Please stand by. We are about to begin. Good day, everyone. And welcome to the Fourth Quarter 2021 Minerals Technologies Earnings Call. Today’s call is being recorded. At this time, I’d like to turn the call over to Erik Aldag, Head of Investor Relations for Minerals Technologies. Please go ahead, Mr. Aldag.

Thank you, Katie. Good morning, everyone. And welcome to our fourth quarter 2021 earnings conference call. Today’s call will be led by Chairman and Chief Executive Officer, Doug Dietrich; and Chief Financial Officer, Matt Garth. Following Doug and Matt’s mass prepared remarks, we will open it up to questions. I’d like to remind you that beginning on page 15 of our 2020 10-K, we list the various risk factors and conditions that may affect our future results. And I will also point out the Safe Harbor disclaimer on this slide. Statements related to future performance by members of our team are subject to these limitations, cautionary remarks and conditions. Now, I will turn the call over to Doug. Doug?

Thanks, Eric. Good morning, everyone, and welcome to today’s call. I will walk you through our results for the fourth quarter and the full year of 2021. I will also give you my insights on the year, focusing on our key financial and strategic highlights, as well as the various dynamics we faced and successfully managed through. Matt will then discuss our financial results in more detail and outline our first quarter outlook. Following Matt, I will finish up by describing how we see 2022 shaping up as a strong year for us, touching on our key priorities, growth initiatives and market conditions. Let me start by going through the takeaways for the fourth quarter, which concluded a very strong year for MTI. Market demand continued to remain robust and we delivered sales of $477 million, 10% higher than last year and earnings per share of $1.25, an increase of 16%. Despite the market conditions, this is by far the most difficult operating quarter of the year. We had to navigate through a variety of inflationary and logistics pressures, which became more pronounced late in the quarter. Cash flows remain solid through the fourth quarter, capping off a strong year. Operating cash flow was $69 million and free cash flow was $46 million, and we made progress to lower our debt levels by paying down $20 million of debt. Let me share how the quarter played out from an operational perspective and the actions we put in place to address the rapidly changing conditions. Heading into the fourth quarter, we anticipated that inflationary costs, and logistics and supply chain challenges would persist, and we would positioned ourselves to recover these costs through implemented pricing actions. For much of this transpired as expected, we experienced significant additional cost escalations, notably due…

Thanks, Doug. I will review our fourth quarter results, the performance of our segments, as well as our outlook for the first quarter. I will then to turn the call back over to Doug for some additional perspectives on the year ahead. Now, let’s review the fourth quarter results. Sales in the fourth quarter were 10% higher than the prior year and 1% higher sequentially. Organic growth for the company was 4% versus the prior year and the acquisition of Normerica contributed the remainder of the growth. Operating income, excluding special items was $54.7 million and operating margin was 11.5%. The year-over-year operating income bridge on the top right of this slide shows that we experienced $27.4 million of inflationary cost increases versus the prior year, which we offset with $18.6 million of pricing. In addition, supply chain challenges, including trucking and labor availability, resulted in a delay of volumes from the fourth quarter, particularly in our Processed Minerals and SPCC product lines. The sequential bridge on the bottom right shows how inflation continued to accelerate from the third quarter to the fourth quarter. And heading into the quarter, we expected the pace of inflationary costs to moderate from the third quarter and we expected to recapture some margin with our planned price increases. As we move through the fourth quarter, inflationary costs accelerated to nearly $10 million, including higher energy costs in Europe and Turkey. We were able to mitigate the unexpected increase with additional pricing in the quarter. However, a portion of the necessary price adjustments could not be passed through contractually until January 1st. In addition, logistics and labor availability challenges resulted in shipping delays, lower productivity at our facilities, and ultimately, higher per unit production costs in the period. These challenges including the delayed sales volume…

