Q4 2023 Minerals Technologies Inc Earnings Call

Operator: Thank you. Good day, everyone, and welcome to the fourth quarter 2023 Minerals Technologies conference call. Today's call is being recorded. At this time, I would like to turn the conference over to Lidia Kopilova, Head of Investor Relations for Minerals Technologies. Please go ahead.

Good day, everyone and welcome to the fourth quarter 2023 minerals technologies earnings call.

Today's call is being recorded.

At this time I would like to turn the conference over to Lydia a couple over head of Investor Relations for minerals technologies. Please go ahead Ms Coppola.

Lidia Kopilova: Thank you, Shelly. Good morning, everyone, and welcome to our fourth quarter 2023 earnings conference call. Today's call will be led by Chairman and Chief Executive Officer Doug Dietrich and Chief Financial Officer Eric Aldack. Following Doug and Eric's prepared remarks, we'll 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.

Thank you Shirley and good morning, everyone and welcome to our fourth quarter 2020 earnings Conference call. This call will be led by Chairman and Executive Chief Executive Officer, Doug Dietrich and Chief Financial Officer, Eric I'll Duck Duck notes prepared remarks, we'll 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 our SEC filings disclosed certain risks and uncertainties, which may cause our actual results to differ materially from the forward looking statements.

Lidia Kopilova: Our SEC filings disclose certain risks and uncertainties that may cause our actual results to differ materially from this forward-looking statement. Please also note that some of our comments today refer to non-GAAP financials. The reconciliation to get financial measures can be found in our earnings release and an appendix to this presentation, which is posted on our website. Now I'll turn it over to Doug. Doug?

Also note 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 appendix of this presentation, which are posted on our website now I'll turn it over to Doug Doug. Thanks, Lydia Good morning, everyone and thanks for joining today.

Douglas T. Dietrich: Thanks, Lydia. Good morning, everyone, and thanks for joining us today. Let me start by giving you a quick outline for today's call. First, I'll take you through our fourth quarter and discuss our highlights, and as I do so, I'll walk you through the main drivers of our results and how they align with our long-term strategic initiatives. As you saw in our press release, we had a strong finish to a record year, and I'm excited to share more details in the coming slides. I'm also going to take a few minutes to give you an update on innovation at MTI and highlight a few new products that made an impact on our year and that will continue to do so going forward. Eric will then review the financials and provide an outlook for the next quarter, and I'll close out with an outlook for 2024. We'll be sure to leave plenty of time to take your questions after our remarks. Let's get started with the fourth course.

Let me start by giving you a quick outline for today's call.

First I'll take you through our fourth quarter and full year highlights and as I do so I'll walk you through the main drivers of our results.

They align with our long term strategic initiatives.

As you saw in our press release, we had a strong finish to a record year and I'm excited to share more details in the coming slides.

I'm also going to take a few minutes to give you an update on innovation at MTI and highlight a few new products that made an impact on our year and then we'll continue to do so going forward.

Eric will then review the financials and provide an outlook for the next quarter and I'll close out with an outlook for 2024 will.

We will be sure to leave plenty of time to take your questions. After our remarks.

Let's get started with the fourth quarter.

Douglas T. Dietrich: Overall, it was another great quarter for us, and I'm happy to report that we set a few performance records, generated record sales levels for a fourth quarter with broad-based growth across our portfolio. Strategic positions in higher growth, consumer markets, and geographies more than offset the softness we saw in a few of our end markets. Sales for the quarter were up 3%, with growth coming from both our segments. Excluding the deconsolidation of Barrett's Minerals Inc. this quarter, our underlying sales for the remainder of the company were up 6%, better illustrating the performance of the ongoing business. Within the consumer and specialty segment, the household and personal care product line continues its stable growth trajectory across all geographies. Engineering Solutions, our High Temperature Technologies product line, drove this segment to another solid quarter. Operating margins expanded to 13.2% this quarter, a 450 basis point improvement over last year.

Overall, it was another great quarter for us and I'm happy to report that we set a few performance records.

We generated record sales levels for our fourth quarter with broad based growth across our portfolio.

Our strategic positions in higher growth consumer markets and geographies more than offset the softness we saw in a few of our end markets.

Sales for the quarter were up 3% with growth coming from both our segments.

Excluding the deconsolidation of <unk> minerals, Inc. This quarter, our underlying sales for the remainder of the company were up 6% better illustrating the performance of the ongoing business.

Within the consumer and specialty segment, our household and personal care product line continues its stable growth trajectory across all geographies.

In the engineered solutions, our high temperature technologies product lines drove this segment to another solid quarter.

Operating margins expanded to 13, 2% this quarter of 450 basis point improvement over last year.

Douglas T. Dietrich: Margins expanded in both segments as we captured input cost savings, improved productivity in our operations, and tightly managed expenses. A record level of sales in these expanded margins yielded $69 million of operating income. Significantly higher than last year, earnings per share came in at $1.28, which is another record for a fourth quarter. We continue to demonstrate the company's strong cash generation profile, delivering $95 million in cash from operations. Another highlight for the quarter was that we announced a doubling of our dividend and, at the same time, initiating a one-year $75 million share repurchase program. Now, I will move on to summarize the full year.

Margins expanded in both segments as we captured input cost savings improved productivity in our operations and tightly managed expenses.

Our record level of sales in these expanded margins yielded $69 million of operating income significantly higher than last year.

And earnings per share came in at a $1 28, which is another record for our fourth quarter.

We continue to demonstrate the company's strong cash generation profile delivering $95 million in cash from operations.

Another highlight for the quarter that we announced a doubling of our dividend and at the same time, initiating a one year $75 million share repurchase program.

Let me move on to summarize our summarize the full year.

Douglas T. Dietrich: And as I do so, you'll see how the similar themes of balanced growth, margin expansion, and cash flow generation light up throughout the year and how they combine to yield a record performance. 2023 was an eventful year for us. We started it by realigning our business segments with our key markets and core technologies to better reflect the MTI of today. This is a major change for the company and undertaken to unlock our hidden potential. Throughout the year, the realignment drove organizational efficiencies, tighter collaboration, and faster decision-making, all leading to higher levels of performance.

And as I do so.

Youll see how similar the similar themes of balanced growth margin expansion and cash flow generation laid out throughout the year and how they combine to yield a record performance.

2023 was an eventful year for us.

We started it by realigning our business segments with our key markets and core technologies to better reflect the MTI today.

This is a major major change for the company and undertaken to unlock our hidden potential.

Throughout the year, the realignment drove organizational efficiencies tighter collaboration and faster decision, making all leading to higher levels of performance.

Douglas T. Dietrich: Back in May, we held an investor day where we outlined MTI's potential for you and communicated our five-year growth and performance targets. One year in, we're right on track to achieve those targets, and we made progress across each of the priority areas. Let's start with sales. Sales for the full year were a record for MTI, driven by growth in both segments.

Back in May we held an investor day, where we outlined MTI has potential for you and communicated our five year growth and performance targets.

One year and we're right on track to achieve those targets and we made progress across each of the priority areas.

Let's start with sales.

Sales for the full year were a record for for MTI and driven by growth in both segments.

Douglas T. Dietrich: Consumer and specialty segments experienced the strongest sales expansion with high single-digit and double-digit growth in our cat litter, animal health, and edible oil and renewable fuel filtration products. These products have strong positions in steadily growing markets, driven by macro trends like expanding pet ownership, increased demand for natural animal feed additives, and the growing demand for renewable fuels. Growth in the engineered solutions segment is primarily driven by refractories, environmental wastewater remediation, and infrastructure drilling products. Sales of these products were driven by the deployment of our newest technologies to support the growing demand for safer and more efficient manufacturing processes, environmental water cleanup, and an increase in infrastructure projects globally. Here's a list of some of the markets we serve and the geographies in which we serve them.

Consumer and specialty segment experienced the strongest sales expansion with high single digit and double digit growth in our cat litter animal health and edible oil and renewable fuel filtration products.

These products have strong positions and steadily growing markets driven by macro trends like expanding.

Pet ownership increased demand for natural animal feed additives and the growing demand for renewable fuels.

Growth in the engineered solutions segment was primarily driven by refractories, environmental wastewater remediation and infrastructure drilling products.

Sales of these products were driven by the deployment of our newest technologies to support the growing demand for safer and more efficient manufacturing processes environmental water cleanup and an increase in infrastructure projects globally.

Due to the nature of some of the markets, we serve and the geographies in which we serve them well.

Douglas T. Dietrich: We'll see fluctuations in demand as economic cycles and other local factors play through. We experienced a few softer markets this year. Despite these pockets, the portfolio performed as expected, sales from our positions and higher-growth consumer markets and geography more than offsetting these areas of temporary lower demand. Long-term growth should average 5% per year.

We will see fluctuations in demand as economic cycles and other local factors play through.

We experienced a few softer markets this year, but despite these pockets.

Portfolio performed as expected.

Sales from our positions in higher growth consumer markets and geographies more than offsetting these areas of temporary lower demand.

Our long term growth should average between average 5% per year with economic and local market factors moving that number up or down slightly in any given year.

Douglas T. Dietrich: Economic and Local Market Factors moving that number up or down slightly in any given year. A great example of what we call our balanced portfolio and how we see our top line performing over the long term. We emphasize how improving margins is a priority focus area for us.

The Great example of what we call our balanced portfolio and how we see our topline performing over the long term.

Emphasized how improving margins was a priority focus area for us and this year operating margins increased by 100 basis points.

Douglas T. Dietrich: And this year, operating margins increased by 100 basis points, continuing to create value for our customers, leverage synergies from the reorganization, Capture Input Cost Savings, and Drive Productivity. Worth noting is that our operating margin for the second half of the year averaged 13.6%, above the target we communicated earlier in the year. Record sales this year were leveraged through these expanded margins to deliver record operating income of $280 million, up 11%, and record EBITDA of $370 million, up 8% over last year, was $5.21, another record for the company. Double-year cash flows improved significantly, and we delivered $234 million in cash from operations, more than double last year, and $140 million in free cash flow. We will use this cash to strengthen the balance sheet, reducing our net leverage to 1.9 times EBIT. As I mentioned earlier, to return capital to shareholders, drive our strategy, and deliver consistent performance. It takes a dedicated and committed team.

We continue to create value for our customers leverage synergies from the reorganization.

Capture input cost savings and drive productivity improvements.

Worth, noting is that our operating margin for the second half of the year averaged $13, 6% above the target we communicated earlier in the year.

Record sales this year were leveraged through these expanded margins to deliver record operating income of $280 million up 11% and record EBITDA of $370 million up 8% over last year.

Earnings per share were $5 21, another record for the company.

Full year cash flows improved significantly and we delivered $234 million in cash from operations more than double last year and $140 million in free cash flow.

Use this cash to strengthen the balance sheet, reducing our net leverage to one nine times EBITDA and as I mentioned earlier to return capital to shareholders.

Drive our strategy and deliver consistent performance.

It takes a dedicated and engaged team a strong operating culture, and an unwavering adherence to our values.

Douglas T. Dietrich: A strong operating culture and an unwavering adherence to our values, the team did a great job this year on all. We have a very strong culture of operational excellence here at MTI, built an environment of continuous improvement thinking, and have equipped employees with the tools and training they need to see, analyze, and remove waste from any manufacturing or business process. Our teams conduct over 30 problem-solving Kaizen events every day around the world and provide suggestions at an extraordinarily high level. Engagement and continuous improvement by our employees is the essence of our high-performance culture and something that sets MTI apart.

