Q1 2024 H.B. Fuller Company Earnings Call

Operator: Good day. My name is Ellie, and I will be your conference operator today. At this time, I would like to welcome everyone to HB Fuller's first quarter earnings conference call. All lines have been placed on mute to prevent any background noise.

Good day My name is Shelley and I will be your conference operator today at this time I would like to welcome everyone to H B Fuller first quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be.

Operator: After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to review your question, press star and the number one key again.

Shelley: Question and answer session, if you'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad, if you'd like to withdraw your question, sorry, and number one again.

Steven E. Brazones: Thank you. Steven Brazones, you may now begin the conference. Thank you, operator. Welcome to HB Fuller's first quarter, 2024. Presenting today are Celeste Mastin, President and Chief Executive Officer, and John Corkrean, Executive Vice President and Chief Financial Officer. After our prepared remarks, we will have a question and answer session. Before we begin, let me remind everyone that our comments today will include references to certain non-GAAP financial measures. These measures are supplemental to the results determined in accordance with GAAP. We believe that these measures are useful to investors in understanding our operating performance and in comparing our performance with other companies. Reconciliation of non-GAAP measures to the nearest GAAP measure is included in our earnings release.

Shelley: Yeah.

Operator: Even with those you may now begin the conference.

None: Thank you operator, welcome to H B Fuller's first quarter 2024 Investor Conference call.

Celeste Beeks Mastin: Presenting today are Celeste, Mastin, President and Chief Executive Officer, and John Corcoran, Executive Vice President and Chief Financial Officer.

Celeste Beeks Mastin: After our prepared remarks, we will have a question and answer session.

None: Before we begin let me remind everyone that our comments today will include references to certain non-GAAP financial measures.

None: These measures are supplemental to the results determined in accordance with GAAP.

None: We believe that these measures are useful to investors in understanding our operating performance and to compare our performance with other companies.

None: Reconciliation of non-GAAP measures to the nearest GAAP measure are included in our earnings release.

Steven E. Brazones: Unless otherwise noted, comments about revenue refer to organic revenue. Comments about EPS, EBITDA, and profit margins refer to adjusted non-GAAP. We will also be making forward-looking statements during this call. These statements are based on current expectations and assumptions that are subject to risks and uncertainties.

None: Unless otherwise noted comments about revenue refer to organic revenue and comments about EPS EBITDA and profit margins refer to adjusted non-GAAP measures.

None: We will also be making forward looking statements. During this call. These statements are based on current expectations and assumptions that are subject to risks and uncertainties.

Steven E. Brazones: Actual results could differ materially from these expectations due to factors covered in our earnings release, comments made during this call, and the risk factors detailed in our filings with the Securities and Exchange Commission, all of which are available on our website at investors.hbfuller.com. I will now turn the call over to Celeste Mastin.

None: Actual results could differ materially from these expectations due to factors covered in our earnings release.

None: Comments made during this call and the risk factors detailed in our filings with the Securities and Exchange Commission.

None: All of which are available on our website at investors that H B Fuller dotcom.

None: I will now turn the call over to Celeste Mastin.

None: Celeste.

Celeste Beeks Mastin: Thank you, Steven, and welcome, everyone. We are off to a good start to the year with first quarter financial results largely consistent with our expectations. Our team is maintaining commercial discipline, proactively innovating to create win-win opportunities for our customers and pricing to reflect that value, while also driving restructuring savings and synergy realization on the 2023 collection of acquisitions. We continue to proactively respond to changing business dynamics to drive strong, adjusted EBITDA growth, margin expansion, and robust cash flow. Looking at our consolidated results in the first quarter, organic revenue declined 4% year-on-year due to anticipated pricing adjustments and slightly lower volume.

Celeste Beeks Mastin: Thank you Steven and welcome everyone. We're off to a good start to the year with first quarter financial results largely consistent with our expectations. Our team is maintaining commercial discipline proactively innovating to create win win opportunities for our customers and pricing to that value while also driving <unk>.

Celeste Beeks Mastin: Restructuring savings and synergy realization on the 2023 collection of acquisitions.

Celeste Beeks Mastin: We continue to proactively respond to changing business dynamics to drive strong adjusted EBITDA growth margin expansion and robust cash flow.

Celeste Beeks Mastin: Looking at our consolidated results in the first quarter organic revenue declined 4% year on year due to anticipated pricing adjustments and slightly lower volume.

Celeste Beeks Mastin: The impact from pricing was in line with our expectations and primarily represented index-based pricing adjustments. In the first quarter, the year-over-year impact from pricing was similar to Q4, while volume declined slightly year-over-year, driven principally by HHC's hygiene market segment. From a profitability perspective, taking into consideration that our first quarter is always our lowest-margin quarter of the year due to the seasonality of our business, we perform very well. We grew Adjusted EBITDA 12% year-on-year to $123 million, expanded adjusted EBITDA margin by 160 basis points year-on-year to 15.2%, and grew adjusted EPS by 22% year-on-year. On balance, global economic conditions remain similar to last quarter. However, manufacturing activity continues to be subdued, evidenced by PMI readings below 50 percent for more than a year in both the United States and Europe.

Celeste Beeks Mastin: The impact from pricing was in line with our expectations and primarily represents index based pricing adjustments in.

Celeste Beeks Mastin: In the first quarter the year over year impact from pricing was similar to Q4, while volume declined slightly year over year, driven principally by Hh sees hygiene market segment.

Celeste Beeks Mastin: From a profitability perspective, taking into consideration that our first quarter is always our lowest margin quarter of the year due to the seasonality of our business, we performed very well.

Celeste Beeks Mastin: We grew adjusted EBITDA, 12% year on year to $123 million.

Celeste Beeks Mastin: <unk> adjusted EBITDA margin by 160 basis points year on year to 15, 2% and grew adjusted EPS by 22% year on year.

Celeste Beeks Mastin: On balance global economic conditions remain similar to last quarter manufacturing activity continues to be subdued evidenced by PMI readings below 50% for more than a year in both the United States and Europe.

Celeste Beeks Mastin: Our outlook assumes manufacturing activity will be weak through the end of the year. However, from a year-on-year comparison standpoint, constrained manufacturing activity will be more than offset by the absence of the destocking impact that weighed so heavily on 2023 volumes. In this slow growth economic environment, it is essential that we continue to innovate and price to value, leveraging the vast set of tools and capabilities we have created to continue to expand our margins. Our customers have increased their focus on developing lower-cost versions of their products to better suit the market environment, and we play an important role in bringing robust bonding solutions that enable their success. We also leverage our reformulation capabilities to develop solutions that help lower our customers' costs while maintaining or improving our market. Now, let me move on to review the performance in each of our segments in the first quarter and HHC. Organic revenue was down 9% year-on-year due to lower volume and anticipated index-based pricing adjustments.

Celeste Beeks Mastin: Our outlook assumes manufacturing activity will be weak through the end of the year. However from a year on year comparison standpoint constrained manufacturing activity will be more than offset by the absence of the destocking impact that weighed so heavily on 2023 volume.

Celeste Beeks Mastin: In this slow growth economic environment. It is essential that we continue to innovate and price to value leveraging the vast set of tools and capabilities. We have created to continue to expand our margins.

Celeste Beeks Mastin: Our customers have increased their focus on developing lower cost versions of their products to better suit the market environment and we play an important role in bringing robust bonding solutions that enable their success.

