Q1 2024 Minerals Technologies Inc Earnings Call
Operator: Good day and welcome to the first quarter 2024 Minerals Technologies earnings call. As a reminder, today's call is being recorded. At this time, I'd like to turn the call over to Ms. Lydia Kopylova, Head of Investor Relations for Minerals Technologies. Please go ahead, Ms. Kopylova.
Good day and welcome to the first quarter 'twenty 'twenty for minerals technologies earnings call. As a reminder, today's call is being recorded at this time I'd like to turn the call over to MS. Lydia couple over head of Investor Relations for minerals technologies. Please go ahead, Ms Kopple of AR.
Lydia Kopylova: Thank you, Maddie. Good morning, everyone, and welcome to our first quarter 2020 earnings conference. Today's call will be led by Chairman and Chief Executive Officer, Doug Douglas, and Chief Financial Officer, Erik Aldag.
Lydia Kopylova: Thank you, Matt and good morning, everyone and welcome to our first quarter 'twenty 'twenty four earnings conference call today's call will be led by Chairman and Chief Executive Officer, Doug Dietrich and Chief Financial Officer, Eric called out following doesn't Erik's prepared remarks, we'll open it up to questions.
Lydia Kopylova: Following Doug and Erik's prepared remarks, we'll open the call up to questions. As a reminder, some of the statements made during this call may constitute forward-looking statements within the meaning of the Federal Security Act. Please note the cautionary language about forward-looking statements contained in our earnings release and on this slide. Our SEC filings disclose certain risks and uncertainties. Transcripts provided by Transcription Outsourcing, LLC. Please also note that some of our comments today refer to non-GAAP financial... A reconciliation to gap financial measures can be found in our earnings release, an appendix to this presentation, which I posted on our website. Now I'll turn it over to Doug. Thanks, Lydia. Good morning, everyone.
Lydia Kopylova: As a reminder, some of the statements made during this call may constitute forward looking statements within the meaning of the federal Securities laws. Please note the cautionary language about forward looking statements contained in our earnings release and on this slide.
Lydia Kopylova: SEC filings disclosed certain risks and uncertainties, which may cause our actual results to differ materially from these forward. Looking statements was also know that some of our comments today refer to non-GAAP financial measures and reconciliations to GAAP financial measures can be found in our earnings release and in appendix of this presentation, which are posted on our website now I'll turn it over to.
Speaker Change: Thanks Lydia.
Lydia Kopylova: Good morning, everyone. Thanks for joining today.
Doug Douglas: Thanks for joining us today. Okay, let's go over a quick outline for today's call. I'll begin today's presentation by reviewing the highlights from our first quarter. As you saw in our press release, we posted a record quarter for MTI, and I'll share the actions that drove our strong results. I'll then take a few minutes to give you some insight into the current dynamics of our main market and also highlight a few growth initiatives that will come into play over the next few quarters. Erik will then take you through the detailed financials and provide an outlook for the second quarter, and then we'll open up the meeting to questions. With that said, let's get started.
Speaker Change: Okay, Let's go for a quick outline for today's call.
Speaker Change: I'll begin today's presentation by reviewing the highlights from our first quarter and as you saw in our press release.
Speaker Change: We posted a record quarter for MTR.
Lydia Kopylova: Sure the actions that drove our strong results.
Lydia Kopylova: Well then take a few minutes to give you some insight into the current dynamics of our main markets.
Lydia Kopylova: Also highlight a few growth initiatives that will come into play over the next few quarters.
Lydia Kopylova: Eric will then take you through the detailed financials and provide an outlook for the second quarter and then we'll open up the meeting to questions.
Speaker Change: Let's get started.
Speaker Change: We're off to a strong start this year.
Doug Douglas: We're off to a strong start this year with several factors and initiatives that combine to deliver a record quarter. The re-segmentation of the company last year, which organized our product lines around our core technologies and similar end markets, and which also streamlined our internal organizational structure, is driving higher levels of performance. The strategy to Move into Higher Growth, Higher Margin Markets is also delivering. Sales in the consumer and specialty segments continue to grow, and our highest margin products across the company are growing the fastest.
Speaker Change: Several factors and initiatives the combined to deliver a record quarter.
Speaker Change: The re segmentation of the company last year, which organized our product lines around our core technologies and similar end markets.
Speaker Change: <unk>, which also streamlined our internal organizational structure.
Speaker Change: It's driving higher levels of performance.
Speaker Change: Our strategy to move into higher growth higher margin markets is also delivering.
Speaker Change: Sales on the consumer and specialty segment continue to grow.
Speaker Change: Our highest margin products across the company are growing the fastest.
Speaker Change: Our margin expansion initiatives are ahead of our target pace and we continue to leverage savings from the reorganization.
Doug Douglas: Margin Expansion Initiatives are ahead of our target pace. We continue to leverage savings from the reorganization. (Inaudible) Each business is executing well operationally, focusing on safety, variable cost control, and productivity improvement. These initiatives led to an all-time record quarterly operating income.
Speaker Change: Strength in pricing and capture input cost savings.
Speaker Change: Each business is executing well operationally focusing on safety variable cost control and productivity improvements.
Speaker Change: Combined these initiatives led to an all time record quarterly operating income and.
Doug Douglas: First Quarter Records for Earnings Per Share and Cash Flow. Overall, we're pleased with the performance and the strong momentum we've built. Let me take you through some of the highlights.
Speaker Change: In first quarter records for earnings per share and cash flow.
Speaker Change: Overall, we're pleased with the performance and the strong momentum we built.
Speaker Change: Let me take you through some of the highlights.
Doug Douglas: Sales were $535 million, and adjusting for the deconsolidation of Barrett's minerals, they were relatively flat compared to last year and up slightly from the fourth quarter. We continue to drive growth across the consumer and specialty segment, with sales up 4% over last year on an underlying basis. Sales in the engineered solutions segment were lower compared to last year, primarily driven by pockets of weak market conditions in the environmental and infrastructure products.
Speaker Change: Sales were $535 million and adjusting for the deconsolidation of <unk> minerals were relatively flat compared to last year and up slightly from the fourth quarter.
Speaker Change: We continue to drive growth across the consumer and specialty segment with sales up 4% over last year on an underlying basis.
Speaker Change: Sales in the engineered solutions segment were lower compared to last year, primarily driven by pockets of weak market conditions in the environmental and infrastructure product line.
Speaker Change: Within consumer specialties, the household and personal care product line remained on its steady growth track and sales increased by 7%.
Doug Douglas: Within consumer and specialties, the household and personal care product line remained on its steady growth track, and sales increased by 7%. This was driven by continued strong demand for private label cat litter and increases across the board for renewable fuel filtration, animal health feed additives, personal care, and fabric care products. We'll go into a bit more detail on what's driving this in a moment.
Speaker Change: This was driven by continued strong demand for private label cat litter and increases across the board or renewable fuel filtration animal health feed additives personal care and fabric care products.
Speaker Change: Moving to a bit more detail on what's driving this in a moment.
Speaker Change: Underlying sales in the specialty additives product line increased by 2% driven by a rebound in demand from North America paper and packaging customers and also from strong sales of ground calcium carbonate products in our Western U S market.
Doug Douglas: Underlying sales in the Specialty Additives product line increased by 2%, driven by a rebound in demand from North America paper and packaging customers and also from strong sales of ground calcium carbonate products in our Western U.S. market. Within the engineered solution segment, high-temperature technologies product line sales were similar to last year with stable steel and foundry market conditions in our major geography. We experienced a few foundry customer maintenance outages in North America in January.
Speaker Change: Within the engineered solutions segment high temperature technologies product line sales were similar to last year with stable steel and foundry market conditions in our major geographies.
Speaker Change: We experienced a few foundry customer maintenance outages in North America in January.
Doug Douglas: Volumes rebounded quickly throughout the quarter, and demand remained solid. We also saw continued growth of foundry volumes in Asia. In the environmental and infrastructure product line, sales were lower than last year due to an uncharacteristically slow seasonal period for commercial construction.
Speaker Change: With volumes rebounded quickly throughout the quarter and demand remains solid.
Speaker Change: We also saw continued growth of foundry volumes in Asia.
Speaker Change: In the environmental and infrastructure product line sales were lower than last year due to an uncharacteristically slow season seasonal period for commercial construction.
Doug Douglas: We were also involved in a couple of very large environmental remediation projects last year, adding to the comparative sales decline. As I mentioned, each business put up a solid operating performance this quarter. They maintained strong pricing, actively secured lower input costs, and remained focused on safe and efficient operations. Savings realized from our internal reorganization last year also contributed to increased profitability. These actions, combined with the strong sales mix, yielded an operating margin of 14.5% and a record $77 million in operating income, a 23% increase over last year. Earnings per share were $1.49, a 31% increase over last year.
Speaker Change: We're also involved in a couple of very large environmental remediation projects last year, adding to the comparative sales decline.
Speaker Change: As I mentioned each of the business put up a solid operating performance this quarter.
Speaker Change: We maintained strong pricing actively secured lower input costs and remain focused on safe and efficient operations.
Speaker Change: The savings realized from our internal reorganization last year also contributed to increased profitability.
Speaker Change: These actions combined with the strong sales mix yielded an operating margin of 14, 5% and a record $77 million of operating income of 23% increase over last year.
Speaker Change: Earnings per share were $1 49.
Speaker Change: A 31% increase over last year.
Doug Douglas: Cash flow was also strong this quarter, at $56 million. This quarter is a good example of the power of our new organization, our focus strategy, and the strength of our business. For the past few years, we've built a balanced portfolio of leading consumer and industrial businesses that provide stable long-term growth, expanding margins through the innovation of higher-value products, and through operational excellence and fixed cost leverage. (Inaudible) Overall, I'm pleased with the start to the year and the positive track we are on.
Speaker Change: Cash flow was also strong this quarter at $56 million.
Speaker Change: This quarter is a good example of the power of our new organization, our focused strategy and the strength of our business model.
Speaker Change: For the past few years, we've built a balanced portfolio of leading consumer and industrial businesses that provide stable long term growth.
We're expanding margins through the innovation of higher value products through operational excellence and fixed cost leverage.
Speaker Change: We've strengthened cash flow increased returns to shareholders and maintained balance sheet strength and flexibility.
Overall, I'm pleased with the start to the year and the positive track we are on.
Doug Douglas: As we head into the second quarter, I want to take a few minutes to give you a bit of color on the current market conditions for each product line and also highlight a few new products that are coming out over the next several quarters. This should give you a sense of the positive combination of market conditions and new business opportunities that we see driving strong results for the second quarter and into the back half of the year.
Speaker Change: As we head into the second quarter I wanted to take a few minutes to give you a bit of color on the current market conditions for each product line and also highlight a few new products that are that are advancing over the next several quarters.
Speaker Change: It should give you a sense of the positive combination of market conditions, and new business opportunities that we see driving strong results for the second quarter and into the back half of the year.
Doug Douglas: To give you the general backdrop, the second and third quarters are typically our strongest due to seasonal strength in the residential, commercial construction, and environmental remediation markets. We're also seeing improvement on top of this regular seasonality in a few of our markets compared to last year, which I'll point out as I move through the product. Let's start with household and personal.
Speaker Change: As a general backdrop, the second and third quarters are typically our strongest due to seasonal strength in the residential commercial construction and environmental remediation markets.
Speaker Change: We're also seeing improvement on top of this regular seasonality and a few of our markets compared to last year, which I'll point out as I move through the product lines.
Speaker Change: Let's start with household and personal care.
Speaker Change: Market served by this product lines continue to be robust.
Doug Douglas: Markets served by this product line continue to be Brobo. We are the leading provider of private-label cat litter, and global demand remains solid. The market for our personal care products has moved past last year's de-stocking phase, and we're seeing improvements in our order book. Innovation driven by close collaboration with our customers in each of these markets is paying dividends, and demand for our newest products in animal health, renewable fuel filtration, and fabric care is growing.
Speaker Change: We are the leading provider of private label Cat litter.
Global demand remains solid.
Speaker Change: Market for our personal care products has moved past last year's Destocking phase and we're seeing improvements in our order book.
Speaker Change: Innovation driven by close collaboration with our customers in each of these markets is paying dividends and demand for our newest products in animal health renewable fuel filtration and fabric care is growing.
Speaker Change: On the growth initiative side for this product line, we have several new innovations for pet litter and fabric for the fabric care market that are moving through development and that will result in new sales in the coming quarters.
Doug Douglas: On the Growth Initiative side for this product line, we have several new innovations for pet litter and fabric for the fabric care market that are moving through development and that will result in new sales in the coming quarter. Products focused on cat wellness and hygiene for pet litter and aesthetic and softening particles for laundry detergent are being commercialized this year.