Our team did a great job this year on all fronts.

We have a very strong culture of operational excellence here at MTI.

We built an environment of continuous improvement thinking and have equipped our employees with the tools and training they need to see analyze and removed waste from any manufacturing or business process.

Our teams conduct over 30 problem solving and kaizen events everyday around the world and provide suggestions at an extraordinarily high level.

This engagement and continuous improvement by our employees is the essence of our high performance culture, and something that sets <unk> apart.

Douglas T. Dietrich: In summary, 2023 was a transformational year for MTI. The foundation is solid in every aspect, and we intend to build on this year's record performance to deliver another one in 2025. There are a number of key drivers supporting our long-term growth, one of them being innovation.

In summary, 2023 was a transformational year for MTI.

Our foundation is solid in every aspect and we intend to build on this year's record performance to deliver another one in 2024.

There are a number of key drivers supporting our long term growth one of them is innovation.

Douglas T. Dietrich: Innovation has always been a part of MTI's DNA, and we've developed new technologies that are becoming an influential part of our story. I want to take a moment to highlight some of the tremendous work that's happening at MTI and point out a few of our newest products aimed at large market opportunities that have offered us significant growth over the past several years. We've refined our new product development process to accelerate innovation at MTI, shortening the time from ideation to commercialization. We have driven closer collaboration with our customers and focused our efforts on developing the highest value products to meet their needs. The results of our efforts are evident in the chart in the middle, with the percentage of sales from our newest products reaching 18%. A record level for the company, right?

Innovation has always been a part of MTI DNA and we have developed new technologies that are becoming an influential part of our story.

I want to take a moment to highlight some of the tremendous work that's happening at MTI and point out a few of our newest products aimed at large market opportunities that offer us significant growth potential.

For the past several years.

We've refined our new product development process to accelerate innovation at MTI.

<unk> the time from ideation to commercialization.

We drove closer collaboration with our customers and focused our efforts on developing the highest value products to meet their needs.

Results of our efforts are evident on the chart in the middle.

But as a percentage of sales from our newest products, reaching 18% this year a record level for the company.

Douglas T. Dietrich: You can see how balanced the distribution of our innovation pipeline is across all four products. Let me highlight several of these new products and the trends that have driven their development. In the household and personal care product line, we're creating new cat litter formulas aligned with the latest consumer trends and that offer better home hygiene, improved odor control, and help owners with litter box training. We're developing natural feed additives to improve farm animal health and higher performing filtration products targeted at the growing demand for renewable fuel. In Specialty Additives, we're expanding our sustainable recycling technologies for white and brown packaging and developing natural mineral-based barrier coatings for food packaging. At High Temperature Technologies, our new Minscan Scantrol robotic units are transforming the refractory application process in electric arc steel furnaces, and in association with these units, we're developing a software system to provide customers with real-time process data analytics.

On the right you can see how balanced the distribution of our innovation pipeline is across all four product lines.

Let me highlight several of these new products and the trends that have driven their development.

In the household and personal care product line, we're creating new cat litter formulas aligned with the latest consumer trends and that offer better home hygiene improved odor control and help owners with litter box training.

We're developing natural feed additives to improve farm animal health and higher performing filtration products targeted at the growing demand for renewable fuels.

Specialty additives were expanding our sustainable recycling technologies for white, and brown packaging and developing natural mineral based barrier coatings for food packaging.

And high temperature technologies, our new men's scan scan troll robotic units are transforming the refractory application process and electric arc steel furnaces.

And in Association with these units were developing a software system to provide customers with real time process data analytics.

Douglas T. Dietrich: In the environmental and infrastructure product line, we continue to improve our fluorosorb technology aimed at removing forever chemicals in water and soil around the world. And we're developing new drilling fluid additives to support the growing demand for critical infrastructure projects, Grid Hardening, and Geothermal Energy Systems.

In the environmental and infrastructure product line, we continue to improve our Fluoro sorb technology aimed at removing forever chemicals and water and soil around the world.

And we're developing new drilling fluid additives to support the growing demand for critical infrastructure projects like grid hardening and geothermal energy systems.

Eric Aldack: Collectively, we have over 500 products at various development stages in our pipeline, representing over $1 billion in potential future sales. However, not every idea makes it all the way through. But the new products I've highlighted today are good examples of products that came through this development pipeline, leveraging our core technologies and applications expertise to create valuable solutions for large challenges in today's evolving market. Now I'd like to turn it over to Eric to review the details of the financials. Thanks, Doug, and good morning, everyone.

Collectively we have over 500 products at various development stages in our pipeline representing over $1 billion and potential future sales.

Not every idea makes it all the way through.

But the new products I've highlighted today are good examples of products that came through this development pipeline leveraging our core technologies and applications expertise to create valuable solutions for large challenges in today's evolving marketplace.

Now I'd like to turn it over to Eric to review the details of the financials there.

Thanks, Doug and good morning, everyone.

Eric Aldack: I'll begin by summarizing our fourth quarter and full-year financial results, followed by a review of our segments, and I'll also provide our outlook for the first quarter. Following my remarks, I'll turn the call back over to Doug for some additional perspectives on the year ahead. Now let's review our first quarter results. Let me begin by saying that we had another strong performance in the fourth quarter, capping off a very strong year for the company. Sales of $525 million grew 3% and represented a record level for the fourth quarter.

I'll begin by summarizing our fourth quarter and full year financial results followed by a review of our segments and I'll also provide our outlook for the first quarter.

Following my remarks, I'll turn the call back over to Doug for some additional perspective on the year ahead.

Now, let's review our first quarter results.

Let me begin by saying that we had another strong performance in the fourth quarter capping off a very strong year for the company.

Sales of $525 million grew 3% and represented a record level for our fourth quarter.

Eric Aldack: And if you adjust for the deconsolidation of BMI, underlying sales grew 6% year over year, driven by growth in three of our four product lines. Higher selling prices contributed to growth across the portfolio, and we benefited from continued volume growth in household and personal care and high-temperature technology. Fourth quarter operating income was $69 million, up 57% versus the prior year, and Operating Margin was 13.2% of sales. Earnings per share was $1.28, excluding special items.

And if you adjust for the deconsolidation of BMI underlying sales grew 6% year over year driven by growth in three of our four product lines.

Higher selling prices contributed to growth across the portfolio.

And we benefited from continued volume volume growth in household and personal care and high temperature technology.

Fourth quarter operating income was $69 million.

Up 57% versus prior year.

Operating margin was 13, 2% of sales.

Earnings per share was $1 28, excluding special items.

Eric Aldack: And free cash flow was very strong, at $73 million in the quarter. Before I move to the full year, I want to highlight our operating margin performance against the target we set for ourselves for 2023. At our investor day last year in May, we projected that we would exit 2023 with 150 basis points of margin improvement versus 2022 on a run rate basis. Given the typical seasonality we experience in the fourth quarter, the second half of the year is a good indication of where we are from a full-year run rate perspective on margins. Our operating margin for the second half of 2023 was 13.6% of sales, 170 basis points above the full year 2022.

And free cash flow was very strong at $73 million in the quarter.

Before I move to the full year I want to highlight our operating margin performance against the target we set for ourselves for 2023.

At our Investor Day last year in May we projected that we would exit 2023 with 150 basis points of margin improvement versus 2022 on a run rate basis.

Given the typical seasonality we experienced in the fourth quarter. The second half of the year is a good indication of where we are from a full year run rate perspective on margin.

Our operating margin for the second half of 2023 was 13, 6% of sales.

170 basis points above the full year 2022.

Eric Aldack: We achieved this target margin improvement primarily through price cost recovery as well as productivity and variable conversion cost improvements at our recent cat litter acquisition. And this performance in 2023 puts us squarely on track to achieve our targeted 14% run rate operating margin in 2024 and 15% in 2025. Now let's take a look at our full year financial performance. We delivered a solid performance in 2023, with records for sales, operating income, EBITDA, and earnings per share excluding special items. Sales of $2.2 billion were 2% above last year.

We achieved this target margin improvement primarily through price cost recovery as well as productivity and variable conversion cost improvements at our recent cat litter acquisition.

And this performance in 2023 puts us squarely on track to achieve our targeted 14% run rate operating margin in 2024 and 15% in 2025.

Now, let's take a look at our full year financial performance.

We delivered a solid performance in 2023 with records for sales operating income EBITDA and earnings per share excluding special items.

Sales of $2 2 billion were 2% above last year.

Eric Aldack: Looking at the sales bridge on the right side of the slide, you can see growth in both segments as well as in most of our product lines, demonstrating the balance of our portfolio during mixed and market conditions. Operating income increased 11% to $280 million, and operating margin improved 100 basis points to 12.9% of sales. EBITDA was $370 million for the year and represented 17.1% of sales.

Looking at the sales bridge on the right side of the slide you can see growth in both segments as well as in most of our product lines demonstrating the balance of our portfolio during mixed end market conditions.

Operating income increased 11% to $280 million and operating margin improved 100 basis points to 12, 9% of sales.

EBITDA was $370 million for the year and represented 17, 1% of sales.

Eric Aldack: Our full-year earnings per share, excluding special items, was $5.21, a 7% increase compared to 2022. To give you a little more perspective, you can see in the EPS bridge on the bottom left that our revenue performance contributed 70 cents of earnings growth, which more than offset a 37 cent headwind from higher interest expense. Our effective tax rate for the year was 22 percent, and for 2024, we expect our rate to be approximately 23 percent, a slight increase, primarily due to the changes in global tax laws. Free cash flow for the year returns to a more normal level for the company of $140 million for 6.5% of sales.

Our full year earnings per share excluding special items was $5 21.

A 7% increase compared to 2022.

To give a little more perspective, you can see in the EPS bridge on the bottom left that our income performance contributed <unk> 70 of earnings growth, which more than offset a 37% headwinds from higher interest expense.

Our effective tax rate for the year was 22% and for 2024, we expect our rate to be approximately 23%.

<unk> increased primarily due to the changes in global tax laws.

Free cash flow for the year returned to a more normal level for the company of $140 million or six 5% of sales.

Eric Aldack: Now let's review our segment performance in more detail, beginning with consumer and specialty... Fourth quarter sales in the consumer and specialty segment were $280 million, up 3% and up 8% versus last year, excluding BMI. Our household and personal care product line continued on its strong growth trajectory, with sales increasing 13% year over year. Demand for our cat litter products remained strong, and we saw growth in several high-margin specialty products, including double-digit growth in animal health, as well as in edible oil and renewable fuel purification. Underlying sales in our specialty additives product line were 3% above the prior year, XBMI, as sales from our newest paper and packaging satellites in Asia offset lower volumes in North America. Fourth quarter operating income was $36.6 million, a significant increase over the prior year, and operating margin was 13% of sales.

Now, let's review our segment performance in more detail, beginning with consumer and specialty.

Fourth quarter sales in the consumer and specialty segment with $280 million up 3% and up 8% versus last year, excluding BMI.

Our household and personal care product line continued on its strong growth trajectory with sales increasing 13% year over year.