Celeste Beeks Mastin: We also leverage our reformulation capabilities to develop solutions that help lower our customers' costs, while maintaining or improving our margins.

Celeste Beeks Mastin: Now let me move on to review the performance in each of our segments in the first quarter.

Celeste Beeks Mastin: And Hh see organic revenue was down 9% year on year due to lower volume and anticipated index based pricing adjustments pricing was down mid single digits as expected.

Celeste Beeks Mastin: Pricing was down mid-single digits, as expected. However, excluding hygiene, HHC volume was flat year over year and has continued to strengthen sequentially over the past three quarters. The decline in hygiene volume reflects our customers adjusting their inventory levels to take into consideration lower-than-forecasted demand, as well as our exit from lower-margin business and disruption in certain emerging markets due to currency controls and restrictions. HHC's responsible pricing actions, focus on reliability and innovation, and selective pursuit of profitable growth opportunities in its leveraged market segments enabled it to increase adjusted EBITDA 4% and increase adjusted EBITDA margin by 130 basis points year-over-year despite lower organic revenue. For engineering adhesives, organic revenue declined 2% in the first quarter.

Celeste Beeks Mastin: Excluding hygiene Hh see volume was flat year over year and has continued to strengthen sequentially over the past three quarters.

Celeste Beeks Mastin: The decline in hygiene volume reflects our customers adjusting their inventory levels to take into consideration lower than forecasted demand our exit of lower margin business and disruption in certain emerging markets due to currency controls and restrictions.

Celeste Beeks Mastin: <unk> responsible pricing actions focus on reliability and innovation and selective pursuit of profitable growth opportunities and its leverage market segments enabled it to increase adjusted EBITDA, 4% and increased adjusted EBITDA margin by 130.

Celeste Beeks Mastin: <unk> points year over year, despite lower organic revenue.

Celeste Beeks Mastin: In engineering adhesives organic revenue declined 2% in the first quarter strength in the electronics and automotive market segments was offset by slower demand in the woodworking market segment.

Celeste Beeks Mastin: Strengthening the electronics and automotive market segments was offset by slower demand in the woodworking market segments. Overall, the diversification of EA's portfolio has resulted in relatively strong and consistent volume performance despite the challenging global manufacturing environment. Adjusted EBITDA increased 5% in EA, and the adjusted EBITDA margin increased 90 basis points year-on-year to 15.9%. Favorable net pricing and raw material cost actions and restructuring benefits drove the increase in adjusted EBITDA margin year-on-year. In construction adhesives, organic sales increased 10% year-on-year. The absence of customer destocking and the expectation of a return to a more normal construction season in North America benefited CA during the quarter. Roofing was particularly strong, with organic sales increasing more than 20% year on year.

Celeste Beeks Mastin: Overall, the diversification of Ea's portfolio has resulted in relatively strong and consistent volume performance. Despite the challenging global manufacturing environment.

Celeste Beeks Mastin: Adjusted EBITDA increased 5% in EMEA and adjusted EBITDA margin increased 90 basis points year on year to 15, 9%.

Celeste Beeks Mastin: Favorable net pricing and raw material cost actions and restructuring benefits drove the increase in adjusted EBITDA margin year on year.

Celeste Beeks Mastin: In construction adhesives organic sales increased 10% year on year, the absence of customer Destocking and the expectation for a return to a more normal construction season in North America benefited CA during the quarter.

Celeste Beeks Mastin: Roofing was particularly strong with organic sales increasing more than 20% year on year.

Celeste Beeks Mastin: Adjusted EBITDA for construction adhesives increased nearly $7 million versus the first quarter of last year, and adjusted EBITDA margin expanded 530 basis points to 8.4%. Net price and raw material cost management, improved volumes, and restructuring savings drove the improvement in adjusted EBITDA margin year on year. Recall, the first quarter is CA's seasonally lowest volume, and thus, the seasonally lowest EBITDA margin quarter. Geographically, America's organic revenue declined 2% year-on-year, driven by HHC, which declined 8% versus the prior year in the Americas region. HHC's organic revenue was adversely impacted by some lingering destocking activity as well as volume declines in hygiene.

Celeste Beeks Mastin: Adjusted EBITDA for construction adhesives increased nearly $7 million versus the first quarter of last year and adjusted EBITDA margin expanded 530 basis points to eight 4%.

Celeste Beeks Mastin: Net price and raw material cost management improved volumes and restructuring savings drove the improvement in adjusted EBITDA margin year on year.

Celeste Beeks Mastin: Recall, the first quarter is seasonally lowest volume and thus seasonally lowest EBITDA margin quarter.

Celeste Beeks Mastin: Geographically Americas organic revenue declined 2% year on year, driven by H, H C, which declined 8% versus the prior year in the Americas region.

Celeste Beeks Mastin: H H C organic revenue was adversely impacted by some lingering destocking activity as well as volume declines in hygiene.

Celeste Beeks Mastin: EA and CA combined achieved organic revenue growth of more than 4% year-on-year in the Americas region. In EIMEA, organic revenue decreased 13% versus the first quarter of last year, with all GBUs experiencing a similar magnitude decline. Economic conditions have deteriorated in Europe, reflecting overall cost-of-living challenges on consumers' purchasing power.

Celeste Beeks Mastin: EAA and CA combined achieved organic revenue growth of more than 4% year on year in the first quarter in the Americas region.

Celeste Beeks Mastin: In EMEA organic revenue decreased 13% versus the first quarter of last year with all GB use experiencing similar magnitude declines economic conditions have deteriorated in Europe, reflecting overall cost of living challenges on consumers' purchasing power.

Celeste Beeks Mastin: In addition, volume in EIMEA was adversely impacted by developments in Egypt and the broader Middle East region due to currency restrictions and continued political uncertainty. In Asia-Pacific, organic revenues increased 2% year-on-year. Strength in China, which achieved a mid-single-digit increase in organic sales, more than offset weaker demand throughout the rest of the region. We continue to remain optimistic about our business in China. With no direct exposure to the Chinese construction market and strong representation in the electronics and automotive market segments, we're encouraged by what we're seeing. And while we expect some uneven market activity over the near term, we will continue to grow through innovation share gains in our select markets of choice. Now, I will turn the call over to John Corkrean to review our first quarter results in more detail and our outlook for 2024. Thank you, Celeste.

Celeste Beeks Mastin: In addition volume in EMEA was adversely impacted by developments in Egypt, and the broader middle East region due to currency restrictions and continued political uncertainty.

Celeste Beeks Mastin: Yeah.

Celeste Beeks Mastin: In Asia Pacific organic revenues increased 2% year on year strength in China, which achieved mid single digit increase in organic sales more than offset weaker demand throughout the rest of the region.

We continue to remain optimistic about our business in China with no direct exposure to the Chinese construction market and strong representation in the electronics and automotive market segments. We're encouraged by what we're seeing and while we expect some uneven market activity over the near term.

Celeste Beeks Mastin: We will continue to grow through innovation share gains in our select markets of choice.

Celeste Beeks Mastin: Now, let me turn the call over to John Corcoran to review, our first quarter results in more detail and our outlook for 2024.

John Corcoran: Thank you lift I'll begin with some additional financial details on the first quarter for the quarter revenue was up 0.2% versus the same period last year currency had a negative impact of 0.6% and acquisitions increased revenue growth by 5%.