Speaker Change: These products focused on cat wellness and hygiene for pet litter and aesthetic and softening particles for laundry detergent or being commercialized this year.
Speaker Change: Additionally, the trend toward natural ingredients across the consumer product spectrum continues in our core technologies applied to our mineral reserves uniquely positions us to benefit from this trend.
Doug Douglas: Additionally, the trend toward natural ingredients across the consumer product spectrum continues, and our core technologies applied to our mineral reserves uniquely position us to benefit from this trend. We're collaborating with customers to develop solutions like mineral-based absorptive additives for animal feed and ingredients like our natural delivery system for retinol in person. Specialty Additives; General Market Conditions are relatively solid; global paper and packaging markets remain stable, and we're seeing improved PCC demand in North America compared to last year. The residential construction market in North America is entering its normal seasonally strong period.
Speaker Change: We're collaborating with customers developed to develop solutions like mineral based absorptive additives for animal feed and ingredients like our natural delivery system for retinal and personal care.
Speaker Change: In specialty additives general market conditions are relatively solid.
Speaker Change: Global paper and packaging markets have remained stable and we're seeing improved PCC demand in North America compared to last year.
Speaker Change: The residential construction market in North America is entering its normal seasonally strong period.
Doug Douglas: We've also seen market conditions gradually improve over the past couple of quarters. There are a few additional growth drivers for this product line. We're benefiting from three new paper and packaging satellites that were commissioned last year, and we have five more satellites scheduled to start up this year and into early next. As a reminder, of these eight new satellites, five are for standard PCC, one is for our new yield recycling technology, 2 or Large Ground Calcium Carbonate Plants for White Packaging, one of which also incorporates our New Yield technology.
Speaker Change: Also seen market conditions gradually improve over the past couple of quarters.
Speaker Change: A few additional growth drivers for this product line.
Speaker Change: We're benefiting from three new paper and packaging satellites that were commissioned last year.
Speaker Change: And we have five more satellites scheduled to start up this year and into early next.
Speaker Change: As a reminder of these eight new satellites five or for standard PCC, one is for our new yield recycling technology.
Speaker Change: And to our large ground calcium carbonate plants for white packaging, one of which also incorporates our new yield technology.
Speaker Change: We continue to have a solid pipeline of opportunities across our product and technology platform. Many of them aimed at the packaging market and for further deployment of our sustainable filler solutions.
Doug Douglas: We continue to have a solid pipeline of opportunities across our product and technology platform, many of them aimed at the packaging market and for further deployment of our sustainable filler solution. All in all, we have a positive outlook for this product line for Q2 and into the back half. In high-temperature technologies, we continue to experience steady global market demand for our engineered blends. Automotive, heavy truck, and industrial casting production in our main geographies of North America and Asia remain stable.
Speaker Change: All in all we have a positive outlook for this product line for Q2 and into the back half of the year.
Speaker Change: And high temperature technologies, we continue to experience steady global market demand for our engineered blends.
Speaker Change: Automotive heavy truck and industrial casting production in our main geographies of North America, and Asia remained stable and at this point, we see demand conditions remaining relatively strong.
Doug Douglas: And at this point, we see demand conditions remaining relatively strong. There are a few areas to point out here. We've mentioned that process automation and data analytics have been areas where we've focused our innovation to provide higher value for our customers' manufacturing processes. MinScan units for electric arc furnaces are a result of this development.
Speaker Change: A few areas to point out here.
Speaker Change: I've mentioned that process automation and data analytics have been areas, where we focused our innovation to provide higher value for our customers' manufacturing process.
Speaker Change: Our <unk> units for electric arc furnaces are a result of this development.
Doug Douglas: These units enable the automated measurement of furnace conditions and the subsequent application of our more durable and higher-performing refractory blend. Over the past 18 months, we've secured 15 new long-term contracts for these units and the supply of refractory products. This year, we're installing eight of these units, which will drive sales growth for this product line throughout the year. Our environmental and infrastructure product line currently faces pockets of mixed market conditions but also some very exciting long-term opportunities.
Speaker Change: These units enable the automated measurement of furnace conditions and the subsequent application of our more durable and higher performing refractory blends.
Speaker Change: Over the past 18 months, we secured 15, new long term contracts for these units and the supply of refractory products.
Speaker Change: This year, we're installing eight of these units, which will drive sales growth for this product line throughout the year.
Speaker Change: Our.
Speaker Change: It'll in infrastructure product line currently faces pockets of mixed market conditions, but also some very exciting long term opportunities.
Speaker Change: We're entering the strong season for environmental remediation projects and there are signs that the commercial construction market is beginning to turn given an increase in inquiries we are seeing from customers.
Doug Douglas: We're entering the strong season for environmental remediation projects, and there are signs that the commercial construction market is beginning to turn, given the increase in inquiries we are seeing from customers. However, we remain cautious that the market is actually hitting an inflection point. But once it does, we expect to benefit relatively quickly because our subsurface waterproofing and vapor barrier products are used toward the beginning of many construction projects.
Speaker Change: We remain cautious that the market is actually hitting an inflection point.
Speaker Change: But once it does we expect to benefit relatively quickly because our subsurface waterproofing and vapor barrier products are used towards the beginning of many construction projects.
Speaker Change: I wanted to highlight for this product line of which I'm sure. Many of you are aware is that the EPA recently announced a national standard to limit P fast and related chemicals in drinking water.
Doug Douglas: One area to highlight for this product line, which I'm sure many of you are aware, is that the EPA recently announced a national standard to limit PFAS and related chemicals in drinking water. This is a positive development, and it establishes a significant market for our Fluorazorb product. We've been trialing Fluorazorb for both drinking water and groundwater PFAS remediation for several years. This solution is cost-effective and versatile in its deployment and explicitly targets PFAS and associated molecules.
Speaker Change: This is a positive development and it establishes a significant market for our floors or a product.
Speaker Change: We've been trialing floor reserved for both drinking water and groundwater P fast remediation for several years.
Our solution is cost effective and versatile and its deployment and explicitly targets P fasten associated molecules.
Speaker Change: No doubt this is a crucial regulatory step and we expect it to further stimulate interest in Florida.
Doug Douglas: No doubt, this is a crucial regulatory step, and we expect it to further stimulate interest in Fluorazorp. It will take time for the drinking water PFAS market to fully develop and move from this initial regulation to be in full compliance by 2029. Floor absorbent applicability extends beyond municipal drinking water and is equally effective for groundwater and wastewater remediation and sediment capping systems.
Speaker Change: We will take time for the drinking water P fast market to fully develop and move from this initial regulation to be in full compliance by 2029.
Speaker Change: Floors arb applicability extends beyond municipal drinking water and is equally effective for groundwater and wastewater remediation and sediment capping systems.
Speaker Change: We have plans to run more than 100 pilot trials throughout this year, mostly for municipal water, but also for several large groundwater remediation projects.
Doug Douglas: We have plans to run more than 100 pilot trials throughout this year, mostly for municipal water, but also for several large groundwater remediation projects. We're confident that many of these pilot trials will convert into stable revenue-generating opportunities. Over the long term, we see the remediation of PFAS from water around the world as a significant growth opportunity for MTI.
Speaker Change: We're confident that many of these pilot trials will convert into stable revenue generating opportunities.
Speaker Change: Over the long term, we see the remediation of key files from water around the world as a significant growth opportunity for MTI.
Doug Douglas: To sum up, we're seeing generally positive market conditions across the board as we head into the second quarter. Additionally, in each of our product lines, we have several initiatives developed through our innovation pipeline and aligned with macro market trends that will continue our momentum and drive both near-term and long-term growth. Lastly, I want to give a quick update on progress with Barrett's Minerals Inc. As you may have seen, we entered into an agreement to sell BMI's assets, which was approved by the Bankruptcy Court a few weeks ago.
Speaker Change: To sum up we're seeing generally positive market conditions across the board as we head into the second quarter.
Speaker Change: Additionally, each of our product line and each of our product lines. We have several initiatives developed through our innovation pipeline and aligned with macro market trends that.
Speaker Change: We will continue our momentum and drive both near term and long term growth.
Speaker Change: Lastly, I want to give a quick update on progress with <unk> minerals, Inc.
Speaker Change: As you may have seen we entered into an agreement to sell <unk> assets.
Speaker Change: Which was approved by the bankruptcy court a few weeks ago.
Speaker Change: We are currently working through closing the transaction, which is slated for early next week.
Doug Douglas: We're currently working through closing the transaction, which is slated for early next week. Proceeds from the sale will be used to repay the dip financing that was put in place last year as well as to fund the ongoing bankruptcy process.
Speaker Change: Proceeds from the sale will be used to repay the dip financing that was put in place last year as well as to fund the ongoing bankruptcy process.
Speaker Change: This is an important step in mti's exit from the <unk> business and represents forward progress in BMI chapter 11 process.
Erik C. Aldag: This is an important step in MTI's exit from the talc business and represents forward progress in BMI's Chapter 11 process. This sale not only delivers value and certainty for BMI's various stakeholders but also enables MTI to move forward with a clear focus on its core long-term strategic objectives. We'll continue to keep you informed of additional progress, which we're advancing as expeditiously as possible. Now, I'll turn it over to Erik to review the financial details, segment highlights, and our outlook for the second quarter. Thanks Doug, and good morning everyone.
Speaker Change: The sale not only delivers value uncertainty for BMI as various stakeholders and it also enables MTI to move forward with a clear focus on our core long term strategic objectives.
Speaker Change: We'll continue to keep you informed of additional progress, which we're advancing as expeditiously as possible.
Speaker Change: Now I'll turn it over to Eric to review the financial details segment highlights and our outlook for the second quarter Eric.
Eric: Thanks, Doug and good morning, everyone.
Eric: I'll start by providing a summary of our first quarter results followed by a review of our segments and then I'll wrap up with our outlook for the second quarter.
Eric: Following my remarks, we'll turn the call over for questions.
Now, let's review our first quarter results.
Erik C. Aldag: I'll start by providing a summary of our first quarter results, followed by a review of our segments, and then I'll wrap up with our outlook for the second quarter. Following my remarks, we'll turn the call over to questions. Now, let's review our first quarter results. We had a very strong start to the year with several record-setting performances in the first quarter. First quarter sales were $535 million, up slightly versus the prior year on an underlying basis.
Eric: We had a very strong start to the year with several record setting performances in the first quarter.
Eric: First quarter sales were $535 million up.
Eric: <unk> versus the prior year on an underlying basis.
Eric: Underlying sales in the consumer and specialty segment grew 4%.
Eric: Given by volume growth across the segment.
Eric: In the engineered solutions segment sales were lower than the prior year driven entirely by slow conditions for environmental and infrastructure projects.
Eric: The year over year sales growth for this product line was especially challenged given the relatively strong start we had last year, including a few large remediation projects at superfund sites in the U S.
Erik C. Aldag: Underlying sales in the consumer and specialty segment grew 4%, driven by volume growth across the segment. In the engineered solutions segment, sales were lower than the prior year, driven entirely by slow conditions for environmental and infrastructure projects.
Eric: I'll note here that as we lap the Q1 comparison period, we expect Mti's overall year over year sales growth to revert to the mid single digit range on an underlying basis.
Eric: First quarter operating income was $77 million up 23% from a year ago, driven by a 290 basis point improvement in operating margin.
Erik C. Aldag: The year-over-year sales growth for this product line was especially challenged given the relatively strong start we had last year, including a few large remediation projects at Superfund sites in the U.S. I'll note here that as we lap the Q1 comparison period, we expect MTI's overall year-over-year sales growth to revert to the mid-single-digit range on an underlying basis. First quarter operating income was $77 million, up 23% from a year ago, driven by a 290 basis point improvement in operating margins.
Eric: As you can see in the operating income bridge on this side the income and margin growth in Q1 came from three areas.
Eric: Yeah.
Eric: First volume and mix drove $2 million of income improvement and 60 basis points of margin improvement driven by strong sales of higher margin products, which resulted in a favorable mix impact.
Eric: I should also highlight that the prior year income in this bridge includes income from BMI.
Eric: So the volume mix contribution from the underlying business was greater than the $2 million as shown in this bridge.
Eric: Second our disciplined pricing is helping to ensure that our margins reflect the value we provide to customers.
Eric: Pricing overall contributed to $5 million of income and 100 basis points of margin improvement versus last year.
Eric: Third we realize the cost improvement of $7 million versus last year or 130 basis points of margin.
