Good day everyone, and welcome to the First Quarter 2022 Minerals Technologies Earnings Call. Today's call is being recorded. At this time, I'd like to turn the conference over to Erik Aldag, Head of Investor Relations for Minerals Technologies. Please go ahead, Mr. Aldag.

Thanks, Jennifer. Good morning, everyone. And welcome to our first quarter 2022 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 prepared remarks, we'll open it up to questions. I'd like to remind you that beginning on page 15 of our 2021 10-K, we list the various risk factors and conditions that may affect our future results. And 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'll turn the call over to Doug. Doug?

Thanks, Erik. Good morning, everyone. Welcome to today's call. I'll start by walking you through our results for the first quarter and provide an overview of market dynamics, as well as some strategic highlights. I'll also provide some context to put our first quarter results into perspective and explain what's driving our strong performance. Matt will then review our financial results in more detail. And we'll also share our second-quarter outlook. First quarter was a record financial performance for MTI. And these results reflect the team's successful execution on a number of fronts. Sales of $519 million were up 15% versus the prior year, and up 19% on a constant currency basis. From a market perspective, demand remains robust across our segments. Our consumer-oriented products, which make up approximately 30% of our sales, continue to benefit from favorable secular market trends. We've seen steady growth across pet care, personal care, edible oil purification, food and pharma applications. Also continue to see strong demand from our industrial product lines with robust sales to the foundry steel and construction customers. Our results this quarter are also a function of our strategic growth initiatives, driven by multi-year advancements in new product development and geographic penetration, as well as additional growth from acquisitions. I'll take you through this in more detail in a few moments. Operating income of $68 million was 15% higher than last year, and a record for a first quarter and earnings per share of $1.36 was a record for any quarter. Performance is also driven by the agility of our team delivering solid execution across operations, pricing actions and cost control. The historic pace of inflationary cost increases continued in the first quarter, including significant spikes in the energy cost across the world, and in Europe in particular. Despite the…

Thanks, Doug. I'll review our first quarter results. The performance of our segments, as well as our outlook for the second quarter. Following my remarks, I'll turn the call over to for questions. Now, let's review first quarter results. First quarter sales were $519 million, reflecting strong sales growth both year-over-year and sequentially. Year-over-year sales bridge on the left of the slide shows that, sales grew by 15% compared to the prior year, and by 19% when excluding the impact of foreign exchange. Sales were higher by double-digits across all segments with organic growth contributing 4%, the Normerica acquisition delivering 6%, and selling price actions yielding 9%. Operating income, excluding special items was $67.8 million in the first quarter, and the year-over-year operating income bridge, on the lower left of the slide, shows that operating income grew by 15% compared to the prior year. As we expected, our selling price actions surpassed the impact from inflation in the first quarter despite increasing energy costs, particularly in Europe. In total, we delivered $41.5 million of selling price increases, compared with $39.1 million of inflationary costs. In addition, continued strength in our refractory segment, further demand recovery in several of our project oriented businesses and lower corporate costs helped to offset a slow start to the quarter stemming from COVID and weather impacts in the United States. Operating margin in the first quarter was 13.1% of sales, which is an increase of 10 basis points compared to the prior year despite the dilutive effect related to inflation pass through. Now moving to the right side of the slide. The sequential sales bridge shows that sales increased by 9% compared to the fourth quarter and were 10% higher on a constant currency basis. Sequential operating income bridge shows that inflation continued to accelerate…

Thank you. [Operator Instructions] And our first question today comes from Daniel Moore with CJS Securities.

Thank you. Good morning, Matt. Good morning, Doug. Thanks for taking the questions. Maybe start with Concept Pet’s intrigue there, maybe talk about where the reserves are. I know it's small, but what kind of synergies and-or growth potential you expect? And more importantly, are there similar sized -- are there multiple or other similar sized tuck-in opportunities out there?

Sure. Thanks, Dan. Yes, we're really excited about Concept Pet. It's a small bolt-on to continue the growth of our European Pet Care business, which is -- the brand is Sivomatic. It's complementary in terms of its Western Europe, but also brings in some customers in the central European zone. So the reserves are in Slovakia with operations there as well. And so, it gives us kind of logistically and positionally throughout Europe -- geographically through Europe a nice footprint. Those reserves help support that business, but they can also be used for other purposes as well. So it's not going to be a lot of cost synergies here given its size. It's really going to be more around being able to serve our European pet care customers better, more fully, and also grow with them more completely. So really excited about it. Welcome the 50 new employees to MTI.

