Earnings Call Transcript - ODC Q1 2023

Operator, Operator

Welcome to the Annual Meeting for Oil-Dri Corporation of America. Our host for today's call is Leslie Garber, Manager of Investor Relations. At this time, all participants will be in a listen-only mode. I will now turn the call over to your host, Leslie Garber, you may begin.

Leslie Garber, Manager of Investor Relations

Good morning and welcome to Oil-Dri Corporation of America's 2022 Annual Meeting of Stockholders. My name is Leslie Garber and I am the Manager of Investor Relations at Oil-Dri. We are conducting this meeting virtually, a format utilized during the COVID-19 pandemic, which enables greater stockholder attendance and participation, improves efficiencies, increases our ability to communicate with stockholders and reduces costs. On your screen under Meeting Materials, you will find the Meeting Agenda, Rules of Conduct, List of Stockholders of Record and Oil-Dri's Proxy Statement and Annual Report. During the meeting today, we will be covering the election of directors and one other proposal. Next will be the business presentations and financial review followed by time for Q&A. We ask that you submit your questions online under the Ask a Question field on your screens. Only stockholders of record are able to ask questions during the meeting. Stockholders will also be able to vote online by clicking on the Vote Here button on your screens. Now it is my pleasure to introduce our General Counsel and Secretary, Laura Scheland, who will conduct the formal portion of today's meeting.

Laura Scheland, General Counsel and Secretary

Good morning ladies and gentlemen. I now call to order the 2022 Annual Meeting of Stockholders of Oil-Dri Corporation of America to conduct the formal business set forth in the notice of meeting and proxy statements. Commencing on October 25, 2022, a notice regarding the availability of proxy materials or a copy of the proxy materials was mailed to all Oil-Dri stockholders of record as of the close of business on October 10, 2022, which is the record date fixed by Oil-Dri's Board of Directors for the determination of stockholders entitled to notice of and to vote at this meeting. Broadridge Financial Services has delivered an affidavit confirming the foregoing. Oil-Dri has appointed Peter Sablich of CT Hagberg to serve as the Inspector of Election for this meeting. He is present on the webcast and has taken the oath of office. As of October 2022 the record date for this meeting, there were 5,075,302 shares of Oil-Dri's common stock and 2,045,415 shares of Oil-Dri's Class B stock outstanding. Holders of our common stock are entitled to one vote per share and holders of our Class B stock are entitled to 10 votes per share and generally vote together without regard to Class. A quorum is present at this meeting if holders of a majority of our common stock and Class B stock outstanding and entitled to vote are present in person or represented by proxy. Thus, the number of votes necessary to constitute a quorum at this meeting is 12,790,255 votes. Mr. Sablich has informed me that there are more than such numbers of votes represented at this meeting. Therefore, I declare there is a quorum present for purposes of transacting business. Now, I will present the matters to be voted upon. If any stockholder would like to make a comment regarding any of the proposals, please submit your comment through the Ask a Question field in the web portal and we will review any comments on the proposals themselves after all proposals have been presented. As described in the proxy statement, the first item of business is the election of nine Directors. The proxy statement listed Oil-Dri's nominees for Director, each of whom currently serves as a Director of Oil-Dri. Those nominees are Daniel S. Jaffee, Ellen-Blair Chube, Paul M. Hindsley, Michael A. Nemeroff, George C. Roeth, Amy L. Ryan, Allan H. Selig, Paul E. Suckow and Lawrence E. Washow. The second item of business is the ratification of the appointment of Grant Thornton LLP as Oil-Dri's independent auditor for the fiscal year ended July 31, 2023. The Audit Committee of the Board of Directors of Oil-Dri has appointed Grant Thornton to serve as the company's independent auditor for fiscal year 2023 and has directed that appointment to be submitted for ratification by the stockholders at this meeting. At this time, we'll transfer and review any comments on the proposals that have been submitted. It looks like no comments have been received, so we will proceed with opening the poll. It is 9:35 AM on December 7, 2022 and the polls are now open. Any stockholder who hasn't yet voted or wishes to change their vote may do so by clicking on the Vote Here button on your screen. Stockholders who have sent in proxies or voted via telephone or Internet and who do not wish to change their vote do not need to take any further action. While we allow time for stockholders who haven't already done so to complete their voting, I'd like to remind you that the business presentation and other commentary by any of Oil-Dri's employees today may contain forward-looking statements of expected future performance. Any such forward-looking statements are subject to certain risks, uncertainties and assumptions that could cause actual results to differ materially. We highlight a number of important risk factors that may affect our future performance in our SEC filings, including our annual report for the fiscal year ended July 31, 2022. We urge you to review and consider those risk factors carefully in evaluating the company's comments and evaluating any investment in Oil-Dri stock. Copies of our SEC filings are available through the company or online. All right, one last minute to finish voting. Okay. At this point, the polls are closed and I will now report the preliminary results of the voting. We will be reporting the final vote results in a Form 8-K to be filed within four business days to the SEC. As described in the proxy statement, a Director may only be elected by a plurality of votes cast. The nine nominees who receive the largest number of votes will be elected. We have been informed by the Inspector of Elections that the preliminary vote report shows that the nine candidates nominated by Oil-Dri received the largest number of votes. Regarding the second item of business, an affirmative majority of the votes represented at the meeting is necessary for ratification of the appointment of Grant Thornton as Oil-Dri's independent auditor for the fiscal year ending July 31, 2023. We have been informed by the Inspector of Elections that the preliminary vote report shows that such ratification received more than a majority of the votes represented at this meeting. This completes the business to be conducted at this meeting. There being no further business to come before the meeting, the 2022 Annual Meeting of Stockholders of Oil-Dri Corporation is now adjourned. I am now happy to introduce Dan Jaffee, our President and Chief Executive Officer for our business presentation and financial review.