Erik C. Aldag: As you can see in the operating income bridge on this slide, the income and margin growth in Q1 came from three areas. First, volume and mix drove $2 million of income improvement and 60 basis points of margin improvement, driven by strong sales of higher margin products, which resulted in a favorable mix impact. I should also highlight that the prior year income in this bridge includes income from BMI.
Our operations teams continue to drive productivity and variable conversion cost improvements at our facility.
Eric: And as the restructuring program, we announced last year has reached full run rate savings.
Eric: In addition, as input costs, such as energy and freight have stabilized over the last few quarters we.
Eric: We have favorability versus the prior year Q1, when we were working through significantly higher cost inventory.
Erik C. Aldag: So the volume mixed contribution from the underlying business was greater than the $2 million shown in this bridge. Second, our disciplined pricing is helping to ensure that our margins reflect the value we provide to customers. Pricing overall contributed to $5 million of income and 100 basis points of margin improvement versus last year. Third, we realized a cost improvement of $7 million versus last year, or 130 basis points of margin, as our operations teams continue to drive productivity and variable conversion cost improvements at our facilities. And as the restructuring program we announced last year has reached full run rate savings.
Eric: All of the above contributed to a gross margin of 25, 4% 330 basis points above last year and EBITDA margin of 18, 8% 310 basis points above last year.
Eric: In short we are executing on the margin improvement strategy, we outlined in our Investor day last year.
Eric: And there is plenty of opportunity for further margin improvement, particularly as we leverage incremental volume across our fixed cost base as.
Eric: As we continue to innovate and commercialize new products and.
Eric: And as we continue to grow the highest margin products in the portfolio.
Eric: Earnings per share was $1 49, excluding special items up 31% from prior year and represented a record level for the first quarter.
Eric: Cash flow was also strong with cash from operations of $56 million.
Erik C. Aldag: In addition, as input costs such as energy and freight have stabilized over the last few quarters, we have favorability versus the prior year Q1 when we were working through significantly higher cost inventory. All of the above contributed to a gross margin of 25.4%, 330 basis points above last year, and an EBITDA margin of 18.8%, 310 basis points above last year. In short, we are executing on the margin improvement strategy we outlined at our Investor Day last year.
Eric: Up 66% versus last year, and also representing a record level for our first quarter.
Eric: Now, let's review the segments, beginning with consumer and specialty.
Eric: First quarter sales were $297 million up 4% on an underlying basis from prior year.
Sales in our household and personal care product line were up 7%.
Eric: Given by higher volumes across end market.
Eric: Demand for cat litter products remains strong growing in the mid single digits.
And growth across the rest of this product line was around 10%.
Eric: In specialty additives underlying sales were up 2%.
Eric: We're seeing growth from our three new paper and packaging satellites in Asia.
Eric: In Europe, we were encouraged to see volumes improve sequentially and year over year, which helped offset the sales impact from formula driven price changes.
Erik C. Aldag: And there's plenty of opportunity for further margin improvement, particularly as we leverage incremental volume across our fixed cost base, as we continue to innovate and commercialize new products, and as we continue to grow the highest-margin products in the portfolio. Earnings per share was $1.49, excluding special items, up 31% from the prior year, and represented a record level for the first quarter.
Eric: Meanwhile, demand for our residential construction applications has remained resilient.
Eric: Operating income was $42 million in the first quarter and operating margin improved by 330 basis points to 14, 1% of sales.
Improved volume and mix disciplined pricing favorable input costs, and a 6% productivity improvement drove a 30% year over year increase in operating income for this segment.
Eric: Looking ahead to the second quarter, we expect demand for household and personal care products to remain solid with continued year over year growth.
Erik C. Aldag: Cashflow was also strong, with cash from operations of $56 million, up 66% versus last year and also representing a record level for our first quarter. Now, let's review the segments, beginning with consumer and speciality. First quarter sales were $297 million, up 4% on an underlying basis from the prior year. Sales in our Household and Personal Care product line were up 7%, driven by higher volumes across and. Demand for cat litter products remains strong, growing in the mid-single digits.
Eric: In specialty additives, we expect higher sales sequentially in the seasonally stronger period for residential construction.
Eric: And we will continue to see sales increases driven by our newest satellites ramping up in Asia.
Which will mostly offset typical second quarter customer maintenance outages in North America.
Eric: Altogether, we expect another strong quarter with operating income up approximately 5% sequentially and up 30% year over year.
Eric: Now, let's review the engineered solutions segment.
Eric: First quarter sales in the engineered solutions segment were 238 million, 5% lower than last year.
Eric: Sales in our high temperature technologies product line were 1% lower as some of our foundry customers in North America took temporary maintenance outages early in the first quarter.
Erik C. Aldag: And growth across the rest of this product line was around 10%, and specialty additives, underlying sales were up 2%. We're also seeing growth from our three new paper and packaging satellites in Asia. And in Europe, we were encouraged to see volumes improve sequentially and year over year, which helped offset the sales impact from formula-driven price changes. Meanwhile, demand for our residential construction applications has remained resilient. Operating income was $42 million in the first quarter, and operating margin improved by 330 basis points to 14.1% of sales.
Eric: Meanwhile, we saw continued improvement in foundry volume across Asia.
Eric: And the.
Eric: Mental and infrastructure product line sales were lower by 14% driven by softness in commercial construction and environmental lining projects.
Eric: As I mentioned, we also had a few large remediation projects in the prior Q1 that are affecting the comparison.
Eric: Despite the lower sales segment operating income improved 9% to $38 million in the first quarter.
Eric: And operating margin improved by 200 basis points to 16, 2% of sales.
Eric: The margin improvement was driven by favorable product mix disciplined pricing cost control and a solid operating performance that resulted in 11% productivity improvement versus last year.
Erik C. Aldag: Improved Volume and Mix, Disciplines Pricing, Favorable Input Costs, and a 6% productivity improvement drove a 30% year-over-year increase in operating income for this segment. Looking ahead to the second quarter, we expect demand for household and personal care products to remain solid, with continued year-over-year growth. In specialty additives, we expect higher sales sequentially in the seasonally stronger period for residential construction, and we'll continue to see sales increases driven by our newest satellites ramping up in Asia, which will mostly offset typical second quarter customer maintenance outages in North America.
Eric: Looking ahead to the second quarter, we expect market conditions in steel and foundry to remain stable.
Eric: With a sequential improvement in Asia foundry due to the lunar new year holiday in the first quarter.
Eric: We are also expecting higher sales to steal customers driven by installations of our newest <unk> technologies at several Eas mills in the U S.
Eric: In environmental and infrastructure, we will see a sequential increase in sales as we enter the seasonally stronger period for environmental and commercial construction projects.
Erik C. Aldag: All together, we expect another strong quarter, with operating income up approximately 5% sequentially and up 30% year-over-year. Now, let's review the Engineered Solutions segment. First quarter sales in the Engineered Solutions segment were $238 million, 5% lower than last year.
As Doug mentioned, we are seeing improvements in bid activity, but it is too early to say whether this market has hit an inflection point.
Eric: Overall, we expect another strong performance from this segment in the second quarter with operating income up approximately 10% sequentially and up 10% year over year.
Erik C. Aldag: Sales in our High-Temperature Technologies product line were 1% lower as some of our foundry customers in North America took temporary maintenance outages early in the first quarter. Meanwhile, we saw continued improvement in foundry volume across Asia. In the environmental and infrastructure product line, sales were lower by 14% driven by softness in commercial construction and environmental lining projects.
Speaker Change: Now, let's turn to our balance sheet and cash flow highlights.
We delivered record cash flow for our first quarter generating $56 million of cash from operations and $39 million of free cash flow.
Speaker Change: Capex totaled $17 million in the first quarter.
Speaker Change: Our full year outlook for free cash flow remains unchanged in the $140 million to $160 million range.
Speaker Change: We continued our balanced approach to capital deployment in the first quarter, using our free cash flow to pay down $13 million in debt.
Erik C. Aldag: As I mentioned, we also had a few large remediation projects in the prior Q1 that are affecting the comparison. Despite the lower sales, segment operating income improved 9% to $38 million in the first quarter, and Operating Margin improved by 200 basis points to 16.2% of sales. The margin improvement was driven by favorable product mix, disciplined pricing, cost control, and a solid operating performance that resulted in a 11% productivity improvement versus last year
Speaker Change: And returning $18 million to shareholders.
Speaker Change: Including $15 million of share repurchases and $3 million of dividends.
Speaker Change: So far we've completed $29 million of the $75 million share repurchase program and we are on track to complete the program by the end of the authorization in October.
Speaker Change: The balance sheet remains very strong.
Speaker Change: Total liquidity at the end of the first quarter was $536 million.
And our net leverage ratio was one eight times EBITDA.
Speaker Change: Now I'll summarize our outlook for the second quarter.
Speaker Change: We expect a strong performance for MTI in the second quarter.
Speaker Change: In consumer in specialties, we expect demand for consumer oriented products to remain strong.
Erik C. Aldag: Looking ahead to the second quarter, we expect market conditions in steel and foundry to remain stable, with a sequential improvement in Asia foundry due to the Lunar New Year holiday in the first quarter. We are also expecting higher sales to steel customers driven by installations of our newest Minscan technologies at several EAF mills in the U.S. In environmental and infrastructure, we'll see a sequential increase in sales as we enter the seasonally stronger period for environmental and commercial construction projects. As Doug mentioned, we are seeing improvements in bid activity, but it is too early to say whether this market has hit an inflection point.
Speaker Change: And we are entering a seasonally stronger period for residential construction.
Speaker Change: We will also benefit from the continued ramp up of our new paper and packaging satellite.
In engineered solutions, we expect sequential and year over year growth from high temperature technology.
Speaker Change: We also expect a seasonal uptick in environmental and infrastructure activity with sales for this product line returning to a similar level to last year.
Speaker Change: In total for MTI for the second quarter, we expect year over year underlying sales growth between three and 5%.
Operating income between 80% and $85 million.
Speaker Change: And earnings per share between $1 55, and.
Speaker Change: And $1 65.
Speaker Change: Representing another strong quarter for the company.
Speaker Change: Now I'll turn the call over for questions.
Erik C. Aldag: Overall, we expect another strong performance from this segment in the second quarter, with operating income up approximately 10% sequentially and up 10% year-over-year. Now, let's turn to our balance sheet and cash flow highlights. We delivered record cash flow for our first quarter, generating $56 million of cash from operations and $39 million of free cash flow. CapEx totaled $17 million in the first quarter.
Speaker Change: Thank you if you would like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment again press star one to ask a question, we'll pause for just a moment to allow everyone.
Speaker Change: One an opportunity to signal for questions.
Speaker Change: Okay.
Speaker Change: We will take our first question from Daniel Moore with CJS Securities.
Erik C. Aldag: Our full-year outlook for free cash flow remains unchanged in the $140 to $160 million range. We continued our balanced approach to capital deployments in the first quarter, using our free cash flow to pay down $13 million in debt and returning $18 million to shareholders. Including $15 million of share repurchases and $3 million of dividends. So far, we've completed $29 million of the $75 million share repurchase program, and we are on track to complete the program by the end of the authorization in October. The balance sheet remains very strong. Total liquidity at the end of the first quarter was $536 million.
Daniel Joseph Moore: Thank you, Doug and Eric Thanks for the color.
Daniel Joseph Moore: Appreciate taking the questions.
Daniel Joseph Moore: Hi, Dan.
Daniel Joseph Moore: Start with consumer and specialties.
Daniel Joseph Moore: Obviously.
Daniel Joseph Moore: On this call in the last several calls you've laid out.
Dan: A lot of new formulations and emerging opportunities from.
Dan: Edible oils animal feed alternative milks retinol et cetera.
Dan: How do we think about I guess, where are you seeing the most pull or the most penetration near term and how do we think about sizing medicines opportunities.
Erik C. Aldag: And our net leverage ratio was 1.8 times EBITDA. Now, I'll summarize our outlook for the second quarter. We expect a strong performance for MTI in the second quarter. In Consumer and Specialties, we expect demand for consumer-oriented products to remain strong, and we are entering a seasonally stronger period for residential construction. We will also benefit from the continued ramp-up of our new paper and packaging satellite. In engineered solutions, we expect sequential and year-over-year growth from high-temperature technologies.
Dan: And a follow up on the PFS.
Speaker Change: Yes emerging opportunities as well if you don't mind.
Speaker Change: Sure maybe I'll kick it off and then I'll hand, it to DJ moment going to give you some more color.
Speaker Change: We're seeing growth across that product line and consumer and specialty is let's talk mostly about the household and personal care product line.
DJ: In our pet care business continued to grow at 4% this past quarter.