Got it. Really helpful. Matt, you gave some good detail, particularly within the segments around pricing actions as it relates to this quarter and the guide. When we think about the Q2 guide, how much catch up in terms of pricing do we still have to go that could drive margins further still into Q3 and beyond, or be closer to caught up by the end of Q2? Thanks.

Yes. The way I stack it up, Dan, is a tally beginning in sort of the June timeframe last year, when inflation was really starting to pick up. If you track it from that point, we've absorbed about $94 million, $95 million in inflationary cost. And you've seen that on our bridges that we've reported to you over the past couple of quarters. Offsetting that has been now about $77 million in pricing. So there is still some catch-up, but you're seeing the gap improve. Caveat being there, we're still seeing some inflation, particularly in energy, and that is moving quite spiky in Europe. And so you're seeing that like we told you about in SMI, about $2 million we absorbed this quarter, that will pass through contractually in the beginning -- late in the second quarter, early third quarter. And so, we'll continue to have that dynamic, but we certainly believe -- you saw us call back about $2 million to $3 million of that inflationary gap. We'll expand on that in the second quarter. And as we've given you an outlook for the full year, that's going to mean further margin progression and capturing that gap, and then improving on it as we move into the back half of the year.

Really helpful. And then, China, you gave a pretty solid outlook for Q2 despite what type of impact do we expect on Metalcasting? Or maybe, I shouldn't say in Metalcasting, overall in China based on where we sit today in Q2?

Right now – Dan, it’s Doug. Right now, China was a drag through the first quarter in Metalcasting volumes. We see those rebounding through the second quarter. I think as we said in April, it's still -- it's moving along sideways. It hasn't ramped up yet. But we see our outlook at least through June and into July being much more positive. The demand there, from both automotive and non-automotive production still remains strong. We do have some backlog. We've been working to get those backlogs through our plants, given some of the transportation restrictions. And so we're moving through it, but it has been a little bit slow, but what our outlook for the region through the second quarter and further out is pretty positive.

Perfect. Thank you. I've got one or two others, but I'll follow up and jump back in queue. Thank you.

Yes, I didn't answer your bolt-on question, Dan. So if you want to do the later? I can answer it now. In terms of pet care --

Yes, curious about the opportunity set. That would be great.

Sure, sure. So I didn't answer that earlier. Yes. So, there are other opportunities. I would say though in the Pet Care business through Sivomatic, Normerica, and now Concept Pet, we've put together a really nice portfolio of physicians, mine resources, manufacturing locations next to population densities to be able to really effectively serve those pet litter customers. But right now, our goal is obviously to continue through the integration of Normerica, making sure we finalize that. Now concept that in Europe, and then really utilize this space to grow that business. Further out, I think there are in other geographies some other positions that may make sense, but I think right now we've really built a nice global base of operations and mine assets to really grow this business. So we're excited about it. We've put it together. When we started this business, when we bought Amcol, the business was about $70 million, the business is now about $385 million in revenue. So that gives you the size and it's growing at about kind of 8% to 10% per year. So that gives you an idea of what we think this is capable of and bolting on Concept Pet is going to be a real help to continue that growth.

Perfect. Thank you.

And our next question comes from Mike Harrison with Seaport Research Partners.

Hi, good morning. Congratulations on a nice start to the year.

Thanks, Mike.

I had a couple of questions here on the Refractories business. First of all, you mentioned some additional raw material cost, are you having any problems with cost or availability of magnesium oxide? And can you also comment on whether the Russia-Ukraine war maybe leading to some weakness in Russian Steel and creating some opportunities for your Refractories business where you participate outside of Russia?