Thanks, Matt. As we look ahead, this is going to be another dynamic year, with many of the same inflationary and logistics pressures continuing. But with the momentum across our businesses and the growth projects under way and our strong operating performance, 2022 is shaping up to be another record year for MTI. Overall, I am very excited about where we are as a company and where we are going. We have transformed MTI into a higher growth, higher margin, and higher value company. We have more opportunities in front of us, beyond what I have shared with you today that will further enhance this trajectory. We are well positioned to leverage our balanced portfolio. We have a breadth of attractive projects across our businesses that will drive our sales and earnings momentum this year. We focused on accelerating our geographic penetration and our core product lines and building our growth opportunities in adjacent markets. In addition, we will further strengthen our R&D pipeline with a focus on increasing the percentage of revenue from new products, as well as introducing solutions with help -- which help us penetrate attractive markets. With our solid financial footing, we have the resources to execute on all of our growth initiatives. Our strong balance sheet and cash flow generation gives us the flexibility to deploy capital to shareholders, while at the same time, accelerating our growth trajectory through acquisitions, similar to what we achieved this past year. We have a targeted list of inorganic opportunities that will continue to transform our company with a focus on profitable growth. Underpinning everything we do is our culture of continuous improvement. Operational excellence is embedded in our company with our employees at its center. It’s our employees and their high level of engagement around problem solving through…

Thank you. [Operator Instructions] We will go first to Daniel Moore with CJS Securities.

Thank you. Good morning, Doug. Good morning, Matt. Thanks for the color as always. I will start with a couple of housekeeping things just to get out of the way. Refractory, I think, you said, Q1 up -- income up 20%, is that sequentially as you gave with the other segments or was that year-over-year?

Yeah. All of our guidance is typically sequentially and that is the case for each of the segments and for the full company sort of Refractory are sequential.

Perfect. So the -- just to clarify the $5 million costs, labor, logistics, et cetera, do you expect to get those all back in Q1 or over the course of Q1? I am just trying to see how much of this recovery is embedded in the guide.

Yeah. So if you take a look at that $5 million, the easy way to break it out, if you listen to the prepared remarks, about $2 million of that was inflation that we said we were going to capture with pricing going into the first quarter and then the other $3 million was largely related to the logistics and some of the labor challenges that we saw and the impact on our operations. What we have said is, we are going to be able to recover that in the first quarter, so that is embedded in the move from the $54.7 million to a $63 million to $65 million range.

Perfect. Okay. And then, just looking at the, sorry about that, Refractories, I think, you talked about this previously, but a new project that would be about $100 million incremental revenue benefit over the next five years. When do you expect that to start to kick in in terms of timing and ramp?

Sure. Let me kick it off and then I will let Brett Argirakis, who runs the business to give you a little bit more color, Dan. Some of those have already started to kick off, probably, more later in the first quarter or second quarter and throughout the year. We have other projects that are planned to kick in probably third quarter and fourth quarter. I think there’s all told, Brett, seven contracts, eight contracts totaling $100 million over the next six years. Why don’t you give a little color on that, if you can?

Yeah. Sure. The -- there’s seven of the contracts we anticipate kicking in in 2022, seven of the eight. So, we anticipate a couple of those starting sometime in the first quarter and then they will gradually expand through the year. These projects, of course, they are based on our key initiatives that are driving the new products, durable products, more efficient applications and safer processes. So, it’s really driving into the new EAF market, the expansions, a lot of growth. There’s about 5 million tons of new steel coming into the market, and we are happy to say we are part of that and we are initiating all of our segments into those growth areas. So we are pretty excited about that.

That help Dan. So $100 million over five years, it averages out to $20 million, but they will ramp up a little bit later this year. So you might see an incremental $15 million from those contracts this year as they ramp up? But, yeah, I am pretty excited about the new technologies that we have deployed in this market and should provide that growth through this year and beyond for Refractories.

Excellent. No. That’s very helpful. More bigger picture, just from an M&A perspective, obviously, you have been focused on or you have been a little bit more vocal about the growth in your consumer-oriented businesses. Is that the primary area of focus for future M&A or are you looking at a sort of a wider array of opportunities? Thanks, Doug.

Yes. Wide array. Yeah. I think we do highlight as you picked up on in our consumer-oriented portfolio and we think that’s important, because in my last comments where that we do think that this provides us a bigger portion of the company that sits in structurally growing non-cyclical markets and that balances out some of the industrial markets that we are in and there’s some cyclicality that as you have noted. And so, yes, I think, we are -- we see opportunities to continue to expand in that consumer where we have vertical integration capabilities, number one, but also where we have technical capabilities to supply those types of consumer specialties. But I think there’s also opportunities in our core markets, core minerals around the world that we are also looking at. So I think it’s balanced across all of industrial and consumer, but certainly we are focused on continuing that balance through additions to that Consumer Specialty business where we think we add a lot of value.

All right. Very good. I will jump back in queue with any follow-ups. Thanks.

Thanks, Dan.

We will take our next question from Silke Kueck with JPMorgan.