Demand for our cat litter products remained strong and we saw growth in several high margin specialty products, including double digit growth in animal health as well as in edible oil and renewable fuel purification.

Underlying sales in our specialty additives product line were 3% above prior year ex BMI.

As sales from our newest paper and packaging satellite in Asia, offset lower volumes in North America.

Fourth quarter operating income was $36 6 million a significant increase over the prior year and operating margin was 13% of sales.

Eric Aldack: The improvement in operating income was driven by volume increases in our household and personal care product line, selling price adjustments, and favorable input costs compared to the inflationary spike in energy and logistics that we absorbed last year in Europe. Turning to the full year stats on the right side, segment sales of $1.2 billion increased 3%. Our household and personal care product line delivered 9% growth on continued strong demand for cat litter, while customer de-stocking impacted sales for some of our high-margin specialty products. We saw 34% growth in animal health, and 9% growth in edible oil and renewable fuel purification. In specialty additives, underlying sales were 1% higher.

The improvement in operating income was driven by volume increases in our household and personal care product line selling.

Selling price adjustment.

And favorable input costs compared to the inflationary spike in energy and logistics that we absorbed last year in Europe.

Turning to the full year stats on the right side.

Segment sales of $1 2 billion grew 3%.

Our household and personal care product lines delivered 9% growth on continued strong demand for cat litter.

While customer Destocking impacted sales for some of our high margin specialty product, we saw 34% growth in animal health.

And 9% growth in edible oil and renewable fuel purification.

In specialty additives underlying sales were 1% higher.

Eric Aldack: Three new paper and packaging satellites were ramping up in 2023, including our newest satellite dedicated to serving the growing packaging market in China. Despite significantly lower paper volumes in North America and Europe, sales to paper and packaging customers increased, primarily driven by the new satellites in Asia and contractual pricing adjustments. Demand for specialty additives into other end markets, such as construction and consumer products, has been mixed, with residential remodeling activity helping to offset softness in new construction and some destocking in food and pharma.

Three new paper and packaging satellite we're ramping up in 2023.

Including our newest satellite dedicated to serving the growing packaging market in China.

Despite significantly lower paper volumes in North America, and Europe sales to paper and packaging customers increased primarily driven by the new satellites in Asia and contractual pricing adjustments.

Demand for specialty specialty additives into other end markets, such as construction and consumer products has been mixed with residential remodeling activity, helping to offset softness in new construction and some destocking in food and pharma.

Operating income for the segment rose, 24% to $141 million in 2023.

And operating margin improved 210 basis points to 12, 2%.

Eric Aldack: Operating income for this segment rose 24% to $141 million in 2023, and Operating Margin improved 210 basis points to 12.2%. Looking ahead to the first quarter, we expect another strong sales performance from Household and Personal Care, driven by demand for cat litter and improving demand for our specialty products and specialty additives. We expect to see improvement in North America paper and packaging and additional volumes in Asia driven by the ramp-up of our new satellite. However, we remain in the seasonally slower period for construction activities.

Okay.

Looking ahead to the first quarter, we expect another strong sales performance from household and personal care driven by demand for cat litter and improving demand for our specialty products.

In specialty additives, we expect to see improvement in North America paper and packaging and additional volumes in Asia, driven by the ramp up of our new satellite.

However, we remain in the seasonally slower period for construction activity.

Segment operating income for the first quarter is expected to be up slightly sequentially.

Now, let's turn to the engineered solutions segment.

Fourth quarter sales in engineered solutions increased 4% versus the prior year to $243 million.

Eric Aldack: Segment operating income for the first quarter is expected to be up slightly sequentially. Now, let's turn to the Engineered Solutions segment. Fourth quarter sales in Engineered Solutions increased 4% versus the prior year to $243 million. In high-temperature technologies, we continue to see steady demand for foundry and steel applications in North America, and we delivered significant growth in Asia foundry volume. Sales in our environmental and infrastructure product line were 6% lower.

And high temperature technologies, we continue to see steady demand for foundry and steel applications in North America.

And we delivered significant growth in Asia foundry volume.

Sales in our environmental and infrastructure product line were 6% lower driven.

Driven by softness in commercial construction.

Despite some market challenges the segment delivered another strong operating performance.

Operating income in the fourth quarter was $36 7 million, an increase of 16% over the prior year.

And operating margin improved 160 basis points.

Eric Aldack: Driven by softness in commercial construction, Despite some market challenges, the segment delivered another strong operating performance. Operating income in the fourth quarter was $36.7 million, an increase of 16% over the prior year, and Operating Margin improved 160 basis points to 15.1%.

15, 1%.

For the full year segment sales grew 1%.

High temperature technologies product line delivered 3% sales growth.

Demand conditions remained steady through the year in North America, while soft steel market conditions in Europe persisted.

Demand in Asia foundry gradually improved through the year following a slow start in China.

Eric Aldack: For the full year, segment sales grew 1%. The High Temperature Technologies product line delivered 3% sales growth. Demand conditions remained steady through the year in North America while soft steel market conditions in Europe persisted, and Demand in Asia Foundry gradually improved through the year following a slow start in China. Environmental and Infrastructure, however, those were 3% lower, as construction market conditions affected demand for our waterproofing and environmental lining.

And environmental and infrastructure sales were 3% lower as construction market conditions affected demand for our waterproofing and environmental lining systems.

Sales for remediation and wastewater solutions were a bright spot increasing more than 40% compared to last year.

We also saw double digit double digit growth in our drilling product sales driven by an uptick in demand from sustainable geothermal energy projects and from infrastructure projects.

Full year operating income improved 3% to $151 million in 2023.

Eric Aldack: Sales for remediation and wastewater solutions were a bright spot, increasing more than 40 percent compared to last year. We also saw double-digit growth in our drilling product sales, driven by an uptick in demand from sustainable geothermal energy projects and from infrastructure projects. Full-year operating income improved 3% to $151 million in 2023, and Operating Margin improved 30 basis points to 15%. Turning to the first quarter, we expect to see mostly similar market conditions across both product lines, and we expect operating income to be similar to the fourth quarter. Now let's review our balance sheet and cash flow highlights. We delivered strong cash flow in the fourth quarter, with $95 million of cash from operations and $73 million of free cash flow, bringing our full year free cash flow to $140 million. Capital expenditures were $94 million for the year.

And operating margin improved 30 basis points to 15%.

Turning to the first quarter, we expect to see mostly similar market conditions across both product lines.

And we expect operating income to be similar to the fourth quarter.

Now, let's review, our balance sheet and cash flow highlights.

We delivered strong cash flow in the fourth quarter with $95 million of cash from operations and $73 million of free cash flow, bringing our <unk>.

Full year free cash flow to $140 million.

Capital.

<unk> were $94 million for the year.

Our strong free cash flow in 2023 marks a return to more normal levels of cash flow generation for the company.

As the inflationary impact on our working capital has subsided.

As we look ahead to 2024, we expect another solid year of free cash flow generation in the $140 million to $160 million range.

During the year, we used our cash flow to pay down $49 million in debt and we returned $22 million to shareholders through $14 million of share repurchases and $8 million of dividend.

Eric Aldack: Our strong pre-cash flow in 2023 marks the return to more normal levels of cash flow generation for the company, as the inflationary impact on our working capital has subsided. As we look ahead to 2024, we expect another solid year of free cash flow generation in the $140 to $160 million range. During the year, we used our cash flow to pay down $49 million in debt, and we returned $22 million to shareholders through $14 million of share repurchases and $8 million of dividends. The balance sheet remains very strong.

The balance sheet remains very strong.

We ended the year with total liquidity over $500 million.

And a net leverage ratio of one nine times EBITDA.

Now I'll summarize our outlook for the first quarter.

Overall for MTI, we expect a similarly strong performance in the first quarter.

In consumer specialties, we see continued strong demand in household and personal care and.

And in specialty additives higher sales in paper and packaging driven by new satellites and improving demand in North America.

And similar conditions to the fourth quarter for other end market.

Eric Aldack: We ended the year with total liquidity exceeding $500 million and a net leverage ratio of 1.9 times EBITDA. Now, I'll summarize our outlook for the first quarter. Overall, for MTI, we expect a similarly strong performance in the first quarter. In consumer and specialties, we see continued strong demand for household and personal care. And in specialty additives, higher sales in paper and packaging driven by new satellites and improving demand in North America, and similar conditions to the fourth quarter for other end markets. In engineered solutions, we expect similar demand conditions in high-temperature technologies across North America and Europe, with sequentially lower volumes in Asia due to typical seasonality around the lunar new year. And in Environmental Infrastructure, we will experience similar seasonal conditions to the fourth quarter.

In engineered solutions, we expect similar demand conditions and high temperature technologies across North America, and Europe with sequentially lower volumes in Asia due to typical seasonality around the lunar new year.

And in environmental and infrastructure, we will experience similar seasonal conditions to the fourth quarter.

Overall for the company, we expect operating income of approximately $70 million up around 10% from the prior year and EPS between $1 25.

$1 30.

Which would also represent growth of at least 10% from last year.

Continuing on our profitable growth trend and continuing our solid earnings trajectory.

Now I'll turn the call back over to Doug for some additional perspective on 2024. Thanks.

Douglas T. Dietrich: Overall, for the company, we expect operating income of approximately $70 million, up around 10% from the prior year, and EPS between $1.25 and $1.30, which would also represent growth of at least 10% from last year, continuing on our profitable growth trend and continuing our solid earnings trajectory. Now, I'll turn the call back over to Doug for some additional perspective on 2024. Thanks, Eric.

Thanks, Eric.

As we move into 2024, our priorities are clear.

<unk> strengthening the MTI business model by continuing our penetration into higher growth markets.

Developing new and innovative products.

Expanding margins and maintaining strong cash flow generation.

On the sales front as we head into the year, we're seeing generally stable and in some cases more positive trends across our end markets.

Our consumer oriented markets like pet litter animal health and edible oil and renewable fuel filtration remains strong and we will deliver another year of high single digit to double digit growth.

Douglas T. Dietrich: As we move into 2024, our priorities are clear, further strengthening the MTI business model by continuing our penetration into higher growth markets, developing new and innovative products, expanding margins, and maintaining strong cash flow generation on the sales front as we head into the year. We're seeing generally stable and, in some cases, more positive trends across our end market. Consumer-oriented markets like pet litter, animal health, and edible oil and renewable fuel filtration remain strong and will deliver another year of high single-digit to double-digit growth. Our businesses in Asia will also continue to grow in 2024 with the ramp-up of our newest packaging satellites and stronger foundry markets compared to last year. One additional item to highlight, since our last call, we've signed two additional long-term contracts for paper and packaging satellites in Asia. One in India and another for ground calcium, carbonate, and new yield for a packaging application in China.

Our businesses in Asia will also continue to grow in 2024 with the ramp up of our newest packaging side alone.

And stronger foundry markets compared to last year.

One additional item to highlight since our last call. We've signed two additional long term contracts for paper and packaging satellites in Asia.

One in India, and another for ground calcium carbonate and new yield for our packaging application in China.

These will be constructed over the course of this year and likely startup late this year or early next.

Other markets, such as automotive steel and residential construction are expected to remain stable and at similar levels to last year.

Markets would show improvement this year are North America paper and packaging and personal care.

Is the Destocking, we saw last year comes to an end and volumes in these businesses rebound.

