Minerals Technologies Inc 2026 Q3 Earnings Call

Good morning, and welcome to the Minerals Technologies Third Quarter 2026 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Lydia Kopylova, Head of Investor Relations. Please go ahead. Thank you, Gary.

Good morning, everyone, and welcome to our Third Quarter 2026 Earnings Conference Call. Today's call will be led by Chairman and Chief Executive Officer Doug Dietrich and Chief Financial Officer Erik Aldag. Following Doug and Erik's prepared remarks, we'll open it 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 securities laws. 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 which may cause our actual results to differ materially from these forward-looking statements. Please also note that some of our comments today refer to non-GAAP financial measures. A reconciliation 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 Doug. Doug? Thanks, Lydia. Good morning, everyone, and thanks for joining today.

I'm going to kick us off with a review of our third quarter numbers before Erik takes you through the financials in more detail and provides our outlook. After Erik's comments, I want to take you through some highlights from our recent Investor Day, which took place at one of our R&D facilities in Bethlehem, Pennsylvania. After that, we'll open up the call to questions. This is a quarter that I would characterize with some significant highlights, solid top-line growth for the company, and a record operating performance in Engineered Solutions, and also some challenges, dealing with another round of energy and raw material inflation in Consumer & Specialties. As we projected, we continued along our target growth track this quarter with sales of $555 million, up 4% over last year and up 6% year-to-date.

Both segments are executing on their growth initiatives. In the Consumer & Specialties segment, we are seeing strong demand for our newest cat litter formulations in North America, and our fabric care and natural oil purification volumes are growing, supported by the expansions that came online a few months ago. In the Engineered Solutions segment, we see solid growth across the board. In High-Temperature Technologies, we continue to see good traction for our MINSCANs, with six new installations this year and more coming online next. We have also secured new contracts for our calcium wire products at two greenfield steel plants that are scheduled to come online next year. Volumes of foundry green sand bonds continue to grow, driven by strong automotive EV production in Asia, offsetting continued soft agricultural equipment and heavy truck markets in the U.S.

Stronger environmental remediation markets and solid drilling product sales have contributed to several quarters of growth in the Environmental & Infrastructure product line. Overall, we are executing on the strategic projects we laid out for this year and remain on track to hit our full-year mid-single-digit revenue growth target, and we see this rate continuing through 2027. Our operating income in the third quarter was $72 million, and earnings per share were $1.53. Our Engineered Solutions segment had another very strong quarter with 9% sales growth, 9% operating income growth, and generating 17.6% operating margins. This segment's performance puts it on track for a record year. Total operating income for the company was slightly below our guidance this quarter, driven by a challenging operating quarter in Consumer & Specialties due to the significant increases in energy, transportation, and raw material costs.

However, our teams around the world continue to work closely with our customers to adjust prices. Previous rounds of price increases have taken hold, and these latest price changes will take effect this quarter and carry over into the next. We expect to fully recover segment margins, which historically have been around 14%, as our pricing catches up with these inflationary costs. Doing so will drive full company margins back to the 15% level. Despite the inflationary challenges, we continue to generate strong cash flow. Year to date, our cash from operations is $171 million, up 32% compared to last year. Our balance sheet remains solid, and we improved our financial flexibility by extending debt maturities and expanding our revolving credit facility. Lastly, we announced that we increased our regular quarterly dividend by 8% to $0.13 per share.

This is the fourth year in a row that we have announced an increase, which reflects the continued confidence we have in our future cash generation. With that, I would like to hand the call over to Erik. Erik? Thanks, Doug, and good morning, everyone.

I will start by providing an overview of our third quarter results, followed by a detailed review of our segments and a summary of our fourth quarter outlook. Following my comments, I will turn the call back over to Doug for a recap of our recent Investor Day and some closing remarks. Now let's review our results. We continue to see positive momentum with our growth initiatives in the third quarter, with sales increasing by 4% versus prior year to $555 million. In the Consumer & Specialties segment, there were several encouraging developments in the quarter in the Household & Personal Care product line. We saw higher sales of our new fabric care additives, higher sales of cat litter in North America, and our natural oil purification volumes continued to ramp up through the quarter.

These higher sales were partially offset by softer-than-normal seasonal volumes for European cat litter. On the Engineered Solutions side, we had another strong quarter, with sales in High-Temperature Technologies up $13 million versus prior year, as sales to steel customers remained on their growth track, and our foundry business had a solid quarter. In the Environmental & Infrastructure product line, the positive sales momentum we saw through the first half of the year continued, with sales up $8 million versus prior year, bringing the total sales growth for the segment to 9% for the quarter. On a year-to-date basis, total sales are up 6% for the company, and as Doug mentioned, we remain on track for full-year growth in the mid-single digits.

In the Consumer & Specialties segment, the Household & Personal Care product line is up 4% year to date, driven by 6% growth in cat litter and 11% growth in natural oil purification. In the Specialty Additives product line, changes in the paper and packaging market in North America and a soft residential construction market have impacted sales on a year-over-year basis. Nonetheless, sales for the product line are higher by 2%, driven primarily by the progress of our growth initiatives in Asia. Altogether for the segment, sales are up 3% year to date. In the Engineered Solutions segment, the third quarter was largely a continuation of the strong growth performance we delivered in the first half.

Sales in the High-Temperature Technologies product line are up 7% year to date, and in the Environmental & Infrastructure product line, sales are up 16% year to date, totaling 10% growth for the segment so far this year. Operating income for the quarter was $72 million. As we moved through the third quarter, we faced additional cost increases, primarily in the Consumer & Specialties segment, driven by higher energy costs and rising diesel prices, which contributed to increased transportation, mining, and raw material costs. We have pricing actions planned and in place to cover the inflationary cost increases we experienced in the third quarter, and our teams remain focused on productivity and cost control at the plants. Meanwhile, in the Engineered Solutions segment, our pricing has been keeping pace with changes in cost throughout the year.

Income for the segment was $4 million higher year-over-year in the third quarter and $14 million higher year-to-date. Now let's turn to a review of our segments, beginning with Consumer & Specialties. Third-quarter sales for the Consumer & Specialties segment were $278 million, up 1% sequentially and slightly above prior year. In the Household & Personal Care product line, progress with some of our key growth initiatives gained additional momentum in the third quarter, driving product line sales higher by 6% sequentially and up 1% year-over-year to $131 million. Cat litter sales improved by 5% over the prior quarter, as improved traction with some of our newest cat litter offerings contributed to higher sales in North America.

This growth was partially offset by temporarily lower cat litter sales in Europe due to a more pronounced seasonal impact than normal and a large customer promotion that moved to the fourth quarter. Meanwhile, sales for edible oil and renewable fuel purification were up 21% sequentially as volumes ramped through the quarter. For added context, by the time we exited Q3, volumes were 33% above our Q2 run rate. This upward momentum is expected to continue through the fourth quarter. Lastly, we began to see sales for our innovative fabric care additives move higher in the third quarter, and we expect this to continue to build in the months ahead. Specialty Additives sales were $148 million, down 2% sequentially and flat with prior year.