Hi. Good morning. How are you?

Hi, Silke.

I have a question on the Household Care business. So it looks like that if -- the 24% growth in the quarter had the contribution of Normerica and maybe that was -- yeah, it looks like maybe that was a 28% -- like a 28% contribution. That was like higher price of a couple of percent, maybe like 4%. So were the volumes down about 8% and was that all related to the Pet Care business? And do you think -- and I want to know like how fast you can get the business back. Is it all going to come back in the first quarter or will that spread out through next year? It’s my first question.

Yeah. So make sure I understand, you are looking at volumes -- your question is why were volumes in Pet Care down, your estimate 8% of that? What it is -- that’s generally due to some of the logistics challenges that Matt was talking about. There’s a couple fewer days in the fourth quarter versus the third quarter, so that played a few percent into it. But largely, Silke, that is -- and let me describe some of that, what some of these logistics challenges are. In the fourth -- you touched on something that I think I want to make sure we are clear on. In the fourth quarter and largely in December, and I think, you have probably heard this from a number of different companies, trucking was challenging and so was rail, and that was due to drivers, and probably, had some issues with COVID and what was going on with the supply of labor throughout December. And so, yes, we had things on the dock ready to go and if a truck doesn’t show up, you got to readjust it, you got to move some stuff around and that causes productivity issues in your plant. And then the truck that you thought was yesterday shows up tomorrow and you got a loaded up and then some trucks just didn’t show up during the past few weeks. So our order books regardless of that are extremely strong. In Normerica, we faced a lot of those, the same logistics issues. I don’t think the trucking strike in Canada that happened recently helped all this whole situation. But we see that that’s probably not going to continue through the first quarter. And so a lot of that volume declines on Pet Care was due to just getting that stuff off the dock and navigating those logistics challenges. That said, those order books are full. We see that loosening up through the quarter and we see getting all of that out through the first. And that’s -- and so we are -- we have a positive outlook on the first and to Dan’s last question, we are going to capture that. We have already got pricing and activities in place to more than capture that $5 million and move on with that growth that we see and drop in that’s the bottomline, the first. So hope that helped with some of where the Pet Care volume went but it’s not a demand related issue.

Okay. So you should see all things being equal and maybe that’s a question with the Performance Materials business overall, given that there was acquisition benefits and positive price, but it looked like there was like no volume growth for the Performance Materials segment in the quarter and you see like really strong volume growth in the first quarter as you expected?

Yeah. We are expecting that. Again, we had some challenges across the business in terms of the last few weeks of the year of shipments. And so some of that’s delayed into the first. We definitely have the order book to fulfill all of it. So it’s not a demand related issue right now. It is more making sure the operations and getting that packaging. And yeah, we had to move some ships around with getting perspective and I know 10% of our North America plant based workforces quarantined at some point through December, January. So, but that’s what my comments were that the teams did a great job, navigating ship schedules, moving things around, getting the plants to continue to produce, getting things off the docks, shifting orders. Yeah, it was a challenging quarter. But like I said, it’s not a demand related issue. We have made those corrections in our plants. We see the logistics loosening up and we have put pricing in place to more than cover the inflation that we saw acutely in the quarter. So we will get all of that back, order books are good and we see a much stronger first quarter coming. This is what we think is more of a fourth quarter kind of acute issue.

That’s helpful. I didn’t mean to criticize. I thought everybody had the same issues, I was just trying to figure out how much volumes might not have been shipped and what might come next year in order to better model it. But that was sort of…

I know…

… the question.

I appreciate that. I just took your question as an opportunity to lay out some more clarity on what went on. That’s all. So I appreciate that.

Excellent. It’s really helpful. Thank you. And are your Paper business is affected by the strike in Finland? Your PCC Paper business or that doesn’t affect you? Like, it’s hard to gauge, what exactly is happening, whether the plants are operating or not?

No. We did not see any impact from that.

Okay. In the first quarter, this is some that seemed to have happened like in the beginning of the year.

That has not affected us in any meaningful way this quarter.

Okay. That’s helpful. And lastly, I am like sort of trying to gauge whether there are any effects, like geopolitically like what’s happening between Russia and the Ukraine. Have your customers voiced any concern, what might happen if they can’t input picked iron [ph] or is there any conceptualization, because the nice thing is that there’s a lot of capacity that’s coming on or like this include production that’s expected in terms of steel production in 2020. Then there’s the issue of whether all the raw material that you need can be gotten. Does your customer base have a view how things might play out?