John J. Corkrean: I'll begin with some additional financial details. First, for the quarter, revenue was up 0.2% versus the same period last year. Currency had a negative impact of 0.6%, and Acquisitions increased revenue growth by 5%. Adjusting for those items, organic revenue was down 4.2% with volume down 0.9%, and pricing down 3.3% year-on-year in the quarter.

John Corcoran: Adjusting for those items organic revenue was down four 2% with volume down 0.9% at pricing down three 3% year on year in the quarter.

John J. Corkrean: The suggested gross profit margin was 30.1%, up 320 basis points versus last year. The Net Effect of Pricing and Raw Material Actions and Restructuring more than offset the impact of slightly lower bonds. The adjusted selling, general, and administrative expense was up year-over-year, as expected, with acquisitions driving half of the increase and the rest of the increase resulting from higher wage inflation and higher variable compensation, partially offset by restructuring. The adjusted EBITDA for the quarter of $123 million was up 12% year-on-year, reflecting the net positive impact of the Pricing and Raw Material Costs Act, and the favorable contribution of suggested earnings per share of $0.67 was Operating cash flow in the quarter improved significantly year-on-year as higher margins, lower working capital requirements, and favorable accrued compensation more than offset the lower organic growth. Strong growth in EBITDA and cash flow resulted in net debt to EBITDA of 2.8 times at the end of the first quarter, down from 3.3 times at the end of the first quarter of last year.

John Corcoran: Adjusted gross profit margin was 31% up 320 basis points versus last year is the net effect of pricing and raw material actions and restructuring savings more than offset the impact of slightly lower volume.

John Corcoran: Adjusted selling general and administrative expense was up year over year as expected with acquisitions driving half of the increase and the rest of the increase resulting from higher wage inflation and higher variable compensation, partially offset by restructuring savings.

John Corcoran: Adjusted EBITDA for the quarter of $123 million was.

John Corcoran: It was up 12% year on year, reflecting the net positive impact of pricing and raw material cost actions restructuring savings and the favorable contribution of acquisitions.

John Corcoran: Earnings per share of <unk> 67.

John Corcoran: <unk> was up 22% versus the first quarter of 2023, driven by strong operating income growth.

John Corcoran: Operating cash flow in the quarter improved significantly year on year as higher margins lower working capital requirements and favorable accrued compensation more than offset the lower organic revenue.

John Corcoran: Strong growth in EBITDA and cash flow resulted in net debt to EBITDA of two eight times at the end of the first quarter down from three three times at the end of the first quarter of last year and two nine times at the end of 2023.

None: With that let me now turn to our guidance for the 2020 for fiscal year.

John J. Corkrean: With that, let me now turn to our guidance for the 2024 fiscal year. As a result of our good start to the year, which was largely consistent with our expectations, we are reiterating our previously communicated financial guidance for Fiscal 2022. Net revenue growth is expected to be in the range of 2% to 6%, with organic revenue flat to up 3% year-on-year. Adjusted EBITDA is expected to be in the range of $610 million to $640 million, with growth of approximately 5% to 10%. Combined, these assumptions result in full-year adjusted EPS in the range of $4.15 to $4.45, equating to year-on-year growth of between 7 and 15 percent. Continue to expect full-year operating cash flow to be between $300 and $350 million, weighted toward the second half of the year. Finally, based on the seasonality of our business, we would expect second quarter EBITDA in the range of $145 to $155 million. Now, let me turn the call back over to Celeste to wrap us up.

None: As a result of our good start to the year, which was largely consistent with our expectations. We are reiterating our previously communicated financial guidance for fiscal 2024.

None: That revenue growth is expected to be in the range of up 2% to 6% with organic revenue flat to up 3% year on year.

None: Adjusted EBITDA is expected to be in the range of $610 million to $640 million equating to growth of approximately 5% to 10% year on year.

None: Combined these assumptions result in full year adjusted EPS in the range of $4 15 to $4 45.

None: Equating to year on year growth of between 7% and 15%.

None: We continue to expect full year operating cash flow to be between 300 and $350 million weighted toward the second half of the year.

None: Finally based on the seasonality of our business, we would expect second quarter EBITDA in the range of $145 million to $155 million.

Now, let me turn the call back over to Celeste to wrap us up.

Celeste Beeks Mastin: Thank you John as.

Celeste Beeks Mastin: As the market leader in innovation, we have the privilege of collaborating with some of the most exciting and forward thinking companies in the marketplace companies that think differently act differently and exhibit the courage to take a risk to improve our world next month, we will be launching the inaugural H B Fuller.

Celeste Beeks Mastin: Our customer innovation awards, we are proud to publicly recognize the most outstanding customer innovations during the previous year that were enabled by our adhesive technology.

Celeste Beeks Mastin: Thank you, John. As the market leader in innovation, we have the privilege of collaborating with some of the most exciting and forward-thinking companies in the marketplace. Companies that think differently, act differently, and exhibit the courage to take a risk to improve our world.

Celeste Beeks Mastin: We look forward to celebrating with these customers and continuing to innovate to support their objectives keep an eye on our social media platforms and our web site for the official announcement to learn who will be named our winners.

Celeste Beeks Mastin: In conclusion, we're off to a good start to the year and we are pleased with our results in the first quarter.

Celeste Beeks Mastin: Next month we will be launching the inaugural HB Fuller Customer Innovation Award. We are proud to publicly recognize the most outstanding customer innovations during the previous year that were enabled by our adhesive technology. We look forward to celebrating with these customers and continuing to innovate to support their objectives. Keep an eye on our social media platforms and our website for the official announcement to learn who will be named our winner.

Celeste Beeks Mastin: Our teams are executing well in a challenging environment and continue to demonstrate disciplined in balancing changing price and raw material cost dynamics drive acquisition synergy realization and deliver meaningful cost savings from restructuring initiatives to drive growth in adjusted EBITDA.

As we look ahead, we remain on track for another year of strong profit growth continued margin expansion and improved volume trends in fiscal 2024.

Operator: In conclusion, we are off to a good start to the year, and we are pleased with our results in the first quarter. Our teams are executing well in a challenging environment and continue to demonstrate discipline in balancing changing price and raw material cost dynamics, driving acquisition synergy realization, and delivering meaningful cost savings from restructuring initiatives to drive growth in adjusted EBITDA. As we look ahead, we remain on track for another year of strong profit growth, continued margin expansion, and improved volume trends in fiscal 2024. We will continue to strengthen the portfolio through targeted organic investments and new highly synergistic strategic acquisitions. And we are confident in our ability to achieve our long-term growth and profitability goals. That concludes our prepared remarks for today. Operator, please open the line for questions. We are now opening the floor to questions and answers. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad.

Celeste Beeks Mastin: We will continue to strengthen the portfolio through targeted organic investments and new highly synergistic strategic acquisitions, and we are confident in our ability to achieve our long term growth and profitability goals.

None: That concludes our prepared remarks for today operator, please open the line for questions.

None: We are now opening the floor for a question and answer if you'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad, if you'd like to withdraw your question Press Star and number one again.

None: Our first question comes from Ghansham Panjabi from Baird. Your line is now open.

Ghansham Panjabi: Good morning, everybody. Thank you operator.

Ghansham Panjabi: Good morning Ghansham.