DJ: We're seeing that continue quarter over quarter, we're seeing our specialties business grew 10% I believe this quarter.
DJ: And that came from animal health growth of renewable fuels.
Erik C. Aldag: We also expect a seasonal uptick in environmental and infrastructure activity, with sales for this product line returning to a similar level to last year. In total, for MTI for the second quarter, we expect year-over-year underlying sales growth between 3 and 5 percent and operating income between $80 and $85 million.
DJ: Fabric care, so it's been really across the board then.
DJ: And I think thats the pace that we outlined at our Investor day that this household and personal care business should grow in that 7% to 10% range kind of compound year over year. So it's it's acting and doing what we thought it would do.
DJ: We're also I wanted to highlight a couple of trends that we're following and we're participating in like natural additives and our innovation pipeline is in tune with that so I think not only of the market's growing but we have innovations behind it with new products that will continue to feed that type of growth rate I don't know TJ. If you want to give some more any particular things in pet.
Operator: And earnings per share between $1.55 and $1.65, representing another strong quarter for the company. Now, I'll turn the call over to you for questions. Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment.
DJ: Care fabric care, yes.
DJ: Dan.
TJ: Tough to zero in on any one thing because it has been across the board there are several.
Operator: Again, press star one to ask a question. We will pause for just a moment to allow everyone an opportunity to ask a question. Signal for request. We will take our first question from Daniel Moore with CJS Security. Thank you, Doug and Erik. Thanks for the color.
TJ: Exciting things going on that Doug had kind of mentioned and alluded to during the future statements sticking with the household and personal care side I think that the strategy of that pet litter business is starting to pay off they've gotten well aligned with their private label customers in particular working with them and.
Daniel Joseph Moore: Appreciate you taking the questions. Let's start with consumer and specialties. Obviously, on this call and the last several calls, you've laid out a lot of new formulations and emerging opportunities. Edible oils, animal feed, alternative milks, retinol, etc.
TJ: They understand their brand strategies that private label strategy, they enhance and bring forward some some innovations that.
TJ: That help with.
TJ: Help with pet ownership and so those are things as simple as packaging, but then expand further and improve performance of pet litter, which goes anything for.
Doug Douglas: You know, how do we think about, I guess, where are you seeing the most pull or the most, you know, penetration near term? And how do we think about sizing those up? Follow-up on the PFAS. Emerging Opportunity as well. Sure, maybe I'll kick it off and then I'll hand it to DJ Monago to give it some more color.
TJ: Lower dusting more aesthetically pleasing and then there are recent additions are things that will help.
TJ: Cat owners train their cats, better and get them more associated with a litter box you go to household personal and the consumer specialties group.
TJ: We are doing very well with the pull that's coming from renewable fuels, we see our relationship with key customers strengthening especially in Europe, and the macro trends supporting that growth is very strong and then.
Doug Douglas: We're seeing growth across that pipeline, and consumer and specialties, let's talk mostly about household and personal care products. You know, our pet care business continued to grow, I think, 4% this past quarter. We're seeing that continue quarter over quarter.
TJ: And a little different shifts we go to the specialty additives business, Doug pointed out the great progress that we're seeing with the new satellites and now. This is working on are our Crystal engineering competency, but these new satellites and new products are kicking in and we've got several more that'll be coming on.
Doug Douglas: We're seeing our specialties business grow 10%, I believe, this quarter. And that came from animal health, growth, renewable fuels, fabric care. So it's been really across the board, Dan. And I think that's the pace that we outlined at our investor day that this household and personal care business should grow at that 7% to 10% range, kind of compounded year over year. So it's acting and doing what we thought it would do
TJ: Throughout the year and the pipeline for that remains very robust and then and then applying that same core competency of Crystal engineering.
TJ: We do see further growth coming from advanced sealants and the construction in Automotives industry.
Doug Douglas: I wanted to highlight a couple of trends that we're following and participating in, like natural additives, and our innovation pipeline is in tune with that. So I think not only are the markets growing, but we have innovations behind it with new products that will continue to feed that type of growth rate. I don't know, DJ, if you want to give us more, any particular things in pet care or fabric care. Yeah.
TJ: Paul also from the food industry you alluded to.
TJ: Non dairy milk stats.
TJ: Continues to be an area of interest for us and we can add to that whole category and there are also some new markets that we're starting to get exposed to.
TJ: People explore alternatives and as we branch out further and stretching that core competency. So.
TJ: I know I gave you a lot, but it really is across the board, but also perfectly in line with what we had laid out in the Investor day.
TJ: Okay.
DJ Monago: So Dan, it's tough to zero in on any one thing because it has been across the board. There are several exciting things going on that Doug kind of mentioned and alluded to during the future statements. Sticking with the household and personal care side, I think that the strategy of that pet litter business is starting to pay off. They've gotten well aligned with their private label customers, in particular. Sticking with them, and as they understand their brand strategies, that private label strategy, they enhance and bring forward some innovations that help with pet ownership.
Speaker Change: That helped them very helpful. Yes.
Speaker Change: Yes, it certainly does.
Speaker Change: And I appreciate the color Doug on P costs, and certainly happy to see the EPA decision.
Speaker Change: Any more color you can provide in terms of how you think about the scope of the opportunity not in 2425, but five years and beyond.
Speaker Change: And then.
Speaker Change: Any update as far as.
Speaker Change: Any kind of potential EPA approval for four floors Orbis.
Speaker Change: The key player in that market.
Speaker Change: I'll tell you what why don't we do two things one might pass it to Brett our generic is to give you kind of what we're working on what's happening here in the near term what's going on with regulation.
DJ Monago: And so those are things as simple as packaging, but then they expand further and improve the performance of pet litter, which goes anything for, you know, lower dusting, and more aesthetically pleasing. And then there are recent additions that will help cat owners train their cats better and get them more associated with the litter box. You go to household personal and the consumer specialties group.
Speaker Change: I'll talk a little bit about the longer term after that right.
Brett: Alright, yes sure. Thanks.
Brett: Thanks, Dan.
Brett: Let me let me just let me just recap the regulation quickly and then I'll give you some.
Update on our activity.
Brett: First of all the new new regulation.
Brett: As you know.
Brett: Last week.
Brett: It'll be in full effect in five years from promulgation date, so that will that will bring us.
DJ Monago: We are doing very well with the pull that's coming from renewable fuels. We see our relationship with key customers strengthening, especially in Europe, and the macro trend supporting that growth is very strong. And then, in a little different shift, we go to the specialty additives business. Doug pointed out the great progress that we're seeing with the new satellites, and now this is working on our crystal engineering competency. But these new satellites and new products are kicking in, and we've got several more that will be coming on throughout the year, and the pipeline for that remains very robust. And then, applying that same core competency of crystal engineering, we do see further growth coming from advanced sealants in the construction and automotive industry.
Brett: The regulation to end.
Brett: April 2029 that allows for capital any capital to be put in place in time to meet the regulations on our parts per trillion.
Brett: Jason.
Brett: Although this regulation is for drinking water, we do expect additional regulations to come out over the next few years that really can provide us even more opportunities.
Brett: Throughout our verticals. So let me give you a little update on the activity.
Brett: We have had a lot of activity already to date before the regulation came out.
Brett: They have the regulations have accelerated discussions both on our federal and state.
DJ Monago: Some pull from the food industry you alluded to, the non-dairy milks. That continues to be an area of interest for us, and we can add to that whole category. And there are also some new markets that we're starting to get exposed to as people explore alternatives and as we branch out further in stretching that core competency. I know I gave you a lot, but it really is across the board, but also perfectly in line with what we had laid out in the investor. Does that help Dan?
Brett: Agency level there.
Brett: Evaluations.
Brett: Two of alternative options from the current options.
Brett: We have been and continue to collaborate closely with the EPA.
Brett: Local agencies and municipalities as well.
Brett: For the use of our floor absorbed to remove <unk> in drinking water.
Brett: But our ultimate goal really is to to proved floor absorbent one of the best available technologies for eliminating the people.
Doug Douglas: Very helpful, yeah, it certainly does, and I appreciate the color Doug on PFAS and am certainly happy to see the EPA. Any more color you can provide in terms of how you think about the scope of the opportunity, not in 24, 25, but, you know, five years and beyond. And then any update as far as potential EPA approval for fluorosorbs, a key player. I'll tell you what, why don't we do two things?
Brett: These agencies are all fully aware fully aware of our products and our activity.
Brett: We will continue to work very closely with them.
Brett: And so right now our floors or technology is currently treating drinking water and three full scale implementations in the northeast we have one additional full scale implementations coming on this month.
Brett: And as Doug Doug mentioned in his.
Doug Douglas: One, I'll pass it to Brett Argirakis to give you kind of what we're working on, what's happening here in the near term, what's going on with regulation. Maybe I'll talk a little bit about the longer term after that. All right, you want to go?
Brett: In his speech, we are piloting several trials now.
Brett: And expect to implement probably over 100 pilot trials. This year, mainly on municipal water. The majority of those are going to be in North America, but we do have a few of those.
Brett Argirakis: Yeah, sure. Thanks, Dan. Look, let me just recap the regulation quickly and then I'll give you an update on our activity. First of all, the new regulation, as you know, will be in full effect in five years from the promulgation date, so that'll bring us, you know, The regulation to end in April 2029. That allows for capital, any capital, to be put in place in time to meet the regulations on a parts per trillion basis. Although this regulation is for drinking water, we do expect additional regulations to come out over the next few years that can provide us with even more opportunities. Unknown Speaker.
Brett: Europe.
Brett: Perhaps our drinking water, we do continue to pursue.
Brett: Implement global in situ remediation projects to <unk>.
Brett: Control P foster to source.
Brett: Some examples might be like pumping treat applications for groundwater side reactive core Max for storm water conveyance and sediment capping.
Brett: As well as other soil stabilization products projects.
Really based on the test results and feedback we're getting we're really confident in the Florida.
Brett: Feel good about it.
Brett: The benefits will will generate additional.
Brett: Revenue and continued interest moving forward.
Brett: Just to be a little cautious it's going to take some time to test and prove our product to support the new regulation, but we do expect to continue to generate.
Brett Argirakis: So let me give you a little update on the activity. We have had a lot of activity already to date before the regulation came out. The regulations have accelerated discussions both at the federal and state agency level for evaluations of alternative options from the current one. We have been and continue to collaborate closely with the EPA, local agencies, and municipalities as well for the use of our Fluorazorb to remove PFOS from drinking water. But our ultimate goal really is to prove Fluorazorb is one of the best available technologies for eliminating PFOS. These agencies are all fully aware of our products and our activity.
Brett: Activity moving forward over the next few years.
Brett: As Dan I'll, just add the long term as I mentioned in my remarks, I think this is a big growth opportunity for the company for that product.
Brett: Breakfast mentioned municipal water is one area.
That will develop.
Brett: Over the next.
Brett: Four or five years, and we've got a great position and a great product to be able to participate in that market, but longer term as we get into broader cleanup.
Brett: As I mentioned, our product is equally as effective there and we've been doing some cleanup projects, we think that could be even a bigger market for sure than the municipal water market.
Brett: But now and so providing us long term sales this is something thats going to.
Brett Argirakis: We will continue to work very closely with them, and right now, our FluorZorb technology is currently treating drinking water in three full-scale implementations in the Northeast. We have one additional full-scale implementation coming this month, and as Doug mentioned in his speech, we are piloting several trials now and expect to implement probably over 100 pilot trials this year, mainly on municipal water. The majority of those are going to be in North America, but we do have a few of those in Europe.
Brett: We're going to benefit from for a long time, but right now I just want to keep US focused we're working on making sure that this is best in class technology, we're working through those hurdles. We're trialing is like I said 100 trials, we're working closely with agencies. So we're in a good spot, but yes. This is a big near term opportunity and a nice long term opportunity for the company.
Speaker Change: Perfect last one for me I'll jump out.
Speaker Change: You already hit your 14% EBIT margin target this quarter.
Brett Argirakis: Outside of drinking water, we do continue to pursue and implement global in-situ remediation projects to control PFAS at the source. Some examples might be pump-and-treat applications for groundwater sites, reactive core mats for stormwater conveyance, and sediment capping, as well as other soil stabilization projects.
Speaker Change: Implication is to do a little bit better than that in Q2, and you mentioned in Q2 and Q3 typically seasonally stronger period. So.
Speaker Change: I assume it sounds like you expect thats typical seasonality to hold this year and so you know.
Speaker Change: Not asking you to update it but that kind of 14%.