Well, let me give you the impact. Certainly, that is a risk, right? So everything we have given you is forecasting relatively similar or current geopolitical environment. So I am not going to predict what’s going to happen with Russia and Ukraine. However, I can tell you what -- where we sell and what directly would impact the company, right? So directly, our sales into Russia are very small, $5 -- below $5 million, so that’s -- it’s not a sales issue for us. We do source some things from Russia and if that were to be interrupted, we have backups and but that’s also a very small portion of what we actually source. So I think the impacts on us would be more tangentially on our customers. And what I mean by that, I guess, another direct impact could be energy. We have seen a lot of energy price increase in Europe. Should there be energy disruptions. That’s something that could impact the company in certain areas and many companies, by the way, I would imagine. And then the tangential impacts of what sanctions are put in place, if any, and how they affect markets and demand and that ripple effect. I am not in a position right now to tell you exactly what those would be, because I don’t know. But as a direct impact from MTI, our supply chains are secure and our sales are very small into Russia and Ukraine in total. So, but we do see that, as it should be, as a risk to the global economies and that could have an impact on the company, obviously, as with others.

So you as Refractory customers have not expressed the concern that there might be able to import enough -- the paperwork for permit to continue operating.

No. No. Our -- we are -- anything that would support our Refractory business in North America is either self-manufactured or sourced outside of Russia. So Russia would not be or the Ukraine would not be an issue for us. We do source magnesium oxide in Turkey. We manufacture and mine our own and we also sourced from China and we have largely already secured those supplies throughout the year and move them, frankly. And as a matter of fact, out of China, before the Olympics. So we had planned on a lot of things happening in China. So those are secure. We do manufacture our own calcium metal. We manufacture that. We are the only calcium metal manufacturer in North America, in the western hemisphere, frankly and we have sourced calcium metal out of Russia. But we also have other sources for that to be able to shore up that supply chain. And that goes into our calcium wire that goes into the steel industry in the U.S. But right now, we have looked at those redundancies, our supply redundancies around the world and ensuring that that’s not going to be a disruptive effect on any customer here in the United States or Europe, for that matter.

That’s helpful. My -- and I won’t believe it, I will move on. My concern was this that, that there was an issue in making the steel. Like I was less worried about you getting them a bit easier, I was worried about it being an effect on like steel products in U.S., if you can get paper work.

Yeah. I think, Russia is about 1.3 million, yeah, imported in the United States. So I think there’s probably capacity to be able to bring that up in the United States. We see with the new capacity coming online, the 5 million tons that Brett just mentioned. Russia imports about 1.3 million tons into the U.S. I think the U.S. will be able to absorb it, and certainly, we have the capacity to be able to support that from a Refractory standpoint.

That’s great. Thank you for making it so clear. And my last question was, I hope it was -- that was the PCC Specialty business that you bought in November? Like what did you pay for them? Like are there -- what are the sales that are coming from that business? Thanks very much.

Yeah. It’s a small bolt-on, Silke. So I think the revenue, probably -- it’s like a $10 million type revenue business in the Midwest. So a small, yeah, relatively small purchase price for a valuable asset like that.

That’s great. Thank you.

Thanks, Silke.

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

Hi. Good morning.

Hi, Mike.

I wanted to go back to the Household and Pet Care segment with a couple of questions. First of all, I guess, maybe a good time to just discuss how the Normerica integration has been going. I mean, aside from the logistical issues that you saw, are you seeing the integration and maybe some of the synergies that you anticipated there playing out and maybe talk about kind of underlying trends around private label and premium cat litter as we get into 2022?

Sure. Thanks, Mike. So the integration is going well. We have captured over half of the synergies already and the others are more timing related, timing related to vertically integrating the clay supply. There were some contracts in place when we bought Normerica from other clay suppliers that we look to integrate in as they expire. So, those are the remaining synergies to capture and that should be done through the second quarter of this year. So largely from a -- from an operations standpoint, we couldn’t be happier to have the new employees. We have gone through extensive safety training, operational excellence training, working through their plants and upgrading them in terms of starting to upgrade them from a capability standpoint. Just really wanting to bring them to what you see is a standard of education and operation in MTI and that’s still ongoing. So our back-office already integrated, all of that going really well. The challenges we have had obviously is purchased it and we absorbed some inflation. So a lot of packaging inflation, logistics challenges throughout the four months that we have owned it. Many of those contracts to be able to push that pricing through, as Matt mentioned, were down on January 1. So, I guess, the challenge and maybe not surprise was that we had to deal with some issues through the end of the year, but largely made those corrections and we are well on our way from a -- from an operations standpoint with that integration. I will let Jon talk a little bit more about the market where we are from a private label standpoint and what the demand outlook looks like. Jon?