Ghansham Panjabi: Good morning, So maybe you can just build on your comments on what you saw during the first quarter.

Ghansham Panjabi: You said Europe deteriorating a bit in China, a little bit stronger.

Ghansham Panjabi: Just based on that how are you thinking about the regional macroeconomic backdrop with the rest of the fiscal year and then also can you update us on your view on where we are relative to the destocking.

Across your three core operating segments.

None: Sure So let's start with Destocking.

None: I think where we're largely through that destocking phenomenon that we saw in 2023.

None: There are some lingering effects of that in H H C. In Q1, and there might be a little in Q2, but for the most part I think that's complete.

Ghansham Panjabi: If you'd like to withdraw your question, press star and number one again. Our first question comes from Ghansham Panjabi from Baird. Your line is now open. Good morning, everybody. Thank you, Operator. Good morning, Ghansham. Good morning, Celeste.

None: As far as the quarter overall as you stated.

None: China was stronger than anticipated.

None: And Europe weaker.

None: In fact, Europe was pretty notable in that.

Celeste Beeks Mastin: You know, maybe you can just build on your comments on what you saw during the first quarter. I mean, you know, I think it's important for us to be clear about what we saw during the first quarter. You know, just based on that, how are you thinking about the regional macroeconomic backdrop for the rest of the... And then also, can you update us on your view on where we are relative to DSTOC across U3 core?

None: All three of our Gpus experienced volume declines of 10% or greater.

None: So you know that that was a significant change for versus what we had seen in 2023.

None: But again, given the strength of China, we were able to balance that out.

None: If you look at get down a little deeper and look at it by segment.

None: Overall volume was pretty flat, but for H H C and within H H C. It was really just the hygiene segment, where we saw a volume decline so.

Celeste Beeks Mastin: Sure. So let's start with destocking. You know, I think we're largely through the destocking phenomena that we saw in 2023. There were some lingering effects of that in HHC in Q1, and there might be a little in Q2, but for the most part, I think that's complete. As far as the quarter overall, you know, as you stated, China was stronger than anticipated and Europe was weaker. In fact, Europe was pretty notable in that all three of our GBUs experienced volume declines of 10% or greater. So, you know, that was a significant change versus what we had seen in 2023. But again, given the strength of China, we were able to balance that out.

None: No.

None: Hey up on easier comparisons EAA was really lifted a double digit percentage increase given what's happening in China.

None: And that was really the quarter in a nutshell.

None: Got it and maybe I'll add just a little color on Europe because.

Although it was weak and I think we continue to assume that it will be weak for the year. It did improve sequentially over the quarter. So just to give you some perspective on kind of the cadence.

None: Q1 revenue in Europe was down in the high teens in P. One down in the mid teens and Pete too.

None: High single digits in Q3, and then pay for year to date, it's down mid single digits. So we're seeing sequential improvement, we think thats a positive sign but were still remaining cautious on Europe.

None: And just just to elaborate on Europe, a little bit. So we thought this really pronounced destocking phenomena in North America in 2023 I don't believe this is the same thing in fact based on anecdotes from a few of our large customers and again customers across GB use.

Celeste Beeks Mastin: If you look, you know, get down a little deeper and look at it by segment, overall volume was pretty flat, but for HHC, and within HHC, it was really just the hygiene segment where we saw volume decline. So, you know, CA up on easier comparisons, EA was really lifted, double-digit percentage increase given what's happening in China. And that was really the quarter in a nutshell.

None: The statement that kept being repeated was that they had overproduce demand. So I think there has been little.

None: Little over production happening in Europe, and what we're seeing now is a correction of that temporary correction and as John pointed out.

John J. Corkrean: Maybe I'll add just a little color on Europe because although it was weak, and I think we continue to assume that it will be weak for the year, it did improve sequentially over the quarter. So just to give you some perspective on kind of the cadence. In Q1, revenue in Europe was down in the high teens in P1, down in the mid-teens in P2, down high single digits in P3, and then P4, year-to-date, it's down mid-single digits. So we're seeing sequential improvement. We think that's a positive sign, but we're still remaining cautious on Europe. Yeah, and just to elaborate on Europe a little bit. So, you know, we saw this really pronounced destocking phenomenon in North America in 2023. But I don't believe this is the same thing.

None: The volume numbers that we experienced month over month ending.

None: Ending this month to date really indicate it is a correction and not a major destocking activity.

Okay Super helpful. And then just for my second question on commodity costs, and obviously, you've seen significant margin expansion at H B Fuller.

None: Just price costs and also your restructuring and cost optimization initiatives et cetera.

None: So we are seeing oil tick up a bit.

None: Some of the other inputs that started to pick up as well in terms of propylene and.

None: Also some of the tier two et cetera in China et cetera is starting to pick up how are you sort of thinking about that dynamic.

Celeste Beeks Mastin: In fact, based on anecdotes from a few of our large customers, and again, customers across GBUs, you know, the statement that kept being repeated was that they had overproduced demand. So I think there has been a little overproduction happening in Europe, and what we're seeing now is a correction of that, a temporary correction, and as John pointed out, you know, the volume numbers that we experienced month over month for, you know, ending this month today really indicate that this is a correction and not a major destocking activity, which is really helpful. And then just for my second question on, you know, commodity causes, Cost Optimization Initiatives, et cetera. We are seeing oil prices take a bit, and some of the other inputs have started to pick up as well. TiO2, et cetera, in China, et cetera, starting. How are you sort of thinking about that dynamic? Yeah, we've seen those same things, Ghansham.

None: For H B Fuller going forward as it relates to the upstream.

None: Inflation pulse if you will.

None: Yes, we've seen those same things ghansham, but again, we experienced this a lot differently in our business.

None: Remember that 87% of our of our raw material spend is specialty chemicals.

None: We monitor 4000 different.

None: <unk> bases and and Theyre, so influenced by the volume of what's happening where they are in use much more so they don't trade like the commodities and so.

None: We what I'm anticipating is that we're gonna see more deflationary or flatter raw materials.

None: Possibly but more deflationary likely if volume remains constrained.

None: So volume if our volume continues.

None: Remains weak then I think we'll see more deflationary raws again, because they really don't move like the propylene and the crude oils of the world.

None: I think we'll see those suppliers getting squeezed.

None: Okay perfect. Thanks, so much.

None: Okay.

None: Our next question comes from.

None: Our next question comes from Kevin Mccarthy from vertical research. Your line is now open.

Celeste Beeks Mastin: But again, we experience this a lot differently in our business. So, remember that 87% of our raw material spend is on specialty chemicals. You know, we monitor 4000 different material bases, and they're so influenced by the volume of what's happening where they are in use, much more so they don't trade like commodities. And so, you know, what I'm anticipating is that we're going to see more deflationary or flatter raw materials, possibly, but more deflationary, likely, if volume remains constrained. So if our volume continues, you know, remains weak, then I think we'll see more deflationary ROS again because they really don't move like propylene and the crude oils of the world. I think we'll see those suppliers getting squeezed. Thanks. My next question comes from... Our next question comes from Kevin McCarkey. From Vertigo Research: Your line is now open.

Kevin Mccarthy: Yes, Thank you and good morning.

Kevin Mccarthy: Celesta, thanks to see your construction adhesives business.

Kevin Mccarthy: Posted results that it did can you talk a little bit about what you're baking into the annual guide for that segment in terms of.