Brett Argirakis: Really, based on the test results and feedback we're getting, we're really confident in the floor resort and feel good about it. The benefits will generate additional revenue and continued interest moving forward. But just to be a little cautious, it's going to take some time to test and prove our product to support the new regulation, but we do expect to continue to generate activity moving forward. As again, as I mentioned in my remarks, I think this is a big growth opportunity for the company for that product. Brett just mentioned, you know, municipal water is one area.
Speaker Change: Exert rate looks conservative at this point.
Speaker Change: It is a year I still just getting to that 15% and if we get there quicker great or how do we kind of think about it.
Speaker Change: Where we go from here.
Speaker Change: Yeah. Thanks, Dan This is Eric.
Eric: So you're right 14, 5% in the first quarter is a great place to start.
Eric: Right now, we're assuming we can maintain that level at least.
Eric: Going forward this year and we do as you said typically expect a lift in the second and third quarters. So it should be.
Eric: Above 14, 5% all else equal so we're feeling pretty good about the margin trajectory.
Eric: We're watching energy rates.
Eric: We'll be managing things tightly if we do see an uptick over the summer in terms of energy rates.
Eric: But thats sequential volume improvement over the middle two quarters.
Eric: Should go a long way to helping out the margins as we go through the year. So I guess you mentioned, 15%. If we were going to do 15% in a year 14, 5% in the first quarter is not a bad place to start.
Doug Douglas: And that'll develop over the next four or five years, and we've got a great position and a great product to be able to participate in that market, but longer term as we get into broader cleanup. As I mentioned, our product is equally as effective there, and we've been doing some cleanup projects. We think that could be even a bigger market for sure than the municipal water market. But now, and so providing us with long-term sales, this is something that's going to, you know, we're going to benefit from for a long time. But right now, I just want to keep us focused.
Eric: So I guess, it's early in the year, but as long as we see no major changes in macro or input costs, yes.
Speaker Change: Yes, we can do 15% this year it would help if we got some help from the commercial construction markets for sure.
Speaker Change: But we're feeling pretty good about the margin trajectory right now.
Speaker Change: Very helpful. I appreciate the color.
Speaker Change: Strong performance and I'll jump back in queue with any follow ups. Thanks.
Speaker Change: Thanks, Dan.
Speaker Change: We will take our next question from Mike Harrison with Seaport Research partners.
Doug Douglas: We're working on making sure that this is best-in-class technology. We're working through those hurdles. We're trying it, like I said, in 100 trials.
Michael Joseph Harrison: Hi, good morning, Congrats on the strong start to the year.
Michael Joseph Harrison: I was hoping.
Doug Douglas: We're working closely with agencies. So we're in a good spot. But yes, this is a big near-term opportunity and a nice long-term opportunity. Perfect. Last one for me. I'll jump out.
Michael Joseph Harrison: Maybe we could dig in a little bit.
I'm curious you just commented a little bit on the margin performance.
Michael Joseph Harrison: It sounds like you believe a lot of that is sustainable for the rest of the year, but I wanted to dig in a little bit in bulk segments, you called out some some productivity improvement I believe you said, 6% year.
Daniel Joseph Moore: You know, you already hit your 14% EBIT margin target this quarter. The implication is to do a little bit better than that. Q2, and you mentioned Q2 and Q3. Seasonally Stronger Period.
Erik C. Aldag: So it sounds like you expect that typical seasonality to hold this year, and if so, you know, I'm not asking you to update it, but that. Transcripts provided by Transcription Outsourcing, LLC. Unknown Speaker Your eyes are still just getting to that 15%, and if we get there quicker, you know, great, or how do we kind of think, Um, Yeah, thanks, Dan. This is Erik. So you're right, 14.5% in the first quarter is a great place to start.
Michael Joseph Harrison: Year over year productivity gain in the consumer segment and 11% in the engineered solutions segment can you.
Michael Joseph Harrison: Maybe help us understand kind of what's baked into.
Michael Joseph Harrison: Improving productivity number that sounds so those are kind of specific numbers and I'm just curious kind of what what metrics are you using.
Erik C. Aldag: Right now, we're assuming we can maintain that level, at least, going forward this year. And we do, as you said, typically expect a lift in the second and third quarters, so we should be above 14.5%, all else equal. So we're feeling pretty good about the margin trajectory. You know, we're watching energy rates. We'll be managing things tightly if we do see an uptick over the summer in terms of energy rates, but that sequential volume improvement over the middle two quarters should go a long way to helping out the margins as we go through the year. So I guess, you know, you mentioned 15%.
Michael Joseph Harrison: Can you maybe help us understand how you expect those productivity gains to evolve.
In both segments in the next several quarters.
Speaker Change: Yes, Thanks, Mike. Thanks for the question, maybe I'll start and pass it over to Eric.
Eric: Productivity is something we measure every month, we said productivity targets. So we're it's a key indicator of efficiencies and it's part of our operational excellence, it's a metric that we watch through through our OE Prost.
Eric: Processes, we are constantly looking at removing waste from operating processes from business processes you name it.
Erik C. Aldag: If we were going to do 15% in a year, 14.5% in the first quarter is not a bad place to start. So I guess, you know, it's early in the year, but as long as we see no major changes in macro or input costs... Yeah, we can do 15% this year. It would help if we got some help from the commercial construction markets, for sure, but we're feeling pretty good about the margin trajectory right now. Very helpful. I appreciate the color.
Eric: We measure it from a productivity standpoint, and so we.
Eric: Kaizen events.
Eric: That are working with teams to to redraw processes remove waste lock in new standards.
Eric: We're moving this is something that's just inherent in the company and part of our culture. So.
Eric: This year I think it was six and 11% in the two segments.
Eric: Eric is that where it was entering yes, Mike that's measured on a tons per hour worked basis. So that's the metrics that we're looking at.
Unknown Attendee: Congratulations. Unknown Attendee, We will take our next question from Mike Harrison. Unknown Speaker 0, Hi, good morning.
Eric: And going forward Eric.
Michael Joseph Harrison: Congratulations on the strong start to the year. Um, I was hoping that maybe we could dig in a little bit. I'm kind of curious, you just commented a little bit on the margin performance, and it sounds like you believe a lot of that is sustainable for the rest of the year. But I wanted to dig in a little bit on both segments.
Eric: Forecast, what we expect to continue I mean part of the we did exceed the guidance that we gave in the first quarter Mike.
Eric: Part of that was the strong operational performance that we had our teams are working really well to improve productivity improve variable conversion cost per tonnes at the facilities. This is something like Doug said, we measure and track and manage very closely at the operational level.
Michael Joseph Harrison: You called out some, some productivity improvement. I believe you said 6% year over year productivity gain in the consumer segment and 11% in the engineering solution segment. Can you maybe help us understand kind of what's baked into that improving productivity number? That's kind of those are kind of specific numbers, and I'm just curious about what metrics you are using. And can you maybe help us understand how you expect those productivity gains to evolve in both segments over the next several quarters? Yeah, thanks, Mike. Thanks for the question. Maybe I'll start it and pass it over to Erik.
Eric: So we're expecting those productivity improvements to continue through the year.
Eric: Something that's embedded into the margin profile of the company. So.
Speaker Change: Hope that helps.
Yeah very helpful. And then I guess, maybe just to kind of follow up on that.
Speaker Change: You have in your slides here.
Speaker Change: Our cost number and it looks like that cost contributed.
Doug Douglas: You know, productivity is something we measure every month. We set productivity targets, so it's a key indicator of efficiency, and it's part of our operational excellence. It's a metric that we watch through our operational processes.
Speaker Change: 130 basis points of year over year improvement.
Speaker Change: I'm, assuming that part of that cost improvement is.
Speaker Change: In this product at these these productivity numbers in metrics that you are talking about.
Doug Douglas: We're constantly looking at removing waste from operating processes, from business processes, you name it, we measure it from a productivity standpoint. And so, Kaizen events that are, you know, working with teams to redraw processes, remove waste, lock in new standards, you know, we're moving, this is something that's just inherent in the company and part of our culture. So, this year, I think it was 6 and 11% in the two segments. Erik, is that where it was?
Speaker Change: Part of it is also related to just just input cost and it sounds like some of your input costs were favorable year on year. So maybe.
Speaker Change: Just give us a little bit more detail on what youre seeing in terms of input costs and energy costs as we're looking out into Q2 and Q3.
Yeah sure, Mike So, yes that $7 million of improvement in the cost bucket versus last year that includes the very strong operating performance that includes the productivity we're seeing.
Erik C. Aldag: That's right, yeah, and that's Mike, that's measured on a ton per hour work space. So those are the metrics that we're looking at. We did exceed the guidance that we gave in the first quarter, Mike, and a big part of that was the strong operational performance that we had. Our teams are working really well to improve productivity and improve variable conversion costs per ton. At the facilities, this is something, like Doug said, we measure and track and manage very closely at the operational level.
Speaker Change: Particularly around the pet care business, we're seeing a lot of improvements there and a lot of cost savings versus last year.
Speaker Change: It also includes the $10 million cost savings program.
Speaker Change: We've achieved full run rate in.
Speaker Change: In the first quarter.
Speaker Change: Call it $2 5 million.
Speaker Change: The savings there from the restructuring program and yes, we have favorable freight and energy primarily versus last year.
Erik C. Aldag: We're expecting those productivity improvements to continue through the year. That's something that's embedded into the margin profile of the company. Hope that helps.
Speaker Change: Really a year over year comparison, if you think about last Q1, we were still working through some significantly higher cost inventory levels.
Michael Joseph Harrison: Yeah, very helpful. And then I guess maybe just to kind of follow up on that. You have on your slides here a cost number, and it looks like that cost contributed 130 basis points of year-over-year improvement. I'm assuming that part of that cost improvement is... In this product, these productivity numbers and metrics that you're talking about, well, part of it is also related to just input costs.
Speaker Change: So energy and freight that played a role in the year over year favorability.
Speaker Change:
But thats really been embedded in the margin heading into the quarter. If you think about it on a sequential basis.
Speaker Change: Didn't have a huge change in input costs sequentially Q4 to Q1, maybe $1 million favorability from an energy perspective.
Erik C. Aldag: And it sounds like some of your input costs were favorable year on year. So maybe just give us a little bit more detail on what you're seeing in terms of input costs and energy costs as we're looking out into Q2 and Q3. Yeah, sure, Mike. So yes, that's $7 million of improvement in the cost bucket versus last year. That includes the very strong operating performance that includes the productivity we're seeing, you know, particularly around the pet care business. We're seeing a lot of improvements there and a lot of cost savings versus last year.
Speaker Change: So thats sequential margin improvement, we saw was mostly driven by that improved volume and mix in the consumer and specialty side, the pricing and the productivity and the variable conversion cost performance.
Speaker Change: Alright, that's very helpful. And then I wanted to dig in for my last question here on the high temperature technologies business.
Speaker Change: It sounds like Youre seeing relatively strong.
Speaker Change: <unk> trends, even though.
Erik C. Aldag: It also includes the $10 million cost savings program that we achieved full run rate in the first quarter. They'll call it $2.5 million of savings there from the restructuring program. And yes, we have favorable freight and energy primarily versus last year. That's really a year-over-year comparison.
Speaker Change: The.
Speaker Change: Underlying sales number was down a little bit year on year, but maybe just give me a little bit more detail on what youre seeing in terms of market drivers.
Speaker Change: Some of the actions that you guys are taking to benefit from new.
Erik C. Aldag: If you think about last Q1, we were still working through some significantly higher cost inventory levels. So energy and freight, that played a role in the year-over-year favorability. But that's really been embedded in the margin heading into the quarter.
Speaker Change: New customer wins and kind of new products.
Speaker Change: Weighted growth. Thank you.
Speaker Change: Yes, I'll start.
Speaker Change: Mike and the high temperature technologies product line sales were relatively.
Speaker Change: <unk> I think as Eric mentioned the decline over last year was a couple of outages that we saw in North America that that didn't happen last year maintenance outages that were extended.
Erik C. Aldag: If you think about it on a sequential basis, we didn't have a huge change in input costs sequentially Q4 to Q1, maybe a million dollars favorability from an energy perspective. So that sequential margin improvement we saw was mostly driven by that improved volume and mix in the consumer and specialty side, the pricing and the productivity, and the variable conversion cost performance. All right, that's very helpful.
Speaker Change: But volumes and demand picked up through the quarter and we see that being relatively stable going forward, our major end markets automotive heavy truck industrial.
Speaker Change: And some good volume growth in Asia, we see continuing so stable markets. We got a good feel for it at least at least as we sit today and it looks like through the back half of the year.