Daniel Jaffee, President and CEO

Thank you, Laura, and welcome to our shareholders, our Oil-Dri teammates. I know they tune in and I know we even have some parents of teammates that are tuning in today, and so welcome everyone. Thank you. I’m proud of the quarter, proud of how the team performed in a very dynamic environment. Those of you who have owned our shares for a long time know what I like to do at this point in the presentation is cover new promotions of existing people in new positions of importance of the company and then also Vice Presidents who have joined us during the year or people who have been promoted to the Vice Presidential level during the year, because an investment in Oil-Dri really is a twofold investment. Number one, you're investing in our mineral and its value and our ability to understand that, but then you're really investing in our team who is going to help communicate that value to our customers and then sharing that value with them. So with that being your twofold investment, you know about our mineral and you'll hear more about our opportunities as we move forward. I'd like to cover our new Vice Presidents and senior promotions that occurred during the year. First, Chris Lamson is our Group Vice President of Retail and Wholesale. We feel very fortunate that Chris joined our team almost a year ago. He received his BS in Finance from St. Mary's of California. He then spent 18 years with Clorox in many positions, including VP, General Manager of the Food and Charcoal Division, and Vice President of the Walmart Customer Team. He spent four and a half years as a Senior VP at Central Garden and Pet, again, giving him knowledge not only of the consumer products arena, but the actual pet arena that we compete in and as I said, he has been here a little bit under a year. Currently at Oil-Dri he has full oversight of our domestic and Canadian consumer product businesses, our industrial and sports turf businesses, and one of our copack relationships. And he is leading our S&OP process, which is really how we run the company now, and has had a major positive impact on our ability to supply our customers in a very dynamic environment. So welcome Chris to the team. Next, Aaron Christensen, you've seen him before. So this is an old face and a new job. He was promoted during the year as Vice President of Operations. He received his BS in Mechanical Engineering from Washington University in St. Louis. Before he joined us, five and a half years with Procter & Gamble as a processing engineer, quality assurance manager, and then 10 years with Unilever and the last two as manufacturing manager at their largest consumer product plant in Jefferson City, Missouri. He has now been with us seven years, which is amazing. He's just been a great addition to the team and his current responsibilities include oversight of all of our activities relating to mining, manufacturing, engineering, logistics, procurement, customer service, and planning. And if we had any more, we'd give them to him. My dad always said, if you want to get something done, find a busy person and assign it to them. So that's what I've done there. And then his promotion opened up a promotion for David Downs, who is now our VP of Manufacturing taking Aaron's former role. David received his BS in Mechanical Engineering from VMI. His past experience includes VP and Plant Manager at United States Lime & Minerals, lots of mining experience. He then was a Senior Engineer at Nestlé Purina's Cat Litter plant in Virginia, and he's now been with us six years as our Plant Manager, first in Ripley, and then as our Regional Manager in Georgia. His new responsibilities include oversight of all manufacturing at our eight plants in the U.S. and Canada, and we're very fortunate to have David on our team. Next, I appointed myself as the Head of Amlan. I missed a plan for a month, so I terminated myself. No, I'm just kidding about that. Really what I did for a couple of years was just get the strategy, get the people in place. We added a lot of teammates and one of the major additions was Dr. Wade Robey, who joined us at that time as our VP of Marketing. And so now he is being promoted to President of Amlan International. He received his BS in Ag Sciences from Auburn, his Masters in Avian Physiology from Auburn, and his PhD in Animal Nutrition from Virginia Tech. So you can see he has absolutely got the educational experience to lead our team. And then he has the work experience, which really has been stellar 30 plus year career in animal health and biotech. He's been with such notable global multinational companies as Monsanto; Novus, where he was Director of Nutrition Research; Cargill, he was an R&D Director; Syngenta and then POET, Senior VP and Chief Technology Officer. I mentioned he's been with us two years. He recently also began overseeing product development out at VIC and now he has oversight of our entire global animal health business and he has an incredible team beneath him and we're just really excited about the future and appreciative that Wade is on our team and leading our business. So Wade, thank you very much for that. His promotion opened up room for another promotion. So Reagan Culbertson who's been with us for 15 years, she received her BS in Media Arts and Design, Communication Studies from Northeastern and Boston. She's been with us a long time. She was promoted to Global Marketing Director in 2020 and she led the turnaround at Amlan by clarifying our message and promoting the efficacy of our mineral as our unique selling proposition. That is our reason to be in the category and we are leveraging that heavily and a lot of that is with her help and communication. So her new role will be oversight of all of our B2B strategic marketing. So that includes our Ag division and our fluids purification division, our branding communications and product management. Reagan, congratulations and thank you for taking on these new responsibilities.

