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Greetings, and welcome to the Quaker Houghton Second Quarter 2026 Earnings Conference Call. Operator provided instructions. As a reminder, this conference is being recorded. I would now like to turn the call over to John Dalhoff, Director of Investor Relations. Mr. Dalhoff, you may begin.
Thank you. Good morning, and welcome to Quaker Houghton's Second Quarter 2026 Earnings Conference Call. Joining us on the call today are Joe Berquist, our President and Chief Executive Officer; Tom Coler, our Executive Vice President and Chief Financial Officer; and Robert Traub, our General Counsel. Our comments relate to the financial information released after the close of the U.S. markets yesterday, July 30, 2026. Our press release and accompanying slides can be found on our Investor Relations website. Both the prepared commentary and discussion during this call may contain forward-looking statements, reflecting the company's current view of future events and their potential effect on Quaker Houghton's operating and financial performance. These statements involve uncertainties and risks, which may cause actual results to differ. The company is under no obligation to provide subsequent updates to these forward-looking statements. This presentation also contains certain non-GAAP financial measures, and the company has provided reconciliations to the most directly comparable GAAP financial measures in the appendix of the presentation materials, which are available on our website. For additional information, please refer to our filings with the SEC. Now it's my pleasure to hand the call over to Joe.
Thank you, John, and good morning, everyone. We achieved our fourth consecutive quarter of year-over-year profitability growth in the second quarter, highlighted by a 7% increase in sales volumes. This resulted in the highest quarterly adjusted EBITDA in our company's 160-plus years history. Our volume increase was driven by broad-based growth and net share gains across all regions, amid end markets that we estimate were flat to slightly above the prior year in the aggregate, tempered by offsetting pockets of strength and weakness. Demand remained steady through the end of the quarter after a strong start in April as some customers accelerated buying against the backdrop of the crisis in the Strait of Hormuz. Asia Pacific once again delivered the strongest performance, marking a second consecutive quarter of double-digit volume growth. Our team successfully navigated sharp increases in raw material costs and supply disruption resulting from the conflict in the Strait of Hormuz. Through disciplined execution and by engaging in proactive customer communication, we were able to leverage the flexibility of our global manufacturing network and maintain supply continuity throughout the quarter. Gross margins declined sequentially, but stronger volumes and improved utilization rates helped offset product margin pressure. We implemented price increases throughout the quarter, and we'll see further adjustments from our index pricing in the third quarter. Underlying market conditions were mixed. Demand was steady despite the geopolitical uncertainty with pockets of growth in select markets as normal buying patterns returned. Steel and aluminum end markets trended positively, while automotive light vehicle production remained challenged across most regions and geographies. Some customer purchasing activity may have been pulled forward in response to the Middle East conflict early in the quarter, but we do not believe prebuy activity had a significant impact on the quarter's results. In aggregate, we estimate end markets were flat to slightly above the prior year, underscoring the significant contribution of share gains to our volume growth. Turning to the second quarter results. Net sales increased 10% year-over-year, driven by mid- to high single-digit share gains and were achieved across all regions. Momentum remains strongest in Asia Pacific, where we are winning significant new business in metalworking by penetrating growing sectors like electric vehicle OEMs and component manufacturers. We continue to execute effectively in attractive growth markets such as China, India and Thailand, where our investments in local capabilities and customer relationships are translating into meaningful wins. The Americas and EMEA regions each delivered mid-single-digit volume growth during the quarter. In the Americas, we saw improvement in customer activity levels with the return of previously idled capacity and contributions from recent business wins. The Americas region delivered one of its strongest volume performances in several quarters as operational and customer-specific challenges that affected prior periods improved against the backdrop of firming demand. Our strong customer pipeline and commercial execution drove volume growth in EMEA as we benefited from recent wins in metals and metalworking in that region and continue to grow in the Middle East and Africa despite the challenging backdrop. Adjusted EBITDA margins reached 16% during the quarter, reflecting the increased top line performance and stable SG&A, which declined as a percentage of sales versus the first quarter. In addition to delivering strong financial results, we are executing key strategic initiatives that support our long-term growth and profitability objectives. We remain committed to a disciplined and balanced capital allocation strategy. In May, we announced a new $250 million stock repurchase authorization and returned approximately $24 million of cash to shareholders through repurchases during the second quarter. We also successfully completed the refinancing of our credit facility, further enhancing financial flexibility. In addition, our Board of Directors approved an approximately 4% increase to the quarterly dividend, marking our 17th consecutive annual dividend increase and our 50th dividend increase since becoming a public company. At the