise, but I'm you know, I'm thinking about trends in China and then the balance of Asia, I guess including India, you know outside of China, but you know your longer term growth programs there, you know have been
Ups and downs, just want to make sure I answer quite yet.
I'm sorry, it wasn't I wasn't very precise, but I'm thinking about trends in China and then.
The balance of Asia, including India.
Side of China, but China your longer term growth.
Programs there.
Ben.
Speaker 7: transcript
Speaker 7: somewhat disturbed, I guess, or moved. You know, to have the environment has changed over the last couple of years, but just thinking about how the trend has been sequentially. And, you know,
Somewhat disturbed I guess or move.
To have the environment has changed over the last couple of years, but just thinking about how the trend has been sequentially.
And.
Speaker 7: transcript
Speaker 7: How close are you back to, let's say, where you were a year or two ago?
How close are you back to let's say where you were.
Or two ago.
Okay.
So let me I'm going to.
Speaker 2: transcript
Speaker 2: Set this up and then I'll probably give it to Brett and DJ to talk about their specific businesses in the market and China.
Set this up and then I'll, probably give it to Bret D. J D talk about their specific businesses and the market in China.
Speaker 2: transcript
Speaker 2: Where the market is today is different from where we are. Right? So the market, I think in general, and two different markets, or major markets in China would be paper packaging and our manufacturing market.
Where the market is today is different from where we are right.
So the market I think in general in two different markets, our major markets in China would be paper and packaging and the foundry market.
Sure.
Speaker 2: transcript
Speaker 2: We are a different place than where that market may be. And I think the market is probably back to where it was pre-COVID levels or somewhere in there, but we're well ahead of that in many of them. And that's due in both of those businesses. And that's due to the penetration that we see as we've been driving through the market. So even though the demand levels may be back to pre-COVID levels or a little bit further.
We are a different place than where that market may be and I think the market is probably back to where it was pre COVID-19 levels or somewhere in there, but we're well ahead of that and many of them and thats due in both of those businesses and that's due to the penetration that we see as we've been driving through the market. So even though the demand levels may be back to pre COVID-19 levels or a little.
Further we've continued to grow we continue to grow with our products will continue to grow into packaging, we've been continuing to grow in our blended products business. So it's so so we're doing well.
Speaker 2: transcript
Speaker 2: We've continued to grow. We've continued to grow with our products, we've continued to grow into packaging, we've been continuing to grow in our blended products business. So we're doing well, and even if the market isn't hasn't grown at its normal rates over the past two to three years. So let me start with DJ. Maybe get some color on paper and packaging and where we are in China and India.
And even if the market isn't hasnt grown at its normal rates over the past two to three years. So let me start with DJ maybe get some color on paper and packaging and where we are in China and India.
Speaker 2: transcript
Speaker 2: versus the market. Certainly. So, David, thanks for the question. Look.
The market certainly.
So David Thanks for the question look.
Speaker 2: transcript
Speaker 2: As we've been saying, our penetration, our growth story for Asia on the paper side is penetration and the introduction of new products. So what you're seeing in this quarter's results is good growth on the sales, good growth on the volumes, good growth and contributing on the overall income. On top of that is we look at the immediate trajectory we've been...
As we've been saying our penetration our growth story for Asia on the paper side.
As penetration and the introduction of new products. So so what youre seeing in this quarter's results is good growth on the sales good growth on the volumes could growth and contributing on the overall income on top of that as we look at the immediate trajectory we've been.
Speaker 2: transcript
Sharing with everyone our growth plans and just this last quarter, we did startup one of the new satellites.
In India, and then our next quarter, even as I speak were ramping up a couple of satellites in China.
Included in those satellites.
Major.
Yeah.
Speaker 2: transcript
Speaker 2: major piece that goes into packaging that the new product offering GCC, so that's just coming online now. We had talked last quarter about the fact that one of those satellites, the one in India, was also the new yield offering. Then on top of that, as we go into the next quarter, we've got, you know,
Major piece that goes into packaging, it's a new product offering GCC. So thats just coming online now.
Had talked last quarter about the fact that one of those satellites. The one in India was also the new yield offering and then on top of that as we go into the next quarter we've got.
Yes.
Speaker 2: transcript
Speaker 2: Part of 2020 for we've got yet another new satellite coming on in China. So our growth you're seeing is all about the penetration that we've been working up to and there's more growth to come from just that penetration and the introduction of new products. So we're pretty good spot in Asia.
Early part of 2024, we've got.
Yet another new satellite coming on in China, So far.