Aldo, Unknown

And then last but not least, we have a new Vice President of Human Resources, Pat Walsh. Pat received his BS in Psychology from the University of Illinois, his Masters in HR and Industrial Relations, also from the University of Illinois. He spent 14 years with PepsiCo Frito Lay. He was a Senior HR Director, HR Manager. He's been with us a little under a year and has already had a major impact on our company, really embracing our lessons learned and our core values and leading the charge from that. And then also spearheading our talent management program which we really is nascent and he's been doing a great job at that. So Pat, really happy to have you on the team and investors you should be proud of the team that is every day trying to maximize your shareholder value. I'm not going to get into any of the details because that's what Susan Kreh is for. So I'm going to turn it over to our CFO and Chief Information Officer, Susan Kreh.

Susan Kreh, CFO and Chief Information Officer

Thank you, Dan. So we're going to talk a little bit about fiscal year 2022, but that's history. It was a tough year. We're glad to have that behind us. And we'll look at the results here for the first quarter of 2023. If I start fiscal 2022, our net sales were up 14% over the prior year with a lot of the trajectory and momentum coming in the back half of the year. And that momentum carried forward into the first quarter of fiscal '23 when we achieved record sales of $99 million, representing 19% growth over the first quarter in fiscal 2022. And that 19% growth is entirely attributable to pricing. Now, we did have some shift in mix in volume, meaning that we were down about 5% in volume in the quarter in our retail and wholesale business, but that was offset by the same amount of growth in our B2B business. And I think, Chris, can you give us a little color on what happened there in the first quarter?

Christopher Lamson, Group VP of Retail and Wholesale

Yes, and I think it's noted in the management discussion as well, Susan. Primarily in our Co-man business, our Co-man partner exited really the entirety of the international piece of their business, expect we will lap that in March. So really, single biggest driver; if you look back at our consumer business and our industrial business volumes were flat slightly.