same time, we remain active evaluating potential acquisition opportunities that strengthen our business and support our long-term growth strategy. We continue to assess targets that expand our portfolio, accelerate innovation and deliver geographic and channel diversification in new markets. With our strong balance sheet and improved financial flexibility, we remain well positioned to pursue strategic opportunities that create value for shareholders. We will continue to take a prudent approach to capital deployment, weighing returns to shareholders, balance sheet discipline and careful investments in growth. Turning to the conflict in the Middle East. We continue to navigate the ongoing challenges and are maintaining reliable supply, and strong service levels to our customers in a tough environment. Our direct sales into the Middle East and Africa have remained steady, and our consistency of supply has enabled us to win new business in the region. We continue to monitor the situation closely, but have not experienced any significant supply disruptions to date. In many instances, global supply chains have begun adapting to the changing environment, and our global network flexibility continues to ensure reliable service to our customers. But the situation is volatile and the trajectory is uncertain. We are continuing to invest in the capabilities and infrastructure that further strengthen our network and position us for future growth. In June, we achieved an important milestone in our Asia Pacific plan with the successful start-up of our new manufacturing facility in Zhangjiagang, China. This new site enhances our local-for-local operating model and will enable us to manufacture the full breadth of our portfolio inside China, reducing the need to import certain products and thereby creating additional flexibility, efficiency and service responsiveness for customers throughout the Asia Pacific region. More broadly, we continue to take actions across the business to improve efficiency, simplify operations and optimize our cost structure. We are pleased with the progress we are making with the business transformation and cost optimization program announced last quarter. The actions we implemented during the second quarter are expected to deliver approximately $10 million of run rate savings with benefits already reflected in our Q2 results. We will continue to focus on process simplification, productivity improvement and manufacturing footprint optimization, which will further strengthen our profitability over time. The opportunity for profitability improvement over the next few years supports our long-term goal to achieve EBITDA margins above 18%. Finally, we released our annual sustainability report during the second quarter, highlighting our progress in advancing sustainable solutions for our customers and improving the environmental performance of our operations. The accomplishments highlighted in this year's report underscore how sustainability is embedded within our culture and is central to how we innovate, operate and partner with customers around the world. Turning to the outlook. Our view on underlying market conditions remains unchanged. The first half of the year progressed in line with our expectations, and we still expect end markets will be flat to modestly positive during the second half of 2026. Raw material costs have currently stabilized, but at elevated levels. Base oil prices remain volatile due to supply constraints across the refinery network and ongoing uncertainty. Based on our current visibility to supply dynamics, we expect our overall input costs to remain stable at these higher rates in the short term and begin to moderate as we progress through the back half of the year. As a result, we anticipate that our gross margin percentage in the third quarter will be in the range of Q2 gross margins as we work through the timing of raw material cost inflation, inventory movements and price recovery actions. At the same time, incremental pricing actions and certain index-based adjustments will take effect, which will provide increasing benefits as the quarter progresses and should return us to our target range above 36% by the end of the year. Operationally, we were pleased by the strong volume performance in Q2. Demand remains healthy and is showing no signs of slowing in the early part of the third quarter. We expect normal seasonal patterns in the second half, which has historically been better than the first half of the year. In the third quarter specifically, there may be longer seasonal shutdown activity in parts of Europe with the summer holiday period and unseasonably higher temperatures across the continent as well as customers managing their inventories. However, demand in the Americas is improving and tracking broadly in line with normal seasonal patterns, which should help offset the expected slowness in Europe. We anticipate our third quarter performance will be in the range of the second quarter, barring disruptions in the market. As a result, we expect to deliver meaningful revenue and mid- to high single-digit adjusted EBITDA growth for the full year 2026. Our consistent ability to generate share gains, our commitment to execute pricing actions and improve our cost structure and the advantages derived from our global operating network position us well to steadily navigate uncertainty while creating long-term value. In closing, I am extremely proud of how our team performed during a particularly challenging quarter. Our industry-leading teams of operators and experts enabled us to achieve outsized share gains despite the volatility in the macro environment, resulting in record quarterly EBITDA. We continue to demonstrate the resilience in our differentiated service model that are enabling us to win regardless of external market conditions. And we expect to carry our strong momentum through the remainder of the year. With that, I will turn the call over to Tom to walk through the financials in more detail.
