MINERALS TECHNOLOGIES INC Q1 FY2025 earnings call

• First quarter was challenging with slow start, order volume reductions, and extended customer downtime. - BMI Old Co's Chapter 11 case led to a $215 million provision for talc-related claims and litigation costs. - Implemented a $10 million cost savings program targeting efficiency improvements. - Markets were uncertain with seasonal cycles disrupted by tariff structures. - Consumer and specialties saw order pattern normalization in March with improved volumes. - Engineered solutions had bright spots in environmental lining systems and PFAS remediation. - Long-term strategy includes penetration into core markets, growth of higher-margin consumer-oriented products, and innovation pipeline.

Consumer and Specialties segment: First quarter sales were $268 million. Sales were affected by customer order pattern changes due to inventory management, tariff uncertainties, and consumer demand outlook. Edible oil and renewable fuel purification in household and personal care grew 6% year-over-year, and ground calcium carbonate in specialty additives saw 6% sales growth. Operating income was $30 million. Engineered Solutions segment: First quarter sales were $224 million. High-temperature technologies had softer demand in some industrial end markets, while Asia foundry volumes grew 9% year-over-year. Environmental and infrastructure saw stability in large-scale project activity, with environmental lining applications up 19% year-over-year. Operating income was $34 million, with an operating margin of 15.4% of sales.

• Second quarter sales range from a low end of $520 million run rate continuing through the quarter to a high end of $535 million with normalization of order patterns. - Midpoint of sales range expects operating income around $75 million and EPS around $1.40. - Second quarter expected to be much stronger than first quarter, with sales 5%-10% higher and operating income around 20% higher sequentially. - Engineered Solutions segment expects sales increase 10%-15% sequentially, with operating income expected to increase to between $40 million and $42 million. - Consumer and Specialties segment expects sales increase approximately 3%-6% sequentially, with operating income expected to improve to between $35 million and $38 million.

• Market uncertainties including economic uncertainty, tariff impacts, and consumer demand outlook. - Customer inventory adjustments and order pattern shifts affecting volume and sales. - Potential impact of tariffs on costs and pricing, including transportation and input costs.

Q: Talk about recent progress in arbitration related to talc litigation and confidence in the $215 million reserve.

A: Doug Dietrich said there was progress in mediation in the first quarter, and based on that progress and hearings, they could make a good estimate of potential funding of the trust and ongoing litigation costs for BMI Old Co and SMI. They feel confident moving through the Chapter 11 process will lead to a final resolution.

Q: Talk about organic top-line growth outlook given slower start and macro impacts.

A: Doug Dietrich said it's hard to give a range, but there's base demand and uncertainty could clear, with potential for low single-digit growth in the back half depending on order patterns and base demand.

Q: Cadence of cost savings and its impact on margins.

A: Erik Aldag said savings will ramp up more meaningfully in the third quarter and continue through early 2026, and it's accretive to margins, helping move towards the 15% margin target through volume or cost savings.

Q: Operating margin details, including first quarter costs and second quarter guidance.

A: Erik Aldag discussed first quarter cost issues like energy, transportation, and tariffs, and second quarter guidance is based on volume, with last year's second quarter having high-margin refractory equipment sales making it a tough comp. Expecting margin improvement in second quarter through volume leverage.

Q: PFAS activities, including pilot plants, beta tests, and Northeast project.

A: Brett Argirakis said the pipeline for PFAS is strong with over 15 new projects in the quarter, six full-scale drinking water systems using FluoroSorb, and four additional ones coming by year-end. The large Northeast drinking water project is being commissioned this month and is a large-scale municipal project removing multiple contaminants.

Q: China-focused question on competitiveness in PCC and foundry activities.

A: Doug Dietrich said they haven't seen loss of competitiveness in China, have won a new contract recently, and customers value the technology and blends they bring, which transcend where the company is based.

Q: Signs of sequential demand pickup in second quarter related to pre-buying ahead of tariffs.

A: Erik Aldag said there was some pre-buying in Asia foundry business in the first quarter, but moderated second quarter forecast for Asia due to tariff impacts on foundry customers. Also mentioned customers holding off related to tariffs in some areas.

Q: Update on full-year free cash flow expectations.

A: Erik Aldag said still expecting strong free cash flow, starting slow due to working capital build in first quarter, but still expecting around 7% of sales to convert to free cash flow and around $150 million of free cash flow this year