Susan Kreh, CFO and Chief Information Officer

Thanks Chris. Internally, we assess our profitability on a per ton basis to ensure that we're generating the most value out of our non-renewable resources, our mineral, as Dan mentioned earlier. The volume was up 6% in terms of tons in fiscal year 2022 with volume gains in both the retail and wholesale and business-to-business channels. Moving forward to the first quarter of fiscal 2023, volume was essentially flat. And again, with the shift in mix, B2B being up, retail and wholesale being down for the reason Chris just gave you color on. When we look at net sales per ton of $421, that highlights the impact of our pricing actions in fiscal 2022 and dial forward to the first quarter of fiscal 2023 and that number is a record $473 per ton. And you can see that compares to $394 in the first quarter of 2022. As we talked about throughout all of fiscal 2022, gross profit per ton was adversely impacted by the timing of cost increases that hit us versus the timing of when we were able to get pricing into the market and into our customers. So a challenging year on a gross profit per ton basis in 2022, so we are excited about where we are sitting in 2023 with the first quarter gross profit per ton being $107 per ton, an increase of 62% over the first quarter a year ago. That flows through to net income per ton, both in the year and for the quarter. And that flows through to our basic earnings per common share, which you see in Q1 at $0.80 per share is almost equal to fiscal 2022's full year number of $0.83 per share. So momentum is on our side. We're seeing the impact of our price increases and we continue to be committed to our dividends, so dividends per share at $0.28 per share here in the first quarter. So that's one cash outlay. And if I take a look back the past couple of years at our significant cash outlays, you can see our continued investment in our plants, in our infrastructure, with our capital spending being the largest commitment of our cash outlays. We intend to invest at a similar rate here in fiscal 2023. And if anyone's interested in some comments, I saw a question on that, we can get that a little bit later. So the challenges with this team and Dan talked about team and it really does take a team, the challenges this team faced, and you can see looking back for the last several quarters during fiscal 2022 were quite large as costs came at us, very cost increases came at us rapidly in an unanticipated level. So if you look at fiscal 2023 first quarter and you can see we've got momentum on our side, and that is what we said in the fourth quarter when we were talking to you as we were feeling that the momentum was there, that we had price increases going into the market in the first quarter and we have some more going in the second quarter of fiscal 2023. So just to wrap it up, we know where we've been. We talked a little bit about cash investments in our business. There's one further one in the first quarter if you noted in the cash flow statement, we made some investments in inventory, pretty significant to the tune of $5.1 million. So I thought I'd invite Aaron to just make a couple of comments on what we're doing there and how we're supporting the business with that investment.

Aaron Christiansen, Vice President of Operations

Thanks, Susan. Happy to field that question. You know, as we've alluded to in prior quarters, service has been immensely challenged over the past year. One of our priorities has clearly been to restore service levels to historic levels. One of the ways we've done that is with very intentional and selective addition of inventory in the right places and our highest value-added products to ensure that we can leverage our superior service as an advantage compared to our competitors and other customers.

Susan Kreh, CFO and Chief Information Officer

Wonderful, thanks. With that, I'm going to wrap it up and actually turn it over to you, Aaron.