One area, where we haven't seen much change is the commercial construction market. So we could see some recovery in project activity in the second half of the year.

Douglas T. Dietrich: These will be constructed over the course of this year and likely start up late this year or early next. Other markets, such as automotive, steel, and residential construction, are expected to remain stable and at similar levels to last year. Markets that show improvement this year are North America paper and packaging and personal care, as the de-stocking we saw last year comes to an end, and volumes in these businesses rebound. One area where we haven't seen much change is the commercial construction market, though we could see some recovery in project activity in the second half of the year. As Eric mentioned, we're targeting a 14% operating margin by the end of 2024 and are on track to achieve this with strong pricing.

As Eric mentioned, we're targeting 14% operating margin by the end of 2024 and are on track to achieve this with strong pricing.

Higher margin product mix diligent cost control and continuous improvement in our operations.

Sales growth and stronger margins will continue to generate higher cash flow.

This gives us the resources, we need to keep the balance sheet in a solid position while at the same time, providing us with the flexibility to pursue both M&A opportunities and return capital to shareholders.

In summary, I see 2020 for setting up to be another strong year for MTI.

The combination of our positions in growing markets differentiate differentiated technologies and applications expertise financial stability global mineral reserves and a strong culture is what truly sets <unk> apart and a formula that will continue to drive long term value for shareholders.

Douglas T. Dietrich: Higher Margin Product Mix, Diligent Cost Control, and Continuous Improvement in our operations, sales growth, and stronger margins will continue to generate higher cash flow. This gives us the resources we need to keep the balance sheet in a solid position, while at the same time providing us with the flexibility to pursue both M&A opportunities and return capital to shareholders. In summary, I see 2024 setting up to be another strong year for MTI. The combination of our positions in growing markets, differentiated technologies and applications expertise, financial stability, global mineral reserves, and a strong culture is what truly sets MTI apart and a formula that will continue to drive long-term value for shareholders. I'd like to thank our teams at MCI for a great year, and thank you for joining the call.

I'd like to thank our teams at MTI for a great year and thank you for joining the call today.

Now, let's go to questions.

Yeah.

And if anyone would like to ask a question. Please signal by pressing star one on your telephone keypad.

If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment, Hey, Blake popped on the phone line will indicate that your line is open again, you can press star one to ask a question, we'll pause for a brief moment to allow everyone an opportunity to signal for questions.

Yes.

Okay.

Our first question is coming from Daniel Moore with CJS Securities. Your line is open.

Douglas T. Dietrich: Let's go to questions, www.microsoft.com. And if anyone would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach us. A voice prompt on the phone line will indicate that you're ready to ask a question. Again, you can press star 1 to ask a question.

Thank you good morning, Doug Good morning, Erika I appreciate the color and thanks for taking my questions.

With kind of the topline outlook.

You you've got a longer term kind of 5% growth target do you have a lot of great color around that.

The various end markets as we enter the year.

How do you see fiscal 2004 shaping up from a topline growth perspective relative to that longer term, 5% alcohol go obviously visibility isn't perfect but.

Operator: We'll pause for a brief moment to allow everyone an opportunity to ask a question, www.microsoft.com. Our first question is coming from Daniel Moore with CJS Securities. Thank you. Morning, Doug. Morning, Eric.

Douglas T. Dietrich: Appreciate the color and thanks for taking questions. Start with kind of the top line outlook. You've got a longer term kind of 5% growth target, and give a lot of gray color around, you know, the various end markets as we enter the year. You know, how do you see fiscal 24 shaping up from a top line growth perspective relative to that longer term 5%? Visibility isn't perfect, but where do you see the biggest puts and takes that could cause you to hit that?

Where do you see the biggest puts and takes that could cause you to hit that maybe come up a little shy or or even exceed it.

Yes, let me give you a little perspective on how this year around 3% kind of growth excluding BMI than the underlying business.

And then so let me characterize it 80% of the company grew last year and 20% didn't.

Or kind of went backwards a bit.

And we see and what I tried to highlight is that 80% is going to continue to grow and grow strong again. This year, and then 20%, which is paper and packaging some of the destocking that we saw commercial construction.

Douglas T. Dietrich: Maybe, you know, come up a little shy or, Yeah, let me give you a little perspective on how, so this year, around 3% kind of growth, you know, excluding BMI and the underlying business. And then, so let me characterize it, 80% of the company grew last year and 20% didn't, you know, or kind of went backwards a bit. So, and I try to highlight this, that 80% is going to continue to grow and grow strong again this year. And that 20%, which is, you know, paper and packaging, some of the destocking that we saw, commercial construction, the majority of that, I think, starts to move back forward. We're seeing the early signs of a rebound in some of those destocking markets, so we see those volumes rebounding. That leaves commercial construction, which right now looks a bit sideways from where we are, to improve later next year.

The majority of that I think starts to move back forward we're seeing.

Early signs of a rebound in some of those destocking market. So we see those volumes rebounding that leaves commercial construction, which right now looks a bit sideways from where we are could improve later next year.

That tells me that that 3% kind of referred back up to that 5% on average and could go higher depending on what happens with commercial construction alright. So when everything is going and things are really booming I think we go back up to that 7% local factors could change that but that's why we highlighted that 5% average over time plus.

Or minus two on either side of that depending on economic factors and local but I think we're reverting back up to that that average growth rate could exceed it depending on commercial construction.

Really helpful.

To what extent do you expect pricing to be.

I guess I should say, what do you expect pricing impact to be both each one and for full year on that overall growth.

Douglas T. Dietrich: That tells me that, you know, that 3% kind of reverts back up to that 5% on average and could go higher depending on what happens with commercial construction, right? So, you know, when everything's going well and things are really booming, I think we go back up to that 7%. Little local factors could change that, but that's why we highlighted that 5% average over time, plus or minus two on either side of that, depending on economic factors and local conditions. But I think we're reverting back to that. That average growth rate could exceed it, depending on the commercial. It is really helpful.

It could be another positive impact this year, we still have stronger pricing in the pipeline. There is pockets that we're continuing to.

To drive the value and get price for it.

I can't I can say, it's probably not going to be at the levels. We saw over the past couple of years, where we're pushing through almost $200 million of pricing, but still great opportunities to make sure that we're getting the value for the products.

That we deliver to our customers.

Very helpful and maybe splitting hairs, but just to make sure. We're on the same page.

The 14% operating margin that is sort of exit run rate for 2024 is that the expectation for the full year.

Douglas T. Dietrich: To what extent do you expect pricing to be, I guess I should say, what do you expect the pricing impact to be both, you know, H1 and for the full year on that overall? That's going to be another positive impact this year. We still have, you know, stronger pricing in the pipeline. There are pockets that we're continuing to drive value and get prices for it. You know, I can say it's probably not going to be of the levels we saw over the past couple of years where we're pushing through almost 200 million dollars in pricing, but still great opportunities to make sure that we're getting value for the products that we deliver to our customers. Yeah, Dan. This is Eric.

Yes, Dan this is Erik thanks for the question right now we feel really good about that 14% I indicated in the in the in the prepared remarks that that's a run rate by the end of the year, but we have really good line of sight to achieving that 14%.

It's all of the three margin levers that we talked about we've been talking about since investor day at pricing, it's fixed cost leverage including more to come in pet care that we've been talking about its continued mix improvement from the new products that we're launching.

So I'd say if markets stay where they are we feel really good about that 14% run rate by the end of the year.

Doug was talking about.

If the 20% of market start to go in our favor that werent in our favor last year, we feel better about that on a full year basis as well.

Eric Aldack: Thanks for the question. You know, right now, we feel really good about that 14%. I indicated in the prepared remarks that that's a run rate by the end of the year, but we have a really good line of sight to achieving that 14%. You know, it's all of the three margin levers that we talked about, we've been talking about since Investor Day: pricing, fixed cost leverage, including more to come in pet care that we've been talking about. It's continued mixed improvements from the new products that we're launching. So I'd say, you know, if markets stay where they are, we feel really good about that 14% run rate by the end of the year. And as Doug was talking about, if the 20% of markets start to go in our favor that weren't in our favor last year, we feel better about that on a full year basis as well. Really helpful. I'm going to ask one more related question. If I look at H1 of this year with the exit run rate of H2 of last year of 13.6, would we be at least in the building, or is there anything that would cause you to take a step? Yeah, I think so...

Really helpful I'm going to ask one.

One more related.

If I look at each one of this year with the exit run rate for each two of last year 13 six.

B at least their in building or is there anything that would cause you to take a step back.

Yes, I think that's sorry, Eric.

Her couldnt hear the question I think Youre right were exiting on that same run rate and I think there is opportunities to build on that Dan.

We're going through.

If you look at the fourth quarter and probably a similar as Eric mentioned similar level in the first quarter, but then we start hitting some really strong quarters for us the second and third are typically the strongest for the company.

And like I said some of these markets that are typically strong in the third.

Second and third like paper and personal care and even some of the construction markets, we see them rebounding, where they were soft last year. So we think we're going to we have some real strength go on and especially in the margins going into the end of the middle of the year.

Really helpful jump back with any follow ups. Thanks.

Our next question is coming from Mike Harrison with Seaport Research Partners. Your line is open.

Hi, good morning, Congrats on.

Nice end to the year.

Douglas T. Dietrich: Sorry, Eric couldn't hear the question. I think you're right, we're exiting on that same run rate, and I think there's opportunities to build on that, Dan. I think we're going through, if you look at the fourth quarter, probably as similar as Eric mentioned, a similar level in the first quarter, but then we started hitting some really strong quarters for us. The second and third are typically the strongest for the company.

Thanks, Doug I was wondering if you could give a little bit more color on the strength that you're seeing in that household and personal care business I guess specific to pet care.

Maybe you can talk a little bit about what the growth looked like across the different regions.

Are you benefiting from any share shift towards private label.

Douglas T. Dietrich: And like I said, some of these markets that are typically strong in the second and third quarters, like paper and personal care and even some of the construction markets, we see them rebounding where they were soft last year. So we think we have some real strength going in, especially in the margins going into the middle of the year, really helpful to jump back to them if at all possible. Our next question is coming from Mike Harrison with Seaport Research. Hi, good morning.

And then over on the personal care side.

There's still some destocking headwinds in the fourth quarter or did that appear to kind of subside versus the Destocking you received and maybe Q2 and Q3.

Yeah. Thanks, Mike tell you, but let me give you give that question to DJ and let's talk about the segment.

Give you more color there yeah. Thanks question, Mike So.

First kind of dig in to pet care pet care.

Douglas T. Dietrich: Congratulations on a nice end to the year. Doug, I was wondering if you could give a little bit more color on the strength that you were seeing in the household and personal care business, specifically pet care. Maybe talk a little bit about what the growth looks like across the different regions. Are you benefiting from any share shift toward private label? And then over on the personal care side, you know, was there still some destocking headwind in the fourth quarter? Or did that appear to kind of subside versus the destocking you were seeing in maybe Q2 and Q3. Yeah, thanks, Mike. Tell you what, let me give that question to DJ and let him talk about the segment and give you more color there.

Very strong volumes, we continue to see that trajectory.

As we had imagined earlier in the year, we said that this is going to be growing at a seven 9% sort of rate, we still see that for the R. R.

Our long term outlook.

