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DATE

  • Friday, July 25, 2025, at 11 a.m. ET

CALL PARTICIPANTS

  • Chief Executive Officer — Doug Dietrich
  • Chief Financial Officer — Erik Aldag
  • Vice President, Consumer & Specialties — D.J. Monagle
  • Vice President, Refractories — Brett Argirakis
  • Manager, Investor Relations — Lydia Kopylova

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RISKS

  • The Consumer and Specialties segment is experiencing "more competitive dynamics" and higher discounting, with the pet care market seeing a 2% drop in the market during Q2, which may indicate margin pressure unless conditions normalize.
  • European steel markets remain "really, really low" with "suppressed" conditions, according to management, and ongoing "macro uncertainty around trade and tariffs" is expected to result in higher tariff costs, with a projected $1.5 million increase in Q3 2025.

TAKEAWAYS

  • Earnings Per Share-- $1.55 (excluding special items), representing a 36% sequential increase (excluding special items) and ranking as the second highest ever, only behind last year's Q2, based on earnings per share (excluding special items).
  • Revenue-- $529 million, up 8% sequentially, primarily driven by higher volumes across both segments.
  • Operating Income-- Operating income was $79 million, up 25% from the previous quarter, driven by volume gains, improved productivity, and contributions from the cost savings program.
  • Operating Margin-- 14.9% operating margin, up 200 basis points sequentially, returning to the company's natural margin level.
  • Free Cash Flow-- Free cash flow was $34 million, with cash flow is expected to increase in the second half of 2025 and full-year free cash flow projected at approximately 6% of sales.
  • Capital Expenditures-- $29 million in CapEx and projected at approximately $100 million for the full year, supporting growth investments anticipated to generate $100 million in annual revenue at above-average margins.
  • Shareholder Returns-- $22 million returned through dividends and repurchases, totaling $73 million returned to shareholders over the last four quarters.
  • Balance Sheet Liquidity-- Nearly $700 million in liquidity at quarter-end, which is $150 million higher than last year, and net leverage ratio at 1.7x EBITDA at quarter-end, below the company's target.
  • Consumer & Specialties Segment Sales-- $278 million, up 4% sequentially, with Household and Personal Care sales reached $127 million, benefiting from capital investment and double-digit growth in specialty applications such as natural oil purification and animal health.
  • Specialty Additives Sales-- Sales in the specialty additives product line were $150 million, down 5% from the prior year, mainly due to softer demand in North America and Europe but up 4% sequentially on seasonally higher construction sales.
  • Engineered Solutions Segment Sales-- $251 million in sales for the Engineered Solutions segment, up 12% sequentially, with operating margin increased 200 basis points sequentially to 17.4% of sales.
  • High Temperature Technologies-- $178 million in sales, 3% below prior year but up 5% sequentially, stable in North America, and with continued adoption of MINscan systems.
  • Environmental and Infrastructure Sales-- $73 million returned to shareholders over the last four quarters and 1% above prior year though overall project activity remains below historical norms.
  • Growth Initiatives-- Multiple capacity expansions in sustainable aviation fuel, animal health, fabric care, and pet care are underway, with three new satellite facilities and one expansion expected to be operational in the next seven to eight months supporting $100 million in incremental revenue growth from these projects.
  • Tariff Costs-- $0.5 million in incremental tariff expense was incurred; $1.5 million in tariff costs is expected in Q3 2025 with ongoing mitigation efforts by management.
  • Sustainability Progress-- The company achieved 11 of 12 environmental goals from 2018 through 2024, reaching its 2025 target a year early. Scope 1 emissions were reduced by 32% from 2018 through 2024, Scope 2 emissions were reduced by 36% from 2018 through 2024, and emission intensity for both Scope 1 and 2 on a per unit basis was reduced by over 50% from 2018 through 2024, while 66% of new products developed over the past five years have a sustainable profile.
  • Q3 2025 Outlook-- Sales are projected between $525 million and $535 million for Q3 2025, operating income is targeted at approximately $75 million for Q3 2025, and a stable demand environment anticipated, with higher tariffs and customer maintenance outages as potential headwinds.

SUMMARY

Minerals Technologies (MTX 2.35%) management is investing substantially in high-growth areas such as sustainable aviation fuel, animal health, and international pet care, positioning for accelerating margin expansion as these initiatives scale. Demand in the US steel and foundry markets remains solid, supporting refractories and engineered solutions, while European steel and construction markets continue to lag with no sign of imminent recovery. Strategic consolidation and upgrades of manufacturing facilities are expected to improve both productivity and cost position for key product lines, with new capacity in Asia and India targeted for second-half operational rollout. The company maintains conservative capital stewardship, enabling flexibility for potential acquisitions, while ongoing competitive activity and pricing pressure in the pet care business may weigh on near-term Consumer & Specialties segment margins.