So, yes, let me start with that, and then I'll pass it to Brett Argirakis, who is leading that business. No, we're not seeing any issues around supply and the supply chain. I will say that part of the Matt's comments around our strategic inventory build was making sure that we secured and put on docks from parts -- part of that was China and getting some reserves in our raw materials out of the country ahead of time. So we utilized some really good opportunities to purchase and some timing to build those inventories, and that's part of that inventory build that will release throughout the year. So no, we really did a good job on the supply chain issues. As far as Russia-Ukraine, this was the business that had some business in Russia and Ukraine, it's about $5 million. So it was negatively impacted actually as we ceased those sales into the region, probably around $1 million in the first quarter. So it was actually a detractor from the results. But really, I think the results that you're seeing right now are just a solid execution, really smart cost control, a good procurement. And we're talking about the delivery of these technologies in a package form. These newer formulations, raptor and laser measurement and application technologies that are leading to positions and just delivering higher value to the customers. So anyway, sorry, Brett, if I took a little away from you, but too exciting to hold back. So why don't you give us more color, particularly in the US around what you're delivering in terms of new sales from this?

Thanks, Doug. Mike, just a little bit more color. So as far as Russia, as Doug pointed out, our overall sales, maybe $5 million between Russia and Ukraine, so it's not a big part of our business. But where we may see some indirect support would be the Ukrainian steel production, some of that is moving to Turkey where we have a very good business. So we may see some from added steel production some more demand on our refractory product. So we're hopeful that helps us out. Overall, when you look at Russian Steel, they produce about 75 million tons of steel, United States is about 85 million tons. So they do have a very good market. But as I said, we're not very deeply penetrated in that market, mainly refractory and some laser. But going back to what Doug said, our business really has been focused on our growth, new business initiatives and our outlook looks pretty strong. The business is healthy. We have eight new contracts we're starting up in 2022. And they're all utilized, or they are refractory wire and laser technology, or a combination. So we're really excited about that. The laser business, the Ferrortron laser business is doing very well now. We have a strong order book and as COVID loosened up, we're able to commission those lasers. And also, the new refractory formulations continue to show very positive results and that also is starting to grow and allow us to penetrate the markets globally. And lastly, really, we've signed over -- now we're up to about $120 million of new sales over the next five years and that puts us in a really good position to continue to grow and keep our margins strong. Hope that answers your question.

Yes, I appreciate all the additional color there. Maybe shifting over to the household Pet Care and Specialty business, the revenue number, I think was a record there in that low $140 million range. I know that there is some seasonality to that business, but with the pricing efforts you have in place with the growth initiatives, and obviously we need to bake in the Concept Pet acquisition as well, is this kind of a good revenue run rate for the rest of the year going forward or should we think that Q1 maybe marked some inventory restocking after you had some of the issues in Q4 with supply chain?

No, I think it's -- I don't think there's anything significant in the first quarter. Interestingly, you're right. The lower seasons in some of our businesses are the colder months and the lower seasons in the Pet Care business are in the warmer months as cats are more outdoors. But I don't think that's material. I think what you're seeing and with the Concept Pet acquisition is you're going to see this continued run rate of growth. As I mentioned in my comments, this segment has grown 14% compound over the past five years. And so we see that continuing. The Pet Care business alone has grown, I think around 8% compound in that segment. So I think it's a good run rate for you, Mike. I think with these new positions and some of the new products and with some of our e-commerce strategy taking off, especially that growth in Asia is starting to become forming, I think this is a good sustainable growth rate for you.

34:01 All right. And then wanted to make sure to hit a couple of questions here on the project-driven businesses. Can you give us a little more color on the strength that you're seeing in Environmental Products and how sustainable that could be into the rest of the year? And then in building materials, you noted some delays related to supply chain issues, and we're hearing this about raw material availability, have those issues run their course or do you still see that some customers are going to be struggling to get the materials they need as we get into the busier building season?

I don't think we've seen any real supply chain disruptions, so the business has been doing well from the manufacturing, the operation side. I want to let in Jon Hastings, why don't you give us a little color on environmental building?

Sure. Mike. Hi, good morning. A couple of things. You keyed into it. Our pipeline has strengthened significantly. As you know, the markets have opened up projects are progressing, through funding. We're seeing this in most of our sectors. We see it in the municipal landfills; coal ash pond projects that are supporting the coal fire power plants. We're seeing waterproofing projects, infrastructure projects all expanding. So the outlook has grown considerably stronger as we moved from '21 into '22. To give you a couple highlights by region, for example, in North America, we did see the demand pick up in Q1 just as we expected, and now we're fully booked through Q2 and beyond. We even saw within building materials, we had a little bit of a blip in the Pacific Northwest with the Teamster strike, that affected some project starts, but our order book has continued to be strong and we're working through that and that seems to have been resolved. In Europe, our second biggest market, bidding activity continues very strong. In Southern Europe, they're executing awards and construction of large scale projects at a much higher clip than what they've done in the past two to three years. So we suspect that some of this is also some pent-up demand, but it also is just an expansion of both building materials and also Environmental Products. Internally, what we're focused on is strategically introducing our innovative new technologies. We're focused on sales of our high-value, high-margin specialty products. And as you would expect from us, we continue to ensure efficient and cost effective operations to effectively serve all of our markets. So, yes, there are some, there is a little bit of volatility on logistics and raw materials periodically, but we're really well positioned to continue to offset that with pricing and instituting the best practices, business practice that we put in place. Our order book remains full and we're executing on all cylinders. So hope that -- hope that helps, Mike.

