Earnings Call Transcript - MTX Q1 2024

Operator, Operator

Good day, and welcome to the First Quarter 2024 Minerals Technologies Earnings Call. As a reminder, today's call is being recorded. At this time, I'd like to turn the call over to Ms. Lydia Kopylova, Head of Investor Relations for Minerals Technologies. Please go ahead, Ms. Kopylova.

Lydia Kopylova, Head of Investor Relations

Thank you, Marie. Good morning, everyone, and welcome to our first quarter 2024 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 the slides. 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 an appendix of this presentation, which are posted on our website. Now I'll turn it over to Doug. Doug?

Douglas Dietrich, Chairman and CEO

Thanks, Lydia. Good morning, everyone. Thanks for joining today. Let's quickly outline today's call. I will start by reviewing the highlights from our first quarter. As mentioned in our press release, we achieved a record quarter for MTI, and I will explain the actions that led to our strong results. I will also provide insights into the current dynamics of our main markets and highlight a few growth initiatives that we expect to implement in the coming quarters. Erik will go over the detailed financials and share our outlook for the second quarter, followed by a question-and-answer session. We have made a strong start this year thanks to several factors and initiatives that delivered record results. The resegmentation of the company last year, which reorganized our product lines around our core technologies and similar end markets, along with streamlining our internal structure, has improved performance. Our strategy to focus on higher-growth, higher-margin markets is also proving effective. Sales in the Consumer & Specialties segment continue to rise, and our highest-margin products are experiencing the fastest growth. Our margin expansion initiatives are progressing ahead of schedule, and we are continuing to realize savings from the reorganization while also strengthening pricing and capturing input cost savings. Each business is performing well operationally, concentrating on safety, controlling variable costs, and enhancing productivity. Together, these efforts have resulted in record quarterly operating income and first-quarter records for earnings per share and cash flow. We are pleased with our performance and the strong momentum we have built. Now, let’s review some key highlights. Sales reached $535 million, and after adjusting for the deconsolidation of Barretts Minerals, sales were relatively flat compared to last year and slightly up from the fourth quarter. We are driving growth in the Consumer & Specialties segment, with sales up 4% year-over-year on an underlying basis. Sales in the Engineered Solutions segment were lower compared to last year, primarily due to some weak market conditions in the Environmental & Infrastructure product line. In the Consumer & Specialties segment, the Household & Personal Care product line continued its steady growth, with a 7% sales increase driven by strong demand for private label cat litter and improved sales across several categories, including renewable fuel filtration, animal health feed additives, personal care, and fabric care products. The Specialty Additives product line saw a 2% increase in sales, mainly due to a rebound in demand from North American paper and packaging customers and strong sales of ground calcium carbonate products in the Western U.S. In the Engineered Solutions segment, High-Temperature Technologies product line sales remained stable compared to last year, supported by steady market conditions in steel and foundry. We encountered some maintenance outages among foundry customers in North America in January, but volumes rebounded quickly throughout the quarter, and demand remained solid. We also saw continued growth in foundry volumes in Asia. The Environmental & Infrastructure product line experienced lower sales compared to last year, primarily due to an unusually slow seasonal period for commercial construction, with last year’s large environmental remediation projects contributing to the comparative decline. All our businesses delivered solid operating performance this quarter. We maintained strong pricing, actively secured lower input costs, and remained focused on safe and efficient operations. The savings from our internal reorganization also enhanced profitability. Together with a favorable sales mix, we achieved an operating margin of 14.5% and record operating income of $77 million, a 23% increase over last year. Earnings per share stood at $1.49, reflecting a 31% increase compared to last year. Cash flow also remained strong this quarter at $56 million. This quarter exemplifies the strengths of our new organization, focused strategy, and solid business model. Over the past few years, we have developed a balanced portfolio of leading consumer and industrial businesses that provide stable long-term growth. We are expanding margins by innovating higher-value products through operational excellence and fixed cost leverage. We have strengthened cash flow, increased returns to shareholders, and maintained a robust balance sheet. Looking ahead into the second quarter, I want to highlight current market conditions for each product line and a