Minerals Technologies Inc. Q2 FY2026 earnings call

Overall Financial Performance

• Total Q2 2026 sales hit $548 million, up 4% year-over-year; first half 2026 sales are up 7% year-over-year. Q2 operating income was $75 million, and adjusted EPS was $1.60, up 3% year-over-year.
• The company remains a strong cash generator: year-to-date operating cash flow is $95 million, up $37 million year-over-year, with year-to-date free cash flow of $45 million. Net leverage reduced to 1.6x EBITDA, leaving the balance sheet in strong shape.
• Cost headwinds: $16 million in total cost increases in Q2 driven by higher freight, energy, and mining-linked costs, with the majority impacting the Consumer and Specialty segment due to contractual pricing lags.

1. Consumer and Specialty Segment: Q2 2026 sales were $275 million, representing 50.2% of total company revenue. Year-to-date sales are up 5% year-over-year, and Q2 operating income was $29 million, with year-to-date operating income of $62 million. Within the segment, household and personal care product line sales were $123 million in Q2; cat litter sales are up 9% year-to-date, though Q2 sales moderated after strong Q1 channel filling for new products. Specialty additives sales are up 1% year-over-year in Q2 and 3% year-to-date, with global paper and packaging customer sales up 7% year-to-date, offsetting soft residential construction demand. Margins were negatively impacted in Q2 by persistent inflation and contractual pricing lags.

2. Engineered Solutions Segment: Q2 2026 sales were $274 million, representing 49.8% of total company revenue. Sales grew 9% year-over-year in Q2 and 10% year-to-date. Q2 operating income hit a record $49 million (a record 17.8% margin), with year-to-date operating income of $88 million (up 13% year-over-year). Within the segment: High Temperature Technologies had Q2 sales of $190 million, up 7% year-over-year, driven by 14% sales growth for Asian foundry customers, strong North American steel demand, and early signs of improving European steel demand. Environmental and Infrastructure had Q2 sales of $84 million, up 15% year-over-year, and 19% year-to-date, with building materials sales up 41% (driven by large projects), drilling products up 20%, and environmental lining solutions up 18% on strong mining sector activity.

• Full-year 2026 sales growth is expected to remain in the mid-single-digit range, with this growth trajectory expected to continue into 2027.
• Q3 2026 total sales are expected to be approximately $550 million, up ~4% year-over-year, with operating income expected to be flat sequentially at ~$75 million and EPS between $1.55 and $1.60.
• Both the Consumer and Specialty and Engineered Solutions segments are expected to deliver Q3 2026 year-over-year sales growth of 3% to 5%.
• Full-year 2026 operating margin is expected to be between 13% and 13.5%. Operating margins for the Consumer and Specialty segment are expected to recover in Q4 2026 to slightly above prior year levels once price adjustments fully take effect.
• Full-year 2026 capital expenditures are expected to remain in the $90 million to $100 million range, with full-year free cash flow expected to equal 6% to 7% of sales.
• Cat litter sales are on track to deliver mid to high single-digit full-year 2026 growth.

• Persistent, elevated inflation for energy, transportation, and raw material costs has compressed near-term margins, particularly in the Consumer and Specialty segment, due to contractual lags that delay the pass-through of cost increases to customer pricing.
• Ongoing talc liability litigation related to subsidiary BMI OldCo (formerly Barrett's Minerals): a $290 million reserve charge was recorded in Q2 to fund potential settlement trusts and related costs. The bankruptcy proceedings have been abated pending resolution of a talc causation issue in district court, creating uncertainty around the timing and final outcome of the matter.
• Residential construction end-market demand remains soft relative to prior year, acting as a drag on growth for the Consumer and Specialty segment.
• Geopolitical tensions have caused shipping and logistics challenges, delaying near-term sales for the raffinol bleaching earth expansion.

Q: After Q2 cat litter sales slowed following a very strong Q1, what is the timing of a return to growth and your confidence in hitting full-year targets? / A: Q1 cat litter growth of 19% was driven by heavy channel filling for new products, which naturally caused Q2 orders to moderate once distribution centers were full. Order growth has already returned to a normal steady pace in early Q3. The bleaching earth expansion for sustainable aviation fuel clients was fully ramped at the end of Q2, so its new sales will also contribute to H2 growth alongside cat litter. The company remains confident of hitting its mid to high single-digit full-year growth target for cat litter.

Q: After the recent Q2 margin compression from cost inflation, when can margins return to the historical 14%+ range once costs stabilize? / A: Full-year 2026 margin is expected to land between 13% and 13.5%. Pricing adjustments to cover recent cost increases will take full effect over coming quarters, and the company expects to fully close the price-cost gap once cost inflation stops. The company has a historical track record of expanding margins after inflationary periods, and exiting 2026 it expects to be well-positioned to return to target margin levels as price-cost dynamics normalize.

Q: What drove the Q2 Consumer and Specialty sales shortfall relative to guidance, and why are you confident growth will rebound in Q3? / A: Three factors shifted sales from Q2 to H2: slower cat litter orders after the Q1 channel fill, delayed Q2 sales from the late ramp of the bleaching earth expansion, and a major customer personal care campaign that moved from Q2 2026 to H2 after holding it in Q2 2025. Early Q3 data shows strong retail pull for new and refreshed cat litter SKUs, all shipping delays for the bleaching earth expansion have been resolved, and the company remains confident in hitting full-year growth targets.

Q: Is the record 17.8% Q2 margin for Engineered Solutions sustainable, or just a one-time outperformance? / A: The Q2 margin result is solid, with no unusual one-time factors driving the performance. After a multi-quarter lull, the environmental and infrastructure product line has now posted five straight quarters of growth, and volume growth in this high-contribution segment flows directly to the bottom line. Management expects 17%+ margins to form a new structural baseline for the segment going forward, with further upside as growth continues.

Q: What is the update on Florazorb, the company's PFAS remediation product, after its EPA panel feature? / A: The 10 planned 2026 full-scale municipal drinking water installations are complete, and 18 additional systems are already specified and under construction, with most coming online in 2026 and 2027. Multiple pilot projects for small groundwater plants are expected to move to full scale over the coming months, and two large airport/military in-situ remediation projects will launch in Q3. The company is also finalizing a cooperative research agreement with the EPA that will accelerate further development and adoption.