Sure. A couple of things just to reiterate, synergy is certainly well in hand. We are working with all of our customers and the market’s been very strong, demand is there. As we have been retooling our operations, we have also been retooling some of our customer relationships. We have worked with them on pricing like we do everybody else that’s been extremely successful and everything’s in place. In addition to that, like I said, demand is extremely strong. We have picked up new customers, we are adding chair positions, winning new contracts and that will push more volume through our plants as well. And we are retooling those plants or debottlenecking them and we are expanding our capacity. So, from a market demand perspective, again, very, very strong, and we see that in Canada and also the U.S. and we are well-positioned to take advantage of it.

All right. Great. And then my other question on the consumer side of the business, you mentioned edible oil purification and some of the Personal Care businesses had grown pretty nicely during 2021. Maybe just talk about this, is that an area where some of these new products and innovation are started to contribute? Maybe talk about kind of how you are growing that organically and are you going to get to a point where you maybe need to look at an acquisition to expand capabilities?

Yeah, Mike, again this is Jon. As you know, we have had a large success with our existing business. As we have built that plant a couple of years ago, we filled it up. We have been growing with customers and new products and innovation. That team has been very energized and looking for opportunities with customers around the world, in Europe and North America, also in Asia. We continue to see that growth expanding as we continue into the year to come and also the years going forward. We have been debottlenecking our plant there as well, expanding capacity, and at the right time, we will make investments where needed in order to continue supplying the products and the demand that our customers are asking for. So very successful and we will continue expanding as we can.

Yeah. Mike we have got a lot of opportunities across these consumer businesses. And I mentioned, wastewater and the further development of our floors, our product and our Personal Care business, which has some bentonite based portions of it and polymer based portions where we have very unique capabilities. Edible oil, which is a bentonite based business. So we are going to continue -- with the growth trajectory we are seeing, we will probably make some investments in some -- in expanding capacity in the near future to make sure we keep pace of that growth. But it is also an area where as I mentioned we would look to acquire, so some additional positions. So, yes, on both fronts, we see a good opportunity set to grow this further and these are higher margin products. So these are part of that accretive to our margin growth going forward and our margin target. So, a good outlook for both of these businesses.

All right. Sounds good. And then my last question is around pricing. If I do the math, it looks like you got about 4% or 5% year-on-year pricing overall for the company, is that correct? Where do you expect that pricing number to be as we get to Q1 and maybe talk about kind of pricing contribution by segment? Are there areas where you feel better about being caught up against inflation and areas where your kind of further behind?

Yeah. You have the numbers pretty accurately, Mike. I think we -- pretty simply to breakdown our 10% to 15% growth. Last quarter, I said, 5% from organic volume, 5% from Normerica and we see another 5% probably in pricing. So between -- yeah, 10% in price and volume and how that plays out, that could be higher depending on how these markets go and we have 5% from just a year-over-year impact from Normerica. So we see -- even without that inorganic piece of Normerica up in that 10-plus range and with that kind of volume and the operating capabilities, it’s why we are really positive about 2022. Yes, we are going to have these challenges. We are going to be navigating, getting stuff off the docks. We are going to be making sure we secure trucks and we supply our customers. But we have been doing that all last year, too. It’s hard to predict where COVID goes. But seeing this past us through December and January, we have a better outlook. We think a lot of our employees returning to work, moving through it. That’s going to bode well for us. So we look for -- we are going to be probably above that 5% pricing in the first quarter and we are going to maintain that over our costs throughout the year. So we are going to get back the deficit that we have from last year and exceed it, and that’s why we are bullish on our margins as well through the year. The place that we are probably a little bit behind, but it’s not because of any actions from ours, it’s more contractual. A piece of that energy increase we saw in the fourth quarter was in our paper business and that will get passed through probably second quarter of this year or late second quarter. So that’s just contractual timing. So part of that is we are a little bit -- we have some delay as things go up in that paper business. But the rest of the business, I think, really happy. We are right on top of stuff. We have really changed our contracts to short them up. We have changed our ability to move quickly. We have increased the speed of dialog and transparency with customers. I have mentioned before we used to raise prices maybe once a year. We have done it five times, six times last year. And so that pace, that agility and being able to have our contracts and dialogs in place with customers be able to do that, that’s where we are. So we continue to, probably, we have to face that this year, but we are positioned to do so.