few new products we will be launching over the next several quarters. Generally, the second and third quarters are typically our strongest due to seasonal strength in residential and commercial construction, as well as environmental remediation markets. We are also observing improvements in several of our markets compared to last year. Beginning with Household & Personal Care, the markets we serve remain robust. We lead the private label cat litter market, and global demand continues to be strong. The market for our personal care products has moved past last year’s destocking phase, and we are seeing improvements in our order books. Innovation, resulting from close collaboration with our customers, is yielding positive results. Demand for our latest products in animal health, renewable fuel filtration, and fabric care is growing. As part of our growth initiatives, we have several new innovations for pet litter and fabric care that are in development, which will generate new sales in the coming quarters. These innovations focus on cat wellness and hygiene for pet litter and more effective laundry detergent components. Additionally, the trend toward natural ingredients in consumer products remains strong, and our core technologies applied to our mineral reserves place us in a good position to benefit from this trend. We are working with customers to develop solutions like mineral-based additives for animal feed and natural delivery systems for ingredients in personal care. In Specialty Additives, general market conditions are stable. The global paper and packaging markets remain steady, and we are seeing improved demand for PCC in North America. The residential construction market in North America is entering its typical strong period, with gradual improvements observed over recent quarters. Some of our growth drivers include three new paper and packaging satellites commissioned last year, with five more scheduled to start up this year and into early next year. Our current pipeline of opportunities includes many aimed at the packaging market and sustainable filler solutions, which presents a positive outlook for this product line in Q2 and the latter half of the year. For High-Temperature Technologies, we continue to experience steady global market demand for our engineered blends. Automotive, heavy truck, and industrial casting production in North America and Asia remains stable, and we expect solid demand conditions to persist. Notably, we have been focusing on innovation in process automation and data analytics to enhance value for our customers' manufacturing processes, exemplified by our MINSCAN units for electric arc furnaces. These units automate the measurement of furnace conditions and allow for the application of our more durable refractory blends. Over the past 18 months, we've secured 15 new long-term contracts for these units and our refractory products, with eight units scheduled for installation this year that will contribute to sales growth. For the Environmental & Infrastructure product line, we are encountering mixed market conditions but also see exciting long-term opportunities. We are entering the strong season for environmental remediation projects, and we are noticing increased inquiries from customers in the commercial construction sector. Although we remain cautious about whether the market has reached an inflection point, we anticipate benefiting quickly once it does, given our products’ usage at the beginning of many construction projects. A significant development is the EPA's recent announcement of a national standard to limit PFAS and related chemicals in drinking water. This establishes a substantial market for our FLUORO-SORB product, which we have been testing for PFAS remediation in drinking water and groundwater. Our solution is cost-effective and versatile, specifically targeting PFAS and associated molecules. We plan to conduct over 100 pilot trials this year, primarily for municipal water but also for several large groundwater remediation projects. We are confident that many of these pilot trials will convert into stable revenue opportunities. We view the global remediation of PFAS from water as a significant growth opportunity for MTI. In summary, we are observing generally positive market conditions as we move into the second quarter, and each of our product lines has several initiatives aligned with macro market trends that will continue to drive both near-term and long-term growth. Lastly, I want to provide an update on Barretts Minerals Inc. We have entered into an agreement to sell BMI's assets, approved by the Bankruptcy Court recently. We are currently in the process of finalizing the transaction, expected to close early next week. The proceeds will be used to repay the DIP financing established last year and to support the ongoing bankruptcy process. This sale is a crucial step in MTI's exit from the talc business and represents progress in BMI's Chapter 11 process. It offers value and clarity for BMI's various stakeholders and enables MTI to refocus on our core long-term strategic objectives. We will keep you updated on further progress as we advance expeditiously. Now, I will turn it over to Erik to review the financial details, segment highlights, and our outlook for the second quarter. Erik?