Aaron Christiansen, Vice President of Operations

Thanks, Susan. Today I'd like to take a few minutes, and I'm really excited to have the opportunity to talk about how Oil-Dri is investing in our future. We invest in many ways. We invest in our brands, we invest in our culture, we invest in our minerals and reserves, we invest in the environment, we invest in new products and innovation, and we invest in our teammates. Today, I would specifically like to talk about how we invest in our infrastructure. Oil-Dri is an 80-year business. Our producing facility is our foundation to what we do. I'm going to provide some really brief insight into our capital outlay, not in-depth, but some examples of how we have invested and are continuing to invest in our facilities through our capital spend. Both Susan and Dan have made comments and there's a note in the disclosure and press release about our ongoing commitment. First, I'd like to talk about our philosophy. Any business finds itself with a continual conflict between investing in business growth endeavors, cost savings, and business continuity. And by business continuity, I mean savings, environmental compliance, safety, and the ongoing simple maintenance of our facilities. Oil-Dri looks for very intentional and intelligent ways to find investments that align with our growth strategy, but also deliver on cost compression and continuity of business. In fiscal 2022, Oil-Dri spent just less than $23 million. I believe there's a question that's been fielded in the portal. Susan alluded to it earlier. We fully anticipate and expect investing in a very similar way, similar philosophy and similar level in the years ahead. Later today, you're going to hear from several of our commercial leaders about our growth strategies in those areas, specifically in the area of litter and animal health. I'm going to take a few minutes and show some examples in these four areas of investments we have already made that deliver on all three: cost savings, business growth, and business continuity. I hope they're insightful in ways that are meaningful to our investors. Before I talk in those, talk through those four areas, I'd like to talk about our mine operations. Oil-Dri at its core is a clay mining and minerals company. That is foundational to our business. We make substantial investments every year in our mine assets and mine equipment. It is essential that day in and day out we can deliver clay to our factories in a way that's reliable. We look for ways to do so that are more efficient, more modern each and every year. It is a continual commitment. I'd like to take a moment to also talk about how we reinvest in the land that we have leveraged and used. Oil-Dri has a substantial commitment to land reclamation every single year. You can see images on the screen here of land that we have mined and used. It's been restored to hunting and fishing property, lakes and ponds that are used for the years ahead. Oil-Dri has an annual commitment to restore land that we used to its natural state. So now I'll take a few minutes and talk about examples of where we've made investments in front of our growth agenda. The first is the renewable diesel area. Oil-Dri has looked at ways to debottleneck our milling operations, prepare for the future years in advance and build capacity that we fully anticipate needing. We also take advantage to do so in manners that also improve our environmental footprint, reducing particulate matter and emissions. We've been able to leverage our environmental agenda at the same time that we deliver capacity for growth. Chris will talk shortly about lightweight cat litter. We are on a multi-year journey to add capacity, reduce cost, and modernize our lightweight cat litter packaging operations. It's also an area we've invested in ways that are better for our teammates; modern robotics, line layouts, lighting, ways that make us an attractive employer for our teammates, and ultimately help build and develop the culture that we want to flourish in our producing facilities. Thirdly, I'd like to talk about how we have and are investing in our agricultural products. What's shown here is an image of investments made in one of our facilities that supports our highest value-added agricultural products. We've used modern design techniques, 3D modeling, advanced methods to optimize design and construction and grow our producing base in ways that are rapid. We chose equipment selection that reduces maintenance costs long-term as well as electricity and utility costs so that we can reduce costs from those products and ultimately reduce both utility and repair costs. Lastly and you'll be hearing from Dr. Wade Robey later, I'd like to talk about how we've invested in our animal health producing footprint. This is really the most transformational area over the last 12 months, and we expect it to be similar over the next year or two. A very wide-ranging scope of investments made a really fundamentally built to add capacity. We've added air handling capacity, which also shrinks our environmental footprint, automation and modern drying assets, sets that we're prepared for the growth ahead instead of being behind the eight ball. Hopefully this has been insightful and has answered some questions that have been fielded on the portal about our plans in the years ahead. We continue to look many years into the future to make sure that we are well in advance of our commercial team's plans to grow the business. Speaking of plans to grow the business, I'd like to hand the baton to Mr. Chris Lamson, who is our Group VP of Retail and Wholesale.

Christopher Lamson, Group VP of Retail and Wholesale

Thanks, Aaron. It's great to be with everyone this morning. We're going to discuss our commitment to lightweight litter. While we feel confident about our coarse litter business, our primary growth is expected in lightweight litter, both in our branded products and private label. Dan mentioned the progress after about a year in his role, and as I reviewed our strategy, I recognized the tendency for newcomers to implement a lot of changes. This presentation, however, highlights why we're maintaining our current direction. We'll touch on a few new tactics and initiatives we're excited about to enhance both our branded and private label businesses, but fundamentally, we remain focused on private label because it resonates strongly with consumers. Who wouldn’t prefer a product that is easier to shop for and handle? It offers significant cost savings for customers and aligns with the environmental goals of most of our major clients, reducing transportation needs. Our mineral is the best natural solution for lightweight litter, and we’ll share more on this shortly. So, while we’re making a few adjustments, our focus on lightweight litter remains unchanged. Looking at the overall cat litter market since 2018, we've seen impressive compounded growth. Notably, this growth has been consistent, ranging from 8.8% to 10.9% annually, and has recently accelerated to 9% and 11% year-over-year. This consistency is encouraging. The growth in our total litter business demonstrates a compound annual growth rate of around 10%, but our lightweight segment is outperforming at a 15% growth rate. This growth in lightweight litter is also picking up speed. Just to clarify, this data reflects our U.S. operations, while the previous slide covered our Canadian business, which accounts for the differences in growth rates. So, why are we staying on this path? Because it’s yielding results. You can see our growth figures. Most of our strategies remain largely unchanged with a few modest tweaks aimed at ensuring that our consumer activities and innovation efforts benefit both our branded and private label lightweight offerings.