Very helpful, thanks. Last question for me is on the guidance. It kind of looks as if you're expecting the second half to be maybe just slightly better than the first half. I think a lot of us have been watching the price cost dynamics and assuming that, what would be a headwind in the first half should actually turn into some additional margin tailwind in the second half. So I guess maybe just help us understand if you're trying to be conservative with that 560 to 570 or if there is some other, I guess components of margin headwind that we need to keep in mind?

I think a few things to note, Mike. Recall that's the first time we've given annual guidance in quite a bit of time. And as we've given you now, second quarter and the full year, you are seeing the benefit of a few things like we detailed. Improvement in our end markets like was just detailed by Jon, and you heard that from Brett, and we've talked about it, demonstrating some of that, being able to price. Doug talked to you about the pricing construct that we have, we've been able to change our contracts. We've been able to work with our customers. We price on the value that we contribute. So that speaks to the margin potential that we have in pricing beyond just recovering inflationary factors. And so, yes, you'll continue to see that as we move through the year. If you remember last quarter, Doug talked about a flight pass in our margin as we move through the year, and that's what we are looking at. And that flight pass moves towards that 14% level as you move into the later months in the year. And that's coming from continued volume growth, based on stable market conditions, expanding those margins, getting pricing in the place that value -- that we believe appropriately values our products, our technologies and our partnership with our customers, and pulling that all together to deliver what we think is a strong year. And in that 560 to 570 range, around that range, that gives you a sense of some confidence as you look into the second half of the year around those factors, being able to control what we can in the face of some uncertain market conditions that are going to be obviously making some headlines, whether that's an economic factor or specific markets that you may see providing some level of contract that we need to manage through. But overall, looking at a very good year in total and progression through the year.

All right. Thank you very much.

Mike, I'd also add -- sorry, Mike, I'd also add now that you may have mentioned it. So we still have some room to go on the integration of these acquisitions. So in the back half of the year. We're not done with the integration and there's still some systems integration going with our Normerica acquisition, and still some margin expansion there, and also with Concept Pet. So, yes, there's some things in the back half of the year that we think markets in the delivery of revenue from acquisitions that are going to strengthen things for us. So, but I think, as Matt said, being able to go out that far right now is projecting the confidence that we have in this business and being able to deliver it.

Sounds good. Thank you.

[Operator Instructions] And we'll hear next from Silke Kueck with JP Morgan.

Hi, good morning.

Hi, Silke.

In your earnings guidance for the second quarter and for the full year, what pricing is embedded in that outlook? So your prices were 9% higher in the first quarter, like what do you think year-over-year -- what do you think it might be in the second quarter, and what do you -- what's baked into your guidance for the full year?

Yes. I think if you remember the way that we detailed our full year outlook last quarter was that we were going to experience about 15% top line growth. That was going to be 5% through organic, 5% through the Normerica acquisition, and 5% through pricing. Again, what you saw this quarter was about 4% organic and that's volume and mix, despite what we've alluded to was a challenging January and February. So, a very good organic growth component, that’s 5% looks good as we move through the year. Normerica contributing about 5% to 6%. Acquisitions, as Doug said, that will trickle through the rest of the year with Concept Pet. So, still seeing about that 5% topline growth. Pricing, to your point, came in stronger than what we had anticipated, and there is a few factors surrounding that. One, you're continuing to see inflation and we are continuing to drive pricing as inflation moves. So that speaks to our value proposition with our customers, the partnership we have in being able to recover that pricing. And then, furthermore, recovering our margin, which was embedded in that 5% as we came into the year. So, as you're looking at it, Silke, you'll continue to see a higher level of pricing as we go through the year, just based on the higher level of inflationary factors that we had. But again, that 15% that we guided to feels good.

