Q2 2024 Oil-Dri Corp of America Earnings Call
Operator: Stand by. Good day, and thank you for standing by. Welcome to Oil-Dri Corporation of America's second quarter fiscal 2024 earnings discussion via webcast. At this time, all participants are in a listen-only mode.
Standby electric.
Good day, and thank you for standing by and welcome to all Dry Corporation of America second quarter fiscal 'twenty 'twenty four earnings discussion via webcast. At this time all participants are in a listen only mode. After the presentation. There will be a question and answer session. Please note that today's conference is being recorded.
Operator: After the presentation, there will be a question and answer session. Please note that today's conference is being recorded. I would now like to pass the call over to the President and CEO, Dan Jaffee.
Now I'd like to pass the call over to the President and CEO Dan Jaffee.
Great. Thank you welcome to our second quarter and six month teleconference.
Daniel S. Jaffee: Welcome to our second quarter and six month teleconference. Joining me either in person or virtually for the call to answer your questions are Susan Kreh, our CFO and CIO, Aaron Christiansen, VP of Operations, and Wade Robey, VP of Ag and President of Amlin International.
Joining me either in person or virtually for the call to answer your question, Susan Craig Our CFO and C. I O Aaron Christiansen VP of operations Wade will be VP of algae and president of Ameren International Chris Lansing Group VP of retail and wholesale Laura <unk>, Chief legal officer and Brian.
President and general manager of the consumer products Division.
<unk>, our vice president of fluids purification, and Leslie Garber, our director of Investor Relations, who will lead us through the safe Harbor.
Thank you Dan welcome everyone on today's call comments may contain forward looking statements regarding the company's performance in future periods actual results in those periods may materially differ in our press release and in our SEC filings, we highlight a number of important risk factors trends and uncertainties that may affect our future performance.
We ask that you review and consider those factors in evaluating the company's comments and in evaluating any investment in oil drive stock. Thank you for joining us now I'm going to turn the call over to Susan Craig.
Leslie A. Garber: Chris Lamson, Group VP of Retail and Wholesale, Laura Scheland, Chief Legal Officer and Vice President and General Manager of the Consumer Products Division, Bruce Patsey, our Vice President of Fluids Purification, and Leslie Garber, our Director of Industrial Relations, who will lead us through the safe harbor. Thank you, Dan. Welcome, everyone. On today's call, comments may contain forward-looking statements regarding the company's performance in future periods. However, actual results in those periods may materially differ.
Thank you Leslie and just a quick shout out to you Leslie you did an excellent job of highlighting records and providing color on our very positive second quarter results and the press release, so thank you and great job.
And lastly did such a thorough job I'll just highlight a few key points and then I'll be happy to answer any further questions during our Q&A session.
For the quarter consolidated net sales were up 4%, which was a record for oil drive consolidated net sales for the second quarter.
This was driven in part by growth of fluids purification and cat litter products, including co packaged items.
Susan Marie Kreh: In our press release and in our SEC filings, we highlight a number of important risk factors, trends, and uncertainties that may affect our future performance. We ask that you review and consider those factors in evaluating the company's comments and in evaluating any investment in Oil-Dri. Thank you for joining us. Now, I'm going to turn the call over to Susan Kreh.
The strong sales of co packaged items was partially a result of a large customer restocking during the second quarter.
On your first quarter disruption caused by cyber.
In analyzing the split between pricing and volume on the quarter higher prices across all principal products drove the improvement in net sales.
And while we did experience strong volume growth for fluids purification products that grow on a consolidated basis.
More than offset by the purposeful shedding of some low profit volume within our retail and wholesale segments.
Susan Marie Kreh: Thank you, Leslie. And just a quick shout out to you, Leslie. You did an excellent job of highlighting the records and providing color on our very positive second quarter results in the press release. So thank you and a great job. And since Leslie did such a thorough job, I'll just highlight a few key points, and then I'll be happy to answer any further questions during our Q&A session. For the quarter, consolidated net sales were up 4%, which was a record for oil-driven consolidated net sales for the second quarter. This was driven in part by growth of fluids, purification, and cat litter products, including co-packaged diets.
Consolidated gross profit was $39 million for the second quarter, representing a 34% increase over the same quarter in the prior year.
Our gross margins expanded to 29, 3% in the second fiscal quarter from 22, 6% in the second quarter of fiscal 2023.
Our gross margin expansion as a result of our teammates keen focus on restoring our margins in order to fund our future.