  • Dietrich noted, "Every year, we extract over 1.1 million metric tons of waste CO2 from our customers and our own exhaust stacks and sequester those emissions in used into consumer products."
  • Brett Argirakis reported U.S. steel capacity utilization in the high 70% to 78% range during Q2 2025 and service center inventory has declined to around 55 days in the US steel market, offering stability for steel-related product demand in North America.
  • Seventeen MINscan or ScanControl units have now been installed globally, including the first European contract in Austria slated for next year, indicating broader adoption of automated refractory technology.
  • Dietrich stated, regarding talc litigation developments, the reserve remains sufficient, and recent May hearings led to "referred a key factual question in the case to a federal district court."
  • Promotional activity and increased discounting in North American cat litter markets are being managed via private label brand support, with management expecting these conditions to return to "more normal levels."

INDUSTRY GLOSSARY

  • MINscan: A high-tech, automated refractory application and measurement system for steel production furnaces.
  • NewYield: A sustainable specialty mineral product line targeting paper and packaging applications.
  • ScanControl: MINscan system variant incorporating advanced laser and camera technologies for refractory monitoring.
  • PFAS Remediation: Treatment and removal of per- and polyfluoroalkyl substances from water and environment, referenced as Fluorozorb technology.

Full Conference Call Transcript

Doug Dietrich: Thanks, Lydia. Good morning, everyone, and thanks for joining today. I'll start the call by giving you an overview of our second quarter, followed by a review of our current market conditions across our product lines, as well as an update on our near-term growth initiatives. Erik will then take you through the detailed financials and provide an outlook for the third quarter. I'm going to close our prepared remarks with a quick review of our seventeenth annual sustainability report, which we just released earlier this week before opening the call to questions. Let me start with our Q2 numbers.

It is a strong quarter for us, both on a standalone and historical basis, with EPS coming in at $1.55, up 36% from Q1 and at a level only behind the second quarter of last year, when market conditions were relatively stronger. Our ability to generate these results amid the recent global economic backdrop is an example of the strong operating culture of this company. As we shared on our last call, we started to see a significant uptick in sales at the end of the first quarter, and our sales rate expanded through the second quarter and resulted in $529 million, up 8% sequentially. Operating income came in at $79 million, up 25% sequentially.

And operating margin was 14.9%, up 200 basis points from the first quarter and reverting to our natural level of 15%. It's important to put this performance into context given the challenges presented by changing tariffs, and the ongoing uncertainties they continue to put on our end markets. Our results are a testament to MTI's strong fundamentals, including our operational agility, prudent cost and expense control, and our team's ability to take quick action and make necessary adjustments. I'd like to highlight that we delivered strong cash conversion this quarter, in line with our historical average of around 7% of sales. A level that we expect to continue.

We also returned $22 million to shareholders this quarter, reflecting our ongoing commitment to steer capital back to investors. Our balance sheet remains in excellent condition giving us a strong foundation with the flexibility to pursue multiple avenues to drive growth in sales, earnings, and cash flow. Now let me talk a bit about what we're seeing with market conditions and give you some insight into projects that we have coming online to drive both growth and margin expansion. Let's start with the Consumer and Specialties business segment, which comprises our household and personal care and specialty additives product lines. In household and personal care, we're seeing mixed conditions across these consumer end markets.

The North America cat litter market has been slower this year compared to recent years. And these conditions have created more competitive dynamics. We are navigating this with increased promotional activity with our customers, and are seeing momentum building in our order books as a result. We continue to see positive long-term growth dynamics across global pet litter markets. To support this growing demand, we've been retooling our facilities in North America and Europe with new process and packaging equipment. These upgrades are designed not only to produce higher quality products, but also to improve efficiency and reduce production costs.

In addition, we are opening a new pet litter packaging facility in Asia late in the third quarter, to support the demand growth we are seeing there. In our other consumer-oriented products, we are seeing significant increased demand for renewable fuel purification, animal health solutions, and fabric care. This is being driven by regulation changes for more sustainable aviation fuel, the continued trend toward natural livestock feed additives, and the growing demand for more sustainable laundry detergents. We have several capacity expansion projects underway for these product lines as well. In the Specialty Additives product line, market conditions remain mixed. The paper market in North America is relatively flat and Europe remains weak.

