Minerals Technologies Inc. (NYSE:MTX) Q2 2023 Earnings Call Transcript

Doug Dietrich: Yes, it’s largely that personal care piece. I think personal care – a smaller piece of that segment, but I think it was down 40%, 42% in the quarter. So, it was pretty pronounced. And as Erik mentioned, that’s some high margin products for us, and we think that’s probably going to continue through the third, Mike. But then we – like I mentioned, we think some of the order book will uptick in the fourth. I think you’ve seen that in the marketplace with kind of consumer products have been going through a destocking phase. This portion of that product line faced that as well. But we do have a number of good trials going on for our new Retinol delivery device – Retinol delivery systems with some major healthcare providers. So, we think that that bodes well probably for the fourth and into next year.

Mike Harrison: Got it. And then I guess maybe just a couple more on pet care. In terms of that 15% year-on-year number, I’m curious how much of that was pricing? I think you guys were still trying to catch up on pricing there. And also curious if you’re seeing a pickup in the private label side of that business. I would assume that there’s some trading down that is happening in this inflationary environment. So, are you seeing some faster growth on the private label portion of your pet care business?

Doug Dietrich: So, first question, I’d say about 15% – it’s probably 50% pricing, 50% volume. I’m going to say it’s pretty balanced around the world. I’d say North America has seen some good strength in the order book and all of that is private label. So, I think the private label in general, as we highlighted, has been growing probably the fastest of the category, and I think we’re participating in that that. So, I’d say probably more of that was North America, but we also saw some good demand pickup in Europe as well. China high growth, small portion of the business, so won’t call that up. But I’d say first question, 50-50 price, volume, strong private label. I’d say the majority of that was in North America.

Mike Harrison: Perfect. And then on the PCC business, I’m just kind of curious if you can talk about price-cost dynamics and whether you saw sequential increases in pricing for PCC as your contractual pass-throughs are kind of catching up there. And what does that mean for the pace of margin recovery in the second half in that PCC business?

Doug Dietrich: Yes, this is what I’ve been highlighting for, I guess, several quarters. And last year, when inflation was coming through, the way these contracts are set up is, with the delay mechanism – we have to absorb a lot of this cost. I remember last year, a couple of quarters we were absorbing $2 million, $2.5 million worth of costs before we could pass that through. Well, now we’re at that point where as inflation starts to taper, hasn’t gone back down, we’re catching up on all that. All of that pricing is being pushed through. In some areas, we’re starting to see some of the energy, some of the input costs deflate, and that is what’s driving some of that expanded margin. So, it’s really a function of those contracts and how they protect us in that business. And so, yes, we are seeing some of that. As long as energy prices continue to decline in certain areas, we will see that margin continue to expand through the back half of the year.

Mike Harrison: All right. Last one for me is on the free cashflow guidance. I think I missed that. Did you say 100 to 125 or 125 to 150.

Erik Aldag: 100 to 125, Mike.