This is necessary because of the financial impact of our aging infrastructure.
We have a five year capital plan that addresses, replacing aged and fully depreciated assets and our manufacturing facilities.
It is imperative that our pricing enables oil drag to generate adequate cash to fund the asset infrastructure thats required to sustain our future ability to serve our customers and grow our business.
To highlight this point I would call your attention to the bottom of the consolidated balance sheet that was presented in the earnings release.
Susan Marie Kreh: The strong sales of co-packaged items were partially a result of a large customer restocking during the second quarter, following a first quarter disruption caused by a cyber event. In analyzing the split between pricing and volume for the quarter, higher prices across all principal products drove the improvement in net sales. And while we did experience strong volume growth for our fluids purification products, that growth on a consolidated basis was more than offset by the purposeful shedding of some low profit volume within our retail and wholesale segment. Consolidated gross profit was $30.9 million for the second quarter, representing a 34% increase over the same quarter in the prior year.
Year to date, we've made capital investments of $15 5 million compared.
Compared to a depreciation and amortization expense of $8 9 million for the same period.
That depreciation and amortization expense represents 57% of capital invested.
And as we continue to replace our aged infrastructure, we expect that ratio of depreciation as a percentage of capital investment to increase.
During the second quarter, we also booked a one time or unusual item related to the modification of our only landfill, which is located at our proxy, Georgia manufacturing site.
Now as a reminder, during the second quarter of last year, we established an accrual of $2 5 million to perform the work required to modify the landfill.
That modification work is now underway, but today, we have a better estimate of the cost to complete the modification as a result, we have taken an additional charge of 500000 to add to this accrual during our second fiscal quarter of 2024.
Susan Marie Kreh: Our growth margins expanded to 29.3% in the second fiscal quarter from 22.6% in the second quarter of fiscal 2023. Our gross margin expansion is a result of our teammates' keen focus on restoring our margins in order to fund our future. This is necessary because of the financial impact of our aging infrastructure. We have a five-year capital plan that addresses replacing key aged and fully depreciated assets in our manufacturing facilities. It is imperative that our pricing enables Oil-Dri to generate adequate cash to fund the asset infrastructure that's required to sustain our future ability to serve our customers and grow our business. To highlight this point, I would call your attention to the bottom of the consolidated balance sheet that was presented in the earnings release. Year to date, we've made capital investments of $15.5 million, compared to a depreciation and amortization expense of $8.9 million for the same period. That depreciation and amortization expense represents 57% of the capital invested. As we continue to replace our aged infrastructure, we expect that ratio of depreciation as a percentage of capital investment to increase.
Now, let's get a couple of points related to cash.
Year over year cash and cash equivalents are up substantially from $14 million at the end of the second fiscal quarter of 2023 to $27 8 million at the end of our second fiscal quarter in 2024.
However, as highlighted in the consolidated statement of cash flows for.
For the first six months of fiscal 2024, we reduced our cash by $4 million.
In addition to funding to $15 5 million of capital investments that I mentioned earlier.
We paid our teammates their annual bonus during the first quarter.
And we deliberately increased inventories by $3 7 million to support our historically high.
Service levels with our customers.
One of the drivers of this strong performance and service levels, who has been having the right inventory in the right place at the right time.
In addition to that we also built inventory in advance of some specific one time customer initiatives, which we expect to occur during the third and fourth quarters of this fiscal year.
I would also pointed out that during fiscal 2024, we have repurchased 40075 shares of oil dry docks for.
For $2 million that were surrendered by teammates to pay taxes as part of the vesting process under our restricted stock Award program.
We have not purchased any shares on the open market during fiscal 2024.
And finally, let's talk about our strong balance sheet, which is a result of our continuing strong financial performance.
Along with our low net debt position.
Oil dry remains well positioned to invest in our growth opportunities.
Our cash priorities continue to be investing and reinvesting in our business with a focus on future growth opportunities.
At the same time, maintaining our existing asset base.
Supporting our dividend, which we have increased for 20 straight years impede or 50 straight years.
Maintaining enough financial strength to support strategic M&A targets become available.
And that is all followed by Opportunistically accessing the repurchasing of shares of our stock when the valuation warrants an acceptable return for our shareholders.
So those are some of the key highlights for the quarter and with that Dan I'll turn it back over to you for a question and answer session.