However, we continue to penetrate the paper and packaging market in Asia, with strong customer pull for our packaging solutions and sustainable products like NewYield. Three new satellite facilities, two of which are for packaging applications, and one packaging and one capacity expansion set to come online within the next seven to eight months. And we continue to see a strong pipeline of additional opportunities across the paper and packaging market further down the road. In other areas, the automotive market has been relatively flat this year, while residential construction markets vary for us by region. With stronger demand on the US West Coast and continued softness on the East Coast. Meanwhile, our food and pharmaceutical markets remain robust.

Now let me turn to our engineered solutions segment, which includes our high temperature technologies and environmental and infrastructure product lines. In high temperature technologies, we continue to see strong demand in North America for our automated MIN scan systems and for our newest steel refractory formulations. The North America steel market remains relatively stable, and at a production level that provides good volumes for us. In Europe, the steel market remains weak, we expect these conditions to continue for the remainder of the year.

Lydia Kopylova: A bright spot in Europe,

Doug Dietrich: is that we've secured our first Minscan LSC sale there, opening a new market for our technology. We're pursuing the same strategy as we have in North America, helping our customers reduce costs and improve safety through high-tech automated refractory application and measuring systems. We expect to generate additional Minscan sales moving forward as other customers become comfortable with and adopt our new technology. The US foundry market has generated solid demand for our greensand bonds, through the first half from stable auto demand and despite the softer heavy truck and ag equipment markets. The China foundry market has remained resilient, despite the introduction of increased tariffs.

Our volumes of greensand bonds in China remain strong, as foundry customers quickly adapt to the changing market conditions, and seek the cost savings and productivity value that our products provide. On the environmental infrastructure side, the commercial construction and environmental lining markets have stabilized, but we have not yet seen the initiation of several planned large projects where we are specified. We expect commercial construction markets to remain relatively soft as long as interest rates remain higher. However, we are seeing strong pull for our infrastructure drilling products, water remediation solutions, offshore energy services, and PFAS remediation through Floresort.

As an overall market summary, we see similar market conditions to the second quarter continuing into the back half of the year. However, I would not characterize these conditions as robust by historical standards. As I just mentioned, we are executing on several initiatives to support the strong near-term demand we are seeing in multiple product lines. These initiatives include new capacity, and plant expansions to support demand for sustainable aviation fuel, animal health, fabric care, and pet care. These specific projects will support $100 million in revenue growth for products that will drive the margin profile of the company higher.

Lydia Kopylova: This is just a subset of our growth initiatives.

Doug Dietrich: Other projects, such as geographic expansion initiatives, and new product introductions, can be supported by our existing capacity. Now let me let Erik take you through some additional details of our financial results as well as the third quarter outlook. Erik?

Erik Aldag: Thanks, Doug, and good morning, everyone. I'll start by providing an overview of our second quarter results, followed by a review of the performance of our segment and I'll wrap up with our outlook for the third quarter. Following my remarks, I'll turn the call back over to Doug to cover the highlights from our 2024 sustainability report. Let's review our second quarter results. Overall, we delivered a strong performance in the second quarter. Across our end markets, conditions played out mostly as we expected, with sales continuing to show improvement from the levels we saw in the first quarter. Sales of $529 million were up 8% sequentially, driven by higher volumes in both segments.

Customer order patterns continued to normalize through the quarter, not quite to prior year levels, but a significant improvement from what we experienced in the beginning of the year. You can see from the bridge on the top right, that higher volume drove $30 million of the $37 million sequential improvement in sales. With the balance of the increase coming from favorable pricing and foreign exchange. Consumer and specialty sales increased by $9 million sequentially. And in engineered solutions, sales were up by $28 million. Operating income increased by $16 million or 25% sequentially to $79 million matching the second highest operating income quarter for the company.

And that was despite the current macro challenges weighing on some of our end markets. In the sequential operating income bridge, you can see that higher volume drove a $9 million improvement to income, which is a typical incremental margin for us on $30 million of volume. In addition to favorable pricing and foreign exchange, we also benefited from $4 million of lower cost driven by improved productivity, and the ramp up of our cost savings program. As a result, operating margin increased by 200 basis points to 14.9% of sales.

It's worth noting that we incurred about a half a million dollars in incremental tariff costs in the second quarter, which our team has done a nice job mitigating through supply chain and commercial actions. As Doug mentioned, we are working on several projects to expand capacity for high growth products and optimize our footprint for continued margin expansion. In the second quarter, we executed on some efficiency opportunities in engineered solutions by consolidating two facilities in the US, which will result in direct cost savings as well as productivity and improvement. In addition, we made adjustments to the layout of another facility in the US to accommodate future capacity expansion for Fluorozorb, our PFAS remediation technology.