Michael Joseph Harrison: And then wanted to dig in from the last question here on the high-temperature technologies business. It sounds like you're seeing relatively strong demand trends, you know, even though the underlying sales number was down a little bit year on year. But maybe you could give it a little bit more detail on what you're seeing in terms of market drivers and some of the actions that you guys are taking to benefit from new, new customer wins and kind of new, new product related growth. Thank you.
Speaker Change: Unless macro trends change, but right now we're feeling good about the.
Speaker Change: That product line, Brett you want to take kind of new products, what's going on what's driving some of the future growth that I mentioned.
Brett: For the high temperature technologies.
Brett: Really when you when you when you take a look at it the refractories business is really really strong right now.
Speaker Change: Both both if you look at the foundry business first foundry business North America pretty stable as Doug said.
Doug Douglas: Yeah, I'll start, Mike, on the high-temperature technologies product line. Yeah, sales were relatively flat. I think, as Eric mentioned, the decline over last year was a couple of outages that we saw in North America that didn't happen last year, maintenance outages that were extended.
Speaker Change: There was some some slowdowns in North America Asia.
Speaker Change: And of.
Speaker Change: Flat.
Speaker Change: But they.
Speaker Change: They're doing okay, we don't see any major drop offs, yet the steel business from the refractory side has been pretty solid about 77% utilization rates now.
Unknown Speaker: [inaudible] Macro Trends Change. But right now, we're feeling good about the That product line. Brett, you want to take a look at some of the new products, what's going on, what's driving some of the future growth that I mentioned? Yeah, for the high-temperature technology.
And that's a little bit higher than the first quarter was that.
Speaker Change: Very stable.
Speaker Change: We anticipate maybe some some Q2 spring outages, which is fairly normal course for maintenance outages. So there might be.
Brett Argirakis: Really, when you take a look at it, the refractories business is really, really strong right now. If you look at the foundry business first, foundry business, North America, pretty stable, as Doug said. There were some slowdowns in North America. Asia's still kind of flat, but they're doing okay.
Speaker Change: Slight slight dip.
Speaker Change: Not seen anything major from a European side is still very soft. So so the steel industry. There is soft there is a couple of fuel.
Steel plants.
Brett Argirakis: We don't see any major drop-offs yet. The steel business, from the refractory side, has been pretty solid. We anticipate maybe some Q2 spring outages, which is fairly normal for some maintenance outages. So there might be a slight dip, but we're not seeing anything major. On the European side, it's still very soft.
Speaker Change: In the U K one in eastern Europe that is and are ramping down and probably closing permanently.
Speaker Change: But they are in Europe, we are seeing green steel.
Speaker Change: As we saw in.
Speaker Change:
Speaker Change: The United States the move from.
Speaker Change: Integrated steelmaking to non integrated Pos to electric arc furnace.
Brett Argirakis: So the steel industry there is soft. There are a couple of steel plants, one in the UK and one in Eastern Europe, that are ramping up and probably closing permanently. But there in Europe, we are seeing green steel, as we saw in the United States, the move from Integrated Steelmaking to Non-Integrated or BLF to Electric Art. And that's starting to transition.
Speaker Change: And that's starting to transition in North America.
Speaker Change: As you saw in the in the presentation.
Speaker Change: We have.
Speaker Change: <unk> 15, new automated <unk> units.
Speaker Change: And we're going to do eight of those that are planned for this year those units really it's about the automate automation and optimization of these units it was really driving.
Brett Argirakis: In North America, we, as you saw in the presentation, we have acquired 15 new automated Minscan units, and we're going to do eight of those that are planned for this year. Those units, really, are about the automation and optimization of these units. It was really driving that transition from BOS to EAF, and we were well-positioned to make that move with our steel customers. This is, this approach really ties in the laser, it ties in, so you can laser the furnace, you can, it's automated with PLC controls, so it automatically applies product to the low spots of the furnace, and, really, most importantly, it's pulling employees off the shop floor and away from molten steel
Speaker Change: From that transition from <unk> to <unk> and.
Speaker Change: And we were well positioned to make that move with our steel customers.
Speaker Change: This is this approach really ties in the laser.
Speaker Change: Rise in.
Speaker Change: So you can laser the furnace, it's automated with plc controls are in autumn automatically.
Speaker Change: Appliance product to the low spots of the furnace.
Speaker Change: And really most importantly, it's pooling cooling employees off the shop floor and away from molten steel.
Speaker Change: So this has been really.
Brett Argirakis: So this has been a really great accomplishment by the team, and it works through our key customers. In parallel, what we did is that technology, while we were developing the equipment, was developing high, high-grade products. For instance, I'll give you an example. We normally do gunning, or applying our refractory products over brick that has been worn away by the molten steel, in the upper portion of an electric furnace.
Speaker Change: Great Okay.
Speaker Change: What you meant by the team.
Speaker Change: Work through our key customers.
Speaker Change: So.
Speaker Change: In parallel what we did is that technology, while we were developing the equipment was developing high high grade products.
Speaker Change: And so I'll give you. An example, we normally what we call gunning are applying.
Speaker Change: Our refractory products over.
Speaker Change: Rick that has been worn away by the molten steel.
Speaker Change: We normally did that in the upper portion of an electric furnace. We've developed products that now go deeper into the furnace into the what we call the banks in the bottoms of the firms.
Brett Argirakis: We've developed products that now go deeper into the furnace, into what we call the banks and the bottoms of the furnace. This is technology that we haven't really participated much in. And now, our technology is tied into these five-year contracts that include that refractory, and that portion of the refractory is two times more. It consumes two times more than the refractory that we are currently utilizing.
Speaker Change: This is technology.
Speaker Change: We haven't really participated much in <unk>.
Speaker Change: And now our technology is tied into these five year contracts that include that that refractory in that portion of the refractory is two times more consumed two times more than the refractory that we're currently utilizing so so this is really exciting for the business.
Brett Argirakis: So this is really exciting for the business, and that is a growth market. We anticipate having, as we said, 15 units through 25. In fact, we have employees from Europe coming over next week, and they're going to be visiting so that we can promote this even further into the European market. But I will mention that we do have two units already in Turkey; we have some units in Europe, but with this green steel technology change, we plan to drive this even further. That will help, Mike?
Speaker Change: And that is a growth market.
Speaker Change: We anticipate having as we said 15 units through 'twenty five.
Speaker Change: In fact, we have we have our.
Speaker Change: Employees from Europe coming over next week, and Theyre going to be visiting so that we can we can promote this even further into the European business, but I will mentioned, we do have two units already in Turkey, we have some units in Europe, but with this green Green steel technology change.
Speaker Change: We plan to drive this even further.
Michael Joseph Harrison: All right, very good. There is a lot going on. Yes, I appreciate the detail there. Thanks very much.
Speaker Change: We did in North America.
Speaker Change: That helps Mike Alright, very good luck going on yes.
Speaker Change: <unk> the detailed there thanks very much.
David Cyrus Silver: Thanks, Mike. We will take our next question from David Silver with CL King. Transcription by CastingWords. Yeah, hi, good morning.
Speaker Change: Thanks, Mike.
Speaker Change: We will take another question a question we yes.
Speaker Change: We will take our next question from David Silver with CL King.
David Cyrus Silver: Yes, hi, good morning, good morning, Thanks, a lot David.
David Cyrus Silver: Thanks a lot. Okay. So I have a couple of questions. I hope the first one is not too confusing, but I'm just trying to scratch my head and get my arms around the price versus volume. I guess drivers this quarter.
David Cyrus Silver: Hey.
David Cyrus Silver: So I have a couple of questions I hope the first one is not too confusing but.
David Cyrus Silver:
David Cyrus Silver: Trying to scratch my head and get I'm scratching my head and just trying to get my arms around the price versus volume.
David Cyrus Silver: Guess drivers this quarter so.
Erik C. Aldag: So, you know, revenues under on an underlying basis were basically flat. And you did talk about volume strength in HNPC or home and personal care and a couple of other areas. And I'm, you know, but again, to get back to kind of a flattish revenue profile year over year. Is really all of the volume softness pretty much on the environmental and infrastructure side or are there some other, you know, pockets or areas where, you know uh improved price kind of made up for maybe some some uh decline in the units uh sold just trying to get a finer sense of which parts of the business were growing volume or units was versus which ones maybe were not and um you know yeah uh how price played a bigger role let's say in the revenue performance thanks, Sure.
David Cyrus Silver: Revenues under on an underlying basis were basically flat.
David Cyrus Silver: And you did talk about the volume strength in.
David Cyrus Silver: <unk> and PC, your home and personal care and a couple of other areas.
David Cyrus Silver: <unk>.
But again to get back to kind of a flattish revenue.
David Cyrus Silver: Profile year over year.
David Cyrus Silver: It's really all of the volume softness pretty much on the environmental and infrastructure side or are there some other <unk>.
David Cyrus Silver: Pockets or areas where.
Yeah.
Improved price kind of made up for maybe some some decline in the units sold just trying to get a finer.
David Cyrus Silver: Which parts of the business, we're growing volume or units was versus which ones may be we're not.
David Cyrus Silver: Yes.
David Cyrus Silver: How price played a bigger role, let's say in the revenue performance. Thank you sure. Thanks, Dave This is Eric.
Erik C. Aldag: Thanks, Dave. This is Erik. So yes, the volume decline was all in the environmental and infrastructure product line, as we mentioned, you know, soft commercial construction conditions and those larger projects that we had last year. The high temperature was relatively flat. The high-temperature technologies product line was relatively flat. I mean, we pointed to some customer maintenance outages early in the quarter this year from the foundry perspective, but overall, volume is relatively flat. And then in the other product lines, we saw volume growth. So that's what you're seeing.
Eric: Yes, the volume decline was all in the environmental and infrastructure product line as we mentioned.
Eric: Soft commercial construction conditions in those larger projects that we had last year.
Eric: The high temperature was relatively flat the high temperature technologies product line was relatively flat I mean, we pointed to some.
Eric: Customer maintenance outages early in the quarter this year.
Eric: From the foundry perspective.
Eric: But overall volumes relatively flat and then in the other product lines. We saw volume growth. So that's what you're seeing kind of the net net of all of that ended up being relatively flat volume growth but.
David Cyrus Silver: Kind of the net-net of all that ended up being relatively flat volume growth, but mainly driven by that environmental and infrastructure product line. Okay, thank you for that. I was hoping to, you know, hone in a little bit on the specialty additives side and, in particular, the five new satellites that are scheduled to be brought on line this year. And I guess I was hoping DJ might be able to characterize them.
Eric: Mainly driven by that environmental and infrastructure.
Eric: Product line.
Speaker Change: Okay. Thank you for that.
Speaker Change: I was hoping to hone in a little bit on the specialty additives.
Speaker Change: Side in particular.
Speaker Change: The five new satellites that are scheduled to be brought on line this year.
Speaker Change: And I guess I was hoping DJ might be able to characterize them in other words I.
DJ Monago: In other words, you know, I have to kind of check my press releases, but I'm just wondering how many of the five would you care to categorize as kind of the legacy, you know, PCC for copy or paper or that type of grade of paper. New Satellites. For packaging, is that the white box or the pizza box type of packaging, or is that maybe making some inroads onto the brown paper side?
DJ: I have to kind of check my press releases, but.
DJ: I'm just wondering how many of the five would you care to categorize as kind of the legacy PCC for.
DJ: Copier paper or that type of grade of paper and I see there are two new yield opportunities may be.
DJ: If you could just discuss how those came about and then im assuming there is some.
DJ: New satellites.
DJ: For packaging is that the white box or the pizza box type.
DJ: Type of packaging or is that maybe making some inroads onto the brown paper side.
DJ Monago: So just, you know, an overview of what new, newer projects are going to be coming online. Um, hi, David, let me try and address those as best I can for you. First one, just to look at it from the packaging segment.
DJ: Just an overview of what what new newer.
DJ: Projects are going to be cut.
DJ: Coming online this year.
DJ: Hi, David Let me try and address those as best I can for you.
David Cyrus Silver: First one just to look at it from that packaging segment.
DJ Monago: One of the new opportunities that has already contributed growth is for packaging in China. That's in a white box, and it is where we brought some innovation into the ground calcium carbonate space. So that's already in those numbers. One of the new ones to which Doug referred earlier was that it's a GCC and a New Yield combination. So, that'll also be in the specialty papers and packaging papers category, as well as some printing and writing grades in that one. So, those are the two categories for packaging. One of the items that just came out is the standard PCC, kind of the legacy PCC, with some updates and tweaks to it.
David Cyrus Silver: One of the new opportunities that al has already contributed growth is for packaging in China. That's on a white box and it is where we brought some innovation into the ground calcium carbonate space.
David Cyrus Silver: So so that's already in those numbers one of the new ones to which Doug referred earlier.