Erik Aldag, CFO

Thanks, Doug, and good morning, everyone. I'll start by providing a summary of our first quarter results, followed by a review of our segments, and then I'll wrap up with our outlook for the second quarter. Following my remarks, we'll turn the call over for questions. Now, let's review our first quarter results. We had a very strong start to the year with several record-setting performances in the first quarter. First quarter sales were $535 million, up slightly versus the prior year on an underlying basis. Underlying sales in the Consumer & Specialties segment grew 4%, driven by volume growth across the segment. In the Engineered Solutions segment, sales were lower than the prior year, driven entirely by slow conditions for Environmental & Infrastructure projects. The year-over-year sales growth for this product line was especially challenged, given the relatively strong start we had last year, including a few large remediation projects at Superfund sites in the U.S. I'll note here that as we lap the Q1 comparison period, we expect MTI's overall year-over-year sales growth to revert to the mid-single-digit range on an underlying basis. First quarter operating income was $77 million, up 23% from a year ago, driven by a 290 basis point improvement in operating margin. As you can see in the operating income bridge on this slide, the income and margin growth in Q1 came from three areas. First, volume and mix drove $2 million of income improvement and 60 basis points of margin improvement, driven by strong sales of higher-margin products, which resulted in a favorable mix impact. I should also highlight that the prior year income in this bridge includes income from BMI. So the volume/mix contribution from the underlying business was greater than the $2 million shown in this bridge. Second, our disciplined pricing is helping to ensure that our margins reflect the value we provide to customers. Pricing overall contributed to $5 million of income and 100 basis points of margin improvement versus last year. Third, we realized a cost improvement of $7 million versus last year, or 130 basis points of margin, as our operations teams continue to drive productivity and variable conversion cost improvements at our facilities, and as the restructuring program we announced last year has reached full-run rate savings. In addition, as input costs such as energy and freight have stabilized over the last few quarters, we have favorability versus the prior year Q1 when we were working through significantly higher cost inventory. All of the above contributed to a gross margin of 25.4%, 330 basis points above last year, and EBITDA margin of 18.8%, 310 basis points above last year. In short, we are executing on the margin improvement strategy we outlined in our Investor Day last year, and there is plenty of opportunity for further margin improvement, particularly as we leverage incremental volume across our fixed cost base, as we continue to innovate and commercialize new products, and as we continue to grow the highest-margin products in the portfolio. Earnings per share was $1.49 excluding special items, up 31% from prior year and represented a record level for the first quarter. Cash flow was also strong with cash from operations of $56 million, up 66% versus last year and also representing a record level for our first quarter. Now, let's review the segments, beginning with Consumer & Specialties. First quarter sales were $297 million, up 4% on an underlying basis from prior year. Sales in our Household & Personal Care product line were up 7%, driven by higher volumes across end markets. Demand for cat litter products remained strong, growing in the mid-single digits, and growth across the rest of this product line was around 10%. In Specialty Additives, underlying sales were up 2%. We're seeing growth from our 3 new paper and packaging satellites in Asia. And in Europe, we were encouraged to see volumes improve sequentially and year-over-year, which helped offset the sales impact from formula-driven price changes. Meanwhile, demand for our residential construction applications has remained resilient. Operating income was $42 million in the first quarter and operating margin improved by 330 basis points to 14.1% of sales. Improved volume and mix, disciplined pricing, favorable input costs, and a 6% productivity improvement drove a 30% year-over-year increase in operating income for this segment. Looking ahead to the second quarter, we expect demand for Household & Personal Care products to remain solid with continued year-over-year growth. In Specialty Additives, we expect higher sales sequentially in the seasonally stronger period for residential construction, and we'll continue to see sales increases driven by our newest satellites ramping up in Asia, which will mostly offset typical second quarter customer maintenance outages in North America. Altogether, we expect another strong quarter, with operating income up approximately 5% sequentially and up 30% year-over-year. Now, let's review the Engineered Solutions segment. First quarter sales in the Engineered Solutions segment were $238 million, 5% lower than last year. Sales in our High-Temperature Technologies product line were 1% lower, as some of our foundry customers in North America took temporary maintenance outages early in the first quarter. Meanwhile, we saw continued improvement in foundry volume across Asia. In the Environmental & Infrastructure product line, sales were lower by 14%, driven by softness in commercial construction and environmental lining projects. As I mentioned, we also had a few large remediation projects in the prior Q1 that are affecting the comparison. Despite the lower sales, segment operating income improved 9% to $38 million in the first quarter and operating margin improved by 200 basis points to 16.2% of sales. The margin improvement was driven by favorable product mix, disciplined pricing, cost control, and a solid operating performance that resulted in 11% productivity improvement versus last year. Looking ahead to the second quarter, we expect market conditions in steel and foundry to remain stable with a sequential improvement in Asia foundry due to the Lunar New Year holiday in the first quarter. We are also expecting higher sales to steel customers, driven by installations of our newest MINSCAN technologies at several EAF mills in the U.S. In Environmental & Infrastructure, we'll see a sequential increase in sales as we enter the seasonally stronger period for environmental and commercial construction projects. As Doug mentioned, we are seeing improvements in bid activity, but it is too early to say whether this market has hit an inflection point. Overall, we expect another strong performance from this segment in the second quarter with operating income up approximately 10% sequentially and up 10% year-over-year. Now, let's turn to our balance sheet and cash flow highlights. We delivered record cash flow for a first quarter, generating $56 million of cash from operations and $39 million of free cash flow. CapEx totaled $17 million in the first quarter. Our full-year outlook for free cash flow remains unchanged in the $140 million to $160 million range. We continued our balanced approach to capital deployments in the first quarter, using our free cash flow to pay down $13 million in debt and returning $18 million to shareholders, including $15 million of share repurchases and $3 million of dividends. So far, we've completed $29 million of the $75 million share repurchase program, and we are on track to complete the program by the end of the authorization in October. The balance sheet remains very strong. Total liquidity at the end of the first quarter was $536 million, and our net leverage ratio was 1.8x EBITDA. Now, I'll summarize our outlook for the second quarter. We expect a strong performance for MTI in the second quarter. In Consumer & Specialties, we expect demand for consumer-oriented products to remain strong, and we are entering a seasonally stronger period for residential construction. We will also benefit from the continued ramp-up of our new paper and packaging satellites. In Engineered Solutions, we expect sequential and year-over-year growth from High-Temperature Technologies. We also expect a seasonal uptick in Environmental & Infrastructure activity, with sales for this product line returning to a similar level to last year. In total for MTI for the second quarter, we expect year-over-year underlying sales growth between 3% and 5%, operating income between $80 million and $85 million, and earnings per share between $1.55 and $1.65, representing another strong quarter for the company. Now, I'll turn the call over for questions.