We recorded special charges in the quarter associated with these actions, which were mostly offset by a gain on the final installment for the sale of refractory manufacturing assets in China. Second quarter earnings per share, excluding these special items, $1.55 up 36% sequentially. Now let's turn to a review of our segments beginning with consumer and specialty. Second quarter sales in the Consumer and Specialty segment were $278 million up 4% sequentially as customer order patterns stabilized throughout the quarter. Sales in our Household and Personal Care product line were $127 million up slightly from prior year and up 3% sequentially. As Doug mentioned, we've got a lot of exciting initiatives in household and personal care.

Some of these specialty applications, like natural oil purification and animal health, are growing at double-digit rates with incremental margins above the company average. The growth of these products will continue to drive the margin profile of the company higher. And we are supporting this growth with capital investment to ensure our facilities can keep up with demand. In our specialty additives product line, sales of $150 million were 5% below prior year driven by softer demand conditions. Primarily in paper production in North America and Europe. On a sequential basis, sales in the product line were up 4% primarily driven by seasonally higher sales into residential construction applications. The team remains focused on driving operational efficiency.

While also supporting our growth opportunity. This segment delivered a much stronger operating performance in the second quarter, Operating income was $37 million up 24% sequentially and operating margin increased by 220 basis points to 13.4% of sales. Margins were lower than last year, due to volume leverage, and some higher raw material and energy costs that we are working to pass through. We're also in the process of making significant upgrades to one of our cat litter facilities in the US. This is resulting in temporarily higher freight costs as we've shifted production around our network to accommodate the work at this facility.

Looking ahead to the third quarter, we expect sales in the Household and Personal Care product line to increase sequentially driven by an improving demand outlook and the ramp up of our growth initiatives. And in specialty additives, we expect a similar quarter sequentially. Now let's turn to the Engineered Solutions segment. Second quarter sales in the Engineered Solutions segment were $251 million up 12% sequentially. In our High Temperature Technologies product line, sales were $178 million three percent below prior year, but up 5% sequentially. Global sales to foundry customers were similar to prior year. Demand in North America is holding relatively stable apart from some ongoing softness for castings going into the agricultural equipment and heavy truck market.

And in Asia, we continue to deliver year over year volume growth including in China, despite lingering tariff uncertainties. Second quarter sales to steel customers were mixed. We saw a modest sequential improvement in sales to European steel customers after significant destocking in the first quarter However, that market remains softer than last year. Meanwhile, The US steel market has been solid. And our team is doing an excellent job executing on growth initiatives. Second quarter sales to steel customers in North America were higher than last year and up sequentially as well.

In the environmental and infrastructure product line, second quarter sales were $73 million 1% higher than the prior year and 35% higher than the first quarter as we entered the seasonally stronger period for this product line. Demand conditions across the product line have stabilized although overall project activity is still lower than historical levels. The segment overall delivered another strong operating performance. Operating income was $44 million operating margin improved by 200 basis points sequentially 17.4% of sales. Matching last year's record performance. Turning to the third quarter, we expect end market conditions to remain stable for the segment and overall sales to be similar sequentially.

Now let me turn to a summary of our balance sheet and cash flow highlights. We delivered a solid cash flow performance in the second quarter. With free cash flow of $34 million Looking ahead, we expect cash flow to continue to build through the second half. As we've mentioned, we're making several key investments across the company that support the progress we've made on our strategic growth initiative. In the second quarter, CapEx was $29 million as activity on several projects picked up.

And for the full year, we're projecting capital of approximately $100 million This figure includes the ramp up of several growth investments that Doug referred to in his remarks, will add $100 million of annual revenue at above average margins. These investments total about $50 million of CapEx that we'll be executing on over the next twelve months. We're expecting to generate significant free cash flow in the second half. At this point, we expect full year free cash flow in the 6% of sales range, which factors in the slower start to the year the higher level of investment, and a very strong second half of cash flow generation.

We also returned $22 million to shareholders through dividends and share repurchases in the second quarter, and we've returned $73 million to shareholders over the last four quarters maintaining our balanced approach to capital deployment. Turning to the balance sheet. Total liquidity at the end of the second quarter stood at nearly $700 million which is $150 million higher than the last year. And our net leverage ratio is 1.7 times EBITDA. Below our target of two times EBITDA. The company's strong balance sheet and reliable cash flow generation provide the financial strength to navigate periods of uncertainty, while also enabling significant flexibility to pursue growth and return cash to shareholders. Now I'll summarize our outlook for the third quarter.