Susan Marie Kreh: During the second quarter, we also booked a one-time or unusual item related to the modification of our only landfill, which is located at our Oaxaca, Georgia manufacturing site. Now, as a reminder, during the second quarter of last year, we established an accrual of $2.5 million to perform the work required to modify the Oklahoma landfill. That modification work is now underway, but today we have a better estimate of the cost to complete the modification. As a result, we have taken an additional charge of $500,000 to add to this accrual in our second fiscal quarter of 2024.
Sure. Thank you Susan great job, great recap the only thing I would like to make just gives a lot of our longtime investors did no. One had interaction with my father, He's got to be Smart Ireland looking down on these results.
It's Ben.
What 84 years of grab a note to my dead to me and it's just very humbling and I'm very very appreciative of the team I was down in our Mississippi plants.
Last week I was at our Georgia plant's about six weeks before that and to interact with the teammates who are making this happen on a daily basis is just so rewarding and self fulfilling so thank you worldwide teammates I need to get tomorrow, but I need to get the tab soon and I will what I definitely want to get up to Canada.
As I can so let's open it up to Q&A, because I'd rather answer the questions that are foremost for our shareholders.
Okay, I'm going to take over.
Please submit your questions using the ask a question field on the webcast and click submit and I'm going to read the first question.
This question comes from Robert Smith Center for performance investing.
He asks the softness at Ameren for Latin America, Mexico surprise me, specifically, what's happening in those two geographies and what actions are needed to turn them around.
Wade answer that question.
Thank you Leslie and thank you Robert for that question I'm going to separate those two geographies slightly and how I, how I answer the question in.
In Mexico as I think our investors know we have been participating in that business through agro mix, which was an acquisition. We partially made a few years ago and now have completed in the last year.
Office in Mexico at the moment was really caused by a couple of things, but chiefly we completed the acquisition of that business. We did some restructuring which caused what I would call a temporal pause on some of the commercial activity. We had with a couple of the products that we were selling in that region, we've reestablish that.
Susan Marie Kreh: Now, let's hit a couple of points related to cash. Year over year, cash and cash equivalents are up substantially from $14 million at the end of the second fiscal quarter of 2023 to $27.8 million at the end of our second fiscal quarter of 2024. However, as highlighted in the Consolidated Statement of Cash Flows, for the first six months of fiscal 2024, we reduced our cash by $4 million.
<unk>.
We're very bullish on the growth of Mexico for the for the future. There is a lot of our key accounts in Mexico that are very very large that we have not approached previously and we're excited about the prospects of gaining business with them and as I said growing that business. When you look at Brazil.
Somewhat of a similar story of what we've seen with the economy in North America, where feed prices have been high and theres been a bit of a depression of productivity or economic.
Susan Marie Kreh: In addition to funding the $15.5 million of capital investments that I mentioned earlier, we paid our teammates their annual bonuses during the first quarter, and we deliberately increased inventories by 3.7 million to support our historically high service levels with our customers. One of the drivers of this strong performance in service levels has been having the right inventory in the right place at the right time. In addition to that, we also built inventory in advance of some specific one-time customer initiatives, which we expect to occur during the third and fourth quarters of this fiscal year. I would also point out that during fiscal 2024, we repurchased 40,075 shares of oil-dry stock for $2.1 million that were surrendered by teammates to pay taxes as part of the vesting process under our Restricted Stock Award Program. We have not purchased any shares on the open market during fiscal 2024.
Productivity in that market that has caused some.
In and out of products in diets, and Brazil rations for poultry.
We've had to deal with that over the last six to nine months on a positive note, we see gaining momentum there as feed prices have started to come down and we expect to continue to have Brazil be really the strongest performer for us in the Latin American market going forward.
Great. Thank you.
The next question comes from Ethan Star an individual investor. He asks how successful is the new anti bacterial cat litter, both in terms of retail distribution and consumer purchases are.
Consumers purchasing the anti bacterial litter switching from other products or a competing brand.
Chris I'll have you answer that.
Hey, good morning, Nathan Thanks for another good question as we come to expect from you.
So antibacterial.
Really there's three questions within it distribution velocities and then how incremental.
We think our sales on antibacterial, our distribution and I think I shared this over the last couple of quarters is very good so our key retailers on the brand.