And one additional thing to add just on the mix component that we were talking about, Mike. If you take a look at the third quarter, fourth quarter of 2021, really good performance in the Performance Materials business, yes, rising costs. I talked in the prepared remarks a little bit about some of the delays that impacted that business because of the contractual nature of getting those increases in on January 1st. We will get that. But as we move into the first quarter, you are going to see, as Doug said, that SMI segment start to get some more pricing. So a little bit of a change as to where you are seeing the pricing coming.

All right. Sounds good. Thanks very much.

Thanks, Mike.

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

Yeah. Hi. Good morning.

Good morning, David.

Hey. I’d like to pick up, I think, on one of Mike’s first question about Normerica. Your answer was very good in terms of discussing the qualitative progress of that acquisition and integration. But when I reviewed my notes in -- to prepare for this call, I guess, last quarter you did set out some quantitative targets and I was wondering if you could comment on two things. First, whether Normerica was accretive in the fourth quarter. And then, secondly, for full year 2022 versus -- is it still your expectation that Normerica will be 5% to 7% accretive and whether, I don’t know, the middle of that range or the low-end or the high-end is more appropriate now from February 4th perspective? Thank you.

Yeah. So Normerica was accretive in the fourth quarter. But I will tell you it was less than we had originally planned and that’s largely due to we captured the synergies that we expected through the fourth quarter, but we faced some inflationary pressures that were unexpected and some shipping delays that were unexpected. That said, I mentioned those contracts as they have changed on January 1. That’s been taken care of, and all of that cost us, should recover that loss, so a bit of a delay there in terms of that accretion, David. But that said, where we are with those operations, with the employee base, with the order book, pricing, we see achieving that 5% to 7% -- that 5% -- no, 5% to 7% is where we -- yeah, we are going to be right on track with that 5% to 7% accretion number for 2022. So back on track, we just needed to get through, absorb some of that cost that we saw in the back half of the year and get on with that -- those changes in the first part of this year.

From a synergy perspective, which we also laid out that $5 million to $7 million, on track and on pace with the synergies. Again, Doug already outlined some of the challenges from an operating income perspective that we saw in the fourth quarter, but the synergies and the integration are moving along as we thought they would.

I think…

Yeah.

Yeah. Go ahead, David. I will let you finish your question.

No. No. If you wanted to add on, please do. Thank you.

No. I was going to say -- yeah, thank you. I was going to mention, though, that despite that, we see the same thesis that we had when we went into Normerica is well intact. The accretion will come in the 2022 as planned. But -- and I think Jon mentioned this, we are seeing -- some of the reasons we bought it is because it positions us around the North American market to be able to serve a broader array of customers, and with our vertically integrated position, add a lot more value to those customers and we are seeing that play out. We are starting to see opportunities, more opportunities, new contracts, new business that I think that is that the perception of the market is that the capability we are is that kind of supplier, not just in North America, but demonstrated in Europe and globally. That’s being noticed and I think that thesis of being able to grow this business and grow it profitably, more significantly than prior to the acquisition. I think is all intact. So we are excited about it. Yeah, we are going to move through this inflationary period like the rest of the businesses. But the thesis of how we bought it and what it’s going to deliver to the company is intact.

Okay. Great. My next question, I was hoping to get maybe a broad, like a 360 perspective on your Metalcasting business. So, year-over-year, Metalcasting revenues were up 24%, but to me even more interestingly, I mean, they are 10% or so above 2019, so in other words, 10% above pre-pandemic levels? And when you look at your global business, I have couple of questions, but how much of that growth from your perspective is, quote-unquote, just cyclical, just the end markets recovering versus how much is maybe company specific or company driven with your customized blends and marketing initiatives, et cetera. And maybe if you could comment on whether the recent strength is indicative -- should I be able to read through that and say, global auto builds are primed to pick up meaningfully, let’s say, in the first half of 2022? Thank you.