Thank you, Joe, and good morning, everyone. Second quarter net sales were $533 million, a 10% increase from the prior year. Sales volumes increased 7%, driven by global net share gains that exceeded the high end of our target range, with Asia Pacific once again being the largest contributor. Selling price and product mix contributed an additional 1% to net sales as pricing actions to offset higher raw material costs resulting from the Middle East conflict were partially offset by changes in the mix of products and services. Sequentially, selling price and product mix contributed a 4% increase to net sales compared to the first quarter. We also had a benefit of 2% to net sales year-over-year from favorable foreign currency across all regions. The second quarter marked the first period in which prior year acquisitions, including Dipsol, are included entirely within our organic results. Gross margins declined on both a year-over-year and sequential basis to 35.5% due to product margin pressure from higher raw material costs. The sequential decline of 130 basis points was less pronounced than originally anticipated due to better top line performance stemming from higher volumes from our global net share gains as well as solid execution on our two rounds of price increases to offset raw material inflation during the quarter. On a non-GAAP basis, SG&A increased approximately $10 million or 8% in the second quarter compared to the prior year. While we began to see benefits from the transformation actions taken during the second quarter, these benefits were offset by higher incentive compensation and unfavorable foreign currency impacts. We delivered $85 million of adjusted EBITDA in the second quarter, while adjusted EBITDA margin of 16% increased 40 basis points year-over-year and 90 basis points sequentially. This performance highlights the operating leverage in our business as strong volume growth drove earnings expansion even in an inflationary environment where margins were under pressure. Switching now to our segment results. Asia Pacific sales in the second quarter increased 12% year-over-year, driven by the second consecutive quarter of 10% organic volume growth. This was the result of new business wins that once again exceeded the high end of our total company target range of 2% to 4%. Favorable selling price and foreign currency also each contributed 1% growth to net sales. Segment earnings in Asia Pacific increased approximately $8 million or 27% in the second quarter compared to the prior year, driven by higher sales volumes. Second quarter net sales in EMEA increased 13% year-over-year, driven by 7% volume growth, higher selling prices related to price actions taken during the quarter to offset raw material inflation and favorable foreign currency impacts. Segment earnings in EMEA increased $8 million or 31% in the second quarter compared to the prior year, primarily due to better top line performance. Lower manufacturing costs related to the closure of our manufacturing facility in Dortmund, Germany also contributed to the improved segment earnings result. Second quarter net sales in the Americas increased 7% year-over-year as 4% higher sales volumes were complemented by favorable impacts from foreign currency and higher selling prices. Higher volumes were primarily the result of new business wins, but also benefited from the resumption of previously idled customer production, along with some new capacity coming online in our metals business. Segment earnings in the Americas decreased $2 million or 3% in the second quarter compared to the prior year as better top line performance was offset by higher manufacturing and operational costs. Turning to nonoperating costs. Our interest expense was $10 million in the second quarter of 2026, which was consistent with the previous quarter, while our cost of debt decreased to approximately 4.4%, reflecting the benefits of our refinancing actions and a more optimized debt portfolio. Our effective tax rate, excluding noncore and nonrecurring items, was approximately 28% in the second quarter, which was in line with the previous quarter and our full year target range of 28% to 29%. Finally, our second quarter GAAP diluted earnings per share were $1.55, and our non-GAAP diluted earnings per share were $2.19, a 28% increase over the prior year due to improved operating performance and lower interest expense as a result of reduced borrowings. Cash generated from operations was $29 million in the second quarter, decreasing from $42 million in the prior year. The lower cash generation in the current year is driven by higher working capital outflows resulting from increased sales volume and increased inventory associated with closing our facility in Dortmund and opening our new facility in China. These items were partially offset by improved operating performance. Capital expenditures in the second quarter were $10 million, primarily related to the construction of our new facility in China. For the full year, we expect 2026 capital expenditures to be approximately 2.5% to 3% of sales. During the second quarter, we announced the approval of a new $250 million stock repurchase authorization that replaces our previous repurchase program and recently announced an increase in our quarterly dividend of 4.3%. We also repurchased approximately $24 million worth of shares and paid approximately $9 million in dividends, returning a total of $33 million of cash to shareholders in the second quarter. Together, our share repurchase activity and increased quarterly dividend reflect our confidence in the strength and durability of our cash flow generation and underscores our commitment to return capital to shareholders through a balanced and disciplined capital allocation strategy. We delivered strong second quarter results, driven by continued share gains, disciplined execution of our pricing actions and broad-based growth across all regions. Our team executed effectively in an uncertain environment, leveraging our global footprint, pricing actions and our operating discipline to deliver record profitability. With a strong balance sheet, enhanced financial flexibility and continued progress on our transformation initiatives, we remain well positioned to execute our strategy and create long-term value for our shareholders. With that, I will turn it back over to Joe.