Daniel S. Jaffee: Finally, let's talk about our strong balance sheet, which is a result of our continuing strong financial performance. With our low net debt position, Oil-Dri remains well positioned to invest in our growth opportunities. Our cash priorities continue to be investing and reinvesting in our business with a focus on future growth opportunities, while at the same time maintaining our existing asset base and supporting our Dividend, which we have increased for 20 straight years and paid for 50 straight years. Maintaining enough financial strength to support strategic M&A if targets become available. That is all followed by opportunistically assessing the repurchasing of shares of our stock when the valuation warrants an acceptable return for our shareholders. So those are some of the key highlights for the quarter.
Our grocery wise or up and down the east coast and I think you can find anti bacterial.
Virtually all of them.
As well as.
As well as in a lot of stores.
I think the U S is largest retailer.
So we feel great about distribution I would say.
We feel good about philosophy, so specifically velocities are running 80%.
Those are the typical cat's pride item and I would say we feel good but we are definitely not satisfied there, we're focusing a pretty good amount of spend and trial generating activities.
Tying into our existing merchandising events, we did a big push in the month of February.
Around.
Really kind of a shelter awareness month.
We focused our platform our marketing platform in store with retailers on.
Clean up the shelters a bit of a bit of a play on words and put anti bacterial at the center of that you've got brake merchandising.
Up and down, particularly the east coast.
So and we will continue to focus on trial generating activities through the end of the fiscal lastly.
How incremental good question difficult to measure.
Daniel S. Jaffee: And with that, Dan, I'll turn it back over to you for our question and answer session. Sure. Thank you, Susan. Great job.
In the marketplace, our research going into launching the product told us it would be highly incremental which is consistent with the products uniqueness in the marketplace and again well difficult to read.
Daniel S. Jaffee: Great recap. The only comment I can make is that a lot of our longtime investors did know and had interaction with my father. He's got to be smiling, looking down on these results.
It would appear that well.
It's obviously coming into the market and generating good velocities.
Other items do not appear to be suffering so that read on the positive incremental <unk> appears to be the right one.
Alright, Thank you Chris.
Our next question comes from Robert Smith.
He says Chevron recently announced it is closing two of its biodiesel plants because of falling demand do you see continuing strength in this area for you in the immediate future and I'm going to turn that over to Bruce Patency.
Daniel S. Jaffee: It's just, you know, it's been, what, 84 years of Grandpa Nick to my dad to me, and it's just, it's very humbling, and I'm very, very appreciative of the team. I was down in our Mississippi plants last week. I was at our Georgia plants for about six weeks before that, and to interact with the teammates who are making this happen on a daily basis is just so rewarding and so fulfilling. So, thank you, Oil-Dry teammates. I need to get to Mounds.
Hi, Robert Thanks for the question.
Yes, Chevron did close some plants, we are aware of that we didn't have any business with those companies.
Biodiesel is a very small segment of the market and we do have some business in biodiesel, but where all the growth is is in renewable diesel.
This is a very large oil refineries that are building.
Plants, where they use a fixed bed catalyst to turn vegetable oil and waste oils into diesel fuel and where biodiesel you can add into fuel at about 5% to 10% to diesel.
Renewable diesel you can add 100% of it into the line with diesel fuel. So all the growth in this industry and what's starting to drive some of our numbers.
Operator: I need to get to TAP soon, and I will, and I definitely want to get up to Canada as soon as I can. So let's open it up to Q&A, because I'd rather answer the questions that are most important for our shareholders. Okay, I'm going to take over. Please submit your questions using the Ask a Question field on the webcast and click Submit.
As the renewable diesel industry and.
And so we see continued growth in that marketplace.
Great. Thank you.
The next question comes from Ethan Star.
The 10-Q, it noted that some north American aniline customer shifted from trials to purchasing products at full price.
This should mean for amarin revenue in the upcoming quarters and you expect more trial users to become full price customers and if so when.
I'm going to turn it over to Wade.
Thank you Leslie and thank you Ethan. This is a question we have had previously but all I know, it's a little bit comps.
Leslie A. Garber: And I'm going to read the first question. The next question comes from Robert Smith for Center for Performance Investments, and he asks, "The softness at Amman for Latin America and Mexico surprised me. Specifically, what's happening in those two geographies and what actions are needed to turn them around?" I have Wade and, Thank you, Leslie.
Complicated so I'll certainly address it again.
Ethan as you know and as Ive indicated previously we do start out with trial pricing in the U S. At some of the largest integrators as we've launched our products there and as we're growing our business that has a time based program that then results ultimately in those customers moving to our full pricing based on the <unk>.
<unk> that they that they purchased as we've done that over the last two years, we've been able to retain those customers and we've not seen that move to what we would call our list pricing at those volumes to be an impediment to our growth going forward as amlin becomes more established in the North American market I would suspect.