Doug Dietrich: We're

Erik Aldag: expecting a largely similar quarter sequentially for sales and income. With a balance of potential upsides and some ongoing macro uncertainty. Overall, we're expecting sales of between $525 million and $535 million In Consumer and Specialties, we're expecting higher sales from continued growth across the household and personal care product line, including natural oil purification, personal care, and animal health products to name a few examples. And in engineered solutions, we see a similar level of sales sequentially as our stable market outlook is balanced by seasonal customer maintenance outages in high temperature technologies. Our operating income guidance of approximately $75 million reflects the midpoint of our sales range and represents a balanced view.

With potential upsides well as the potential for macro uncertainty around trade and tariffs to continue to impact our customers and end markets. And while our direct exposure to tariffs is relatively low, we are facing a higher tariff cost in the third quarter of $1.5 million We're confident we'll be able to mitigate this tariff impact through our ongoing supply chain and commercial efforts. In summary, we feel confident that the second half will be stronger than the first half and we are excited about the progress we are making on several key initiatives will contribute to long-term growth and continued margin expansion.

With that, I'll turn the call back over to Doug for some remarks on our annual sustainability report. Doug?

Doug Dietrich: Thanks, Erik. Wanna close the call with a quick overview of our sustainability report. Which we just released earlier this week. This is the seventeenth year that we've published this report, and it reflects the tremendous amount of ongoing activity across our company. Enhance what we do and how we do it in order to drive value for our customers, employees, communities, and investors. Sustainability is not new to MTI. It's always been explicitly included in our values and how we run the company. We're committed to being responsible stewards of the environment good neighbors, and the places in which we work, and dependable, supportable, supportive and inclusive colleagues who are laser focused on keeping each other safe.

This isn't just talk. We put this commitment into action as you can see from the highlights in our report. Let me give you a few of them. Through 2024, we've achieved 11 out of 12 of the environmental goals we set for ourselves back in 2018. And we achieved them one year ahead of our 2025 target. The progress we've made since 2018 is quite remarkable. We've reduced our overall Scope one emissions by 32%, scope two emissions by 36%, and reduced emission intensity for both scope one and two on a per unit basis by over 50%. We've reduced our airborne pollutant emissions by 70% cut our processed water usage in half, reduced processed waste disposal by 44%.

Every year, we extract over 1,100,000 metric tons of waste CO2 from our customers and our own exhaust stacks and sequester those emissions in used into consumer products. We operate at a world-class safety level and consistently look for ways to make our work environment safer. Though, we will never be satisfied until we reach and maintain zero injuries as a company. We support our customers in achieving their sustainability goals, with 66% of our new products which we define as products developed over the last five years, having a sustainable profile. These products range from natural solutions to emissions and waste reduction products that support pollution prevention, filtration, and energy savings.

You'll also see several examples of how we engage within our communities. By supporting education, installing systems to bring clean waters to areas in need, and working alongside our neighbors in a variety of local initiatives. This is only a sample of what you'll see in this year's report, and I encourage you take a deep dive into it. I'm extremely proud of what we've achieved thus far, but there's so much more to do for us and for our industry.

Erik Aldag: We intend

Doug Dietrich: to outline this next chapter when we publish our new long-term goals in next year's report. With that, let me turn the call over to questions.

Operator: We will now begin the question and answer session. To ask a question, If you are using a speakerphone, please up your handset before pressing the keys. Our first question today comes from Mike Harrison with Seaport Research Partners. Please go ahead.

Mike Harrison: Hi, good morning. Congrats on a nice quarter.

Doug Dietrich: Hi, Mike.

Mike Harrison: Was hoping that we could talk a little bit in start out here with the Household and Personal Care segment. There was some improvement sequentially but we're still not back to the kinds of growth rates we'd like to see there. I know you mentioned that kind of the underlying pet care market is still not fantastic. But can you give us maybe some additional color on what you're seeing in that HPC product line? And in terms of volume trends And when you might expect to get back to stronger growth rates? Sure, Mike. Let me start off and then I'll hand it over to D.J. Monagle to give you a little bit more detail.

Look, think the product line several of the products as we mentioned in this are doing quite well. We've got some of the smaller products like our aviation natural oil, fuel purification, animal health, personal care. These are growing at kind of double-digit and high double-digit kind of rates. So they're doing very well. They're smaller piece of the profile. As I mentioned, we're investing in them, and I think as they grow, they're going to be continued to drive the growth profile of this product line much higher.

They are also the higher margin products in the company, some of our newest technologies, And, they, as I mentioned, will drive the margin profile of the company higher as they grow. Pet care is the largest product in that product line. And, yeah, this year, it's been a bit of a slower year for the market in total, and I think you'll see that across any of the producers or with that commentary. And I think that's driven some higher competitive activity some discounting that's been going on that we've been working our way through. So with that, what I'll I've answered the other products.

