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Minerals Technologies Inc . (NYSE:MTX) shares fell 6.6% following its first quarter 2025 earnings release, which revealed an 8% decline in sales and a significant litigation reserve that pushed the company to a net loss. The company’s presentation, delivered during its April 25 earnings call, highlighted temporary market challenges but projected a recovery in the second quarter.
Quarterly Performance Highlights
Minerals Technologies reported first quarter sales of $492 million, down 8% from the prior year, with operating income excluding special items at $63.2 million, representing a 12.9% margin. Earnings per share excluding special items reached $1.14, a 23% decline from Q1 2024.
The company attributed the disappointing results to abnormally slow business in January and February, driven by customer order pattern changes, though demand stabilized in March. Operating margins were negatively impacted by lower volumes, unfavorable product mix, and higher costs.
As shown in the following overview of Q1 2025 performance:
"We experienced an abnormally slow January and February, driven by customer order changes, but demand stabilized in March," noted Douglas T. Dietrich, Chairman and CEO. "We’ve initiated a cost savings program to address the margin challenges we faced this quarter."
Segment Analysis
The company’s performance varied across its two main business segments. The Consumer & Specialties segment reported sales of $268 million in Q1 2025, down from $279 million in Q4 2024. The decline was primarily attributed to order pattern changes in cat litter, fabric care, and automotive sealants, as well as lower paper and packaging volumes due to customer maintenance downtime.
Despite these challenges, the segment saw continued growth in edible oil and renewable fuel purification applications, which increased 6% year-over-year, along with stronger residential construction activity driving ground calcium carbonates up 6% year-over-year.
The following slide details the Consumer & Specialties segment performance:
The Engineered Solutions segment reported Q1 2025 sales of $224 million, compared to $239 million in Q4 2024. This segment maintained stable market conditions in North America for foundry and steel applications, while experiencing a soft steel market in EMEA. Notably, the segment saw stronger foundry volumes in Asia and increased sales in PFAS remediation and environmental lining projects.
As illustrated in the Engineered Solutions performance metrics:
"Our Engineered Solutions segment maintained a stable margin above 15% despite lower sales," said Erik C. Aldag, Senior Vice President, Finance and Treasury and CFO. "We’re seeing promising growth in our environmental solutions business, particularly in PFAS remediation."
Economic Update and Market Dynamics
The company provided a detailed economic update, highlighting current market conditions and dynamics affecting its business segments. In Consumer & Specialties, after experiencing broad-based consumer order pattern shifts and destocking activities in Q1, the company now sees more stable order patterns in cat litter and continued growth in other consumer-oriented applications. The Engineered Solutions segment faced continued soft steel market conditions but saw stability in foundry markets in North America and growth in China.
The following economic update slide provides a comprehensive overview of market dynamics:
"MTI is well-positioned as a market leader, with growth aligned with secular and sustainable trends, and a strong financial foundation," Dietrich emphasized during the presentation.
Balance Sheet and Special Items
A significant development in the quarter was the establishment of a $215 million litigation reserve related to the BMI OldCo Chapter 11 bankruptcy case. This special item dramatically affected reported results, pushing the company to a net loss of $144 million for the quarter, compared to net income of $46.7 million in the same period last year.
Excluding special items, which also included $5.5 million in restructuring costs and $2.8 million in litigation expenses, adjusted net income was $36.4 million.
The company’s balance sheet showed working capital increasing from $528 million to $569 million, primarily due to lower volumes/inventory turns, strategic inventories, and timing of receivables. Total (EPA:TTEF) liquidity stood at $684 million, with $312 million in cash and $372 million available on the company’s revolving credit facility. Net debt decreased slightly by 1% to $674 million, with a net leverage ratio of 1.7x EBITDA.
The following slide illustrates the company’s balance sheet and capital deployment:
Free cash flow for the quarter was negative at $(22.7) million, compared to positive $39.4 million in the prior year, reflecting the challenging operating environment.
Forward Outlook
Despite the challenging first quarter, Minerals Technologies provided an optimistic outlook for Q2 2025, projecting sales between $520 million and $535 million. This represents expected growth of 3% to 6% in the Consumer & Specialties segment and 10% to 15% in Engineered Solutions. Operating income is anticipated to reach approximately $75 million, with earnings per share of around $1.40.
The company cited several factors supporting this improved outlook, including seasonally higher construction activity, continued growth in high-value consumer specialties, and modest improvement in North America and EMEA foundry and steel markets. Management also expects margin improvement driven by volume, mix, and cost savings measures.
As shown in the company’s second quarter outlook:
"We’re entering a seasonally stronger period for our business, particularly in construction-related activities," said Dietrich. "While uncertainty persists around tariff policies and potential end market impacts, we’re confident in our ability to deliver improved results in the second quarter."
Conclusion
Minerals Technologies’ first quarter 2025 results reflect significant challenges, including slower customer order patterns and the establishment of a substantial litigation reserve. However, the company’s management expressed confidence in a recovery beginning in the second quarter, supported by more stable market conditions and seasonal factors. Investors will be watching closely to see if the projected improvement materializes and whether the company can successfully navigate the ongoing litigation issues.
Full presentation:
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