Okay. So, I think pricing should be something more like double digits going forward for the second quarter and full year?

Yes. Silke, I think we're in that -- we're not saying that 15% is -- we're still holding to that five, five and five, right? So 5% organic volume growth, 5% from acquisitions, at least through the fourth quarter, we will lapse that acquisition number as Normerica kind of annualizes. And we think that given what we currently see with the inflation forward, we still have some pricing to pass through contractually that's going to come through in July-August through the third quarter, and those are largely in our Paper PCC contracts and some in refractory. So I think you're going to see it through the third quarter at least that nine in the first quarter, probably you'll see another five in the second, and probably that five into the third in pricing. Now, it depends on where inflation goes. So we will keep that spread and we will continue to expand margins, like Matt said, that 14% plus over kind of run rate in the fourth quarter. If inflation continues to go at this pace, we're going to continue to do this. I think when that plane is over, that pricing may come off a bit. But for now, we think at least through the third quarter, you're going to see that kind of 5% average number over prior year.

Okay. And in terms of the electricity and your energy costs, like it seems in paper that you have a contractual pass-through. Do you have that? Given like the unusual spikes in Europe, do you have that ability of pass-through in all of your businesses or you only have that in paper?

In paper, it's contractual. It's actually literally written into that. And we do get -- we receive our utilities in many cases from our customers. So in paper where our satellite facilities sit on side of the paper mill, we receive those utilities. They pass on a pricing increase, and then we'll pass that through contractually with a delay, with other factors. There's other raw material input costs and other factors that go into a pricing formula which has a delay to it. In most of our contracts in North America, that's pretty tight. I mean we move those to sometimes instantaneous, one month, three months. But in Europe, there are some contracts that still -- legacy contracts that are out there six to nine months. When you see times like this, in past times we've seen inflationary cost of a couple of hundred thousand dollars, which will carry for six months, and then pass through contractually. As Matt mentioned, we saw $2 million worth of energy cost increases alone in these businesses, primarily in paper, in Europe, given what's going on, that we're going to carry. We'll carry it through the first. We'll carry it through the second, then we'll past it on to the third. So, the good thing about our contracts is they protect us. The challenging piece of our contracts is there is a delay to them and it's exacerbated in some of these really high inflationary periods. However, the products -- our products are priced outside of paper. Our products are priced on value. We're able to make sure that we get the value that they provide. And so, yes, we are working with our customers very transparently around some of these increases, not just energy, and they understand it. They are in many cases in the same position with our customers. So it's always a challenging conversation, but it's not one that's not understood because of the value of our products that we provide to our customers. Hopefully, that helps. It's long-winded.

Okay, thank you for that. And if I can ask like one or two more. Regarding the Normerica acquisition, my memory is that it was like a $140 million business when you acquired it, something like $35 million in sales per quarter. Maybe there's like some seasonality, but did the Normerica business in volume terms, grow this quarter or it contracted? I thought the acquisition benefit was unusually low.

They're about at that pace. They're at that pace, Silke. They have not contracted. We're running at that rate. We -- I was just looking to Jon. We have some new business opportunities that are taking hold that we're putting in place. So I think what you will see is some growth in revenue and that Normerica business. Again, it's going to be in that Pet Care business. And so we'll probably won't call out exactly how much is Normerica or legacy business or Europe. But I think all of that, and the new business, and the acquisitions are going to contribute to that continued kind of 8% to 10% growth rate in that business. So, but for the quarter, I think they were relatively flat with the fourth.

Yes, and just to add on, from a transaction perspective, he integration continues on pace. So, as Doug said, we have some systems integration that are going to take -- that is going to take place later in the year. So we'll continue to put effort there. But overall, Normerica remains very much on track.

Okay. And I guess, there's a question I wanted to ask about your exposure to the Asian markets and some of the COVID related shutdowns in China. Where does that touch you most, in which businesses? And what you sort of like -- what do you expect for the second quarter?

48:19 Yes, I think, it's most impacting our foundry business, our Metalcasting business. Jon, how about you tell us where we are with customers and our facility there?