And feel really good about how we go into this year with that the growth that we're seeing is across both North America and Europe.

And in addition to just the general segment rising we have seen more of a shift too.

The private label.

I'd go further Doug was talking a little bit about our culture.

And he was highlighting some of the operational excellence things that team in particular.

DJ: Yeah, thanks for the question, Mike. So let's first kind of dig into pet care. Pet care has very strong volumes. We continue to see that trajectory. As we had predicted earlier in the year, we said that this was going to be growing at a 7 to 9% sort of rate. We still see that for our long-term outlook and feel really good about how we go into this year with that. The growth that we're seeing is across both North America and Europe. And in addition to just the general segment rising, we have seen more of a shift to private label and stretched their ability to be extremely reliable in delivering on time in full volumes. So that helped us out a lot as the private label was particularly aggressive.

Really improved their ability to to meet all the private label promotions and request.

And stretched their ability to be extremely reliable on.

Delivering on time in full volumes, so that helped us out a lot is the private label was particularly aggressive but we also have further our relationships developing on the brands given our vertical integration. So we're really happy with the way the pet care is going.

There's also some pricing leverage that we still see in that area. Then you had asked about Destocking I would say the destocking was more on the consumer specialty side of things and particularly in the health and beauty solutions and as we're looking at the order books now as we go into the first quarter.

DJ: But we also have further relationships developing on the brands given our vertical integration, so we're really happy with the way the pet care is going. There's also some pricing leverage that we still see in that area. Then you asked about de-stocking.

As you go into the first quarter we are.

Comfortable that that that destocking looks like it's behind US we've got some strong order books. So outlook is very positive.

DJ: I would say the de-stocking was more on the consumer specialty side of things, in particular in the health and beauty solutions. And as we're looking at the order books now as we go into the first quarter, we are comfortable that that de-stocking looks like it's behind us. We've got some strong order books, and the outlook is very positive for that product. And then maybe, since I have you, D.J., maybe just to ask kind of a similar question on the paper PCC-BIS.

For for that.

That product line.

Okay.

And then maybe since I have you DJ.

Maybe just as kind of a similar question on the paper PCC business.

Get a sense that maybe in North America in particular of those customer operating rates.

Where you would like them to be.

For 2023 just.

Just curious if you feel like.

DJ: Get a sense that maybe in North America, in particular, those customer operating rates weren't where you would like them to be for 2023. Just curious if you feel like de-stocking and lower operating rates were something you were still dealing with in the fourth quarter and maybe how those are trending thus far in January and I guess early February. Uh, yeah, so, um... A couple of perspectives on that.

Destocking and lower operating rates, where we're something you were still.

Dealing within the fourth quarter and maybe how those are trending.

Thus far in January then so I guess early February.

Yeah. So.

A couple of perspectives on that so.

If we look at Europe, Europe, still still lagging a little bit down in that 70% operating rates, we have been fortunate in that our customers have been less affected by that decline.

DJ: So, if we look at Europe, Europe's still lagging behind a little bit in that 70% operating rate, and we've been fortunate in that our customers have been less affected by that decline, but Europe is still sluggish. North America, in the low 80s, is starting to climb.

A decline, but Europe is still sluggish North America in the low 80, starting to climb up we look at inventory levels and those have come down.

Down. So so we are projecting that north American volumes will be better this year and we're starting to see some of that come back but not.

DJ: We look at inventory levels, and those have come down. So, we are projecting that North American volumes will be better this year, and we're starting to see some of that come back, but not at the rate we were hoping for, but it's certainly better than last year. That's how that looks. And then, of course, Asia.

Not at the rate, we are hoping for but it's certainly better than than last year that that's to how about that looks and then of course Asia.

DJ: In Asia, we're less dependent on operating rates. Asia is a penetration story, and that continues to go very favorably. All right. And then I guess maybe just over on the metal casting side of the business. We talked about Q1 maybe being kind of a slower seasonal period in Asia. But I'm just curious if maybe you could talk in a little more detail about the pace of recovery in China. I think everybody, maybe around this time last year, was hoping that we were going to see a more robust rate of recovery. It hasn't really materialized that way,

Asia, we're less dependent on the operating rates Asia as a penetration story and that continues to go very favorably.

Alright, and then I guess, maybe just over on the metal casting side of the business.

You talked about Q1, maybe being kind of a slower seasonal period in Asia.

But I'm just curious if maybe you can talk to you in a little more detail about that.

Piece of recovery in China, I think everybody maybe around this time last year was hoping that we were going to see a more robust.

Right of recovery hasn't really materialized that way are you seeing signs that.

Douglas T. Dietrich: Are you seeing signs that some of the government stimulus and other actions that are in place in China are starting to drive some market improvement there? Thanks, Mike. I'm going to pass it over to Brett Rodriguez as well, but let me start by saying, look, last year we saw, referring to the metal casting business, continued growth quarter after quarter after quarter, and we're still seeing that kind of trend. So for us right now, going into 2024, it looks like a really solid year for us, both on, as DJ just mentioned, some new satellites ramping up, new contracts and paper, but also Let me give it over to Brett to give you some color. Hi Dan.

Some of the government stimulus and other actions.

That are in place in China are starting to drive some markets.

Improvement there.

Yes, Thanks, Mike I'm going to.

That's sort of a brent or <unk> as well, but let me start by saying look last year, we saw referring.

Referring to the metal casting business continued growth quarter after quarter after quarter, and we're still seeing that kind of trend so for us right now.

Into 2024, it looks like a really solid year for us both on the DJ just mentioned some new satellites ramping up new contracts and paper, but also in metal casting let me give it over to Brent to give you some color there.

Brett Rodriguez: Thanks for the question. Look, China, as Doug said, China, it was a, the market continued with a slow but continuous recovery last year. The green sand bond volume improved about 7% versus the prior year, but we still have plenty of room to go to get to those peak levels that we saw in 2021. The fourth quarter volumes increased about 26% over the same period in 23, but again, that was, you know, that was a low point, but you can see the recovery. You mentioned government stimulus programs.

Okay.

Dan Thanks.

For the questions.

China as Doug said, China. It was the market continued with a slow but continuous recovery last year.

The Greensand bond volume improved about about 7% versus prior year, but we still have plenty of room to go to get to those peak levels that we saw in 2021.

The fourth quarter volumes increase.

About 26% over the same period.

In 2003.

But again that was that was that was the low point, but you can see the recovery is continuous you mentioned the government stimulus programs. There have been several stimulus programs to boost the economy and we are seeing some impact.

Brett Rodriguez: There have been several stimulus programs to boost the economy, and we are seeing some impact from them. You know, during the Investor Day presentation, we talked about going into the blended product, more so into some of these mature markets. We have it in the mature markets, and we're moving it into other markets. So we continue that initiative. So all in all, we see 2024 with about similar growth of around six to 8%. I'm sorry, is that a comment on China specifically or the metal casting business overall? No, no, that's China specific.

From them.

During the Investor day presentation, we talked about.

Going into the blended <unk>.

Products.

More so into the into the summer.

Some of these are mature markets, we haven't in the mature markets, we're moving them into other markets and we continue that that initiative. So all in all we see 2020 four with about similar growth.

6% to 8% this year.

And sorry is that a comment.

On China, specifically or for the metal casting business overall.

No no Thats China specific.

Brett Rodriguez: Got it. Okay. And then the last question for me is, is one maybe more for Eric.

Got it okay.

And then last question for me is is one maybe more for Eric just curious for your thoughts on interest expense.

Eric Aldack: Just curious for your thoughts on interest expense for both Q1 and the full year, and maybe just remind us how much of your debt is at a fixed rate versus exposed to some variable. Sure, Mike. Thanks. So, roughly 50% of our debt right now is... variable. The average interest rate right now is around 6.15%.

For both Q1, and the full year and maybe just remind us how much of your debt is at fixed rate versus exposed to some variable rate.

Sure Mike Thanks.

No.

Roughly 50% of our debt right now is.

Variable.

The average interest rate right now is around six 5%.

Eric Aldack: So the fixed rate is at 5%, those are the notes, and the floating rate is around 6.9%. So, if and when interest rates come down, we'll see some benefit on that floating piece of the debt. I think, you know... shorter term Q4 to Q1, since we were able to pay down some debt in the fourth quarter, probably going to see about $500,000 of lower interest expense just sequentially from Q4 to Q1, so hopefully that helps. Very helpful. Thanks, everyone.

So the fixed rate is at 5% those are the notes on the floating is around six 9%. So if and when interest rates come down we will see some benefit on that floating piece of the debt.

Shorter term Q4 to Q1 since we were able to pay down some debt in the fourth quarter, probably going to see about 500000 of lower interest expense just sequentially Q4 to Q1.

So hopefully that helps.

Very helpful. Thanks, everyone.

Eric Aldack: Thanks Mike. Our next question is coming from David Silver with CL King. Yeah, hi, good morning.

Thanks, Mike.

Our next question is coming from David Silver with C. L. King Your line is open.

Okay.

Yes, hi, good morning, Thank you.

David Silver: Thank you. I do have a number of questions. And I'm going to demonstrate my lack of organization here, but I'll probably go back and forth a bit. The first question would be on price and volume, you know, trends, but just looking at the fourth quarter... XBMI, you were plus 6%, right? I know you have pricing initiatives in place through the year. I know you have, you know, highlighted a number of new product introductions. How would that 6%, in general, from your perspective, break down? I mean, how much was it priced?

So.

I do have a number of questions.

And I'm going to demonstrate my lack of organization here, but I'll, probably go back and forth a bit.

For first question.

It would be on price and volume.

<unk>.

Trends, but just looking at the fourth quarter.

Ex BMI, you were plus 6% right.

I know you had pricing initiatives in place through the year I know you have.

Highlighted a number of.

New product introductions.

That 6% in general from your perspective breakdown I mean, how much was price.

David Silver: How much was the volume increased? I don't know if you look at it at the company-wide level, but any kind of..., you know, break down there would be helpful. And I apologize if I missed it. I don't think I saw it in the slides.

How much was volume increase I don't know if you look at it at the company wide level, but any kind of.

No.

Breakdown, there would be helpful and I apologize if I missed it I don't think I saw it in the in the slides.

Eric Aldack: Yeah, thanks, Dave. So as we moved through 2023, pricing became less of a year-over-year impact. So as we got to the fourth quarter, you know, pricing is in the low single digits in terms of year-over-year revenue change. So a lot of that 6% is coming from volume and mix improvements. And I'll just say, Dave, and that's going to be the case going forward.

Yeah. Thanks, Dave.

So as we move through 2023 pricing became less of a year over year impact.

As we got to the fourth quarter pricing.

Pricing in the low single digits in terms of year over year revenue changed so a lot of that 6% is coming from volume and mix improvement.

Got it and I will just add that Dave and Thats good.

Eric Aldack: I would say that our growth in 2024 is going to be much less price driven than it has been the last two years. We see good volume growth, as Doug's been talking about, household and personal care staying strong, and pockets of a few markets recovering from where they were in 2023. So the growth going forward, we expect to be much more volume driven. Thank you.

And to be the case going forward I would say that our growth in 2024 is going to be much less price driven than it has been in the last two years, we see good volume growth as Doug has been talking about household and personal care staying strong.

Pockets of a few markets recovering from where they were in 2023 so.