Amlan, Unknown

Thank you, Chris, and good morning everyone. It's a privilege to speak with you today and represent the Amlan Nutrition and Health team globally. We are very excited about the opportunity we have with Amlan to strengthen Oil-Dri’s business and provide significant value to an industry that urgently needs innovation as we strive to address the challenges of feeding a hungry world. I want to focus on our North American team and highlight one of the key regions where Amlan has great potential for growth. Before that, I want to emphasize the advantages Amlan has as part of Oil-Dri and the legacy it brings. Key elements include our leadership with Dan and the Jaffee family, who have maintained a consistent strategic focus and strong core values. Oil-Dri also has a diverse portfolio, and the Amlan and Animal Nutrition Health business is a valuable addition. We leverage Oil-Dri's vertical integration to control the product from the source to the customer, ensuring quality, traceability, and sustainability. Our single source mineral brings tremendous technology to this space, and Oil-Dri has consistently invested in innovation, building out our innovation campus and nurturing a strong R&D team that allows us to create unique value for the market. Amlan's product development focuses on four key areas, illustrated alongside the value opportunity in animal diets. As antibiotics and other pharmaceuticals are increasingly removed from animal diets due to regulatory compliance and consumer preferences, there is a significant opportunity for Oil-Dri and Amlan to create products that support animal growth, productivity, and improve production efficiency.

Daniel Jaffee, President and CEO

Wade, thank you very, very much. Thank you to the whole Oil-Dri team. As I opened up, an investment in Oil-Dri’s is an investment in our people, and I'm sure you are as impressed with our team as I am, and so that we have a lot of momentum heading into the next quarters and the next fiscal years. We're going to open up the floor for questions. People who are submitting their questions, using the Ask a Question field on the webcast, questions or remarks obviously must be relevant to the meeting and pertinent to the matters brought before the meeting. Leslie will read the questions, and then I will either answer it directly or direct it to a specific Oil-Dri teammate to field the question. So Leslie, number one?

Leslie Garber, Manager of Investor Relations

Okay, the first one in the queue is, can you please address the implications of the Albertsons Kroger merger on Oil-Dri specifically, and the branded private label cat litter market more broadly? As I recall, Nestlé has a plant in California that is dedicated to supplying Kroger's private label that may or may not still be the case.

Daniel Jaffee, President and CEO

Great, thank you. Chris?

Christopher Lamson, Group VP of Retail and Wholesale

Yes, thanks, Leslie. We work with both customers currently. We view the upcoming merger as presenting potential benefits, but there are also risks involved, which I believe others in the CPG industry may agree with. Most importantly, our current business is focused on the lightweight segment of litter, and we have a significant advantage here, as indicated by our private label market share exceeding 70% in this category. This gives us confidence. Additionally, regarding California as a private label producer of lightweight products, I would rank our capabilities against those of our competitors. We have a strong presence, which is crucial due to freight costs we've discussed previously. Furthermore, we have a vertically integrated manufacturing facility in California, like all our others.

Leslie Garber, Manager of Investor Relations

Great. Thank you.

Daniel Jaffee, President and CEO

Thank you.

Leslie Garber, Manager of Investor Relations

Okay, so we have two questions related. One is from John Bair. And then the second one is from Robert Smith. So I'm going to just read them sort of together and have a joint answer. What is your outlook for Amlan sales growth that is driven from the combination of both, from repeat orders, from early adopters of products versus new potential customers? And then secondly, are you able to reaffirm your $40 million revenue budget target for Amlan in this fiscal year?