Kevin Mccarthy: Seasonality sales.

Kevin Mccarthy: Margin opportunity.

Celesta: Yeah welcome Kevin.

Celesta: So as it relates to CA.

Celesta: So as it relates to CA.

Celesta: What we saw this quarter was really what I would call customers buying and their sentiment and anecdotes.

Celesta: <unk> to the start of a normal construction season, so we're starting to see the build.

None: And we're anticipating that will be the case, if you look at our guide for the year, what we anticipated there was high single digit organic growth for the business.

None: You want to elaborate any further John.

Operator: Thank you and good morning, Celeste. I'm glad to see your construction. Can you talk a little bit about what you're baking into the annual guide for that segment? www.kenhub.com Yeah, welcome, Kevin.

John Corcoran: I'd say just to echo <unk> comments about our assumptions, we're assuming we're going to have a normal north American construction season, we think the Destocking is complete in that market. So you will see a strong first half Q Q1 will be our strongest quarter I would predict because it is our easiest comparison in Q2 should be.

Celeste Beeks Mastin: So as it relates to California, what we saw this quarter was really what I would call customers buying, and their sentiment and anecdotes were equivalent to the start of a normal construction season. So we're starting to see the build, and we're anticipating that will be the case. If you look at our guide for the year, what we anticipated was high single-digit organic growth for the CA business. Do you want to elaborate any further, John?

John Corcoran: Strong too from a comparison standpoint.

John Corcoran: And then we will see.

John Corcoran: Moderating growth in the second half.

John Corcoran: As we get to comparisons against the improvements we saw in last year's trends. So we still feel good about that high single digit type of growth range, Yes, Kevin and in particular, our roofing business was very strong in Q1.

John Corcoran: And actually.

Kevin: We're instituting some price increases in that in that business unit as well.

John J. Corkrean: Yeah, I just would say, just to echo Celeste's comments about our assumptions, we're assuming we're going to have a normal North American construction season. We think the destocking is complete in that market, so you will see CA have a strong first half.

Kevin: Okay. Good to know and then secondly.

Kevin: Lastly, I think you referenced some softness in the hygiene space within H H C.

Kevin: How is that business evolving relative to your expectations and is the European.

John J. Corkrean: Q1 will be our strongest quarter, I would predict, because it is our easiest comparison. Q2 should be strong, too, from a comparison standpoint. And then we'll see, you know, moderating growth in the second half as we get to comparisons again of the improvements we saw in last year's trends. So, but we still feel good about that, you know, high single-digit growth range. Yeah, Kevin, in particular, our roofing business was very strong in Q1, and actually, you know, we're instituting some price increases in that business unit as well. www.youtube.com Second, Celeste, I think you referenced some soft landings in the hygiene space within HHC. How is that business evolving relative to your expectations, and is the European, you know, dialogue part of the equation there, or is that separate and distinct? Maybe you can just kind of update.

Kevin: Dialogue part of the equation, there or is that separate and distinct maybe you could just kind of update your.

Kevin: Thoughts on likely trajectory for that business.

Kevin: Chris.

Chris: Yeah, absolutely. So so the hygiene market within Hh C.

Chris: Again was responsible for that volume decline the entirety of the volume decline that we saw in Hh C. Now.

Chris: It's a smaller business for us than it used to be in the past.

Chris: And and we were able to offset a lot of that with growth in our packaging and medical adhesive space, but before I go down that Tien Tsin, Let me just talk about hygiene in particular, so a few things going on there.

Chris: Yes per your question relative to Europe that we did see.

Chris: Some of our big customers over producing demand so a correction happening there in Europe in particular in the hygiene market.

Chris: Also our hygiene market is often the lead for us in a lot of developing markets our nations and so the currency restrictions that we experienced particularly in Argentina and in Egypt.

Celeste Beeks Mastin: Thoughts on the likely trajectory for that business, see your, Yeah, absolutely. So the hygiene market within HHC, again, was responsible for that volume decline, the entirety of the volume decline that we saw in HHC. Now, it's a smaller business for us than it used to be in the past, and we were able to offset a lot of that with, you know, growth in our packaging and medical adhesive business. But before I go down that tangent, let me just talk about hygiene in particular.

Chris: Caused us to halt sales in those particular regions that had an impact.

Chris: Of course, we've got the index pricing adjustments those are significant in the hygiene space.

Chris: And by the way just for future reference I would note that a lot of those that index pricing is now flattening out this quarter and future.

Celeste Beeks Mastin: So, there are a few things going on there. Yes, per your question relative to Europe, you know that we did see some of our big customers overproducing demand. So there is a correction happening there in Europe, in particular in the hygiene market. Also, our hygiene market is often the lead market for us in a lot of developing markets and nations. And so the currency restrictions that we experienced, particularly in Argentina and in Egypt, caused us to halt sales in those particular regions which had an impact.

Chris: As opposed to the last two quarters, where indexes were down.

Chris: And finally, there was some there was some price competition occurring in Asia, and we decided to walk away from some of that business. So that's that's what's been.

Chris: That's sort of hygiene in Q1, and and some of my comments of course relate to how I see it moving forward.

Celeste Beeks Mastin: Of course, we've got the index pricing adjustments; those are significant in the hygiene space. And by the way, just for future reference, I would note that a lot of those that index pricing is now flattening out this quarter and future as opposed to the last two quarters where indexes were down. And finally, there's some price competition occurring in Asia, and we decided to walk away from some of that business. So that's sort of hygiene in Q1, and some of my comments, of course, relate to how I see it moving forward. I think as far as the future is concerned, you asked about the future there, I mean, a lot of these things are going to correct, right? We saw this correction in production in Europe. Europe's going to, core Europe will continue to be weak, but it won't be as weak as it was in the first quarter. You know, these currency restrictions are lifting in some areas, so we've seen some getting some help there. As I noted, the index price adjustments are now switching to flat.

Chris: I think so much as far as sorry as far as the future you asked about how at future. The future. There I mean, a lot of these things are going to correct right. We saw this correction in production in Europe.

Chris: Europe's getting core Europe will continue to be weak but.

Chris: It won't be as weak as first quarter. These.

Chris: These currency restrictions are they they are lifting in some areas.

So we've seen some getting some help there as I noted the index price adjustments are now switching to flat. So you know aside from some business, we're walking away from.

Chris: In some parts of the world because of price, you'll see that that hygiene market performed better in future quarters.

None: Understood. Thank you.

None: Yeah.

None: Okay.

None: Our next question comes from Jeff Zekauskas from Jpmorgan. Your line is now open.

Thanks very much.

Jeffrey John Zekauskas: I think your SG&A expense.

Celeste Beeks Mastin: So, you know, aside from some business we're walking away from in some parts of the world because of price, you know, you'll see that hygiene market perform better in future quarters. Our next question comes from Jeff Zekauskas from JP Morgan. Your line is now open. Thanks very much.

Jeffrey John Zekauskas: Adjusted was about $165 million.

Jeffrey John Zekauskas: And I know that Theres, a lot of discretion in the way you allocate.

Jeffrey John Zekauskas: SG&A in a seasonally weak quarter.

None: Do you expect that number in absolute terms to rise through the course of the year or would it be lower or stay the same and you gave us some assistance on that.