48:31 Yes, Silke, like Doug said, it mainly affects our Metalcasting business, greensand bonds. And what we've seen just in the past couple of weeks and months is that, there has been an increase in -- a difficulty in the ability to actually ship out of our plants. However, that's been resolved through a lot of hard work, working with the government, working with trucking et cetera. And so, we've built up a little bit of the backlog with our customers. We have now been supplying. We've worked off that backlog. And going forward, again, it's volatile. We're going to continue watching this. But so far there hasn't been any real significant disruptions and we will continue to generate the volumes for our customers that are needed. So again, no real significant impact so far.

Right. And in the guidance we gave you, as you go through it, you'll see what we basically said is that that China COVID situation is going to continue. Sales are pretty slow in China Metalcasting, and that looks like it's going to continue into the second quarter predicated on what's going on with the COVID condition there. So guidance has embedded that viewpoint. And so we'll work from there. But as John outlined, very good performance from the team working with customers and moving forward.

Exactly. So, I just want to jump in here. We have 500 employees in China. And we have two offices, one in Shanghai, one in Beijing. And those -- that team, those teams are at home and they're continuing to work. They're doing a fantastic job. So a quick call out to them for all their doing maintaining that business. And as Jon said, they're working really closely with customers and those volumes are getting shipped, we're keeping them running. So, anyway, I wanted to put that out there.

That's helpful. And I have a very last question just on cash flows. I was wondering what your CapEx target is for the year? And what's your share repurchase target for the year?

Thank you, Silke. So, cash flow, as I said, free cash flow, we're expecting to generate about $150 million. So another strong year of free cash flow. I think we talked through the dynamic of how working capital is going to release as we move through the year, particularly those strategic inventory positions. CapEx embedded in that assumption is about $80 million to $90 million. If you remember, last year we did about $85 million coming into this year. We said we'd have a similar experience, really good opportunities for investment inside the company. We're going to take care of those and also sustaining CapEx continuing to be in that $40 million range. As you look at our use of cash, yes, you are right, we are currently operating under a $75 million repurchase authorization. We anticipate that we'll complete that by October, so purchases will continue there. The other opportunities for our free cash flow, we've talked to you about our balanced approach using some of that cash. We've just acquired Concept Pet with cash on hand. We will continue to also look at opportunities to pay down debt and you'll see that as we move through the year with free cash flow as it's generated. So really using that cash flow on all three pegs of the stool, delivering to shareholders, finding opportunities to deploy to growth and then also maintaining a very strong balance sheet.

Okay. Thanks very much.

Thanks, Silke.

And our next question comes from David Silver with CL King.

Yes, hi, good morning. I think the first question, the first topic, I would like to ask you about is the PCC business. And I'll just apologize if this is going to be one of my famous kitchen sink question styles. But I would like to focus maybe on the sequential growth in that area, both the paper and the specialty side. It was pretty striking compared to a typical 4Q to 1Q. And I'm just wondering if you could maybe break it down that well into double-digits growth that was there sequentially. And in particular, were there a few start-ups. I think Baiyun on my list is scheduled for first half of this year there may have been a restart in the US, but what are the elements that led to that very strong sequential performance in your PCC business this quarter and will that carry through to the second quarter? Or sometimes I believe there is a seasonal dip there. So, just the trend last quarter, next quarter kind of trend in that business would be helpful. Thank you.

Sure. I think in general, David, it was really due to some seasonality, but also I think in the fourth quarter. I think you're referring to about a 14% sequential growth rate in that business. So we did see some stronger performance. We are moving from a period in December, which was really challenging from both COVID, logistics around the world, and then December was a really tough one through into January. But then I think as you see, as you get into the March timeframe, a lot of different things start to kick in, some construction, automotive builds have been higher, some paper mills that had taken some outages and were down due to COVID have come back. And so, I think what you're seeing in that sequential growth is a lot of just kind of factors that were in late in the fourth quarter that March is a totally different totally different scenario in terms of where we are in the market. But I do think if you take that March and you look through the second quarter, that's the kind of pace that we're on going into this next one. So I think we saw some strong growth due to some things in December, but I think if you take the March performance and you take that up the second -- out of the second quarter, that's the construction, the automotive, the paper, the seasonal activity, you're going to see, and I think you're going to continue to see some growth into the second. So that's at least the dynamic that's happening. DJ, you want to give him more specifics about what's behind it?