D.J., why don't you take us to the pet care and give us a little idea of the dynamics going on there? Yeah. Sure. Glad to. For the question, Mike.

D.J. Monagle: So let's kinda peel back the onion a little bit on what we're seeing in the pet care market. Little surprised to see the sequential drop that we saw in the quarter. It's not uncommon for the second quarter to be a little bit lighter than the first, but we saw a 2% drop in that market, and it particularly hit private label sector. Doug was mentioned some discounts and just give you a flavor of the discounts that we're seeing, done by the major brands, in a normal year, you're seeing, you know, 15 to 20% of those major brands sell on deal. This year, they're still up in the 20 to 30%.

We're starting to see some mitigation on that So we're expecting the shift to private label to start improving a little bit. But the market has still been down. And against that down, we've kind of held our own, not bragging about it, but just that gives you some perspective on that. So let's talk about then what's what's going on in that context. On the pet side, our you know, we enable our private label partners to execute their strategy. And what we're doing lately with them is quite a bit of brand refresh and promotions.

So that brand refresh can be as simple as new placements increased volumes that our partners wanna put and display differently in the shelves, but they also could be as complicated as product refreshes, which could just be a label change but could also be a reinvigoration of the of the whole product line. That would include some things like new products, which would be, in our case, it's what we're promoting is some lightweight litter products and some other things that have to do with the kind of a under the clean hygiene theme. So those promotions are ongoing now. We expect to see a some better growth in that pet care market going forward.

And then I guess, on top of that, as Doug was mentioning, the capital investments that we're doing, towards the beginning of the fourth quarter, a little bit in the third quarter, you're gonna start seeing an increase in China as we bring that new facility online for us. So that's that's the backdrop for pet care that we've got going on. The other element that Erik had mentioned We did a major rework, a major optimization of our footprint in The US And we also made some refinements to our Netherlands facility.

These changes will allow us to improve the productivity, better enabling us to meet some promotions, but it also expands our capability to meet some requests we've got for customers in different channels on new grades, new products. So we're pretty enthused about that. That's the pet care story, and I guess I just wanna I guess, pile on to the other side of the equation. In that household personal care line

Doug Dietrich: Big investment

D.J. Monagle: coming online early in 2026 to meet to continue to meet. The demands of this fast growing bleaching earth product that is helping purify the plant-based fuels and plant-based oils that include sustainable aviation. Sustainable aviation is the primary pull that we're seeing from there. We also have got some really good projects going on, especially in the Fabric Care line, where we're introducing some new products to help the macro trends of better washing, in a cold water environment with those folks So overall, we feel really good about the that part of the product line within the segment.

Still think pet care is on track to be a $500 million plus business feeling really good about the specialties growth trajectory, especially as embodied by

Operator: bleaching our

D.J. Monagle: animal health Fabric Care, and the personal care products. Hope that helps.

Mike Harrison: Oh, very helpful. Thanks for all that additional color. I wanted to switch over to engineered solutions. The operating income you guys had kind of given a range there. In terms of guidance for the second quarter, and it looks like you came in pretty nicely ahead of those expectations. So can you talk about some of the key drivers of that better operating income performance in Q2? And I guess just looking at your overall guidance, seems like even though you expect a similar quarter in Q3, the op income guide is a little bit lower. So is that is that an engineered solutions step back that we should be expecting in operating income?

Erik Aldag: Yeah. Mike, This is Erik. Thanks for the question. So yeah, I think from an engineered solutions perspective, they performed very well in the second quarter. Productivities were very strong. The supply chain teams, in particular, have done a really nice job managing input costs for us. Know, we mentioned that tariffs a huge direct impact for us. But the supply chain team in engineered solutions in particular has done a really nice job mitigating that impact for us. So margins, probably a little bit better than we guided to the second quarter in that segment. I think in terms of what we're looking at for the third quarter guidance, as I mentioned, we have upside to that number.

I think what you're hearing from us is there is still a lot of uncertainty out there in terms of what's going on with macro end markets. And potential impacts on our customers. But I would say you know, things continue to play out and continue to be relatively stable. We can do a similar level of margin performance in the third quarter. We are facing some slightly higher tariff costs in the third quarter, but we are confident that we're gonna be able to mitigate that what I would give you in terms of the color for the third quarter. Yeah, Mike. The only thing I would add is with this

Doug Dietrich: this product line, this segment's performing really well. I think they're doing as Erik mentioned, all the things they've got. This is where the tariffs sit mostly in the company, and I and they are, you know, having to navigate that. They have a heavier load in the third quarter, which we're confident we'll do. So there's some there's some uncertainty there. But know, this is these margins are not you know, they've been moving this direction for a while now and it's it is it is part of the strategy. It's these it's our higher tech, you know, green sand bond solutions It's growing the business in underserved regions.