Jeffrey John Zekauskas: I think your SG&A expense, And I know that there's a lot of discretion in the way you allocate S.G. and A.M.S. Do you expect that number, in absolute terms, to rise through the course of the year or to be lower or stay the same? Sure, I'll take this one, Jeff.

None: Sure I'll take this one Jeff so it was in line with expectations, it's higher certainly as a percentage of revenue in the first quarter because revenue is our lowest revenue quarter seasonally.

None: And if you look at the increase.

None: Up about 10% half of that is acquisitions that we didn't have in the first quarter of last year. So that's driving about half of that increase.

John J. Corkrean: So it was in line with expectations. It's higher, certainly, as a percentage of revenue in the first quarter because revenue, it's our lowest revenue quarter seasonally. And if you look at the increase, it's up about 10%. Half of that is acquisitions that we didn't have in the first quarter of last year. So that's driving about half of that increase. And then the remainder is really driven by higher variable compensation.

None: And then the remainder is really driven by.

Jeffrey John Zekauskas: Higher variable compensation. So we are accruing at a higher rate than we were last year at this time and the impact of wage inflation.

Jeffrey John Zekauskas: So if you look forward.

Jeffrey John Zekauskas: Would expect it to increase sequentially in terms of total dollars.

Jeffrey John Zekauskas: But decrease as a percentage of revenue. So we when we look at how we accrue things like variable compensation, we do.

John J. Corkrean: So we are accruing at a higher rate than we were last year at this time, and the impact of wage increases. So if you look forward, we would expect it to increase sequentially in terms of total dollars but decrease as a percentage of revenue. So when we look at how we accrue things like variable compensation, we do adjust the percentage we accrue to match the seasonality of the business.

Jeffrey John Zekauskas: Just the percentage, we accrued a match the seasonality of the business. So we accrue a little less in Q1 than in Q2, so you'll see that step up but you should see that come down both in terms of the year on year increase because we will start to annualize against those acquisitions and it should also come down as a percentage of revenue.

John J. Corkrean: So we accrue a little less in Q1 than in Q2, so you'll see that step up, but you should see that come down, both in terms of the year-on-year increase because we'll start to annualize against those acquisitions, and it should also come down as a percentage of revenue. And then for my follow up question. Do you guys think that volumes will grow year over year in the second quarter or not? I would say that they should sequentially improve, but I think we're kind of still projecting that they may be down, you know, certainly less than a couple percent, but they would, they may be down, may be flat to down a percent, may be flat to the upper percent. So I don't think we're going to see a significant deviation.

Jeffrey John Zekauskas: Great.

None: And then for my follow up.

None: Do you guys think that volumes will grow year over year in the second quarter or no or stay flat.

None: I would say that they should.

None: Sequentially improve but I think we're kind of still projecting they may be down.

None: Certainly.

None: Less than a couple of percent, but they would they may be down.

It may be flat to down a percent maybe flat to up 1%. So I don't think we're going to see a significant deviation from Q1.

None: Okay, great. Thank you.

None: Yeah.

None: Thanks, Jeff.

None: Our next question comes from Patrick Cunningham.

None: Citi. Your line is now open.

None: Hi, Good morning. This is Eric Zhang on for Patrick can you walk us through how the 2023.

Eric Zhang: Acquisitions have performed and are there any positive or negative surprises.

John J. Corkrean: Okay, great. Thanks. Thanks, Jeff. Our next question comes from Patrick Cunningham from Citi. Your line is now open. Hi, good morning. This is Eric Zhang on behalf of Patrick.

None: Sure Eric.

So I was just looking at the adhesion actually acquisition integration results. This morning was delighted to see that we've actually doubled our performance on the deal model there.

Patrick David Cunningham: Can you walk us through how the 2023 vintage acquisitions have performed, and are there any positive or negative surprises? Sure, Eric. So I was just looking at the adhesion, or actually, acquisition integration results this morning and was delighted to see that we've actually doubled our performance on the deal model there. So overall, if you look at the entire collection, strong performance. We're ahead of our deal model plan. And have, I think, synergy projections for this year would be $25 million of synergies to be achieved, compared to 12 last year. And I can add just a little color on that, Eric.

None: So overall, if you look at the entire collection.

None: Strong performance were ahead of our deal model plan.

None: And have you know.

None: I think synergy projection for this year would be $25 million of synergies to be achieved.

None: Was 12 last year.

None: Yeah.

None: Yeah, and I can add just a little color on that Eric.

Eric Zhang: So I said the total impact that we should see year on year from acquisitions is about $25 million, that's what we discussed.

In Q1, that's the that's the incremental impact versus 2023, and first quarter. So far the first quarter were right in line on that and they're all performing very well in line with expectations.

Celeste Beeks Mastin: You know, as Celeste said, the total impact that we should see year-on-year from acquisitions is about $25 million. That's what we discussed in Q1. That's the incremental impact versus 2023. And in the first quarter, so far in the first quarter, we're right on line on that. And they're all performing very well in line with expectations.

Eric Zhang: Yeah.

None: Got it thank you.

None: Our next question comes from David Begleiter from Deutsche Bank. Your line is now open.

David L. Begleiter: Thank you.

David L. Begleiter: So lost your Q2 guidance is a little bit below street expectations is that through the hygiene or other factors.

David L. Begleiter: Okay.

David L. Begleiter: Hey, David I'll chip in.

David L. Begleiter: On this one.

None: I guess when we look at it we probably don't look at it relative to <unk>.

None: Consensus, but more so kind of trends in year on year. So.

Eric Zhang: Thank you. Our next question comes from David Begleiter from Douche Bank. Your line is now open.

None: Mid point, yes, it would be a little bit lower growth rate than Q1.

None: I think the biggest item there as we're getting our biggest net pricing raws benefit in Q1 that.

David L. Begleiter: Thank you. Celeste, your Q2 guidance is a little bit below street expectations. Is that due to hygiene or other factors?

None: That'll be a little bit lower in Q2, and actually a little it will narrow as we go through the year, but.

None: Offsetting that were seeing.

John J. Corkrean: Hey, David, I'll chip in on this one. You know, I guess, when we look at it, we probably don't look at it relative to the consensus but more so kind of on trends and year on year. So midpoint, yeah, would be a little bit lower growth rate than Q1. I think the biggest item there is, you know, we're getting our biggest net pricing ROAS benefit in Q1. That'll be a little bit lower in Q2 and actually a little narrower as we go through the year.

None: Were seeing synergies and restructuring benefits ramp up so I think it's the assumptions really that things the backdrop for Q2 looks very similar.

None: To Q1, but we get a little bit less net pricing and raw benefit.

None: Got it and based on our Q2 guide your second half guidance EBITDA is up 29% versus your first half EBITDA guidance and results can you just help us bridge that increase of almost 30% from Q1 from first half second half EBITDA.

None: I mean, it's mostly driven by seasonality and the fact that it is.

John J. Corkrean: But you know, the offsetting that we're seeing, we're seeing synergies and restructuring benefits ramp up. So I think it's the assumptions really that things, the backdrop for Q2 looks very similar to Q1, but we get a little bit less net pricing and ROAS. Okay. And based on that Q2 guide, your second half guidance, EBITDA is up 29% for this year, compared to first half EBITDA guidance and results. Can you help us bridge that increase of almost 30% from Q1, from first half to second half EBITDA? Yeah, I mean, it's mostly driven by seasonality and the fact that Q1 is such a low volume quarter.