David Cyrus Silver: Was.
David Cyrus Silver: It's a GCC.
David Cyrus Silver: And a new yield combination. So so that will also be in the specialty papers and packaging papers and some printing and writing grades in that one so those are the two on packaging.
David Cyrus Silver: One of the.
David Cyrus Silver: Items that just came on as standard PCC kind of the legacy PC with some some updates and tweaks to it.
DJ Monago: It is in a printing and writing application currently, but it is located with someone who also makes board, and we're hoping we can grow with that customer. So, that was a strategically placed standard PCC contract on a paper machine that is for printing and writing grades, but the customer makes packaging, and we're growing our relationship with them. The other opportunities we have were a small standard PCC plant in India, a standard PCC printing and writing grade. And then the other new yield opportunity that we had was in Brazil.
David Cyrus Silver: It is in a printing and writing application currently but it is located with someone who also makes.
David Cyrus Silver: Board and we're hoping we can grow with that customer so that was a strategically placed.
David Cyrus Silver: Standard PCC contract in a on a paper machine that is printing and writing grades, but the customer makes packaging and we're growing our relationship with them.
<unk>.
The other opportunities we have it was a small standard PCC plant in.
David Cyrus Silver: In India, our standard PCC printing and writing grades and then the other new yield opportunity that we had was.
DJ Monago: Now this particular one is retrofitting an existing satellite into a printing and writing grade and taking advantage of and working with the customer on a waste stream that they were landfilling and being able to convert that into a useful pigment. So I guess the additional color that I would provide is that this new yield technology that applies, you know, our crystal engineering technologies. We are seeing increased interest in that. We are seeing increased interest in both the printing and writing space and in the packaging space. It basically presents itself as a customer throwing away waste that comes from the pulping operation.
David Cyrus Silver: Was in Brazil now this particular one is.
David Cyrus Silver: Retrofitting and.
David Cyrus Silver: An existing satellite into printing and writing grade and taking advantage of and working with the customer of a waste stream that they were landfilling and being able to convert that into a useful pigment. So I guess the additional color that I would provide is that this new yield technology that that apply.
David Cyrus Silver: <unk>.
David Cyrus Silver: Our Crystal Engineering technologies.
We are seeing increased interest in that we are seeing increased interest in both the printing and writing space and in.
David Cyrus Silver: In the packaging space basically.
Presents itself as a customer is throwing away waste that comes from the pulping operation.
DJ Monago: And so what we're able to do is share savings with them and make good paper or packaging products. So that's an opportunistic technology that has a growing interest given the need for a growing circular economy and provides the color you were looking for, David. Yeah, and then maybe just a brief comment on the new project funnel. And if you were doing a pie chart, I mean, what percentage of the new project funnel, as you see it, is comprised of, I'll just call it, the non-traditional satellite plant opportunities.
David Cyrus Silver: And so what we're able to do is.
David Cyrus Silver: Share of savings with them.
David Cyrus Silver: And make make good paperboard packaging products. So so thats, an opportunistic technology that has a growing interest given the need for a growing circular economy.
David Cyrus Silver: That provides the color you were looking for David.
Speaker Change: Yeah, and then maybe just a brief comment on the new project funnel and.
Speaker Change: If you were doing a pie chart I mean, what percentage of the.
New project funnel as you see it is comprised of I'll just call it the non traditional.
Speaker Change: Satellite.
Speaker Change: Plant opportunities in other words white paper packaging Brown paper new yield.
DJ Monago: In other words, white paper packaging, brown paper, new yield, just, you know, not the printing and writing papers that, you know, you that would dominate the legacy Satellite Projects. So if I were divided up into packaging versus paper, I'm probably 60-40 for printing and writing grades and 40% for packaging, but in that printing and writing grades, there's still a fair amount of pull for some of the newer products like New Yield.
Speaker Change: Not the.
Speaker Change: Printing and writing papers that you that we're a dot.
Speaker Change: That would dominate the legacy.
Speaker Change: The satellite projects.
Speaker Change: So if I were divided up into packaging versus paper.
Speaker Change: Probably.
Speaker Change: 60, 40 printing and writing grades and 40% packaging, but.
Speaker Change: But in that printing and writing grades are still a fair amount of pull for some of the newer products like new yield there are some other ones that that we are chatting with the customers about so so the pipeline I would say is if you want to look at it on a technology basis its probably.
DJ Monago: There are some other ones that we are chatting with customers about. So the pipeline, I would say, if you want to look at it on a technology basis, it's probably 40 to 50%, legacy traditional products and 50% newer innovative products. That's a big change. I'll just say it's a big change from where it was before. I would say, if you asked us that question three years ago, David, that'd probably be 90-10, you know, 90-10 traditional legacy PCC.
Speaker Change: 40% to 50%.
Speaker Change: Legacy traditional products and 50% newer innovative products.
Speaker Change: That's a big change I would just add that as a big change from where it was before I would say if you ask that question three years ago, David That'd, probably be 90 10 nine.
Speaker Change: 90, 10 traditional legacy PCC.
Doug Douglas: So that's, you know, moving that toward 60-40, but even 50-50, if you look at the technology. The new technology deployment is a big shift. And so that's been part of the strategy. You know, legacy PCC plants, good business, high cash flow, great returns. But supplanting and meeting customer needs with new technologies, like new yield, with new yield combined with the GCC, these are new things. And these are, and we're meeting those customer needs, as DJ said, for more sustainable products and packaging and cost savings associated with waste streams.
So thats moving that toward 60, 40, but even 50 50, if you look at the technology. The new technology deployment is a big shift and so that's been part of our strategy.
Speaker Change: Legacy PCC plants good business.
Speaker Change: Cash flow great returns.
Speaker Change: But supplanting and meeting customer needs with new technologies like new yield with new yield combined with the GCC. These are new things and these are in meeting those customer needs as TJ said for more sustainable products and packaging and cost savings associated with waste streams, and so thats whats driving the shift of our opportunity portfolio to get it.
David Cyrus Silver: And so that's what's driving, you know, the shift of our opportunity portfolio to kind of 50-50. And that's where we see the opportunities driving growth. Okay, thank you for that. That's a great color.
Speaker Change: 50 50.
Speaker Change: And Thats, where we see the opportunities.
Speaker Change: Driving growth.
Speaker Change: Okay. Thank you for that.
Speaker Change: Great color and then.
David Cyrus Silver: And then one more for me, I'm going to go back to the fluorosorb opportunity, and it has been covered here in some detail, as I understand it. But, you know, my understanding is that when the EPA was finalizing the regulations for drinking water and setting the limits for PFAS content. You know, there was a bit of a tug of war between the four parts per trillion level that they settled on and maybe a higher level that would have been easier, I guess, for the drinking water plant operators to meet on a smaller budget.
Speaker Change: One more for me I'm going to go back to the Fluoro Sorb opportunity and it has been covered here in some detail I understand.
Speaker Change: But.
Speaker Change: You know my understanding is when the EPA was finalizing the regulations for drinking water.
Speaker Change: And setting the limits for PFS content.
Speaker Change: There was a bit of a tug of war between the four parts per trillion.
Speaker Change: Level that they settled on and maybe a higher level that would have.
Speaker Change: Been easier I guess for the <unk>.
Speaker Change: Drinking.
Speaker Change: Water plant operators to meet maybe on a smaller budget.
David Cyrus Silver: I have just, you know, how would you say the fluorosorb opportunity either grows or shrinks, depending on, you know, the limit that is set. In other words, I guess the EPA settled on four parts per trillion, but I think they also set a goal, you know, even more stringent, potentially zero.
Speaker Change: Sure.
Speaker Change: How would you say the fluoro sorb opportunity either grows or shrinks depending on.
Speaker Change: The limit that is set in other words I guess the EPA settled on the four parts per trillion, but I think.
Speaker Change: Also set a goal.
Speaker Change: Even more stringent.
Speaker Change: <unk> zero.
Doug Douglas: In some cases, but you know, how would you say the thinking of potential customers shifts, you know, towards Flurosorb or some of the other alternatives as the tolerances for PFAS content become tighter and tighter. Yeah, I think so the four parts per trillion, I'm trying to get this right, is really, you know, kind of the lowest detectable limit. It's a no detect limit. This is, you know, kind of being able to detect below four parts per trillion. It's almost very difficult.
Speaker Change: In some cases.
Speaker Change: But.
Speaker Change: How how would you say the thinking of the potential customers.
Shifting toward.
Speaker Change: Fluoro sorb or some of the other alternatives as the tolerances for PFS content.
Speaker Change: Become tighter and tighter.
Speaker Change: Yes, I think so the four parts per trillion.
Speaker Change: I get this right is really kind of the lowest detectable non detect limit this is kind of being able to detect below <unk> <unk>.
Speaker Change: Petroleum.
Speaker Change: And it was almost very difficult. So I think this is kind of the it borders on basically non detect what I will say then.
Doug Douglas: So I think this is kind of the, it borders on basically non-detectable. What I will say then is that, through our trials and through, you know, how the work we're doing with our, By itself, our floor absorber is able to get to four parts per trillion or not detectable on its own. It's very effective the way it's designed to be able to deliver results at that level. So, we're confident that with this regulation that municipal water, you know, and they're all different. There are different utilities, there are different configurations, and capital. We're working through all of that right now. But, you know, on a new installation or a new, you know, physical remediation.
Speaker Change: Is that through our trials and through.
Speaker Change: The work, we're doing with our floor is our product.
Speaker Change: By itself, our Florida, Arb is able to get to four parts per trillion or a non detect.
Speaker Change: On its own.
Speaker Change: It's very effective the way, it's designed to be able to deliver results to that level. So we're confident that.
Speaker Change: With this regulation that municipal water and they're all different there's different utility to the different configurations in capital we're working through all of that right now but.
A new installation or a new.
Speaker Change: Physical <unk>.
Doug Douglas: At the end of the day, we're not going to be able to do that. We're going to be able to take it down to four parts per trillion. But we may be using it in conjunction with other media.
Speaker Change: Remediation.
Speaker Change: Clients at a municipal water, Florida would be able to take it down to four parts per trillion. So.
Speaker Change: We may be used in conjunction with other media, we made the retrofitting into existing equipment. There is a whole lot of things that are going on but we're very effective product and I think that will play into the limits that are set to ultimately I think if they are on the groundwater and wastewater cleanup.
Doug Douglas: There's a whole lot of things going on, but we're a very effective product. I think that will play into the limits that are set ultimately, I think, if they are on groundwater and wastewater cleanup. But we want to continue to test. We want to continue to work with agencies. We want to continue to work in states.
Speaker Change: It's applicable in that market as well so again early days, but we've got a good product, but we want to continue to test we want to continue to work with agencies want to continue to work in states with working with municipal water.
Doug Douglas: We're working with municipal water, you know, to ensure that this product is going to meet those needs. But right now, after the past couple of years of trialing, it looks really good. Okay, great. Thank you very much. I'll get back in queue.
Speaker Change: To ensure that this product is going to meet those needs, but right now after the past couple of years are trialing it looks like a really good product.
Speaker Change: Okay, great. Thank you very much I'll get back in queue.
David Cyrus Silver: Again, if you would like to ask a question, it is star 1. We will take our next question from Kyle May with Sidoti and Company. Hi, good morning, everyone.
Speaker Change: Thanks, David.
Speaker Change: Okay.
Speaker Change: Again, if you would like to ask a question it is star one.
We will take our next question from Kyle <unk> with Sidoti <unk> Company.
Speaker Change: Okay.
Kyle: Hi, good morning, everyone.
Kyle: Hi, Kyle.
Kyle May: A couple of quick ones for me to hopefully round things out. Looking at capital expenditures, they were lower this quarter compared to the last few quarters. Just wondering if we should think about this as a new lower run rate or if this quarter was more of an anomaly. Yeah, thanks, Kyle. This is Erik.
Kyle: A couple of a couple of quick ones for me to to hopefully round things out.
Kyle: Looking at capital expenditures, they were lower this quarter compared to the last few quarters.
Kyle: Just wondering if we should think about this as a new lower run rate or if this quarter was more of an anomaly.
Kyle: Yes. Thanks, Kyle this is Eric so.
Erik C. Aldag: So, Yes, CapEx was a little lower than the run rate, mostly a function of timing. We're still expecting between $90 and $100 million of capital expenditures for the full year. So you'll see that ramp up a bit in the coming quarters. Okay, great. And then also in the environmental and infrastructure segment, you noted that part of the year of year change was the two larger mediation projects that were completed last year.
Eric: Yes, Capex was a little lower than the run rate, mostly a timing.