These Minscan units, which then come with kind of contracts for refractories, but then also there are new formulations that we're using that have, you know, good performance, which help us with a higher margin capture. So there's a number of different things that are going on. And, yeah, the steel market in Europe is pretty weak right now. We got this tariff load. So think we're being a little bit middle of the road here. But, yes, I think there's some upside and I think even further margin expansion in this business long term. Alright. Sounds good. Last question for me. The balance sheet's in pretty good

Lydia Kopylova: shape.

Doug Dietrich: It was 2021 when you guys last did a more

Mike Harrison: sizable acquisition. I was hoping you could talk about your capacity and your appetite for a larger or more transformative deal given that there are some potential targets out there, including some targets that you may have looked at in the past?

Doug Dietrich: Well, M and A has always been a piece of the growth strategy for the company. You know, we've executed fairly regularly on acquisitions over the past five years. I think we've done four of them. The balance sheet's in good shape. Liquidity position's in good shape. I think you know, we have a nice portfolio of things that we're looking at. Mike. I think they are you know, there's some larger things that we would consider and I think there's also some bolt ons that give us a faster penetration in regions or they bolt on to some of these higher margin products. In the consumer space. So I think there's a number of things that

Mike Harrison: that we would

Doug Dietrich: that we would consider. I think, you know, we look at these things obviously very carefully. We model them with the appropriate level of risk and concern and we make sure that we know exactly what we're going to do with it if we were to get it. And so, we take a very measured approach to it. But I think the balance sheet's in good shape if, if something were to become actionable. That's what I can give you.

Mike Harrison: Alright. Thanks very much. The next question is from Dan Moore with

Operator: CJS Securities. Please go ahead.

Will: Hey. This is Will on for Dan.

Erik Aldag: Can you add some more color to the schedule for new PCC satellites, including new yield? Coming online in, the second half and into 2026.

Doug Dietrich: Sure. We'll outline that for you. D.J., do you wanna some details? Had what I mentioned, Will, was we have three new satellites and one expansion coming online in the next seven to eight months. Two of those two of those satellites are for packaging. In Asia. One of them is a is a kind of what we call our base PCC paper. Then another expansion, and D.J. can give you more details on what they are and where they are.

D.J. Monagle: Yeah. Well, so just as a baseline for you, we're we're gonna be we started a plan earlier this year to the in the neighborhood of 60,000 tons. We're still seeing that to ramp up a little bit. That's that's not quite at full capacity yet. In the third quarter, we'll be seeing two more satellites come on. One of them is the expansion to which Doug was referring. That's in India. And that'll come online pretty quickly. The other one is a new yield facility in China. So that'll be coming on, and we'll seeing the impact of that towards the second half of this year.

As we go into next year, we've got another packaging facility that will actually have a combination of products. One is NewYield, but the other one is our satellite GCC. It's a new to MTI technology. That we've been getting a lot of market pull for. So that'll be coming on towards the end of the first quarter as well as a another site that we've got in China that'll be coming on in and that would be a printing and writing site that'll be coming on in China towards the end of that first quarter. So and that one is it's about 60,000 ton sort of ballpark. Thank you. That's super helpful. And then looking at refractories,

Erik Aldag: could you add some more color to the outlook for steel production for the remainder of the year?

Doug Dietrich: And then secondly, where are we in terms of penetration of mini can Miniscan systems, The US and Europe. Sure. Brett Rodriguez, wanna take that one? Sure. Sure, Doug. Thanks, Will. The US steel penetration the second quarter actually saw capacity utilization rates reached the highest level since Q3 of twenty four. So it's that high 70, 78% range. Steel prices seem to be stable. Flat rolls over $900 a ton. So pretty stable

Brett Argirakis: market right now in North America. The service center's inventory has come down to around fifty five days. That's a pretty that usually when you get into the mid fifties, it seems like it keeps a pretty consistent steel production. So overall, US is doing really well. That it's benefiting our refractory business. From the European side, of course, as Doug mentioned, the European market is it still remains really, really low Their efforts converting to green steel technology has slowed. That means going from integrated steel or basic oxygen furnace to electric furnace. That's slowed. Just because of the market.

And the Turkey and Middle East market, which we as part of we work as part of our European group is it has also slowed. So from a market standpoint, pretty really good market for us in North America. And much suppressed market in Europe. So overall, it's it's pretty it's stable for our business. As far as the MIN scans go, you know, as Doug also mentioned, these MIN scans provide us with a really custom application for our customers. It improves safety, and it improves the efficiencies their operation and allows their furnaces to run longer. By extending the refractory life. In 2025 for this year, we signed eight agreements. We installed one in the first half.