Operator, Operator

We will take our first question from Daniel Moore with CJS Securities.

Dan Moore, Analyst

Doug and Erik, thank you for the insights. I appreciate the opportunity to ask my questions. I'll start with Consumer & Specialties. Throughout this call and the previous ones, you've discussed many of the new formulations and emerging opportunities related to edible oils, animal feed, alternative milks, retinol, and others. Where are you experiencing the most demand or penetration in the near term? Additionally, how should we assess the size of those opportunities? I'd also like to ask a follow-up about the PFAS emerging opportunity, if that's alright.

Douglas Dietrich, Chairman and CEO

Sure. I'll start off and then hand it over to D.J. Monagle for additional insights. We're seeing growth across our product line. Specifically in Consumer & Specialties, let's focus on the Household & Personal Care segment. Our pet care business grew by about 4% this past quarter, and we expect that trend to continue. Our specialties business experienced a 10% growth this quarter, driven by advances in animal health, renewable fuels, and fabric care. This aligns with the expectations we set during our Investor Day, where we anticipated the Household & Personal Care business to grow in the 7% to 10% range year-over-year. It's performing as we expected. I also want to emphasize a couple of trends we're monitoring and engaging with, such as natural additives, and our innovation pipeline is aligned with these trends. So, the markets are expanding, and we have innovations accompanying that, with new products that will support continued growth. D.J., would you like to share any specific updates regarding pet care or fabric care?

D. J. Monagle, Executive

Yes. So Dan, it's tough to zero in on any one thing because it has been across the board. There are several exciting things going on that Doug had mentioned and alluded to during the future statements. Sticking with the Household & Personal Care side, I think that the strategy of that pet litter business is starting to pay off. They've gotten well aligned with their private label customers, in particular, working with them, and as they understand their brand strategies, that private label strategy, they enhance and bring forward some innovations that help with pet ownership. And so, those are things as simple as packaging, but then expand further and improve the performance of the pet litter, which goes anything for lower dusting, more aesthetically pleasing. And then, the recent additions are things that will help cat owners train their cats better and get them more associated with the litter box. You go to household, personal and the consumer specialties group, we are doing very well with the pull that's coming from renewable fuels. We see our relationship with key customers strengthening, especially in Europe. And the macro trend supporting that growth is very strong. And then, in a little different shift, if we go to the Specialty Additives business, Doug pointed out the great progress that we're seeing with the new satellites. And now, this is working on our crystal engineering competency. But these new satellites and new products are kicking in, and we've got several more that will be coming on throughout the year. The pipeline for that remains very robust. And then applying that same core competency of crystal engineering, we do see further growth coming from advanced sealants in the construction and automobile industry. Some pull also from the food industry. You alluded to the non-dairy milks. That continues to be an area of interest for us, and we can add to that whole category. And there are also some new markets that we're starting to get exposed to as people explore alternatives and as we branch out further in stretching that core competency. So, I know I gave you a lot, but it really is across the board, but also perfectly in line with what we had laid out in the Investor Day.

Douglas Dietrich, Chairman and CEO

Does that help, Dan?

Dan Moore, Analyst

Very helpful. Yes, it certainly does. And appreciate the color, Doug, on PFAS, and certainly happy to see the EPA decision. Any more color you can provide in terms of how you think about the scope of the opportunity, not in '24, '25, but 5 years and beyond? And then, any update as far as kind of potential EPA approval for FLUORO-SORB as a key player in that market?

Douglas Dietrich, Chairman and CEO

I'll tell you what, why don't we do two things? One, I'll pass it to Brett Argirakis to give you kind of what we're working on, what's happening here in the near term, what's going on with regulation. And maybe I'll talk a little bit about the longer term after that. Brett, you want to go?

Brett Argirakis, Executive

Yes, sure. Thanks, Doug. Thanks, Dan. Look, let me just recap the regulation quickly, and then I'll give you some update on our activity. First of all, the new regulation, as you know, was passed last week. It'll be in full effect in 5 years from the promulgation date. So that will bring us the regulation to end at April of 2029. That allows for any capital to be put in place in time to meet the regulations on a parts per trillion basis. Although this regulation is for drinking water, we do expect additional regulations to come out over the next few years that really can provide us even more opportunities throughout our verticals. So let me give you a little update on the activity. We have had a lot of activity already to date before the regulation came out. The regulations have accelerated discussions, both on a federal and state agency level, for evaluations of alternative options from the current options. We have been and continue to collaborate closely with the EPA, local agencies, and municipalities as well for the use of our FLUORO-SORB to remove PFAS in drinking water. But our ultimate goal really is to prove FLUORO-SORB is one of the best available technologies for eliminating PFAS. These agencies are all fully aware of our products and our activity. We will continue to work very closely with them. So, right now, our FLUORO-SORB technology is currently treating drinking water in 3 full-scale implementations in the Northeast. We have one additional full-scale implementation coming on this month. As Doug mentioned in his speech, we are piloting several trials now and expect to implement probably over 100 pilot trials this year, mainly on municipal water. The majority of those are going to be in North America, but we do have a few of those in Europe. But outside drinking water, we do continue to pursue and implement global in-situ remediation projects to control PFAS at the source. Some examples might be pump and treat applications for groundwater sites, reactive core mats for stormwater conveyance and sediment capping, as well as other soil stabilization projects. Really, based on the test results and feedback we're getting, we're really confident in the FLUORO-SORB, feel good about it that the benefits will generate additional revenue and continued interest moving forward. But just to be a little cautious, it's going to take some time to test and prove our product to support the new regulation. But we do expect to continue to generate activity moving forward over the next few years.