Yeah. Let me give you some perspective. So 20% -- 24% growth in Metalcasting, I gave you -- China this year grew 20%, 21% -- Asia grew 21% that includes China and India. North America volume growth this year was 10% and that included sales were up higher than that through pricing, probably 14%, but that included some back half of the year slowdown due to some of the automotive and what we are seeing in terms of our customers who supply automotive that in North America and actually globally, production for numbers anywhere from 17% to 25% higher than this past year. So we had a strong year last year in North America supplemented by a consistent, we have had 10% compound annual growth in China in Metalcasting, last year was 20%. So, a bigger year last year. We see that compound annual growth outside of the United State continuing and we see that we are able to have a -- we are going into a stronger year Metalcasting than we left in 2021, given the auto demand. We have a strong order book across the industrial, off-highway, agricultural business and then with automotive coming back, we think it’s shaping up to be, at least as we see it today, a strong year. Jon, is that…?

Very right.

…characterize that accurately? Is that what you are seeing there?

Yeah. Very much so. I mean, look at the segments. I mean, auto is a piece of it. It’s probably 35% to 40% of our business and we have talked about that. Heavy truck, ag, municipal, they are all -- demand is extremely strong. We see it in China, we see it in India, we see it in North America, we also see it in Southeast Asia. And so what we predict is going forward into 2022, strong demand continues. The demand -- you asked about the product portfolio, the penetration of our blended products continues. We see the substitution especially in Asia, but also including India. That team is very innovative. As you know, we work with each of our customers and we try to ensure that we deliver the products that they need for their specific blends. So very, very well-positioned and the demand is there from all the segments. Of course, we are working through the ups and downs associated with the demand profiles based on the auto market.

So to answer, David, I’d say 50/50. Half of the growth this year was probably due to strong demand in North America and then the other half is just the continued penetration of our products and value in Asia. But we see that continuing again this year, because we see a strong North America auto market and that continued growth in China, India, Southeast Asia.

Okay. I am going to just sneak a quick one in here. But I was interested in your recent announcement about the packaging targeted PCC satellite in China. And I was wondering if you could just talk about the issues involved in accomplishing that. In other words, is the technology especially different, are you differentiated from your other competitors globally, is this something that they have not done yet? And then, what other issues, I mean, can you follow the same model, satellite model with the basic of your legacy PCC business or are there meaningful differences either in technology or capital cost store or other types of issues? So how might packaging PCC opportunity differ structurally from your legacy PCC satellite business? Thanks.

Sure. So, yeah, we are excited about this one. I will let D.J. talk more about some of the technology and et cetera. But this is structured, it’s similar and it’s different from PCC. It’s structured with a long-term contract, similar to our PCC contract, satellite contracts. It’s a similar level of capital investment. It’s a little bit different because the volumes are 3x a PCC plant. I mean, these are 350,000 tons of GCC. But it’s set up more as a technology and tolling, because in this instance, the customer is providing some of the limestone that we are creating in the ground calcium carbonate and delivering on a constant basis. I think the difference is and why we are excited about this is, because we have both the PCC and the ground calcium carbonate package that we can deploy, because in many cases in these packaging opportunities, it’s both. They use both ground calcium carbonate and PCC. So we have developed a solution to be able to deliver through this contract mechanism that we have, kind of an approach that they can have a one-stop-shop for their carbonate supply for that whole packaging product. There’s room to grow for that and, well, let me let D.J. talk about what the market looks like and maybe a little bit more about our technology.

Yes. So, David, on this particular application, as we have been describing the packaging market in the past, this is on that higher end packaging. So it’s an all-whiteboard and you would be familiar with it on anything from a box that holds golf balls to the ice cream packaging. So that’s the market that we are in. And as Doug was talking about, the basic business model is holding true. We have got an investment. We get a good return on that investment. And what it really does for us, it allows us to bring our applications expertise into that market where we think that we have got an awful lot to offer our customers. It is a satellite model. So we can tailor the product for the specific customer’s needs, plus we bring our operational excellence where we give some level of improvement over time. In this application that was put as whiteboard, it also broadens our ability to bring in PCC as well. So several of these board manufacturers will look to upgrade their product line, so we are starting off with GCC, but we have already have other requests to bring in GCC and PCC. So, we feel that we have got an awful lot to offer there. Now in that 60-million-ton market that is this white packaging board, this -- a lot of that market is well-served with the current infrastructure. These opportunities, in particular, are pursuing the growth that is available in Asia where this satellite model applies. So that’s what we are excited about with this opportunity and we already see several other opportunities coming forward. Just expanding a little bit further on that technology, David, we still are making great progress. I gave a snapshot when we last chatted about progress we are making in the brown boxes. Again, that’s a different technology and we continue to run trials there. And so we are very excited about making progress in the brown market, as well as this top end white market and then that last aspect of packaging that we are doing is standard PCC on this white top market as we have grown in Selma, Alabama, as we have grown in Europe as well. We are getting a couple of other opportunities for that as well. So, quite a bit of activity in the packaging space. Hopefully, that helps.