Eric: Mostly a function of timing, we're still expecting between 90 and $100 million of capital expenditures for the full year, So youll see that ramp up a bit in the coming quarters.
Kyle: Okay great.
Kyle: And then also in the environmental and infrastructure segment, you noted part.
Kyle: Part of the year over year change was the two large remediation projects that were completed last year.
Erik C. Aldag: Just curious if you could give us an update on your outlook for the opportunity set there. Yeah, those were large remediation projects last year, big ones, the Gowanus Canal, I think, and Lake George, where we were providing some product for water remediation in those water bodies. Also, big Superfund sites.
Kyle: Just curious if you could give us an update on your outlook for the opportunity set there.
Yes.
Kyle: Those were large remediation projects last year big ones to go on as Canal I think.
Kyle: And Lake George where we were providing some product for that water remediation and those those water bodies.
Kyle: Also big Superfund sites, and so we will participate in big projects like that these are ongoing projects. So as the next phase comes around we're likely to participate continue to participate in them. So a bit of chunky revenue. When you get these big Big Big product lines. Those are the two last year the outlook.
Kyle May: And so we will participate in big projects like that. These are ongoing projects, so as the next phase comes around, we're likely to participate in them again. So a bit of chunky revenue when you get these big product lines. Those are the two last years.
Doug Douglas: You know, the outlook was pretty good, but it was a weaker first quarter. Right now, we're hitting the seasonal period for environmental remediation, both from just wastewater remediation but also lining systems. We have a pretty solid outlook. I think we said we're going to revert probably back to that normal kind of growth rate of second and third in this business. The other part, as I mentioned, of this product line is commercial construction.
Kyle: It was a weaker first quarter right now we're hitting the seasonal period for environmental remediation both from just wastewater remediation, but also aligning systems.
Kyle: We have a pretty solid outlook I think we said, we're going to revert probably back to that normal kind of growth rates for the second and third in this business.
Kyle: The other part as I mentioned of this product line is that commercial construction I think just reiterating that right now we're seeing some increase in activity in terms of inquiries, but whether they turn into actual projects. Later this year into next is there a little bit undetermined, but at least there is some.
Doug Douglas: I think just reiterating that right now we're seeing some increase in activity in terms of inquiries, but whether they turn into actual projects later this year or next is a little bit undetermined, but at least there's some increased activity we haven't seen over the past three, four quarters. So our outlook for the product line is positive. A little bit of caution given the consumer or residential construction, but for the environmental side of it, we got relatively positive two quarters out of it.
Kyle: Increased activity, we haven't seen over the past three or four quarters. So our outlook for the product line is positive a little bit of caution given the.
Kyle: The consumer or the residential construction, but for the environmental side of it.
Kyle: Relatively positive two quarters ahead of us.
Kyle May: Okay, that's great. And last one, I know we've talked a lot about the EPA, but I was hoping if you could maybe just kind of quickly remind us, maybe how much of your five-year outlook includes the Flores Orb opportunity? And then, you know, with the actual regulations now somewhat in place, you know, do you think there's potential upside to what you've already baked into your five-year outlook? Yeah, so we we put in I think we had 30 to $40 million of revenue in the five year outlook at 2027. You know, that was a year ago when we you know, before the regulation was put out.
Speaker Change: Okay, that's great and last one I know, we've talked a lot about the EPA, but.
Speaker Change: Was hoping if you could maybe just kind of quickly remind us.
Maybe how much of your five year outlook includes.
Speaker Change: The floors or opportunity and then with the actual regulations now somewhat in place.
Speaker Change: Do you think there's potential upside to what you've already baked into your five year outlook.
Speaker Change: Yes, so we put in I think we had a $30 million to $40 million of of revenue and the five year outlook at 2027.
Speaker Change: And that was a year ago when we before the regulation was put out I think we're probably still in that range could be on the high end of that range I think there might be upside I think what I'll give you is.
Doug Douglas: I think we're probably still in that range, and could be on the high end of that range. I think there might be upside. I think Kyle, what I'll give you is, you know, municipal water customers are going to have something tested in place by 2027, and two more years after that. So we're looking at 2029. I think it will ramp up, it'll go slower than it will start to ramp up.
Speaker Change: Municipal water.
Speaker Change: Customers are going to by 2027.
Speaker Change: I have something tested in place two more years after that so we're looking at a 2029.
Speaker Change: I think it will ramp up it will go slower then it will start to ramp up so I think the opportunity is bigger than that but I think over the time period in our five year plan, that's what we looked at.
Doug Douglas: So I think the opportunity is bigger than that. But I think over the time period in our five-year plans, that's what we looked at. You know, if it goes faster, and these trials work, and our work with EPA accelerates, I think there could be some upside. But right now, I think we're kind of going to stick to, and we'll give you updates as we get through some of these trials this year, in that range that we gave you at our Investor Day. I got it.
If it goes faster and these trials work in our work with EPA accelerates I think there could be some upside but right now I think we're kind of stick to and we'll give you updates as we get through some of these trials. This year in that range that we gave you at our Investor day.
Speaker Change: Last year.
Kyle May: Okay, that's great. Thank you very much. Okay, thanks, Kyle. We will take our next question from David Silver with C.L. King.
Speaker Change: Got it okay. That's great. Thank you very much.
Speaker Change: Okay. Thanks, Kevin.
Speaker Change: We will take our next question from David Silver with CL King.
David Cyrus Silver: Okay. Hi. Thank you. I just had one follow-up question.
David Cyrus Silver: Okay, Hi, Thank you I just had one follow up.
David Cyrus Silver: Doug, I was hoping you would have touched on your business in China at various points during this call, but I was just wondering if you might be able to kind of take a step back or give us a broader perspective. You know, maybe two things, but just the overall relationship with the Chinese authorities. I mean, there's a lot of back and forth on all of different, you know, vectors, I guess, or whatever.
Doug I was hoping just you.
David Cyrus Silver: Have touched on your business in China at various points. During this call, but I was just wondering if you might be able to kind of take a step back or give us a broader perspective.
David Cyrus Silver: Maybe two things, but just the overall relationship with the Chinese authorities I mean, theres a lot of back and forth on all on a bunch of different vik.
David Cyrus Silver: Vectors, I guess or whatever.
David Cyrus Silver: Hard for us to judge from a distance.
Doug Douglas: It is hard for us to judge from a distance. And then, secondly, maybe just a comment on your view of how the recovery or the rebound in overall Chinese economic activity as it relates to your industrial businesses would be very helpful. Thank you. Yeah, so the first question: we have, we have, we have good relationships in China. A lot of our business is done in partnership with our customers and joint ventures. These are, you know, large employers in the regions, you know, large paper mills.
David Cyrus Silver: And then secondly, maybe just a comment on your view of how.
David Cyrus Silver: The recovery of the rebound in overall.
David Cyrus Silver: Chinese economic activity as it relates to maybe your industrial businesses would be would be very helpful. Thank you.
Speaker Change: Yes. So the first question David we have we have some.
Speaker Change: We have good relationships in China.
Speaker Change: A lot of our business is done in partnership with our customers and joint ventures.
Speaker Change: These are large employers in the regions large paper mills.
Doug Douglas: We've been there a long time, you know; 24, 25 years we've participated in doing business in China. You know, we're good stewards in our mining operations. From an environmental standpoint, we've recently been awarded, you know, we've gotten some awards and recognition up at our plant and kind of close to Inner Mongolia. And so, you know, I think we approach China like we approach anywhere else in the world, being good stewards of what we do there, environmentally conscious, and I think that flows through into the relationships we have with the local communities, governments, customers, et cetera. So our relationships are strong.
Speaker Change: We've been there a long time, you know 'twenty four 'twenty five years, we participated in doing business in China.
Speaker Change: We are good stewards of Av.
Speaker Change: Our mining operations from an environmental standpoint, we've recently been awarded.
Speaker Change: We've gotten some awards and recognition up in our.
Speaker Change: Our plant in kind of closed inner Mongolia and so.
Speaker Change: Think we approach China like reproach anywhere else in the world being good stewards of what we do there.
Speaker Change: Environmentally conscious and I think that flows through into the relationships, we have with with.
Speaker Change: With the local communities governments customers et cetera, so our relationships are strong.
Doug Douglas: And, you know, I think that that helps us with working through new business opportunities in that partnership, having that long-standing relationship and standing in the country. What we're seeing right now is, you know, pretty stable. We, you know, last year was a, was a, last first quarter was a challenging year, at least in our, on the industrial side of the business.
Speaker Change: And I think that that helps us through working through new business opportunities and that partnership having that long long standing relationship and standing.
Speaker Change: And in the country.
Speaker Change: What we're seeing right now is pretty stable.
Speaker Change: Last year was.
Speaker Change: Last first quarter was a challenging year at least in our in the industrial side of the business.
Doug Douglas: You know, coming through, it seems like a long time ago, but coming through some of the COVID shutdowns through the first quarter, but we saw a stable ramping up of, at least in our business, both from a general foundry condition in terms of demand but also as we continue to penetrate the market. There's a lot of room for us to continue to penetrate our green sand bombs into China and also India and into Asia, and so we continue to progress there, and that's what's feeding a lot of the growth.
Speaker Change: Coming through it seems like a long time ago, but coming through some of the COVID-19 shutdowns through the first quarter, but we saw a stable ramping up at least in our business.
From a general foundry conditions.
Speaker Change: In terms of demand, but also as we continued to penetrate into the market. There's a lot of room for us to continue to penetrate our greensand bonds into China, and also India and into Asia. So we would continue to progress there and that's what's feeding a lot of the growth and so we saw this steady growth and movement throughout the quarters, and we're still seeing that steady growth in <unk>.
Doug Douglas: And so we saw this steady growth and movement throughout the quarters, and we're still seeing that steady growth and improvement. Erik mentioned we're seeing, we saw volume growth in China in particular, but Asia in general, in the first quarter. We're going to see that continual general growth. From our standpoint on the industrial side, it's not booming, but it's also pretty stable, and we can do a lot of work with that.
<unk> Eric mentioned, we're seeing we saw volume growth.
Speaker Change: And China in particular, but Asia in general in the first quarter, we're going to see that continual general growth. So from our standpoint on the industrial side.
Speaker Change: <unk>.
Speaker Change: It's not it's not booming, but its also pretty stable and we can do a lot of work with that we are working with customers to save money, we're putting in new blending systems to help with the scrap rates.
Doug Douglas: We're working with customers to save money. We're putting in new blending systems to help with those scrap rates. You know, we're participating in a pretty strong industrial market right now, and a large portion of our sales go into, you know, kind of compressor housings and big castings that go into refrigeration, and that's doing really well right now. So, you know, we've got a really good stable outlook for China right now, and as DJ mentioned, we won't go into it again, but, you know, we've got five satellites, three of which are ramping up in the region, and so we've got some good growth ahead of us on the paper and packaging side.
Speaker Change: We're participating in a pretty strong industrial market right now with a large portion of our sales go into.
Speaker Change: They're kind of compressor housings, and big castings that go into refrigeration and that's doing really well right now so.
Speaker Change: We've got a really good stable outlook for China, right now and as DJ mentioned, we won't go into it again, but we've got five satellites three of which are ramping up in the region and.
Speaker Change: So we've got some good growth ahead of us.
Speaker Change: On the paper and packaging side so.
Doug Douglas: Right now, it doesn't look terrible to us. It looks pretty stable, and it looks like some stable growth for us ahead through the rest of the year. Long, long answer, but wanted to make sure you got a feel for how we look at China and Asia in general.
Speaker Change: Right now it doesn't look terrible to us it looks pretty stable.
Speaker Change: And it looks like the stable growth for us head through the rest of the year long long answer but.
Speaker Change: Want to make sure you got a feel for how we look at China and Asia in general.
David Cyrus Silver: Very helpful, much appreciated. That's it for me. Thank you. At this time, we do not have any further questions. I'd like to turn the call back. Thank you, Douglas Dietrich, for any closing remarks. Thank you, Maddy. I appreciate everyone joining us today. Hope you have a good weekend and we look forward to talking to you in another three months. Take care. This concludes today's call. Thank you for your participation. You may now disconnect.
Speaker Change: Very helpful much appreciated.
Speaker Change: For me thank you.
Speaker Change: Thanks, David.
Speaker Change: At this time, we do not have any further questions. So I'd like to turn the call back to Mr. <unk> for any closing remarks.
Speaker Change: Thank you Matti I appreciate everyone joining today.
Speaker Change: I hope you have a good weekend and we look forward to talking to you in another three months take care.
Speaker Change: This.
Speaker Change: Today's call. Thank you for your participation you may now disconnect.