Daniel Jaffee, President and CEO

I'll take this one since Wade has covered much of it in his presentation. Amlan is currently in a very dynamic phase as a startup. We are testing with major customers, and if any of them start to roll out, we are confident it will significantly impact not just the division but the entire business. We have communicated our target for the year as $40 million. We achieved $5.5 million in the first quarter, which annualizes to $22 million, but that represents a 52% increase from the previous year. However, we are still in trials with companies that could change the situation quickly. If asked, I wouldn't say we're definitely going to reach $40 million this year; I might lean toward a lower estimate, although momentum is building in the right direction. Ideally, we'd like to have a run rate of $40 million by the fourth quarter. I truly want to achieve it, but given the current dynamism, I'm cautious. Nevertheless, we remain very positive about the short, medium, and long-term prospects for Amlan.

Leslie Garber, Manager of Investor Relations

Okay, great. The next question comes from Ethan Starr. Congratulations on a nice quarter. Dan. You mentioned last quarter that Amlan products are in numerous trials. What's the average length of a trial before a decision is made to buy or not buy Amlan's products? What percentage of companies that try Amlan’s product end up purchasing them?

Daniel Jaffee, President and CEO

Yes. And Wade, I'll turn this over to you. And it's very subjective because this is all new, but I would like to tap in your experience here and have you answer that question?

Wade Robey, President of Amlan International

Yes, thank you, Dan. And thank you for the question. And it'll depend a lot by world area, but let me kind of give you a general sense. And this really plays off what Dan mentioned a moment ago. The runway or the time necessary to trial the products and to convince customers of the efficacy and the value really takes a number of months. We've generally worked through a presentation of information and data and R&D to moving to field trials with customers and then gradual adoption in their various complexes as they roll it out across an operation. So, understandably, that can take a number of months to achieve. I can report to you that we're well into that process in North America and certainly around the world, both with existing products and the new products that we have launched, we've consistently seen excellent performance and not only re-trialing, but beginning of commercial use by these large customers. So, as Dan said, we're very bullish on the year. We believe the volume will come in large tranches as customers adopt and begin utilizing across their commercial operations. And we hope by year end, it'll be at a run rate that is consistent with our targets.

Daniel Jaffee, President and CEO

Great. Thank you, Wade.

Leslie Garber, Manager of Investor Relations

Thank you. The next two questions that are related come from John Bair and Ethan Star, fluids purification sales growth. Is this a result of higher domestic demand, or is there much of this attributable to international sales? If mostly domestic what are your opportunities internationally? And then the second related question it says, Dan in your annual sorry, in your letter to stakeholders in the 2022 annual report, you noted that several renewable diesel plants are scheduled to begin operating in 2023. How many plants, do you expect to begin operating and what's the size of the opportunity for Oil-Dri?

Daniel Jaffee, President and CEO

Yes, and I'm going to turn this over to Bruce Patsey, our Vice President of Fluids purification Division, with the one caveat, he's not in the room with us here. So Bruce, just stay general. We don't give specifics on absolute numbers of plants or absolute dollars, but your general comments would be appreciated.

Bruce Patsey, Vice President of Fluids Purification Division

Sure. Thanks Dan. Basically we had growth mostly in our domestic, in North America and Latin America is where we saw our growth this year or the first quarter, I should say. And we do have opportunities internationally going forward. I think both in the fats and oils business and the renewable diesel business will have opportunities, as we look out in 2023 and 2024. With regard to the second question, there's going to be, there's not going to be a million plants coming on. These are very large facilities, so there'll be several plants in the next two years that will be built and be up and operating. Of course, Oil-Dri will be going after as much business as we possibly can in this marketplace. If I would take a guess that we might have a chance to get 15% to 30% growth in terms of production of our bleaching clay products in this market space. But we'll see, we'll be working hard to get earn that business.