Thank you, Tom. To close, our record second quarter results reinforce the strength of our business model and our ability to consistently outperform our end markets despite macro disruptions and uncertainty. While the external environment remains dynamic, we are confident in our approach and our ability to continue creating value for customers and shareholders and the opportunities ahead in the second half of the year. With that, we will be happy to answer your questions.
分析師問答
Congrats on a nice quarter. I was hoping that maybe we could start, just getting a little bit more color on what you guys are seeing on the raw material front. I'm curious what specific raw material baskets are moving higher or continuing to show a lot of volatility. And really interested in understanding the timing of the P&L impact to the extent you can help us quantify how much raws were up in Q2 and what the expectation is for inflationary impact in Q3 and Q4, that would be very helpful.
Yes. Good question, Mike. So overall, if you think about our raw material buckets, there are three buckets: the items related to base oils or derivatives of crude, the additives which tend to be closely linked to that, and then the oleochemicals. I would say the base-oil and crude-related portion, which is about two thirds of our bucket, remains pretty volatile and is at an elevated range right now. There is a bit of softening on the oleochemical side and on items delinked from crude, and those trends tend to be more regional. Raw material container costs were significant for us in the quarter. We think those impacts peaked in June and even early July. As we go forward, there are different elements at play: pricing that came on during the quarter, index adjustments that happened at the end of the quarter and through the middle of this quarter, and inventory movements. When inventory costs change, we revalue that inventory and there is an associated capitalization effect for a couple of months as that moves through. As we've modeled this out, we think gross margins will be pretty flat in Q3 compared to Q2 and then improve toward the end of Q3 and into Q4.
All right. And then just on the volume front, Asia has been strong, and so I don't think that was a huge surprise, but EMEA was surprisingly strong. I was hoping maybe for both regions, you can talk about the sustainability of the strength that you're seeing.
Yes. The underlying markets in EMEA showed some positive dynamics: steel was up and industrial production was slightly up. Conversely, internal combustion engine automotive production was down, mid-teens in our estimate, so on balance the market was flat to slightly up. Most of the growth we are seeing is from what I would call self-help, meaning share gains from our pipeline. Share gains were on the higher end of our range, slightly above the high end of our 2% to 4% target range. Regarding sustainability, we are confident in remaining within that 2% to 4% range. Any market improvement beyond that would bolster growth. In EMEA specifically, April was a busy month and we do think there was some prebuy in that region early in the quarter, so perhaps one half to two thirds of the growth was share gain and the remaining portion was prebuy. We are into early Q3 now and demand in Europe has remained pretty steady, so prebuy was not a huge contributor to the quarter's results. For Asia Pacific, the market had some softness broadly, which accentuates our double-digit share gains there. Growth in Asia is coming from share gains, winning new lines, and penetration in metal and metalworking applications, including with electric vehicle manufacturers. I would not expect double-digit share gains forever; it will likely normalize toward mid-single digits over time, but we have a strong local team, just opened a new plant in China, and are performing well in India and Southeast Asia, so Asia should be a growth engine for several quarters.
All right. And then my last question is on Americas operating margin. You were down 250 basis points year-on-year and referenced some higher manufacturing and operational costs. I'm just wondering if you can help us understand a little bit more between those operational issues and raw materials and pricing and maybe any volume leverage or cost actions you're taking. Help us understand the puts and takes around Americas margin and how we might think about that trending into the second half?
Yes. In the second quarter specifically, we had some inventory disposal costs related to quality issues that we are working through at one of our plants. On the positive side, we had higher inventory as we worked off backlog and caught up some of our grease orders. One of our primary plants in Middletown has moved to a 24/7 operation, so we will see some ongoing higher costs in the Americas associated with that. I do believe there was a degree of one-time operational expense in the quarter in the Americas, so I would expect that to improve. Overall, operating margins should move back toward the region's historical levels as those one-time items are addressed.