Douglas Dietrich, Chairman and CEO

Dan, I'll just add to the long term. As I mentioned in my remarks, I think this is a big growth opportunity for the company for that product. Brett just mentioned, municipal water is one area, and that will develop over the next 4 or 5 years, and we've got a great position and a great product to be able to participate in that market. But longer term, as we get into broader cleanup, as I mentioned, our product is equally as effective there. And we've been doing some cleanup projects. We think that could be even a bigger market for sure than the municipal water market. But right now, I just want to keep us focused. We're working on making sure that this is best-in-class technology. We're working through those hurdles. We're trialing it. Like I said, 100 trials. We're working closely with agencies. So we're in a good spot. But yes, this is a big near-term opportunity and a nice long-term opportunity for the company.

Dan Moore, Analyst

Perfect. Last one for me. I'll jump out. You already hit your 14% EBIT margin target this quarter. Implication is to do a little bit better than that in Q2. And you mentioned Q2 and Q3, typically seasonally stronger periods. So it sounds like you expect that typical seasonality to hold this year. And if so, I'm not asking you to update it, but that kind of 14% exit rate looks conservative at this point. Is your eye still just getting to that 15%? And if we get there quicker, great. Or how do we kind of think about where we go from here?

Erik Aldag, CFO

Yes. Thanks, Dan. This is Erik. So you're right, 14.5% in the first quarter is a great place to start. Right now, we're assuming we can maintain that level at least going forward this year. And we do, as you said, typically expect a lift in the second and third quarters, so it should be above 14.5%, all else equal. So we're feeling pretty good about the margin trajectory. We're watching energy rates. We'll be managing things tightly if we do see an uptick over the summer in terms of energy rates, but that sequential volume improvement over the middle two quarters should go a long way to helping out the margins as we go through the year. So I guess, you mentioned 15%. If we were going to do 15% in a year, 14.5% in the first quarter is not a bad place to start. So I guess it's early in the year, but as long as we see no major changes in macro or input costs, yes, we can do 15% this year. It would help if we got some help from the commercial construction markets, for sure, but we're feeling pretty good about the margin trajectory right now.

Dan Moore, Analyst

Very helpful. Appreciate the color. Congrats on the strong performance.

Operator, Operator

We will take our next question from Mike Harrison with Seaport Research Partners.

Michael Harrison, Analyst

Congratulations on the strong start to the year. I'd like to explore your comments about margin performance, which you believe will be sustainable throughout the year. You mentioned productivity improvements in both segments, specifically a 6% year-over-year gain in the Consumer segment and 11% in the Engineered Solutions segment. Could you elaborate on what factors are contributing to these productivity numbers? I’m interested in the metrics you're using and how you anticipate these productivity gains will progress in both segments over the next several quarters.

Douglas Dietrich, Chairman and CEO

Thank you, Mike, for your question. I'll begin and then hand it over to Erik. We evaluate productivity on a monthly basis by setting targets, as it serves as a crucial indicator of efficiency and is integral to our operational excellence. We consistently monitor this through our processes and strive to eliminate waste from our operations and business practices. We assess it from a productivity perspective, utilizing Kaizen events with teams to redesign processes, eliminate waste, and establish new standards. This commitment is deeply entrenched in our company culture. This year, I believe we achieved a 6% productivity increase in the Consumer segment and an 11% increase in the Engineered Solutions segment. Erik, is that correct?

Erik Aldag, CFO

That's correct. Mike, we measure that on a tons per hour worked basis, which is the metric we focus on.

Douglas Dietrich, Chairman and CEO

And going forward, Erik? Do you want to give him a forecast what's baked in?

Erik Aldag, CFO

Yes. We expect continued success. We exceeded the guidance we provided in the first quarter, largely due to our strong operational performance. Our teams are effectively enhancing productivity and reducing variable conversion costs per ton at our facilities. As Doug mentioned, we track and manage these metrics very closely at the operational level, and we anticipate that these productivity improvements will continue throughout the year. This is intrinsically linked to our company's margin profile. I hope that information is helpful.