Wade Robey: And thank you, Robert, for that question. I'm going to separate those two geographies slightly and see how I answer it. In Mexico, as I think our investors know, we have been participating in that business through Agramex, which was an acquisition we partially made a few years ago and now have completed in the last year. The softness in Mexico at the moment was really caused by a couple of things, but chiefly, we completed the acquisition of that business. We did some restructuring, which caused what I would call a temporary pause in some of the commercial activity we had with a couple of the products that we were selling in that region. We've re-established that, and we're very bullish on the growth of Mexico for the future.
In fact that the need to offer trial pricing to two customers, who have never experienced our products previously that will become less of a necessity or an opportunity I would say and we will move more to straight pricing with some rebate programs based on the growth that we see in our in our large accounts. So that's.
How we address it and naturally as that as that goes forward, we expect to see positive impacts on both revenue and the margins or profit will earn for that business. Thank you for your question.
Thanks, Brian.
The next question is from Robert Smith, what are your two chief concerns going forward I'm going to turn that over to Dan Jaffee.
Thank you.
I would say aging infrastructure, which you heard Susan cover and the fact that our depreciation is a lagging indicator. We're depreciating our fully depreciated assets that were put into service 10, 15, 20 years ago, and having to replace them with new assets that caused a lot more money today to to put into service then they did those 10 or 15 years ago.
Wade Robey: There are a lot of key accounts in Mexico that are very, very large that we have not approached previously, and we're excited about the prospects of gaining business with them and, as I said, growing that business. When you look at Brazil, it's somewhat of a similar story to what we've seen with the economy in North America, where feed prices have been high, and there's been a bit of a depression of productivity or economic productivity in that market. That has caused some in and out of products in diets in Brazil rations for poultry.
So while.
Focusing on margins is interesting it's really the cash generation, that's going to that's going to pay the way Theyre. My dad used to always say earnings are an opinion cash is effect and so we're going to be very focused on cash generation going forward. So that we can make sure that we can continue to supply our customers.
With the quality and quantity that they require deserve and appreciate so they've been very.
Sure.
Wade Robey: We've had to deal with that over the last six, nine months. On a positive note, we see momentum building there as feed prices have started to come down, and we expect to continue to have Brazil be really the strongest performer for us in the Latin American market going forward. The next question comes from Ethan Starr, an individual investor. He asks how successful the new antibacterial cat litter is both in terms of retail and Purchase. Consumers purchasing the anti-bacterial litter, switching from other classified products, or competing. Hey, good morning, Ethan.
Appreciative of ore and receptive to our conversations with them on that and they understand what we're what we're presenting so aging infrastructure is one the other one is lapping. These results I mean first of all just as I said.
<unk> is going to start catching up with your spend so if we're spending $30 million a year in capital and we're depreciating $18 million to $19 million a year.
That delta is going to start to narrow as you replace zeros with new equipment. So in 10 years, it should frankly be $37 million well, that's going to take a hit.
The reported earnings.
Those are the casual have already been spent and so we're going to very much be focused on cash generation.
But lapping the current results was definitely a challenge the good news is we've got some really exciting growth businesses that we've already planted seeds.
<unk> to come to fruition now or hopefully will come to fruition over the next six to 12 months to 18 months and then we've been we've got some really exciting cost savings opportunities.
Christopher Lamson: Thanks for another good question, as we have come to expect from you. So antibacterial, you know, really, there are three questions within the distribution velocity, and then how incremental do we think our sales on antibacterial are? Distribution, and I think I have shared this over the last couple of quarters, is very good. So you know, our key retailers on the brand, our grocery stores are up and down the East Coast, find antibacterial in virtually all of them, as well as, as well as in a lot of stores, the U.S.'s largest retailer.
Look pretty hard they don't look very soft that hasn't affected us yet, but we'll maybe in <unk>.
Fiscal 'twenty five 'twenty six so we're not going to really disclose what those are but they are definitely going to help offset some of that incremental depreciation expense. So those are the two aging infrastructure and lapping current results.
Thanks, Dan.
The next question is from Ethan Starr what results are you seeing from the lighten your life advertising campaign for Cat's Pride I'll turn that over to Chris Landstar.
Yes Ethan.
So let me first take.
10, a whole view and then I'll and then I'll.
Take a step back and broaden I talked about.