None: The Q1 is such a low.

None: A low volume quarter, So I think I mentioned, the restructuring benefits and.

None: And.

None: And the synergies so those will step up to as we go through.

None: As we go from first half to second half, but it's largely a seasonality impact.

None: Yes, and David when you look at the trends in the business.

David L. Begleiter: We have we have some favorable trends on our side right. So we've got we've got our index prices flattening out our construction season is really ramping up, particularly in our roofing space, which which which.

David L. Begleiter: Drives of our high EBITDA margin for us.

David L. Begleiter: I'm anticipating continued strength in China and.

John J. Corkrean: So I think, you know, I mentioned the restructuring benefits and, and, uh..., and the synergies, so those we'll step up to as we go through. Yeah, and David, when you look at the trends in the business, we have some favorable trends on our side, right? So we've got our index prices flattening out. Our construction season is really ramping up, particularly in our roofing space, which drives a high EBITDA margin for us. I'm anticipating continued strength in China, and I want to elaborate on that because, you know, that is part of the market in China, but also some really tremendous market share gains in China as well. So I'll come back to that. We've got destocking that's complete in all of the GBUs.

None: I want to elaborate on that because you know.

None: That is in part the market in China, but also some really tremendous market share gains in China as well.

None:

None: So I'll come back to that we've got Destocking, that's complete in in all of the Gpus and as John just identified we've got synergies and restructuring, but just to talk a little bit about some of these market share gains our electronics business was up.

None: 50% versus prior year Q1, and we're really seeing some excellent work come to fruition. There in fact, 30% of our new volume and electronics is actually coming from new models.

None: So what would that tells me is that our team is now fully integrated into.

Celeste Beeks Mastin: And as John just mentioned, we've got synergies and restructuring. But just to talk a little bit about some of these market share gains, our electronics business was up 50% versus prior year Q1. And we're really seeing some excellent work come to fruition there. In fact, 30% of our new volume in electronics is actually coming from new models. So what that tells me is that our team is now fully integrated into these customers, so much so that they've become part of their development cycle. So we win a lot.

None: Into these into these customers so much so that they've become part of their development cycle. So we're winning a lot we are well entrenched in that space.

None: And it also indicates that our customers have gone back to innovating. So they are back on their product upgrade cycle post pandemic and that's really important because that's the opportunity that we have to get in and drive share take and to really bring solutions to the <unk>.

None: Customer base.

None: And that's just one example, David I might just add something on the sequential impact because we don't always look at the business the same way and I guess, that's an insight that.

Celeste Beeks Mastin: We are well-entrenched in that space, and it also indicates that our customers have gone back to innovating. So they're back on their product upgrade cycle post-pandemic. And that's really important, because that's the opportunity that we have to get in and drive, share, take, and really bring solutions to the customer base. So that's just one example. The same way, and I guess that's an insight that I hadn't looked at before, but I looked at last year, and last year, our second half EBITDA was up a little over 30%. So I think that's pretty. It's not unusual to see that.

None: <unk> looked at before but I looked at last year and last year, our second half EBITDA was up a little over 30% versus the first half. So I think that's a pretty it's not unusual to see that type of trajectory.

None: Right. Thank you for thank you very much. Thank you.

None: Thanks, David.

Speaker Change: The next question comes from Rosemary more belly from Gabelli funds. Your line is now open.

Rosemarie Morbelli: Thank you very much good morning, everyone.

Speaker Change: So, let's I was wondering.

Well two things first.

Rosemary: First of all following up on you.

Rosemarie Morbelli: Your customers.

Rosemarie Morbelli: <unk> and Youre gaining shares in the electronic arenas electronic incumbency is a lot of things. So if you could give us a better feel for which areas you are really doing well.

David L. Begleiter: Right. No, thank you. Thank you very much. Thank you. Thanks, David. The next question comes from Rosemarie Morbelli from Gabelli Funds. Your line is now open. Thank you very much. Good morning everyone. Celeste, I was wondering, well, two things.

None: And then second quick.

None: Go ahead go ahead I'll ask later.

Rosemarie Morbelli: First of all, following up on your customers' innovations, and you're gaining shares in the electronic arena. Now, electronics encompasses a lot of things. So, if you could give us a better feel for which areas you are really doing well. And then my second question, oh, go ahead, go ahead. I'll ask Leigh.

None: Okay, Thanks, Rosemarie and absolutely happy to elaborate on that so.

Let me give you a few examples.

Rosemarie Morbelli: So one example would be in consumer electronics.

Rosemarie Morbelli: We just replaced a competitor with a P fast competing containing product with our own P. Fast free two part of Hoxie for track pads. So we're able to take advantage of this trend away from P. S. P.

Celeste Beeks Mastin: OK. Thanks, Rosemarie. And I'll be absolutely happy to elaborate on that. So, let me give you a few examples.

Celeste Beeks Mastin: So one example would be in consumer electronics. We just replaced a competitor with a PFAS-containing product with our own PFAS-free two-part epoxy for track pads. So we're able to take advantage of this trend away from PFAS and bring our own products that can perform without it. Another example would be mobile phones.

Rosemarie Morbelli: P fast and bring our own.

Rosemarie Morbelli: Products that can can perform without it.

Rosemarie Morbelli: Another example would be in mobile phones. So we just with one with one manufacturer. We just took a 100% share of the touchpad bonding and the touch pad edge gap bonding with a reactive hot metal polyurethane for a phone that is going to be shipped.

Celeste Beeks Mastin: So with one manufacturer, we just took 100% of the touchpad bonding and the touchpad edge gap bonding with a reactive hot melt polyurethane for a phone that is going to be shipped to Africa, which is pretty exciting. This particular supplier is pursuing the African mobile phone market from China. And then there's even the category that I'll call automotive electronics. So in Europe, we won last year a vehicle display bonding application with an OEM. That business has grown by 10 times over the course of the prior year. So those are some electronics examples.

Rosemarie Morbelli: To Africa.

Rosemarie Morbelli: Which is pretty exciting this particular suppliers pursuing the African mobile phone market from China.

Rosemarie Morbelli: And then there is even the category that I'll call automotive electronics. So in Europe, we had last year one of vehicle display bonding application with an OEM.

Rosemarie Morbelli: That business has grown by 10 times.

Rosemarie Morbelli: Over the course of the prior year. So those are those are some electronics examples closely related to that would be our success in aerospace.

Celeste Beeks Mastin: Closely related to that would be our success in aerospace. So one of the high points for our business in Europe this last quarter was in aerospace. Another example would be us providing adhesives for interior trim in airplanes and even more technical applications, including or now supplying a syntactic epoxy that brings great compressive strength when bonding a honeycomb kind of wall or door material to carbon skins in the aircraft. So those are all sorts of examples of products and markets that are in this growth category, as we've now defined it, that we're really competing successfully in and winning. That is very helpful. I hope you have something for the aerospace industry that will prevent doors from sliding.

Rosemarie Morbelli: So.

Rosemarie Morbelli: One of the high points for our business in Europe. This last quarter was in aerospace.

Rosemarie Morbelli: Example, there would be a providing us providing adhesives for interior trim in airplanes, and even more technical applications, including.

Rosemarie Morbelli: We're now supplying us and tactic of coxey that brings great compressive strength.