The growth going forward, we expect to be much more volume driven.

Eric Aldack: And let me just follow up. But I guess 12 months ago, Eric, you had indicated, you know, with your pricing initiatives that they would, it would, they would, take effect kind of a little bit on a lagging basis. So I just wanted to clarify, but for the fourth quarter, would you say the price cost, you know, has fully offset, or you're slightly better than covering all your costs? And then maybe, from your view, from the, you know, your customers' positioning? um... What is the nature of, you know, the kind of request for some givebacks?

Thank you for that and let me just follow up but I guess 12 months ago, Eric you had indicated.

With your pricing initiatives.

It would it would they would take.

Take effect kind of a little bit on a lagging basis.

So I just wanted to clarify but for the fourth quarter would you say the price cost.

Has fully offset or year slightly better than covering all your costs and then maybe for from your view from the costs your customers positioning.

What is the nature of kind of the requests for some give backs in other words.

Eric Aldack: In other words, you know, it's a mixed cost outlook, right? Labor is up, but at least in a number of areas, goods prices are softer. What's your view or what's baked into your expectations for next year regarding, you know, maintaining the price improvements that you've achieved across 2023? And, and, you know, if you could, you know, your expectations for that price-cost balance. Yeah, thanks, Dave.

Makeup cost outlook right labor is up but at.

At least in a number of areas goods prices are softer.

What's your what's your view or what's baked into your expectations for next year regarding maintaining.

Maintaining the price.

The improvements that you've achieved across 2023 and <unk>.

<unk>.

If you could you know your expectations for that price cost balance.

Eric Aldack: So I would say we've largely caught up. We still have some more pricing to go, pockets of pricing to make sure that we're capturing the value that we're providing to our customers. From an inflationary standpoint, I'd say right now we are facing a much more stable inflationary outlook than we have over the last two years.

Yeah. Thanks, Dave So I would say we have largely caught up we still have some more pricing to go pockets of pricing to make sure that we're capturing the value that we're providing to our customers.

From an inflationary standpoint, I'd say right now facing a much more stable inflationary outlook than we have over the last two years.

Eric Aldack: But from a pricing power and an overall input cost perspective, we're in good shape. You know, I would say we're in a much better position today than we have been historically in terms of reacting quickly to any changes in input costs. We've got our supply chain working really closely with the commercial teams.

But from a pricing power and an overall input cost perspective, we're in we're in good shape.

I would say we're in a much better position today.

We have been historically in terms of reacting quickly to any changes in input costs. We've got our supply chain working really closely with the commercial team. So we feel good about being able to mitigate any changes that we're not anticipating at this point, but.

Eric Aldack: So we feel good about being able to mitigate any changes that we're not anticipating at this point, but overall, we're in a good position in terms of pricing power. Yeah, David, maybe I can pass it over again to TJ and Brett to give you kind of a feel for what's going on, you know, where our products are, the new products, the mix, and how, you know, pricing is playing out this year versus last. So, TJ, I want to start with you.

But overall, we're in a good position in terms of pricing power, Yeah, David maybe I can.

That's over again to T J and Brett to give you a kind of a feel of whats going on where where our products are the new products the mix and how pricing is playing out this year versus versus prior to the AGM I'll start with you certainly so so David as I am looking at the segment of course, you've got part of our pricing that is well covered with contract. So that's on the on the <unk>.

DJ: Certainly. So, David, I'm looking at the segment. Of course, we've got part of our pricing that's well covered by contracts, so that's on the paper and packaging side, and agreements. But if I look at the broader specialty additives group, our pricing power is pretty strong. We've been able to recover and our ability to execute on orders and requests and just be that reliable supplier when other folks have been running out of stuff. It keeps us very strong in our ability to hold on to the price. On the pet care side and on the consumer specialty side, demand still remains very strong, a good pull for the products. And underlying all of this is that with these new products, as Doug had pointed out earlier, the significance of the new products is that they are providing higher levels of value, which is translating into better margins for us. So all of those things add up to us being able to expand further upon our price versus inflation, but as Doug said, probably not to the same degree that we've seen in previous years. Brett, how about you?

And packaging side.

Agreements and if I look at the broader specialty additives group.

Our pricing power is pretty strong we've been able to recover and our ability to.

To.

Execute on.

Orders and requests and just be that reliable supplier when other folks been running out of stuff that keeps us very strong and our ability to hold on the price on the on the pet.

Care side and on the.

Consumer specialty side still remains very strong good pull for the products and underlying all of this is that with these new products and Doug had.

Ted pointed about earlier, but the significance of the new products is that they are providing higher levels of value, which is translating into better margins for us. So all of those things add up to us being able to.

To expand further upon our price versus inflation, but.

Doug said, probably not to the at the same degree that we've seen in the previous year.

Brett Rodriguez: Yeah. So, for the engineered solutions segment, of course, our customers continue to look for lower prices. But this group works really closely with them, not only to offset higher costs, but we also provide them alternative solutions, whether that may be a different product formulation or the technology that applies the product faster or more efficiently so they're using less. The cost and price appear to be stable now, David, in most cases, but there are still pockets, as Doug pointed out earlier, in our business that require additional pricing, and we'll continue to do that. For instance, labor, of course, continues to rise. We're adjusting labor where necessary. And we have some products where certain parts of that formulation require a higher price.

Yeah, so for the engineered solutions segment.

Of course, our customers continue to look for lower prices.

But this group works really close.

With them.

Not only to.

Offsetting higher higher cost, but we also provide them alternative solutions.

Whether whether that be me.

A different product formulation or the technology that applies to the product faster.

Or more efficiently so they are using less.

<unk>.

B.

The cost and price appears to be stable now David.

In most cases, but there are still pockets as Doug pointed out earlier in our business that require additional pricing and we will continue to do that for instance, labor of course continues to rise, we're adjusting labor where necessary and we have some products that certain parts of that.

That formulation require a higher price. So so we're doing that where we are.

Brett Rodriguez: So we're doing that, but again, working very closely with our customers to assure that we're getting what we require but also offsetting their costs. And David, let me just summarize all that for you and give you kind of how that plays out this year, what Eric was saying in terms of more volume growth. We see a pretty strong volume year, at least a stronger volume year ahead for us than when we were in 2020. There are still good opportunities for pricing, and we have strong pricing power in the marketplace to make sure we hold on. On a comparison basis with last year, pricing may have less of an impact because of the huge increases that we're going through in the inflationary cycle.

But again working very closely with our customers to ensure that we're getting what we require but also offsetting their requirements.

David Let me just summarize all of that for you and give you a kind of how that plays out this year, what Eric was saying in terms of volume growth, we see a pretty strong volume year at least a stronger volume year ahead for us and we'd.

Then when we were in 2023.

Still good opportunities for pricing and we have strong pricing power in the marketplace to make sure we hold onto it.

On a comparison basis over last year, it may be pricing, maybe less of an impact because of the huge increases that we're putting through the inflationary cycle. So this year is going to be still some pricing a lot more volume driven revenue growth, but that's going to lead to that leverage through our gross margins. So gross margin expansion because <unk>.

Douglas T. Dietrich: So this year there is going to be some pricing, a lot more volume-driven revenue growth. But that's going to lead to that leverage through our gross margin. So gross margin expansion because, you know, covering fixed costs and more volume through those plants, and that's going to translate down into that operating income line. You know us.

<unk> fixed costs and more volume through those plants and that's going to translate down into that operating income line.

Douglas T. Dietrich: We're pretty stable with our fixed corporate expenses and expenses, so that's going to hold flat this year. So that's where it's really going to come in, that margin expansion, and why Eric said earlier that's why we're pretty bullish on making sure we hit or exceed those targets that we let off for you on operating income, okay? Hopefully, that helps. That's great. And I do want to ask one more, and I'll apologize in advance. Well, actually, I'm going to ask Brett kind of two separate questions, if you don't mind.

We're pretty stable with our.

<unk>, our fixed corporate expenses and expenses. So that's kind of hold flat. This year. So that's where it's really going to come in that margin expansion and why earlier Erik said, that's why we're pretty bullish on making sure we hit or exceed those targets that we laid off are you on an operating income okay.

That helps.

That's great and I do want to ask one more and I'll apologize in advance.

<unk>.

I'm going to ask spread kind of two separate questions. If you don't mind.

David Silver: But. First, on your traditional refractories business, you know, high temperatures. Umm, activities. You know, you did show good growth for Kueck year over year. You cited North American steel. And I would just like to go back. I believe in that group, you know, you have signed or you have had a number of, you know, meaningful new contracts signed over the past, you know, 12, 24 months; at least one went into effect, you know, last year. What is the outlook for those incremental, you know, new supply agreements that you have booked in the past and are supposed to play out, you know, over the next several years? I mean, what should we expect? in that regard for 2024. I'll stop with that.

First on your traditional refractories business high temperature.

Activities you did show good good growth for Q year over year, you cited North American steel.

And I would just like to go back I believe in that group you have signed or you have a number of meaningful new contracts.

Signed over the past 12 to 24 months at least one went into effect.

Last year, what is the outlook for those incremental new supply agreements that you have booked in the past and we're supposed to play out over the next.

Several years I mean, what should we expect.

In that regard for 2024, I'll I'll stop with that I'll start with that one yes, yes.

Brett Rodriguez: I'll start with that one. Yeah, no problem, David. I'm happy to answer that. Look, this business has done a really good job again, working very closely with our customers to sell more value, as Doug pointed out, creating a much safer work environment, and solving problems by using a combination of our refractory materials, our laser equipment, and our application technology. You know, in addition, we've also been able to grow our business from a metallurgical wire standpoint for a cleaner steel operation. But as far as the agreements go, Dave, these are five-year in duration and include, as I said, product and equipment. We currently have 13 refractory and wire contracts in place, and that value is about $150 million through 2026. The annual run rate for this business in 2023 was about $29 million, which is about $10 million higher than 2022. And looking forward, the contracts will generate about $40 million in 2025 and about $50 million in 2026. So, you know... This is a great opportunity to change the market and be more efficient, giving the steel maker what he needs to protect his people and protect his furnaces.

No problem, David I'm happy to answer that.

This business has done a really good job.

Again, working very closely with our customers.

In selling value.

As Doug pointed out, creating a much safer work environment and solving problems by using a combination of our refractory materials are laser equipment in our application technology.

In addition, we've also been able to grow our business from the metallurgical wire standpoint for a cleaner steel operation.

Or is the agreements Joe.

Yes.

These are five year in duration.

And include as I said product and equipment. We currently have 13 refractory and wire contracts in place.

<unk> about $160 million through 2026.

The annual run rate for this business in 2003 was about $20 million, which is about $10 million higher than 2002.

Looking forward the contracts will generate about $40 million.

In 'twenty, five and about $50 million in 2006 so.

No.

This is this is great opportunity changing changing the market to be safer and.

And more efficient, giving the steelmaker with.

What he needs to protect his people wear protective furnaces.

Brett Rodriguez: So, we're looking forward to expanding this into other regions of the world. Okay, great. No, that's extremely helpful. And then last one for Brett, and then I promise I'll get back in queue.

So we're looking forward to expanding this into other regions of the world.

Okay, Great that's extremely helpful and then.

Just one for Brad.

And then I promise I'll get back in queue.