Around our digital marketing focus and you obviously picked up on we shifted from really focusing on litter for good for pre pandemic.
Add a bit of a lull in the marketplace and all the players in the category.
While we worked through service issues, and then came back focusing really on on lightweight litter and the language a little message.
Overall from a.
From a.
Results perspective.
Christopher Lamson: So we feel great about distribution. I would say we feel good about velocity. So specifically, velocities are running 80% of those of a typical cat's pride item.
The great news about digital advertising as you can as you can follow LIBOR.
Your payouts.
And check and adjust as you go in.
That is both I think the campaign and our agility, there along with our agencies.
Our tools to measure ROI are driving great results. So we feel very good about our return on our spend and candidly.
Christopher Lamson: And I'd say we feel good, but we're definitely not satisfied there. We're focusing a pretty good amount of spend on trial generating activities, tying into our existing merchandising events. We did a big push in the month of February around it being really kind of a shelter awareness month.
As we measure them, we look back at that builder for good campaign, our results are even better.
The pinnacle view about kind of program that program as we check and adjust and optimize them feel good more broadly I also shared at the shareholder meeting that we were very happy with our share growth.
Our private label lightweight business in branded lightweight was not growing share relative to the market.
Christopher Lamson: And we focused our platform, our marketing platform in stores with retailers on cleaning up the shelters, a bit of a play on words and put antibacterial at the center of that. We've got great merchandising up and down, particularly the East Coast. So, and we'll continue to focus on trial-generating activities. Lastly, how incremental? A good question.
That was of course, two quarters ago for the last two quarters, we've seen lightweight actually grow faster than heavyweight. So we'll get back to share growth.
With our strong shares, particularly in private label lightweight that's key for us now correlation or causation.
<unk> is a little bit difficult to discern, but we turn this program on two quarters ago and lightweight in the marketplaces, winning again patent then.
Relative to Brent as measured by growing share.
Christopher Lamson: Difficult to measure in the marketplace. Our research going into launching the product told us it would be highly incremental, which is consistent with the products in the marketplace. And again, difficult to read. It would appear that well, you know, it's obviously coming into the market and generating good velocity, while other items do not appear to be suffering.
Throughout the year prior so sort of that broader perspective.
I think we're getting we're impacting the marketplace in that narrow perspective, we're getting good returns.
Great. Thanks, Chris.
Okay. We have another question from Bob Smith.
Is your most important cat litter retailer pressuring for lowering prices.
Chris do you want to answer that.
Jeremy again I guess.
And I guess I don't want to answer it specifically to answer your question, obviously sequentially, but Bob I'll answer it a little more generally what I mean by that is we don't talk to specific plans with specific retailers.
Bruce Patsey: So that reads on positive incrementality. Thank you. The next question comes from Robert Smith. He says, Chevron recently announced it is closing two of its biodiesel plants. Falling Demand, www.oil-dri.com. I'm going to turn that over. Hi, Robert.
I'll start more broadly on this one and say that when you look at marketplace data. When you look at syndicated data sales in the category are still growing faster than you.
So as it plays out on the retail shelves. The retailers are acknowledging there is still inflation presence.
Now is that cost inflation for us.
Still real absolutely is it is it real at a lesser rate than we were experiencing a year ago, absolutely set differently.
Costs continue to rise when we compare year over year.
Bruce Patsey: Thanks for the question. Yes, Chevron did close some plants; we were aware of that. But we didn't have any business with those companies.
But not as great a rate.
Our sales team without revealing our cost structure as well armed to talk to that story win win pushed by retailers.
Bruce Patsey: Biodiesel is a very small segment of the market, and we do have some business in biodiesel, but where all the growth is is in renewable diesel. This is a very large oil refinery that is being built. Plants where they use a fixed bed catalyst to turn vegetable oil and waste oils into diesel fuel.
And I think they've done until effectively at this point I believe theyre going to continue to tell that story.
Really effectively.
I speak to a few different buckets in general.
And when you aggregate those buckets costs costs are still rising they tell that story very well.
Great. Thank you we have a few minutes left in the call and I would like to encourage other investors to please submit questions via the webcast.
Wade Robey: And where biodiesel you can add to fuel at about 5-10% to diesel, renewable diesel you can add 100% of it into the line with diesel fuel. So all the growth in this industry and what's starting to drive some of our numbers is the renewable diesel industry. And so we see continued growth in that market. The next question comes from Ethan Starr. In the 10-Q, it noted that some North American Amman customers shifted from trials to Products at Full Price. What will this shift mean for Amlin revenue in the upcoming quarters, and do you expect more trial use? Full Price Customers, and if so, when? Turn that over.