Rosemarie Morbelli: In bonding honeycomb kind of Waller door material to carbon.

Rosemarie Morbelli: Carbon skins in the aircraft. So those are all sorts of examples of products.

Rosemarie Morbelli: And markets that are in this growth category as we have now defined it that we're.

Rosemarie Morbelli: Really competing successfully and winning.

None: That is very helpful. I hope you can you'll have something for the aerospace that will prevent it.

[laughter] me too.

Rosemarie Morbelli: Me too. And then my second question would be on the hygiene side. You mentioned that it was smaller than in the past, so are you walking away from a lot of businesses, or has the industry changed to the degree that it is not as interesting? Well, where we've walked away has been where, you know, we just weren't able to price as a consequence of, you know, having a challenging time bringing value, particularly in some of these emerging markets. China is really tough.

None: And then my second question.

None: Question would be on the hygiene side, you mentioned that each was smaller than in the past. So are you walking away from a lot of businesses or has the industry changed to the degree that it is not as interesting.

None: Well, we're we've walked away has been where we just we weren't able to price.

None: As a consequence of of you know.

Having a challenging time, bringing value, particularly in some of these emerging markets China is really tough.

Celeste Beeks Mastin: The product performance does not have to excel compared to performance in some other regions. So we are walking away from some business, but really, the bigger impact, Rosemarie, is that we're growing other parts of our business. You know, I just talked about our engineered adhesives business. We've got a lot of focus on growth in that area. And hygiene.

None: Performance does not have to excel.

None: Excel.

None: Compared to some to performance and some other.

None: Region. So so we are walking away from some business, but really the bigger impact Rosemarie is that we're growing other parts of our business you just talked about our engineered adhesives business. We've got a lot of focus on on growth in that area and hygiene hygiene is a leverage segment for us.

Celeste Beeks Mastin: Hygiene is a leveraged segment for us. So our objective with hygiene is to continue to drive productivity, drive the EBITDA margin improvement, but also recognize that in order to do that, we may have to be selective where we play. So that's really kind of directionally where we're going with hygiene.

None: So our objective with hygiene is to continue to drive productivity drive EBITDA margin improvement, but also recognize that in order to do that we may have to be selective where we play.

None: So that's that's really kind of directionally, where we're going with hygiene.

Celeste Beeks Mastin: Thank you very much. Good luck for the rest of the year. Thank you very much, Rosemarie. Ladies and gentlemen, if you have any follow-up questions, please press star and number one on your telephone keypad. That's star and number one on your telephone.

None: Thank you very much good luck for the rest of the year.

None: Thank you very much Rosemarie.

None: Ladies and gentlemen, if you have any follow up questions. Please press star and number one on your telephone keypad.

None: Alright, and number one on your telephone keypad.

Operator: We have a follow-up question from Jeff Zekauskas from J.P. Morgan. Your line is now open. Thank you.

None: We have a follow up question from Jeff Zekauskas from Jpmorgan. Your line is now open.

Jeffrey John Zekauskas: Thanks very much.

Jeffrey John Zekauskas: Can you talk about what the U.S. was like during the quarter and, Howard, are we strengthening or weakening? Absolutely, Jeff.

Jeffrey John Zekauskas: Can you talk about.

Jeffrey John Zekauskas: Demand.

Jeffrey John Zekauskas: Trends in the U S.

Jeffrey John Zekauskas: What what the U S with like during the quarter and how it seems to you in the second quarter.

None: Are we sure weakening how are we doing.

None: Absolutely Jeff so.

Celeste Beeks Mastin: So, so let's just talk about the U.S. in Q1 to start. So, the big, big impact there was that de-stocking ended in our HHC GBU and simultaneously that our CA customers started preparing for a normal construction season. So, you know, volume was sort of up low, single digits there.

None: So, let's just talk about I'll talk about.

None: U S. In Q1 to start so big Big impact there was that Destocking ended in our Hh see GPU.

None: And simultaneously that our CA customers started preparing for a normal construction season.

None: So.

None: Volume was volume was sort of up low single digits there.

Celeste Beeks Mastin: We were strong with our packaging business, as well as our solar business. And in packaging, you know, I'm really delighted with our packaging team in the U.S. They've done an amazing job creating solutions for customers and growing our business as a consequence. We've grown; we grew volume in packaging Q1 24 versus 23 by high single digits and expanded even down margin by 300 basis points. So that team has identified not only how to bring solutions, but they've also looked creatively at how to expand their business into channels where we wouldn't traditionally have gone, distribution channels that bring solutions to specific industries rather than distribution channels that focus on bringing all kinds of adhesives. So they've done a great job. Weaker in the U.S. in Q1 was, of course, as mentioned, the hygiene business as well as our woodworking business are challenged. It's more so products that are used in building products, or they get influenced by construction for sure.

None: Strong where our pet was our packaging business.

None: As well as solar business and in packaging.

None: I'm really delighted with our packaging team in the U S. They've done an amazing job.

None: Creating solutions for customers and growing our business as a consequence, we've grown we grew volume in packaging Q1, 24 versus <unk> 23.

None: By high single digits and expanded EBITDA margin by 300 300 basis points. So so that team has identified not only how to bring solutions, but they've also look creatively at how to expand their business into channels, where we wouldn't traditionally.

None: Have gone.

None: Channels abuse in channels that bring solutions to specific industries, rather than distribution channels that focus on bringing all kinds of adhesives. So so they've done a great job.

None: Weaker in the U S. In Q1 was of course as mentioned the hygiene business.

None: As well as our woodworking business is challenged it's it it's more so products that are used in building products or.

None: They get influenced by construction for sure I mean, John do you want to add anything.

Celeste Beeks Mastin: I mean, John, do you want to add anything? Well, Jeff, just to your comment about or question about trends we're seeing, it was pretty consistent across the quarter in Q1. Celeste hit on some of the key points for Q1. Q4 started out a little bit stronger, is showing improving growth, and HHC is showing improvement too, but they tend to be still a little bit weaker for some of the items that Celeste highlighted. So, small sample size, but so far, Q2 has started out a little stronger than Q1.

John Corcoran: Just to your comment about or your question about trends, we're seeing it was pretty consistent across the quarter in Q1.

John Corcoran: Celeste hit on some of the key points for Q1, Q4 started out a little bit.

John Corcoran: Stronger.

John Corcoran: Construction continues to be strong and we will show good growth probably not.

John Corcoran: A level of growth that we did in Q1 in engineering adhesives is showing improving growth and HFC is showing improvement too, but they are they tend to be still a little bit weaker for some of the items that celeste highlighted.

John Corcoran: Highlighted so small sample size, but so far Q2 has started out a little stronger than Q1.

None: Thank you.

None: Okay.

None: Okay.

John J. Corkrean: As of right now, we don't have any hands raised. I'd now like to hand the call back over to Celeste Mastin for closing remarks. Great, well, thank you all for joining the call and your continued interest. We look forward to speaking with you again next quarter. Thank you for attending today's conference call. You may now disconnect. Have a wonderful day.

None: As of right now we don't have any hands raised I'd now like to hand, the call back over to Tim.

Tim: Nasty for closing remarks.

Tim: Great well. Thank you all for joining the call and your continued interest we look forward to speaking with you again next quarter.

Tim: Okay.

None: Thank you for attending today's conference call you May now all disconnect have a wonderful day.