The growth Youre seeing is is all about the penetration that we've been.
<unk> been working up too and there is more growth to come from just that penetration and the introduction of new products. So we're in pretty good spot in Asia.
And Brett you want to talk about the foundry market.
Speaker 8: transcript
Speaker 8: Sure, Doug. Hi, David. Look, historically, green-fam bonds have been split about 50-50 between Asia and North America.
Sure Hi, David.
Look historically greensand bonds.
Been split about 50, 50 between Asia, and North America and of course in Asia, China makes up the bulk of that.
Speaker 8: transcript
Speaker 8: North America. And of course, in Asia, China makes up the bulk of that. As the China market continues to recover...
As the China market continues to recover.
Speaker 8: transcript
Speaker 8: Our green-tam bond business has shown continuous improvement quarter on quarter. In fact, we're probably 7 or 8 percent, we've seen 7 or 8 percent growth year on year. But it does have a bit more room to go to hit its peak levels from 2021.
Our greensand bond business is showing continuous improvement quarter on quarter. In fact, we're probably 7% or 8%, we've seen seven or 8% growth year on year.
But it does have a bit more room to go to hit its peak levels from 2021.
Speaker 8: transcript
Speaker 8: We do expect the fourth quarter to remain similar with maybe a little bit more growth. So we definitely have some room and we're also working on the 2024 plan now. So also expect to see some modest improvement.
We do expect the fourth quarter to remain similar with maybe a little bit more more growth. So we definitely have some room and we're also working on the 2024 plan now. So also expect to see some modest improvement for for next year or two so so I think we're in a good position and we definitely have growth potential.
Speaker 8: transcript
Speaker 8: So I think we're in a good position and we definitely have growth potential. Special.
Actually in China.
Speaker 7: transcript
Speaker 7: Okay, great. Yeah, no thank you for the color up from from both of you. I appreciate it. Doug, this is more of a question maybe about pricing. So you know over the past year or two, you know your company's been...
Okay. Okay, great Yeah, no. Thank you for the color from from both I appreciate it.
Doug This is more of a question may be about.
Pricing.
Sure.
So over the past year or two.
Your company has been.
Speaker 7: transcript
Speaker 7: pushing for price, maybe to offset higher costs and cost inflation in general and some special situation.
Pushing for price maybe to offset.
Higher costs and.
Cost inflation in general in some special situations.
Speaker 7: transcript
Speaker 7: But, you know, I'm guessing that I'm thinking that we're kind of in a slightly different environment right now, and Doug, you know, I'm gonna quote you here, but you always talk about pricing for value. And, you know, I guess without the tailwind, as much of a tailwind in a cost inflationary environment, I mean,
But.
I'm guessing, but I'm thinking that we're kind of in a slightly different environment right now and I'm going to quote you here, but you always talk about pricing for value.
And I guess without the tailwind as much of a tailwind.
Cost inflationary environment.
Speaker 7: transcript
Speaker 7: you know how important would you say incrementally getting price you know is to hitting those twenty twenty five targets and then in particular you know what are the prospects you know for your portfolio or if you want to call out one or two areas but what would you say you know are the prospects for getting incremental pricing
How important would you say.
Incrementally.
Getting price.
Is to hitting those 2025 targets and then in particular what are the prospects for your portfolio or if you want to call out one or two areas, but what would you say.
Are the prospects for getting incremental pricing.
Speaker 7: transcript
Speaker 7: even on your best valued products.
Even on your bed.
Valued products.
Speaker 7: transcript
Speaker 7: best value proposition products in let's say the current kind of mixed environment.
Best value proposition products, and let's say the current kind of mixed environment.
Yeah, you took my answer off the table you say, we price on value. So David I guess, there is still room to go and I think there always has been I don't.
Speaker 2: transcript
Speaker 2: You took my answer off the table. You say we price on value. So no, but David, I guess there's still room to go. And I think there always has been. I don't, I guess I'll go back and say we've always had price increases. We've always looked to price our products appropriately.
I guess I'll go back and say, we've always had price increases we've always look to price our products appropriately to.
Speaker 2: transcript
Speaker 2: you know, to the value that they deliver and that our products get the fair share of that value with our customers. And I think over the long term and with our relations with customers, that gets to a really good spot. And I think some of the products that we're developing and designing deserve higher margins. They will be higher margins out there in the marketplace.
The value that they deliver it.
Our products get the fair share of that value with our customers and I think over the long term and with our relations with with with customers that gets to a really good spot and I think some of the products that we're developing and designing deserve higher margins they will be higher margins out there in the marketplace.