Brett Rodriguez: But, you know, I was reading kind of what was presented for the environmental activities, and I guess there's probably some seasonal issues there to account for the year-over-year decline. But in particular, I was hoping you could give us an update on progress with PFAS and, you know, in particular, just, I guess, from your perspective, the pace of commercialization, you know, getting past the beta testing and other trials and other things and, you know, moving on to full commercialization. And maybe just a comment on where you think PFAS has made the greatest impact or penetration to date. In other words, is it in the municipal, is it in the drinking water, is it in the groundwater, is it in soil remediation?

I was reading kind of what was presented for the environmental.

Activities.

And I guess, there's probably some seasonal issues there to account for the year over year decline, but in particular I was hoping you could give us an update on progress with with PFS.

And in particular.

Just I guess from your perspective the pace.

Commercialization getting past, the beta testing and others in trials and other things and.

No.

Moving on to full commercialization.

And maybe just to comment on where you think PFS has made the greatest impact or penetration to date in other words is it in municipal is it didnt drinking water or is it in groundwater is it in soil remediation.

Brett Rodriguez: You know, where has the uptake to this point been the most prevalent? Thank you. Yeah, sure. Let me give you a little bit of an update on the PFAS regulation. To date, there has been no finalization of the regulation.

Where has the uptake to this point been the most prevalent.

Prevalent thank you.

Yes, sure let me, let me give you a little bit of an update on the on the <unk> regulations.

To date, there has been no finalization of the regulations that the EPA does plan to continue.

Brett Rodriguez: The EPA does plan to regulate the PFAS this year and beyond, of course. In March of last year, they did propose national drinking water standards, but that was just a proposal. We expect rulemaking to be March of this year. That's not in stone, but that's the target that it seems the EPA is putting out. Let me give you an update on Fluorazorb.

Regulating the P pause this year and beyond of course.

In March of last year, they did propose national drinking water standards that that was a proposal.

Expect.

Rulemaking to be March of this year.

That's not in stone, but that's the target.

It seems the EPA is putting out.

Let me, let me give you an update on floor absorb I think that's where you're going.

Brett Rodriguez: I think that's where you're going, because that continues to generate an increasing level of inquiries and requests for piloting across four verticals. And those verticals really are drinking water, water treatment, landfill leachate, and then, of course, the in-situ remediation. The drinking water space, of course, has a high, high level of intake.

That continues to generate an increasing level of inquiries Andrew.

And requests for.

We're piloting across more verticals and those verticals.

Really our drinking water water treatment landfill leachate and then of course, the in situ remediation groundwater.

The drinking water space of course.

It's a high high level of interest.

Brett Rodriguez: Right now, that space is slow to accept new technology, but again, we have a lot of activity going on, and we currently are actively participating in two full-scale implementations, where Fluorazorb is the media. And we expect four more full-scale implementations to commence sometime this year, hopefully in the first half. We also have a couple of pilot programs for drinking water and soil stabilization that we initiated in Europe, the UK, Germany, and Belgium

Right now that space is slow to accept new technology.

But again, we have a lot of activity going on.

And we.

We currently are actively participating in to full scale implementations.

<unk> is the media and we expect four more full scale implementations to commence.

Sometime this year hopefully in the first half.

We also have a couple of pilot programs for drinking water.

Soil stabilization.

We initiated in Europe.

Hey, Germany and Belgium.

Brett Rodriguez: In addition, we're also actively working with some of the largest landfill companies in the world, using Fluorazorbe, and we continue to pursue In-Titu research to control PFAS. So, in fact, we recently have been specified for two Department of Defense sites in the United States, and these opportunities are expected to generate favorable sales.

Yeah.

In addition.

We're also actively working with some of the largest landfill companies in the world.

Treatment.

And using floors and we continue to pursue the <unk> remediation segment.

Control Paphos.

In fact, we recently.

Have been specified into two department of defense sites in the United States.

These opportunities are expected to generate favorable sales in 2024, So overall, our Florida storm activity remains high.

Brett Rodriguez: So overall, our floor absorb activity remains high, and we fully expect to continue to expand this business through 2020. So right now, it's a mixed bag. Drinking water is the slowest, but it is also generating probably the most...

We fully expect to continue to expand this business through through 2004, So right now it's a mixed bag.

Linking water is the slowest, but it is also.

David Silver: Okay, thank you. I'll get back in queue. Thank you, David. Our next question is coming from... Hi, good morning, everybody. Just a quick one. I'm doing well. Appreciate the time this morning.

Generating probably the most interest.

Okay. Thank you I'll get back in queue.

Thanks, David.

Our next question is coming from Kyle May with Sidoti <unk> Company. Your line is open.

Hi, good morning, everybody.

Hi, how are you.

Just a quick one.

Daniel Moore: Just a quick one for me. Now that your leverage ratio is below two times, does that change the way that you approach or think about the buyback program? No, it doesn't change it right now.

Well I appreciate the time this morning.

Just a quick one for me now that your leverage ratio is below two times.

Does that change the way that you approach or thinking about the buyback program.

No it doesn't change it right now right.

Douglas T. Dietrich: We have, you know, right now we fully intend to complete that program. I think we'll probably look to continue to make sure our balance sheet through debt is in good shape and, I think also, build up some cash reserves. The allocation, our typical allocation is, you know, 50 percent of our free cash flow. We like to return to shareholders that are 50 percent keeping on the balance sheet once we're at this kind of leverage ratio.

Right now we fully intend to complete that program.

I think we will probably look to continue to make sure our balance sheet through debt is in good shape and I think also building up some cash reserves.

The allocation our typical allocation is 50% of our free cash flow, we'd like to return to shareholders and their 50% keeping on the balance sheet. Once we're at this kind of leverage ratio.

Douglas T. Dietrich: This year, with, you know, the balance of our share repurchase program and the doubling of our dividend, that's probably going to be about 75 to 80 million dollars back to shareholders in 2024. As Eric said, that's probably about 50 percent of our 160 million dollars. We could flex that up.

This year with the balance of our share repurchase program and the doubling of our dividend thats, probably going to be about $75 million to $80 million back to shareholders in 2024.

As Eric said, that's probably about 50% of our $160 million, we could flex that up.

Douglas T. Dietrich: You know, if you know, we'd like to hold some money for opportunistic M&A if that comes around; the market may improve, and opportunities may arise if we see them in 2024. If not, we always have the opportunity to flex that back and increase that share repurchase. But right now, we're on course to finishing the one we have. And, and, and we can change that later in the year if conditions so require it. I got it.

If we like to hold some money for opportunistic M&A if that comes around that market may improve in.

Opportunities if we see them in 2024, if not we always have the opportunity to flex that back and increase that share repurchase but right now we're on course to finishing the one we have.

And we can change that later in the year.

Douglas T. Dietrich: That's great. I appreciate it. And also, I was curious about the new product pipeline that you touched on, and, Correct me if I'm wrong, but I believe you said there were maybe 500 products in development with over a billion in potential revenue. I assume that's a long-term target, but just curious if maybe you could give us any color about how much of that product pipeline could potentially come through in 2024 and how much of those products could contribute to revenue growth. Yeah, so the number I gave you, the 18%, is, you know, the percentage of our sales that's generated from new products over the past five years. It's kind of like a freshness indicator, right?

If conditions warrant.

Got it that's great I appreciate it.

And then also I was curious with the new product pipeline that you touched on in.

Correct me if I'm wrong I believe you said there were maybe 500 products in development with over 1 billion in potential revenue.

I assume that's a long term target, but just curious if maybe you could give us any color about.

How much of that product pipeline could potentially come through in 2024.

And then how much of those products could contribute to revenue growth this year.

Yes, so the number I gave you the 18%.

As you know the percentage of our sales generated from new products over the past five years. So it's kind of like a freshness indicator right.

Douglas T. Dietrich: And so that gives you an idea of how much revenue's been generated. We think that's probably going to be between kind of 18 and 20%. I think 20% is, you know, a real benchmark out there.

And so that gives you an idea of how much revenue has been generated we think that's probably going to be between 18% and 20% I think 20% is real benchmark out there. So between 18 and 20% will be the kind of pace of how we're commercializing products to replace the ones that we still generating sales from these products, but we count the freshness if they.

Douglas T. Dietrich: So between 18 and 20% will be the kind of pace of how we're commercializing products to replace the ones that, you know, we're still generating sales from these products, but we count the freshness if they every five years something falls off and something else comes back in. So we're probably commercializing, you know, there are some really large projects, there are some smaller ones. I don't know, 35, 40 new products every year, probably higher than that. But that gives you an idea of how many things are coming out. Probably about 50% of those are what we kind of call replacements. So they're upgrades or higher-margin versions of something we've been selling before. And some of them are, and the other half of them are targeted at growth.

Every five years, something falls off and something else comes back and so we're probably commercializing theres. Some really large projects. There are some smaller ones I don't know if 35 40, new products every year.

Probably higher than that but that gives you an idea of how many things that are coming out probably about 50% of those are we kind of call replacement. So their upgrades or higher margin versions of something we've been selling before and some of them are in the other half of them is targeted at growth.

Douglas T. Dietrich: I would say of the growth ones and all of them, I guess, growth and replacement, 80% of them or 75% of them have, you know, a sustainability element to them. We're talking about increasing the recyclability, the lower energy consumption for either the way they're produced by us or whether they're, how they're used and consumed by our customers. And so that gives you a feel for them.

I'd say.

The growth ones and all of them I guess growth and replacement 80% of them are 75% of them have a sustainability element to them.

We're talking about increasing the recyclability of the lower energy consumption for either the way they are produced by us or whether they're how they're used and consumed.

By our customers and so that gives you a feel for them, we expect probably similar level of sales and rate of commercialization this year to last.

Douglas T. Dietrich: We expect a probably similar level of sales and rate of commercialization this year to last. And I said, you know, a billion dollars is in that portfolio. You know, that's the potential.

And I said $1 billion is in that portfolio now thats the potential I've mentioned not everything is going to make it through but there are some big ones in there and we've commercialized some big ones targeted at big opportunities Big opportunities that are in the environmental space big opportunities and recycling big opportunities in the consumer space and also as Brent mentioned earlier.

Douglas T. Dietrich: I mentioned not everything is going to make it through, but there are some big ones in there. And we've commercialized some big ones targeted at big opportunities, big opportunities that are in the environmental space, big opportunities in recycling, big opportunities in the consumer space. And also, as Brett mentioned earlier, some of these new technologies that are going into high-temperature technology, hopefully a long-winded way of giving you some color of what's in there. No, that's great. I really appreciate it. That's all for me this morning. Our next question's coming from. Sorry about that; I had to get it off mute.

Some of these.

New technologies that are going into high temperature technologies. So.

Hopefully along with the way of giving you some color of what's in there.

No that's great I really appreciate it that's all from me. This morning. Thank you.

Thanks Scott.

Our next question is coming from Daniel Moore.

J S Securities Your line is open.

Sorry about that I had to get off mute pardon. My quick follow up was just covered but maybe just a housekeeping Eric the share count as of December 31.

Daniel Moore: Part of my quick follow-up was just covered, but maybe just housekeeping, Eric, the share count as of December 31st, and Doug, you mentioned, you know, potential prospects for M&A. Maybe just talk a little bit about what the pipeline looks like and anything about what types of size deals. Yeah, Dan, I'm going to give you a number, but it's in the press release, so make sure you check me on this. I think it's around $32,500, the share count at the end of the year, but... I'll get you the right number there.