Yes, a couple of things, David. On the specialty side, we're really taking advantage of those expansions that we had put in to place and the pull from both the automotive and the construction industry remains very strong and the outlook is very strong. We've also been very effective in -- with pricing in that area. So -- and we see that continuing. And that's part of what's built into Matt's guidance. On the paper side, you're seeing North America remained extremely strong in terms of its run rates in the industry, and we've got some upside in China and India as COVID settles down. And then as both Matt and Doug have talked about earlier, you're going to see that the contractual price increases kick in towards that second half of the year. And then finally just to remind you on some of the expansions that you mentioned. You highlighted Baiyun, that's correct. That will be coming in towards the end of that second quarter. Then we have the India contract with SPB that starts kicking in, probably late in the third, sometime in the fourth. And then, the other GCC opportunity that we had will be in 2023. So the trajectory is good, just based on the current builds. And I would give you just a little further insight. I'd say the pipeline is robust as well.

And just to follow up briefly, D.J, but if I just take the simple revenue numbers for the first quarter, $121 million total for your Paper PCC plus the specialty. So you're over $120 million. And if I go back in my records, I mean it's been I think 2015, 2016 was the last time we had that kind of revenue rate, and of course some not inflation adjusting there. But maybe, if you just had a moment, I mean just reflect on kind of how you see the business situated now early 2022, with the diversification into packaging grades relative to how the business looked five years ago. I'm thinking there is just a lot more end market diversification and new applications relative to the last time the business was generating this type of revenue. Thank you.

Thank you. So a couple of things. If we concentrate on that paper business, the team is doing a really good job of shifting that portfolio, both to advanced products in the printing and writing grades that allow for more consumption per ton of paper that's made, but also in to that packaging. And I'll refer to that pipeline, David, if I looked at that pipeline five years ago, maybe I would have had a packaging opportunity in there, probably not. Now, if you look at a dozen active engagements with customers, probably 30% of those are packaging, some of them PCC, some of them like the GCC opportunity that we looked to earlier and then some of them also non-PCC related technologies. So those last two statements I made are two different platforms that help us position in that market. Then the other one on the specialty PCC side, there is a couple of items of significance. The first one is these advanced products that we're making on radiology control, they continue to get a good traction in strong markets. We did make the small acquisition, but an important acquisition for us in North America with our assets in Missouri. And then we've also been penetrating further in food and pharma applications of specialty PCC. So, both -- from a PCC standpoint, both portfolios are well positioned for the future.

And David, the only thing I'd add is, I guess, it's a good -- I appreciate you bringing the look back. It's a different business. It's not quite there yet. We've transformed it from 99% base copy paper into one that we mentioned across the portfolio of companies. One that is a much more higher tech products, they're positioned in markets that are structurally growing, and in geographies that are growing. So I think it follows along the thesis of what we've been doing over the past years to create more stability and position the business into higher growth products and regions. And I think, both in specialty and in Paper PCC, that's what you're seeing. And as D.J mentioned, throughout this year and into next, there is still -- there is some secured contracts that don't show up in the top line yet that will. So, I think you'll see that continue.

Yes, I know. Thank you for that. I mean I considered the development of that business, just a very good microcosm, Doug, of how you talk about a mineral base, but with a differentiation or a technological edge to it. So that's why, I mean, I kind of brought it up. Okay.

Yes, thanks for doing that.

Doug. I appreciate you mentioning the new product development earlier in your comments. I was wondering if you could just give us a quick update on fluoro-sorb in particular. And then you did mention rheology modifiers and I haven't heard you talk about that in a while, I may have missed it. But I mean to me that's very, very high ground area within performance materials. Just wondering, for you calling it out today, was there -- has there been some movement or some development in your business in that area that you considered noteworthy? Thank you.

Thanks, David. Let me give you just some, I guess frame-up the innovation, kind of pipeline and the company, I mentioned a number of comments and a number of stats. I think if you looked at the total value of the portfolio, upwards of $800 million worth of ideas through different stages in that portfolio. And so if you think like -- we've got a much bigger funnel of thinking, but that funnel is focused on some very specific areas, right? And I'll give you a couple of those threads. One of them is, we've always been in rheology modification. I mean in just about everything we do in specialty PCC and in some of our clay based products are rheology modifiers. What is that? What it does is, it in parts, kind of a -- well, I'm going to get out of my element here even in engineering -- it in parts an ability for formulation to flow or a physical property of flow. I'll give you an example in construction automotive sealants being able to have a robot put out a line of sealant and then have it set and not sag. So it has to come out really quickly, but it can't go anywhere from that and it can't have a tail of a string once the gun is pulled away. But what makes it do that is our specialty PCC. And so being able to engineer the particle and engineer how it goes into that process, it helps that flow under that pressure, which is what rheology is. And so -- but we have that capability across the company and we apply it with our different Minerals. And some of these are in cosmetic applications and we used clay to do the same things. And so,…