Daniel Jaffee, President and CEO

Fantastic. For those who are new to the Oil-Dri investment, many of our businesses resemble the game of risk. If you have played it, you know that you can only attack adjacent properties. Our plant is located in Georgia, giving us a unique competitive edge in North America against competitors in Malaysia, Singapore, or Europe. Conversely, they have a significant advantage in their markets. This is why much of our growth occurs in the U.S., especially in North America, and also in South America for our bleaching business, as we are closer to those markets than many competitors. The opposite applies as we cross the Atlantic and Pacific oceans. Thank you, Bruce.

Leslie Garber, Manager of Investor Relations

Okay, next question. Are you seeing any meaningful improvement in your logistics bottlenecks? What are the biggest pressure points, meaning trucking rail, maritime shipping so on?

Daniel Jaffee, President and CEO

Great, and I'll call on J.T. Harrison, our Vice President of Logistics and Procurement. And if you're on mute, JT?

J.T. Harrison, Vice President of Logistics and Procurement

Good question, folks. And can you hear me, Dan?

Daniel Jaffee, President and CEO

Yes, we do. Thank you.

J.T. Harrison, Vice President of Logistics and Procurement

So maritime shipping is still the biggest bottleneck that we face. Our freight procurement strategies executed for domestic trucking for rail, for North American intermodal shipping are all driving great successes to prevent or alleviate any bottlenecks. The maritime market is still a difficult one for us, and most shippers. The global vessels schedule reliability is continuing to hover around 40%, which is a huge challenge. And despite that, we have unlocked some successes by our internal metrics. We are outperforming the market by 30%. And some of that success is the inventory we have built that was mentioned earlier, not just having that inventory, but also positioning it closer to the key export ports that we utilize to give us agility to meet the constantly changing vessel schedules of the ocean carriers.

Daniel Jaffee, President and CEO

Awesome, thank you, JT. We have one question that actually came into me, which is ironic, but I got it. And the question is, we've talked in the past about how Canada has gone all lightweight for Nestlé Purina and how I think what about 55% of the market is now lightweight. And the question is, if the U.S. replicated that lightweight percentage, what would the growth be potentially in the United States?

J.T. Harrison, Vice President of Logistics and Procurement

Yes, so Dan, I'm doing a little back of the envelope math here, but we've obviously looked at this, and you're right, the number one player in Canada, we're benefiting significantly in that market. If the same thing were to happen in the U.S. by way today is around a $400 million at retail category it would more than double that. So I'm sorry, the growth would be more than double that. So the growth would be, about $800 million. So the lightweight category, if really if heavyweight and lightweight were roughly split would grow to over a billion dollars, so $800 million or so growth.

Daniel Jaffee, President and CEO

Fantastic. Yes, so great opportunity. And there's no reason to believe that U.S. cats are that different from Canadian cats.

J.T. Harrison, Vice President of Logistics and Procurement

Having lived in Canada, I can tell you they look pretty much the same. Consumers might be even more enlightened up there.

Daniel Jaffee, President and CEO

We are very optimistic about our business. To summarize quickly, although we're out of time for questions, all our business units are performing well. Our industrial and sports division, which is our largest, is also thriving. We have several strategic initiatives launching simultaneously, including renewable diesel and a booming agricultural business, as well as lightweight cat litter, which is a significant ESG initiative. If the whole country adopted lightweight cat litter like they did with concentrated detergent for environmental and logistical reasons, it would cut the carbon footprint of cat litter by about 40%. There’s no going back; people aren’t going to want heavier options that harm the environment. Instead, they will prefer lighter, environmentally friendly choices, particularly when they don’t have to compromise on performance or pay more. I believe that when lightweight products are available at an ideal price and performance, the entire category will shift. I'm also very enthusiastic about the animal health business, and I don't see a reversal in the trend towards non-antibiotic solutions in food production. We’re in a strong position because we have the best all-natural solutions for these challenges, which is why experienced professionals in this industry are joining us. Their confidence in our product line fuels my confidence in the business's future. I've gotten flak for selling shares to pay taxes, but I recently opted to pay a significant tax bill in cash because I genuinely believe in a bright future for Oil-Dri. That's why I chose to retain all my restricted shares, and I remain very positive about our direction. Thank you for your support, and we’ll reconvene after the next quarter. Wishing everyone a happy and healthy holiday season.

Operator, Operator

That concludes today's conference call. Thank you for joining and have a pleasant day.