Michael Harrison, Analyst

Yes, very helpful. And then, I guess, maybe just to kind of follow up on that, you have in your slides here, a cost number, and it looks like that cost contributed 130 basis points of year-over-year improvement. I'm assuming that part of that cost improvement is in these productivity numbers and metrics that you're talking about. But part of it's also related to just input costs. And it sounds like some of your input costs were favorable year-on-year. So maybe just give us a little bit more detail on what you're seeing in terms of input costs and energy costs as we're looking out into Q2 and Q3.

Erik Aldag, CFO

Yes. sure, Mike. So, yes, that $7 million of improvement in the cost bucket versus last year, that includes the very strong operating performance. That includes the productivities we're seeing. Particularly around the pet care business, we're seeing a lot of improvements there and a lot of cost savings versus last year. It also includes the $10 million cost savings program that we've achieved full run rate in the first quarter, so call it, $2.5 million of savings there from the restructuring program. And yes, we have favorable freight and energy, primarily versus last year. That's really a year-over-year comparison. If you think about last Q1, we were still working through some significantly higher cost inventory levels. So energy and freight, that played a role in the year-over-year favorability, but that's really been embedded in the margin heading into the quarter. If you think about it on a sequential basis, we didn't have a huge change in input costs sequentially, Q4 to Q1. Maybe $1 million favorability from an energy perspective. So, that sequential margin improvement we saw was mostly driven by that improved volume and mix in the Consumer & Specialties side, the pricing, productivity, and the variable conversion cost performance.

Michael Harrison, Analyst

All right. That's very helpful. And then, I wanted to dig in from the last question here on the High-Temperature Technologies business. It sounds like you're seeing relatively strong demand trends, even though the underlying sales number was down a little bit year-on-year. But maybe just give us a little bit more detail on what you're seeing in terms of market drivers and some of the actions that you guys are taking to benefit from new customer wins and kind of new product-related growth.

Douglas Dietrich, Chairman and CEO

Yes. I'll start. Mike, in the High-Temperature Technologies product line, yes, sales were relatively flat. I think, as Erik mentioned, the decline over last year was a couple of outages that we saw in North America that didn't happen last year, maintenance outages that were extended. But volumes and demand picked up through the quarter, and we see that being relatively stable going forward. Major end markets, automotive, heavy truck, industrial, and some good volume growth in Asia, we see continuing. So, stable markets. We got a good feel for it, at least as we sit today. And it looks like through the back half of the year, unless macro trends change. But right now, we're feeling good about that product line.

Brett Argirakis, Executive

Yes. In High-Temperature Technologies, the Refractories business is performing very well right now. The foundry business in North America is relatively stable, although there have been some slowdowns. Asia remains flat but is managing okay without any significant declines. The steel segment in Refractories is solid, currently operating at around 77% utilization, which is an improvement from the first quarter, indicating stability. We expect some typical maintenance outages in Q2, which may result in a slight dip, but nothing major is anticipated. In Europe, the situation is softer, particularly in the steel industry. A couple of steel plants, one in the U.K. and another in Eastern Europe, are reducing operations and may close permanently. However, we're observing a shift towards green steel in Europe, similar to what we've seen in the U.S., moving from integrated to non-integrated steelmaking or from BOF to electric arc furnace. In North America, we have acquired 15 new automated MINSCAN units, with plans to implement 8 of them this year. These units focus on automating and optimizing the process, facilitating the transition from BOF to EAF. This approach integrates laser technology to target low spots in the furnace using automated PLC controls, which also helps reduce employee exposure to molten steel. This achievement reflects the hard work of our team and our collaboration with key customers.

Douglas Dietrich, Chairman and CEO

Does that help, Mike?

Michael Harrison, Analyst

Yes. Appreciate the detail there.

Operator, Operator

We will take our next question from David Silver with CL King.

David Silver, Analyst

I have a couple of questions. I hope the first one is not too confusing, but I'm trying to understand the factors affecting price versus volume this quarter. Revenues on an underlying basis were essentially flat. You mentioned volume strength in Home & Personal Care and a few other areas. However, to return to the year-over-year flat revenue, is most of the volume weakness concentrated in the Environmental & Infrastructure segment? Are there other areas where improved pricing compensated for a decline in units sold? I’m trying to clarify which parts of the business experienced volume growth versus which ones did not and how pricing influenced revenue performance.

Erik Aldag, CFO

Sure. Thanks, Dave. This is Erik. So, yes, the volume decline was all in the Environmental & Infrastructure product line, as we mentioned, soft commercial construction conditions and those larger projects that we had last year. The High-Temperature was relatively flat. The High-Temperature Technologies product line was relatively flat. We pointed to some customer maintenance outages early in the quarter this year, from the foundry perspective, but overall volume is relatively flat. And then, in the other product lines, we saw volume growth. So that's what you're seeing. Kind of the net of all that ended up being relatively flat volume growth, but mainly driven by that Environmental & Infrastructure product line.