Sure, sure, glad to. You mentioned fluoro-sorb and PFAS. Again, if we're getting a lot of attention from potential customers and strong performance is being witnessed in all of our pilot applications. We've got 90 successful demonstrations. Just to give you a couple of concrete things, since last year's Canadian DoD in-situ project. We've got fluoro-sorb that's been impregnated into our reactive mats, and they've been installed at a US DoD site. We've got mobile filtration systems that have been placed at two other sites. We've got one in North American landfill. That's in the in-situ space. In the drinking water space, we're pleased that in the next month or two, so in Q2, we're going into two new municipal drinking water systems. And as you know, other utilities and regulators are watching that really closely, the performance that we see with fluoro-sorb is substantially better than other competitive technologies. So we're pretty excited about having those drinking water system some commercial and installations coming up in the next couple of months. So, looking at the road map going forward. As you know, EPA continues to set their -- set the stage and we're poised to take advantage of the demand once it manifests itself in the marketplace. So a lot of excitement, lot of trials, some commercial applications, and certainly poised to satisfy the demand once it comes from the regulatory environment.

That's great. Thank you very much. I really appreciate all the color.

Thanks, David.

And our next question comes from Daniel Moore with CJS Securities.

Thank you again. Maybe one more, I'll ask it as quick as I can. But you're seeing obviously faster top line growth, now faster bottom line growth leverage based on your implied '22 guide is comfortably below 2 times and you're going to generate a lot of cash in the back half of the year. So I guess stock's still trading where it is in the 10 to 11 times forward EPS range. Are there things you're considering to try and shine a brighter light on the consumer business, which is now a third of your business and less cyclical, be it re-segmentation, another Analyst Day, just anything -- you gave great color, I'm just wondering if there's anything higher level, that's number one. And number two, maybe why not, buy back stock to keeping more aggressively, just given where the leverage is and all those metrics I just cited? Thank you again for the thoughts.

Yes, let me take the last one first. No, I appreciate that. The cash flow generation and where the balance sheet is it would support higher levels of share repurchase. I think where we are and where it's kind of been is, the $75 million is 50% of that free cash flow, that average free cash flow number. That can certainly go higher, but at the moment, we think that's a comfortable place for balance use of that cash to make sure that we also see opportunities on the acquisition front. So we'll continue to make sure our debt stays and our balance sheet stays in that 2 times positions. You might see some debt repayment this year. But we want to -- we see those opportunities out there through acquisitions and we'd like to balance the use of that cash to make sure we have opportunities to do that. As they wane, we can up that share repurchase. And as they get closer, we might back off that share repurchase, if we see the use of that cash for that strategic acquisition. So we like where that is. We think it's a good balance, but we recognize with our balance sheet and cash flow, it could go higher, if acquisitions play in. On the other side of things, I think that's a great question, Dan. I think we're doing -- we spend a lot of time -- as much time as we can with investors and talking about this strategy. Hopefully, in the comments today you found we're a little bit more clarifying in terms of where we've been and where we're directed. I do think that coming out -- going out with an Analyst Day is something that we want to do. We're trying to actually -- it's interesting you said that because we've been talking about the timing of that and exactly when we can do it. We're thinking about possibly this fall. So more to come on that, but yes, I think that would be very helpful to you and the rest on this call, but also to our investors to really see where this is going and what we see further out, than just 2022. So stay tuned. I think it's a great idea. It's something we're going to do. We're going to try to plan that and more than likely will do it. So trying to get that out and have a real robust day around where we're headed.

Appreciate the thoughts as always. We'll talk soon.

Thanks for the question, Dan.

And there are no further questions at this time. I would like to turn the call back over to Mr. Dietrich for any additional or closing remarks.

Thank very much, Jennifer. Thanks everyone for joining the call today. I appreciate the questions and we'll talk to you in three more months. Thanks.

This concludes today’s conference. Thank you all for your participation. You may now disconnect.