And we will wait a few minutes to see if anything comes up.
Yeah.
Okay, well I, just I mean, we've answered or asked and answered all the questions. Thank you for your interest. Thank you for your support and we will be back with you.
We will be back with you.
In three months.
Thanks, everybody.
And thank you everybody for participating and you may now disconnect.
Okay.
[music].
Yes.
[music].
Wade Robey: Thank you, Leslie. And thank you, Ethan. This is a question we've had previously, but I know it's a little bit complicated, so I'll certainly address it again. Ethan, as you know, and as I've indicated previously, we do start out with trial pricing in the U.S. at some of the largest integrators as we launch our products there and as we're growing our business. That is a time-based program that ultimately results in those customers moving to our full pricing based on the volume that they purchased. As we've done that over the last two years, we've been able to retain those customers, and we have not seen that move to what we would call our list pricing at those volumes as an impediment to our growth.
Wade Robey: Going forward, as Amlin becomes more established in the North American market, I would suspect that the need to offer trial pricing to customers who have never experienced our products before will become less of a necessity or an opportunity, I would say, and we'll move more to straight pricing with some rebate programs based on the growth that we see in our large accounts.
[music].
Daniel S. Jaffee: So that's how we address it, and naturally, as that goes forward, we expect to see positive impacts on both revenue and the margins or profit we'll earn from that. Thank you for your questions. The next question is from Robert Smith. What are your two chief concerns going forward? I'm going to turn that over to Dan Jaffee. Yes. Hi, Bob.
Daniel S. Jaffee: Thank you. I would say aging infrastructure, which you heard Susan discuss, and the fact that our depreciation is a lagging indicator. You know, we're depreciating or fully depreciating assets that were put into service 10, 15, 20 years ago and having to replace them with new assets that cost a lot more money today to put into service than they did 10 or 15 years ago. So while, you know, focusing on margins is interesting, It's really the cash generation, you know, that's gonna pay the way there. My dad used to always say, earnings are an opinion, cash is a fact. And so we're going to be very focused on cash generation going forward, so that we can make sure that we can continue to supply our customers with the quality and quantity that they require, deserve, and appreciate. So they've been very appreciative and receptive to our conversations with them on that, and they understand what we're presenting. So aging infrastructure is one. The other one is lapping these results.
Okay.
[music].
Sure.
Yes.
[music].
Okay.
[music].
Daniel S. Jaffee: I mean, first of all, just as I said, depreciation is going to start catching up with your spend. So if we're spending 30-something million a year on capital, and we're depreciating 18, 19 million a year, that delta is going to start to narrow as you replace zeros with new equipment. So in 10 years, it should, frankly, be 30-something million dollars.
Okay.
[music].
Daniel S. Jaffee: Well, that's going to take a hit on the reported earnings, but, you know, those are, the cash will have already been spent. And so we're going to be very much focused on cash generation, but lapping the current results is definitely a challenge. The good news is we've got some really exciting growth businesses that we've already planted seeds in that are either starting to come to fruition now or, hopefully, will come to fruition over the next 6, 12, 18 months. And then we've been, you know, we've got some really exciting cost savings opportunities that look pretty hard. They don't look very soft that haven't affected us yet but will maybe, you know, in fiscal 25 and 26. So we're not going to really disclose what those are, but they're definitely going to help offset some of that incremental depreciation expense. So those are the two, aging infrastructure and lapping current.
Okay.
Okay.
[music].
Christopher Lamson: The next question is from Ethan Starr. What results are you seeing from the Lighten Your Life advertisement? Transcription by Trans-Expert at Fiverr.com. Yeah, hi again, Ethan. So, let me first kind of take a pinhole view, and then I'll, and then I'll, you know, take a step back and broaden.
Okay.
Okay.
[music].
Christopher Lamson: I talked about our, you know, digital marketing focus, and you obviously picked up on that we shifted from really focusing on litter for good, sort of pre-pandemic, had a bit of a wall in the marketplace, as did all the players in the category, where we worked through service issues, and then came back, focusing really on lightweight litter and the lightweight litter message. Overall, from a results perspective, great news about digital advertising. Follow Your Payouts and check and adjust as you go.
Yes.
Okay.
Yes.
Okay.
[music].
Yes.
Thanks.
[music].