Yeah. That’s terrific color. Thank you very much.

Thanks, David.

We will take our next question from Marisa Hernandez with Sidoti & Company.

Hi. Thank you for taking my questions. Most of the questions I have, have been asked. But I have a couple of housekeeping questions and then another more general one. So on the Normerica results, can you share with us, what was the contribution of Normerica to revenues in the fourth quarter?

Yeah. It was $28 million.

Thank you, Matt. Okay. Great. And then, regarding the expansion of margins in the first quarter, you had previously said that you expected to be back to margin levels on a product basis -- on a dollar basis, meaning not on a percentage basis in the first quarter of 2022, is that still the expectation?

Yeah. So what we said is that we were going to get on a dollar basis, caught up with the inflationary costs that we have been experienced over the past couple of quarters. And obviously, in the fourth quarter, inflation continued to rise at a rate that was higher than we expected. But we also showed you that pricing that we put into place captured about 80% of what we saw in the fourth quarter. That’s going to carry through into the first quarter, plus the items that we told you about in the segments where we were getting January 1st pricing taking place. So we will actually come net dollar ahead at the end of the first quarter for the first quarter, and overall, we are continuing to drive margin with those price increases against that inflation. If you look through the full year from a margin perspective, we are going to come through the first half of the year, you are going to see that year-over-year inflationary impact in the financials, first quarter, second quarter, because remember in 2021, inflation wasn’t really as a significant factor in the first half, really a second half component. And as we get into the second half with the pricing that we have in place, the additional actions we are taking, getting through some of the logistics and labor challenges, you are going to see that on margin continue to expand significantly into the second half towards our target levels.

Okay. So, obviously, with all the inflation that we are having, it’s a lot more difficult to get to prior margin levels on a percent basis. What is the expectation regarding that? Can we get to pre-pandemic, call it, 14%-plus operating margin in the foreseeable future?

So let me try and grab it this way. We have pricing actions in place, given the inflation we have experienced and expect to experience this year, that will get us back to those levels or close to those levels. We also believe that our product line growth will be accretive to those margins, so that by the end of this year, we could hit our target level. Now…

And what is that…

… we expect…

…target level?

And that’s around that 14.5%, 15% range. So, as we sit today…

Okay.

… we have got stuff -- we have got a projection that sees our growth in our higher margin businesses and pricing in place. Now, let’s say we are going to have to keep that that spread. We are going to have to and what Matt was saying is pricing in place will catch us up with what was delayed in cost price through the first half and that margin expansion will occur toward the second half. Now, that’s laid out on paper. We got to stay ahead of that inflation. We expect we are going to see more inflation. We are going to have to be nimble. We are going to have to get it off the docks. We are going have to do whole bunch stuff like we did last year to meet -- to deliver that. But we see we have actions in place and we do see that through dialogue, we are able to keep that kind of pricing pace to be able to hit those kinds of targets. Now, we are going to -- we are into a very volatile still year and it could even be more volatile in the beginning of this year than last and so we are just going to have to stay on top of it. But the mechanisms in the company and the foresight we have and some of the costs we have already locked in, we have already locked in many of these things through the year where we were shorter last year, set us up to be able to keep that that spread on price cost to get ourselves back to those margins.

Thank you so much for the color. I appreciate it.

Yeah. Hopefully that helps.

Absolutely. Thank you.

[Operator Instructions] We will go next to -- we will take a follow-up from Daniel Moore with CJS. Securities

Yeah. No. Thank you. The follow up one and two have been covered. So I appreciate the color again.

Thank you. With no additional questions in queue at this time, I’d like to turn the call back over to Mr. Dietrich for any additional or closing remarks.

Thanks, Katie. Appreciate it. I appreciate everyone joining today. Hopefully we answered questions. Anything else you have we will certainly be willing to follow-up with you and we will talk to you I believe in late April, early May. Matt, is that where we are? Okay. Thank you very much. Stay safe.

That will conclude today’s call. We appreciate your participation.