And.

Doug you mentioned potential.

Potential prospects for M&A, maybe just talk a little bit about what the pipeline looks like.

Anything about what type of size deals you might be looking at thanks.

Yes, Dan I'm going to give you a number but it's in the press release. So make sure you check me on this I think it's around 35, the share count and share counts at the end of the year, but.

Eric Aldack: Yeah, I was going to answer the M&A while they scrambled for the share count, but... So here's the share account, we'll make sure that's correct for you, and we'll be in the cave. As far as M&A, look, you know, it's been a quiet couple of years, as you've probably noticed, and we've used that time to really focus on the acquisitions that we've completed over the past four years. You know, we've done four acquisitions in four years, and I think what you're seeing is, you know, the benefits of us truly, you know, there's one thing we call integrating them, right? So getting them into the company and getting them into our financials. And then there's truly integrating them.

I'll get you the right number there that was going to answer the M&A, while they scrambled for the share count but.

So there is the share count will make sure. That's correct for you will be in the K as far as M&A look it's been a quiet a couple of years as you've probably noticed.

And we've used that time to really focus on the acquisitions that we've completed over the past four years, we've done four acquisitions in four years and I think what Youre seeing is the benefits of US truly there is one thing we call about integrating them right, so getting them into the company and getting them into our financials, and then theres truly integrating and what we mean.

Douglas T. Dietrich: What we mean by that is really bringing them up to speed in terms of our culture, OE, productivity, variable costs, looking for opportunities to expand capacity, reduce downtime, upgrading the facilities in terms of safety and modernization. And we're through that, and I think you're starting to see it. And those acquisitions were in the pet care space. If you look at that margin expansion in consumer and specialties, that's where that came from. That's the true really, you know, putting the MTI culture, the MTI operating system, and the operating practices into these.

That is really bringing these up to speed in terms of our culture or E productivity variable costs looking for opportunities to expand capacity reduce downtime upgrading the facilities in terms of safety.

And modernization and work through that and I think youre starting to see and those those acquisitions were in the pet care space. If you look at that margin expansion in consumer and specialties, that's where that's come from that's the true really.

The MTI culture, the MTI operating system and the operating practices entity. So we've taken.

Douglas T. Dietrich: So we've taken a, you know, done a great job this year with those. We're in a good spot in terms of where those businesses are. DJ highlighted the teams and how they did a tremendous job this year on that front. So we've got a great muscle memory in this company to be able to pull in acquisitions and turn them into value. I think this year there could be some opportunities as, you know, the kind of market. I think there's been some, for a couple of years, a bit of a lull, and I think that could come around again.

Done a great job this year with those we are in a good spot in terms of where those businesses DJ highlighted the teams and how they did a tremendous job. This year on that front. So we've got a great muscle memory in this company to be able to pull in acquisitions and turn them into value I think of this year, there could be some opportunities as well.

Kind of market I think there's been some.

And a couple of years of a bit of a lull and I think that could come around.

Douglas T. Dietrich: We're going to be cautious about that. We've got the balance sheet in great shape to be able to execute on something. You know us; we're going to be diligent about how we look at things, what we're going to do with them, the opportunity it provides for us and our shareholders. So we'll go into it cautiously, but we do think the balance sheet, and there could be some opportunities that come our way this year. I appreciate the color, as always.

To be cautious about that we've got the balance sheet in great shape to be able to execute on something you know us we're going to be diligent about we look at things what we're going to do with it the opportunity it provides for us and our shareholders.

So we'll go into it cautiously, but we do think the balance sheet and there could be some opportunities that come our way this year.

Eric Aldack: Thank you. Thank you. And our next question is coming from David Silver with CL Kings. Your line is open. Yeah, hi, thank you. I did want to ask you about the program that was announced during your Investor Day, or thereabouts, with the $10 million cost reduction effort. Just in general, how much do you think was reflected in your fourth-quarter results? And then maybe if there was any kind of feel for the cadence, you know, for the remainder of capturing the full $10 million benefit. Yeah, sure, Dave.

Appreciate the color as always thank you.

Thank you Dan.

And our next question is coming from David Silver with CL King Your line is open.

Yes, hi, thank you.

I did want to ask you about the program that was announced during your Investor day.

There or thereabouts with the $10 million.

Cost reduction efforts.

Just in general how much do you think.

It was reflected in your fourth quarter results and then maybe if there was any kind of feel for the cadence for.

For the remainder of capturing the full $10 million benefit. Thank you.

Eric Aldack: So we're about 75% of the way through that program, and we should be finished in the first half of this year. So we've got around 2 million more to go this year, which should help margins by around 10 basis points for 2020. Okay, great. And the next question would be, I guess, for DJ, but it's about, you know, the PCC business. Two parts to it. First, I was wondering if you could give us, you know, maybe a view of the new project funnel or the, you know, the opportunity set that you're working with currently. And then secondly, I'll ask you to stipulate that this is an unfair question. I'm sure you love all your children equally.

Yes, sure Dave So we're about 75% of the way through that program.

So we will be finished in the first half of this year. So we've got.

Around $2 million more to go this year, which should help margins by around 10 basis points for 2024.

Okay.

Okay great.

The next question would be I guess for for DJ, but it's about the PCC business.

Two parts to it first I was wondering if you could give us.

Maybe a view to the new project funnel or the.

The opportunity set that youre working with.

Currently.

And then secondly.

I'll ask you the yields.

Stipulate. This is an unfair question I'm sure you love all your children equally but if you were thinking about your book of business in China.

DJ: But if you were thinking about your book of business in China and your book of business, PCC Satellites, in India, you know you have a healthy number of relatively new projects in both areas. Regarding the business environment and, you know, whatever other factors you consider relevant. I mean, Where do you think, not necessarily the best upside is, I'm sure they're both very high growth opportunities, but where do you see the business environment maybe being a little bit more difficult to navigate, or other types of risks?

And your book of business PCC satellites in India.

You have a healthy number of relatively new projects in both areas.

Regarding the business environment and whatever other factors you consider irrelevant.

I mean.

Where do you think not necessarily the best upside is im sure Theyre, both very high growth opportunities, but where do you see the business environment may be.

Being a little bit more difficult to navigate or other types of risks in other words, if there was kind of a shortfall in your growth plans in either of those two countries.

DJ: In other words, if there was kind of a shortfall in your growth plans in either of those two countries, which might it be, where might it occur, and then what might be the source of maybe a little bit of a slowdown in anticipated growth. Thank you. So David, I'm going to try and answer those. Let's get this baseline right.

Which might it where might it occur and what what might.

Be the source of maybe a little bit of a slowdown in anticipated growth. Thank you.

So David I'm going to try to answer those let me, let's get the let's get set on the baseline.

Eric had mentioned.

DJ: Eric mentioned the three new PCC plants coming on, a mixture of China and Asia, and one came on early, two came on just towards the end of the year, and just to get something established here, that was roughly 300,000 tons of GCC, which is a new product for us going into the packaging space, and then we had about 65,000 tons of what I'll just call those engineered crystal and those PCC-type products, and not to be So coming on that, you'll see the full benefit of this year in those 65,000 tons of PCCs and 300,000 tons of GCC. What we are already in the process of building that you'll see towards the end of the year are two other projects in Asia that bring in 140,000 tons of traditional PCC. I say 140,000 tons of traditional PCC, but one of those is in a specialty papers and packaging application.

The three new PCC plants coming on.

Mixture of China in Asia and one.

One came on early two came on just towards the end of the of the year and and just to get something established share that was roughly 300000 tons of GCC, which is a new product for us going into the packaging space.

And then we had about a 65000 tons of of what I'll just call those engineered crystal in.

Those PCC type products.

Not to be too in the script here, but part of that's new yield and part of that is our standard PCC. So so coming on that Youll see the full benefit of.

This year is.

<unk>.

Those 65000 tons of PCC is call. It 300000 tons of GCC, what we already are in the process of building that youll see towards the end of the year is to other projects.

In Asia that bring on 140000 tons of traditional PCC, I say 140000 tons of traditional PCC, but one of those is in our specialty papers and packaging.

DJ: And then what Doug also mentioned as just a kind of closing remark is that we will be announcing soon who these customers are, but we picked up two other projects in Asia, again, India and China, but it is standard PCC in a printing writing grade, but we've also got this combination of New Yield and GCC in a packaging grade. So that's another 50,000 tons of engineered crystals and 145,000 tons of the GCC.

Implication.

And then what Doug had also mentioned as just up.

Closing remark is we we have we'll be announcing soon who are these customers are what we picked up two other projects.

In Asia, again, India, and China, but it's.

It is.

Standard PCC and a printing writing grade, but it's also we've got this combination of new yield and GCC and a packaging grades. So so that's another.

Call It 50000 tons of the.

The engineered crystals at 145000 tons of the GCC. So we've got a lot coming on that's in pocket.

DJ: So we've got a lot coming on that's in our pocket. And as I look at that broader pipeline, what is interesting, and this is especially related to our pursuit of packaging growth and new products, we're getting interest all around the world. So it shows up in Europe, it shows up in Latin America, and, of course, it shows up in Asia as well. And I would say North America is more curious than pulling us hard, but certainly these new products are offering something different than what we've offered before, and our penetration in packaging is something of interest to those folks. So lots coming on; a lot of that is in the pocket. You started seeing a little bit of the results show up on 23, 2024 has more coming on.

And as I look at that broader pipeline, what is interesting and it's especially related to our pursuit of the packaging growth and the new products, we're getting interest all around the world. So it shows up in Europe. It shows up in Latin America and of course, it shows up in Asia, as well and I would say North America.

Because more curious than pulling us hard but there is certainly these new products are offering something different than what we've offered before and our penetration in the packaging is something of interest to to those folks so.

So lots coming on a lot of that is in the pocket you started seeing a little bit of the Ah results show up in 'twenty. Three 2024 has more coming on we already know 2025 is going to have more coming on and as I look at what else is developing.

DJ: We already know 2025 is gonna have more coming on. And as I look at what else is developing, you're right; I love all the babies. But what I would say is that because of these new products, because of this broader pursuit in packaging, it's not just Asia. Asia still is a good part of our growth, but we're getting a global pull, if that helps.

Youre right.

I love all the babies.

But what I would say is that because of these new products because of this broader pursuit in the packaging.

Where it's not just it's not just Asia Asia still has.

A good part of our growth, but it's we're getting a global poll.

DJ: No, that's great. Thank you very much. I appreciate it. Thank you, David. And it appears there are no.

If that helps.

Okay.

Okay.

No that's great. Thank you very much.

Appreciate it.

Thanks, David.

Operator: So I would like to turn the call back. Thank you everyone for joining the call today, staying on for a bit longer. We do appreciate it. We'll talk to you again in three months, www.microsoft.com. Thank you. This concludes today's call. Thank you for your participation. You may now go.

And it appears there are no further questions at this time I would like to turn the call back to Mr. Dietrich for any closing remarks.

Thanks, everyone for joining the call today is staying on for a bit longer do appreciate it and we'll talk to you again in three months.

Thanks.

Yeah.

This concludes today's call. Thank you for your participation you may now disconnect.