Thank you.
Right.
Okay.
Okay.
[music].
Okay.
Yes.
Yes.
Yes.
Okay.
Okay.
Okay.
Thank you.
[music].
Yes.
Thanks.
Okay.
Okay.
Yes.
Okay.
Yes.
Okay.
Okay.
Thanks.
Thank you.
Sure.
Okay.
Okay.
Okay.
Thank you.
Okay.
Thanks.
Yes.
Okay.
Okay.
[music].
Okay.
[music].
Okay.
Okay.
Okay.
Okay.
Okay.
Thank you.
Okay.
Thank you.
Okay.
Okay.
Okay.
Thank you.
Okay.
[music].
Sure.
Okay.
Okay.
Great.
Okay.
Okay.
Thank you.
Okay.
Yes.
Okay.
[music].
Okay.
Okay.
Okay.
Okay.
[music].
Christopher Lamson: And that is both. I think the campaign and our agility there, along with our agency, and our tools to measure ROI are driving great results. So we feel very good about our return on our spend, and candidly, you know, as we measure and we look back at the Litter for Good campaign, our results are. That's sort of the pinhole view about, you know, kind of program to program as we check and adjust and optimize and feel good. More broadly, I also shared at the shareholder meeting that we were very happy with our share growth, both in our private label lightweight business and branded lightweight was not growing share relative to the. That was, of course, two quarters ago. For the last two quarters, we've seen Lightweight actually grow faster.
Okay.
[music].
Okay.
[music].
Sure.
Okay.
Okay.
Okay.
Okay.
Thanks.
Okay.
Yes.
Yes.
Okay.
Yes.
Okay.
Okay.
Okay.
[music].
Okay.
Okay.
Okay.
Okay.
[music].
Christopher Lamson: So get back to share, with our strong shares, particularly on private label lightweight, that's key for us. Now, correlation or causation is a little bit difficult to discern, but we turned this program on two quarters ago, and lightweight in the marketplace is winning again, and it hadn't been relative to, you know, as measured by growing share for about the year prior. So, sort of that broader perspective, I think we're getting, you know, we're impacting the marketplace in that narrow way. Great. Thanks, Chris.
Okay.
[music].
Sure.
Okay.
Okay.
Okay.
Yes.
Yes.
Okay.
[music].
Christopher Lamson: Okay, we have another question from Bob Smith. Is your most important cat litter retailer pressuring you to lower prices? Do you want to answer that? Jeremy again, I guess.
Okay.
Okay.
Okay.
Okay.
Okay.
Yes.
Christopher Lamson: And I guess I don't want to answer it specifically to answer your question, honestly, Leslie. But Bob, I'll answer it a little more generally. What I mean by that is we don't talk about specific plans.
Okay.
Okay.
Yes.
[music].
Okay.
[music].
Christopher Lamson: I'll start more broadly on this one and say that when you look at marketplace data, when you look at syndicated data, sales in the category are still growing faster than inflation. So as it plays out on the retail shelves, the retailers are acknowledging there's still inflation present. Now, is that cost inflation for us still real? Absolutely. But is it real at a lesser rate than we were experiencing a year ago?
Okay.
Okay.
Sure.
Okay.
Hi.
Sure.
Yes.
Thanks.
Yes.
[music].
Christopher Lamson: Absolutely. Set differently, costs continue to rise when we compare year over year, just at not as great a rate. Our sales team, without revealing our cost structure, is well-armed to talk about that story when pushed by retailers, and I think they've done so effectively to this point. I believe they're gonna continue to tell that story really effectively. They speak to a few different buckets, in general. And when you aggregate those buckets of costs, costs are still rising when they tell that story.
Sure.
Okay.
Okay.
Thank you.
Sure.
Yes.
[music].
Yes.
Okay.
[music].
Okay.
Okay.
[music].
Yes.
Sure.
Yes.
Yes.
Okay.
Yes.
[music].
Okay.
Hum.
Tom.
Christopher Lamson: We have a few minutes left in the call and I would like to encourage other investors to please submit questions via the webcast, and we will wait a few minutes to see if anything comes up. Okay, well, I guess, I mean, we've asked and answered all the questions. Thank you for your interest. Thanks for your support, and we will be back with you in three months. Thanks everybody and thank you everybody for participating and you may now disconnect. Phone Ringing, ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? www.oil-dri.com ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music, ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?
Yes.
[music].
Okay.
Yes.
[music].
Okay.
[music].