Speaker 2: transcript
Speaker 2: So we've always gotten pricing for our products. It just looked like the only reason we were pricing in the past two years is to catch up on inflation. So yes, we had to make sure that we were pushing through the cost that we were absorbing to get that price. But I think now we're back into a place where there is that normal type value driven pricing that will happen. And.
So we've always gotten pricing for our products. It just looked like the only reason we were pricing in the past two years is to catch up on inflation. So yes, we had to make sure that we were pushing through the costs that we're absorbing to get that price, but I think now we're back into a place where there is that normal type value driven pricing.
Happen and.
Speaker 2: transcript
No.
Still elements like labor inflation in energy and we'll make sure that we get through and capture that but we're always going to price our products based on the value they deliver.
Speaker 2: transcript
Speaker 2: I think that it's not necessary for us to, that incremental pricing isn't the lever that's going to get us to 15%.
Think that.
It is not necessary for us to that incremental pricing isn't the lever that's going to get us to 15%.
Speaker 2: transcript
Speaker 2: There's other structural elements that I've kind of outlined that will help that. Having a company that has more balanced kind of growth profile. So slower in times and markets are weak, but then when they start to line up, that stable growth of our consumer products mixed with the cycle that goes kind of up and down in some of our other markets will provide a stable level of revenue growth.
I think theres other structural elements that I've kind of outlined that will help that having a company that has more balanced kind of.
Growth profile, so slower in times when markets are weak, but then when they start to line up that stable growth of our consumer products mixed with the cycle that goes kind of up and down in some of our other markets will provide a stable level of revenue growth.
Speaker 2: transcript
Speaker 2: And that growth comes with higher margin products.
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That growth comes with higher margin products.
Speaker 2: transcript
Speaker 2: and our ability, our operating model of the company to be able to hold six costs. We've got lots of capacity in our plants.
And our ability our operating model of the company to be able to hold fixed costs. We've got lots of capacity in our plants. We have got a great operating model and operational excellence to squeeze more productivity and pushed product through we're always working at ways to find waste in our systems, our business systems and in our manufacturing.
Speaker 2: transcript
Speaker 2: We've got a great operating model and operational excellence to squeeze more productivity and push product through. We're always working at ways to find waste in our systems, our business systems, and in our manufacturing processes. You know, we...
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Speaker 2: transcript
Speaker 2: 9,000 kaizan events were on track almost 10,000 kaizan events this year Looking for ways to remove waste of that model
<unk> 9000, kaizen events are on track almost 10000 kaizen events of this year, we were looking for ways to remove waste. So that model provides a really good way to hold fixed costs to get high asset utilization and hold them necessary expansion capex.
Speaker 4: transcript
Speaker 2: provides a really good way to hold fixed costs.
Speaker 2: transcript
Speaker 2: to get high asset utilization and hold down necessary expansion cap back.
Speaker 2: transcript
Speaker 2: Those elements, not just pricing alone or incremental pricing, it's those three things that are going to really drive margins higher as we leverage that base as those higher margin products take hold and yes, some incremental pricing on some other things. But it's a combination of things and I don't think that pricing
Those elements not just pricing alone or incremental pricing. It's those three things that are going to really drive margins higher as we leverage that base as those higher margin products take hold and yes, some incremental pricing on some other things, but it's a combination of things and I don't think that pricing.
Speaker 2: transcript
Speaker 2: It's going to be an element, but I don't think it's going to be it's the only driver we need to get to our margins. I think we're well on on track with with kind of just the way the company is structured to get there.
It's going to be an element, but I don't think its going to be it's the only driver we needed to get to our margins I think we're well on track with kind of just the way the company is structured to get there on its own.
Okay.
Speaker 7: transcript
Speaker 7: Okay, no, thank you for that. And then just one last one, maybe for DJ, but.
Okay no. Thank you for that and then just one last one maybe for DJ but.
Speaker 7: transcript
I typically focus on PCC, but I heard today in the opening remarks about our record record performance in your GCC unit.
And.
Speaker 7: transcript
Speaker 7: I'm assuming that's not related to the China project, that that's separate. But for the record, what would you cite for the record performance in GCC? And of course, just what's the outlook for continued growth in that unit, in that product in 2024?
I'm, assuming that's not related to the China project that that separate but for the Rick What would you say for the record performance in GCC and of course, just what's the outlook for continued growth.
And that unit in that product in 2024.
Okay.
Speaker 9: transcript
Speaker 9: So David, that particular unit serves as GCC into non-paper applications. Doug was highlighting it on the West Coast. It's more specifically it's our operation in Lucerne Valley, California. And what we are seeing there is that complement of products.