David Silver, Analyst

Okay. I was hoping to hone in a little bit on the Specialty Additives side, and in particular, the 5 new satellites that are scheduled to be brought online this year. And I guess, I was hoping D.J. might be able to characterize them. In other words, I have to kind of check my press releases, but I'm just wondering how many of the 5 would you categorize as kind of the legacy PCC for copier paper or that type of grade of paper. And I see there are 2 NewYield opportunities. Maybe if you could just discuss how those came about? And then, I'm assuming there are some new satellites for packaging. Is that the white box or the pizza box type of packaging? Or is that maybe making some inroads onto the brown paper side? So just an overview of what newer projects are going to be coming online this year.

D. J. Monagle, Executive

David, I'll do my best to address your questions. First, regarding the packaging segment, one of the new opportunities that has already driven growth is packaging in China, specifically a white box utilizing innovations in ground calcium carbonate. This contribution is reflected in our numbers. One of the new initiatives Doug mentioned earlier involves a combination of GCC and NewYield that will be used in specialty papers, packaging papers, and some printing and writing grades. Those are the two key efforts in packaging. We've also introduced a standard PCC, which is the legacy type with some updates, currently applied in a printing and writing application and associated with a customer that manufactures boards. We aim to expand our relationship with this customer. Additionally, we've established a small standard PCC plant in India for printing and writing grades. Another NewYield initiative is taking place in Brazil, where we're retrofitting an existing satellite for a printing and writing application by collaborating with a customer to convert their waste stream into a valuable pigment. The NewYield technology, leveraging our crystal engineering capabilities, is gaining interest, particularly in both printing and writing and packaging sectors. Essentially, we help customers who discard waste generated from pulping operations, allowing us to share cost savings while producing high-quality paper or packaging goods. It’s an opportunistic technology that's gaining traction in support of a circular economy. Does that answer your questions, David?

David Silver, Analyst

Yes. I’d like to make a brief comment on the new project opportunities. If we were to create a pie chart, what percentage of the new project pipeline would you say consists of nontraditional satellite plant opportunities, such as white paper packaging, brown paper, and NewYield, rather than the printing and writing papers that typically make up the legacy satellite projects?

D. J. Monagle, Executive

If I were to break it down into packaging and paper, I would estimate about 60% for printing and writing grades and 40% for packaging. Within the printing and writing grades, there is still significant demand for newer products like NewYield. We are also discussing other options with customers. If we look at it from a technology perspective, the pipeline consists of roughly 40% to 50% traditional legacy products and the remaining 50% in newer, innovative products. This reflects a significant shift compared to three years ago when the ratio was about 90% traditional legacy products. Moving to a 60/40 balance, and even a 50/50 split in technology deployment, marks a notable change. This shift has been part of our strategy, focusing on legacy PCC plants which provide solid cash flow and strong returns while also addressing customer needs with new technologies like NewYield alongside GCC. These innovations are in response to customer demands for more sustainable products and packaging, as well as cost savings related to waste management. This is what is driving our opportunity portfolio toward a balanced 50/50 ratio and fueling our growth potential.

David Silver, Analyst

That's insightful. I have one more question regarding the FLUORO-SORB opportunity, which has been discussed in detail. My understanding is that during the EPA's finalization of drinking water regulations and PFAS content limits, there was some debate between the settled level of 4 parts per trillion and a potentially higher threshold that might have been easier for water plant operators to achieve on a tighter budget. How do you see the FLUORO-SORB opportunity changing based on the limits set? While the EPA decided on 4 parts per trillion, they also aim for even stricter goals, possibly down to 0 in certain cases. How do you think potential customers' attitudes towards FLUORO-SORB and other alternatives will evolve as PFAS content tolerances become more stringent?

Douglas Dietrich, Chairman and CEO

Yes, the 4 parts per trillion is essentially the lowest detectable limit; anything below that is very challenging to detect. Our FLUORO-SORB product can effectively achieve 4 parts per trillion or go below it on its own. It's designed to yield results at that level. We believe that with the new regulations, particularly regarding municipal water, FLUORO-SORB can meet the requirements, even though different utilities have varying setups and capital costs. We are currently exploring various scenarios, including new installations and retrofitting existing equipment. Our product is highly effective, and we anticipate it will meet the stringent limits set for groundwater and wastewater cleanup. Although it’s early in the process, we have confidence in the product's capabilities and will continue testing and collaborating with agencies and state organizations, as well as working with municipal water systems to ensure it meets their needs. After a couple of years of trials, the results have been promising.

Operator, Operator

We will take our next question from Kyle May with Sidoti & Company.

Kyle May, Analyst

A couple of quick ones for me to hopefully round things out. Looking at capital expenditures, they were lower this quarter compared to the last few quarters. Just wondering if we should think about this as a new lower run rate or if this quarter was more of an anomaly.