The remaining will be in the second half. Possibly into the first quarter, but our target is to get the rest of them tied in. This year. Over the past few years, we've had 17 MIN scans or scan controls which include the laser and the camera. Installed to date. Two of those were in Turkey, and the remaining were in North America. And we're happy to say that we signed our first agreement in Austria that'll go in sometime in the first quarter of next year. So we're excited about that, moving that technology to Europe. So there is there's still a very sufficient runway to add more of these units. There's plenty of electric furnaces out there.

Both in North America and Europe So we're not gonna give up. We're gonna continue to pursue them. Both North America, Europe, and Japan as well. So I hope that helps.

Will: Thank you.

Operator: The next question is from Pete Osterland with SunTrust. Please go ahead.

Pete Osterland: Hey, good morning. Thanks for taking the questions. First, just wanted to ask one on the Pet Care business. Just given the increased competitive activity you've referenced, are you having to lower prices there in order to increase momentum in your order book? And is that a potential source of margin pressure in CNS in the second half until you know, you see a more meaningful pickup for demand?

Doug Dietrich: Yeah. I think there's, you know, promotional activity is you know, generally a pricing issue. It's either, you know, similar prices, higher sizes, or more weight. Two for ones, those types of things. What we're doing is working with, as D.J. we're working with our customer. You know, they own the brand and so it's their decision as to how they wanna put it on the shelf and price it. But we're helping them with you know, those packaging solutions, the labeling, yes, we could help them with some pricing actions a little bit in this quarter to with that promotional activity.

What that does is that, you know, make sure that we maintain and help them maintain that value proposition and that value gap between the branded product and the private label. And ensure that there is that value seen on the shelf, and that tends to pull more pull more of their product, I e, our product off the shelf. So yes, we're working on all of those, and there has been some pricing. That's been through that. But as D.J. mentioned, we expect that some of this promotional activity in the market marketplace in general to go back to more normal levels. We make sure that we keep our private label kind of value proposition.

I think longer term, we see that private label is gonna continue to grow. It's not just in North America and in Europe, but also in Asia. We see, you know, positive fundamentals for the pet litter market in general. Globally. We're investing in that growth. As we mentioned, with investing in our expanding of facility in a new facility actually in Asia, that's going to double the size of our business. In Asia. And I think that's just the beginning because that is a much higher growth rate area. So as we start there, you're going to see that adding to the growth rate of the business. Long term.

So hopefully that helps you with both short term kind of actions and long term dynamics.

Pete Osterland: Peter. Yes. That's very helpful. Thanks. And then wanted to ask one on talc as well. I guess, is there anything you can share on the time frame for a final resolution or any meaningful upcoming dates to be aware of and just kind of as a follow on question to that, is there a timeframe within which it needs to be resolved in order for the reserve that you've established to be sufficient?

Doug Dietrich: Well, first I can't give you know, solid answer on the timing. These are it's quite dynamic and it's determined by a number of different items in terms of courts and court dates. Regarding the reserve, it's sufficient. It is a sufficient reserve and it's we find it sufficient. There's no timestamp on that. We find that is the liability that we see for resolving this. Look, I think you know, what I can give you in terms of over the past ninety days that's happened, a couple of significant items, There's a hearing in the May, about May 14, where the bankruptcy court referred had a hearing and referred a key factual question in the case.

To a federal district court, and that was, you know, to determine whether BMI old co, Calc contained asbestos. You know, that's a relative positive development for us because we've always maintained that BMI old co has always maintained that its talc was safe and free of asbestos. And so there is a forum by which, you know, that can be determined. At the same time, we're still BMI is waiting for that kind of next steps in that hearing. And while we wait, you know, we're waiting on clarity. We're still working and hope that a consensual plan can be developed.

We're we're working through we've always been open to a plan, and we feel that the reserve is sufficient to that end. But, you know, there's two steps here. One through the district court and showing that our TELC has been BMI's TELC has been free of asbestos and then also working on developing a consensual plan. So that's gonna take some time. We're open to both avenues, but I can't give you a time frame when that'll be concluded.

Pete Osterland: That's very helpful. Thanks a lot, Doug.

Doug Dietrich: Yep.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Doug Dietrich for any closing remarks.

Doug Dietrich: Well, everyone, really appreciate you joining the call today. Again, thank you for the questions. Hopefully, it was informative and we look forward to talking to you after the third quarter in October. Alright? Take care till then.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.