So David.
Particular unit serves as GCC and non paper applications, Doug was highlighting it on the West coast, It's more specifically, it's our operation in Lucerne Valley, California.
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And what we are seeing there is is that complement of products.
Speaker 9: transcript
Speaker 9: is well situated for the demand in California right now, which is balanced between the dual yourself sort of improvements, a little bit with new startups, not so much that we saw this time, but it's calling the things like roofing in the tile flooring and in glass and those elements. So that's certainly helping on the demand part.
<unk> is well situated for the demand in California, right now which is balanced between the.
Do it yourself sort of improvements a little bit with with.
With new startups, not so much that we saw this time, but its calling into things like roofing.
And the tile flooring and into glass and those elements. So that's certainly helping on the on the demand part.
Speaker 9: transcript
Speaker 9: What we also were just trying to highlight for that team, that they've been really extraordinary implementing all those elements.
We also were just trying to highlight for that team they've been really extraordinary implementing all of those elements.
Speaker 9: transcript
Speaker 9: uh... that uh... to which dog was just referring on on oe there's a lot of engagement from the employees looking for ways to to leverage that those assets the bottle neck at a relatively low cost and become better at serving our customers uh... fast
To which Doug was just referring on on OE.
A lot of engagement from the employees looking for ways to to leverage that those assets debottleneck at a relatively low cost and become better at serving our customers faster.
Speaker 9: transcript
Speaker 9: They've also been on the leading edge of implementing some of our sustainability improvements, like things like changing from diesel and the biofuel and just staying one step ahead of...
I've also been on the leading edge of implementing some of our sustainability.
Improvements like things like changing from diesel and the biofuel and just staying one step ahead of.
Sure.
Speaker 9: transcript
Speaker 9: of the trends and which is put them in a good position. So a very strong record, you say, how does that look for going forward? I can't tell you it's going to be a record every quarter, David. I'm just saying that they have gotten to a new place and it's a good place to be and we're pretty proud.
The trends and which has put them in a good position. So a very strong record you say how does that look for going forward I can't tell you, it's going to be a record every corner David I'm, just telling that they have gotten to a new place and it's a good place to be and we're pretty proud of.
Speaker 2: transcript
Speaker 2: David, I appreciate you asking the question. And I put it in my speech because of that reason. I wanted to highlight that in a challenging market like residential construction.
David I appreciate you asking the question and I put it in my speech because of that reason I wanted to highlight that in a challenging market like residential construction we can.
Speaker 2: transcript
Speaker 2: We can push through and make great results. And that business has been doing this. That one facility is a great example of our ability to really work as a team, deliver higher level of productivity through put and be able to take on higher levels of sales and utilize those assets. So that's why I've got three records from that facility. And I just wanna say congratulations to them.
We can push through and make great results and that business has been doing this.
That one facility is a great example of our ability to really work as a team deliver higher levels of productivity throughput and be able to take on higher levels of sales and utilize those assets and so that's why we've got three records from that facility I just wanted to say congratulations to them.
Speaker 7: transcript
Speaker 7: Yeah, thank you for that. I did think that that GCC was tied to construction, which made me scratch my head, but I did air, I thought that was for GCC as a whole and not just a specific facility. Anyway, I'll stop there. Thank you all. Thank you for all the color. Thank you.
Yes. Thank you for that I did think that that TCT was tied to construction, which made me scratch my head.
Good Air I thought that was for GCC as a whole and not not just a specific facility.
I'll stop there. Thanks. Thank you all and thank you for all the color. Thank you. Thanks David.
Okay.
Speaker 3: transcript
Speaker 3: At this time, I'd like to turn the call back to Mr. Dietrich for an closing remark.
At this time I would like to turn the call back to Mr. Dietrich for any closing remarks.
Thanks, Melinda I appreciate that thank you to everyone who joined today I appreciate your listening in I appreciate the questions.
Speaker 2: transcript
Speaker 2: Thanks, Melinda. I appreciate that. Thank you to everyone who joined today. I appreciate you listening in. I appreciate the questions. Looking forward to a strong fourth quarter and we'll be back talking to you, I think, in the January . I think the date is. Thank you very much.
Looking forward to a strong fourth quarter and we'll be back talking to you I think end of January I think the data it. Thank you very much.
Speaker 3: transcript
Speaker 3: Thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.
Thank you. This does conclude today's teleconference. We thank you for your participation you may disconnect your lines at this time.
Sure.
Yeah.