Erik Aldag, CFO

Yes, thanks, Kyle. This is Erik. Capital expenditures were slightly lower than expected, mainly due to timing. We still anticipate spending between $90 million and $100 million on capital expenditures for the entire year, so you can expect that to increase a bit in the upcoming quarters.

Kyle May, Analyst

Okay, great. And then, also in the Environmental & Infrastructure segment, you noted part of the year-over-year change was the 2 large remediation projects that were completed last year. Just curious if you could give us an update on your outlook for the opportunity set there.

Douglas Dietrich, Chairman and CEO

Yes. Last year, we had significant remediation projects, notably the Gowanus Canal and Lake George, where we supplied products for water remediation at these locations, which are also major Superfund sites. We plan to continue participating in such large projects, as they are ongoing. Therefore, as new phases arise, we expect to remain involved. These projects contribute substantial revenue through our large product lines. In the previous year, those were the two significant projects. The outlook for the first quarter was weaker than anticipated, but we are now entering the busy season for environmental remediation, which includes wastewater treatment and lining systems. We anticipate a solid outlook and expect to return to a normal growth rate for the second and third quarters in this sector. Additionally, regarding our commercial construction product line, there is currently some increase in activity and inquiries, although it is uncertain whether these will translate into actual projects later this year or next. Nonetheless, we are observing increased activity that hasn't been present in the past several quarters. Overall, our outlook for this product line is positive, with a hint of caution regarding the residential construction sector. However, we are optimistic about the environmental side for the next two quarters.

Kyle May, Analyst

Okay, that's great. And last one, I know we've talked a lot about the EPA, but I was hoping if you could maybe just kind of quickly remind us maybe how much of your 5-year outlook includes the FLUORO-SORB opportunity. And then, with the actual regulations now somewhat in place, do you think there's potential upside to what you've already baked into your 5-year outlook?

Douglas Dietrich, Chairman and CEO

Yes. We projected revenue of $30 million to $40 million in our 5-year outlook for 2027, which we established a year ago prior to the regulations being issued. I believe we are still within that range and could be leaning toward the high end. By 2027, municipal water customers will need to have something tested in place, with an additional two years afterwards to fully implement. We are therefore looking at 2029. Initially, the growth may be gradual, but I expect it will eventually accelerate. The overall opportunity appears larger than our initial estimates. However, for now, we are adhering to the projections made during our Investor Day last year, and we will provide updates based on the outcomes of our trials this year.

Operator, Operator

We will take our next question from David Silver with CL King.

David Silver, Analyst

I have a follow-up question. Doug, you've mentioned your business in China several times during this call, but could you provide a broader perspective? I'd like to understand two things: first, what is your overall relationship with the Chinese authorities? It seems there’s a lot of back and forth, which makes it hard for us to assess from afar. Second, could you share your insights on the recovery or rebound in Chinese economic activity and how that might affect your industrial businesses? That would be very helpful.

Douglas Dietrich, Chairman and CEO

Sure, I'll start with the first question. David, we have strong relationships in China. Much of our business involves partnerships with our customers and joint ventures, and we collaborate with large employers, including significant paper mills. We have been operating there for about 24 to 25 years. We prioritize responsible practices in our mining operations, especially from an environmental perspective, and have recently received some awards and recognition at our plant near Inner Mongolia. Our approach to China mirrors our strategy elsewhere in the world, maintaining environmental responsibility. This commitment fosters strong relationships with local communities, governments, and customers. These relationships support our pursuit of new business opportunities, leveraging our long-standing presence in the country. Currently, we are observing stability. The first quarter of last year was challenging for our industrial segment due to COVID-related shutdowns. However, we have experienced stable growth in our business, driven by improving demand and our ongoing efforts to penetrate the market further. There is considerable opportunity for us to expand our green sand bonds in China, India, and other parts of Asia. Thus, we anticipate ongoing progress in these regions. We observed steady growth and improvement throughout the quarters, with particular volume growth in China and across Asia in the first quarter. We expect this general growth to continue. While the industrial sector is not booming, it remains stable, and we are actively engaging with customers to help them reduce costs and improve efficiency through new blending systems. We are seeing a robust industrial market, with a significant share of our sales related to compressor housings and large castings for refrigeration, which are performing well. Our outlook for China is positive and stable. Additionally, as D.J. mentioned, we have five satellites, three of which are ramping up in the region, indicating good growth potential in the paper and packaging sector. Overall, our perspective on China is that it looks stable, with consistent growth expected for the rest of the year. I hope this provides a comprehensive understanding of our view on China and Asia in general.

Operator, Operator

At this time, we do not have any further questions. I'd like to turn the call back to Mr. Dietrich for any closing remarks.

Douglas Dietrich, Chairman and CEO

Thank you, Marie. Appreciate everyone joining today. Hope you have a good weekend, and we look forward to talking to you in another 3 months. Take care.

Operator, Operator

This concludes today's call. Thank you for your participation. You may now disconnect.