So I just wanted to start by following up on the margin performance, particularly with the drop-off for gross margins less severe than what you anticipated a quarter ago. I guess to what extent did this reflect faster or higher-than-expected pricing implementation? And thinking about the second half, do you now see upside to the 36% to 37% range that you've talked about exiting the year at as you continue to implement pricing in the back half?
Don't necessarily see modeled upside at this stage. The timing of inventory valuation is an accounting exercise that affects how costs flow through the system. We did a good job implementing pricing; we didn't get all the pricing we wanted, and there is still pricing to come. We modeled a 200 to 300 basis point impact to gross margins in Q2. The stronger-than-expected volume performance was a positive surprise and improved capacity utilization, which helped offset margin pressure. We are also starting to see the benefits from plant closures — you can see Europe operating margins improve in part for that reason. I do firmly believe we will be above the 36% gross margin number by the end of the year. Our target range is 36% to 37%, and while we have seen higher expansion in the past under favorable conditions, we are not modeling that as the base case right now.
Very helpful. And then also just wanted to ask a follow-up on capital allocation. Following your recent buyback authorization and some of that repurchase activity kicking in here in the second quarter, how should we think about your plans for the cadence of buybacks this year? How are you currently weighing share repurchases against the potential you see to execute on additional bolt-on M&A?
Yes. Thanks for that question, Pete. We continue to have good flexibility from a capital allocation standpoint with the new share repurchase authorization. We refinanced our credit facility and added capacity there as well. First and foremost, we want to deploy capital to help the business grow, whether that's through organic investments like our new plant in China or inorganic opportunities through our M&A pipeline. We'll remain opportunistic when it comes to share repurchases, balancing that with dividend payments — we recently increased our dividend by 4.3%. We will use all the tools in the toolkit and maintain a balanced approach, with a priority on deploying capital to grow the business.
It's actually Dan Rizzo on for Laurence. Just getting back to the Asia share gains that you guys are doing. I was wondering if that's a lot of singles or some — meaning that there's a lot of smaller new wins? Or is it a couple of customers where you're getting really great penetration and how that should look moving forward?
Thanks for the question, Dan. It's really broad-based in Asia. China is the largest country in the region, but our growth in India and Southeast Asia has been very good as well. It's across all product lines, so it's a lot of singles and doubles. When a new mill or a new cold rolling line comes online, for instance, we can win significant business — sometimes a larger opportunity, but most of it is broad-based across industrial sectors and geographies in the region.
So with that, say that the new fluid intelligence at a new plant, is that kind of the toehold and then over the next few years, you should penetrate more? I mean is that kind of how it works — this is the way in and then we take it from there? Am I thinking about that right that it could accelerate with each plant as you just get a foothold in it?
That is the design. Fluid intelligence is an enhancement of our service model. When it works well in rolling applications, if a new line is being built, we engage with OEMs and equipment manufacturers to control how our fluids are used, improving efficiency and giving customers control over their systems and insights to optimize fluid application. We continue to innovate in that area across steel rolling, aluminum rolling and metalworking, and we expect it to be a core part of our offering going forward.
And then you mentioned India versus China. I would assume then that India actually offers more opportunity with more new plants and more new metalworking or steel rolling plants coming online there versus China, which I guess would be a little bit more mature at this point. Is that accurate as well?
Yes and no. China still has growth pockets, particularly in the electric vehicle segment — die casting, electrical steel and line refresh activity — so it's not stagnant. The market size means overall growth may be decelerating on a comparative basis, but there is still meaningful activity. India is growing differentially and many forecasts suggest industrial production there could double between 2020 and 2030 or 2035. There is a lot of new production coming online, and we are well positioned to grow alongside that expansion.
I was wondering if you could just talk about the expectation for share gain and new business wins going forward. I think you've been at or above the high end of your 2% to 4% target range for over a year now, and you're lapping some of that acceleration. What's the competitor dynamic or response given that your business trends are pretty sticky there? And should we recalibrate our expectation of your ability to continue gaining share as you continue to do that? Just help us out with the thoughts on the target range.
Good morning, Jon. That target range is considered carefully. Our sales cycles vary — from as short as three months to as long as a year or longer. We've had a strong run for several quarters. Why is that happening? It's a combination of cross-selling, acquisitions that add technology and expand addressable markets, and a stronger local-for-local model in high-growth geographies like China and India. Our fluid intelligence offering has also helped win difficult accounts by enhancing our service proposition. We incentivize the organization on net share gains, and we've reduced churn back to the low single-digit range, which also helps the growth math. We expect to continue to drive share gains, and the 2% to 4% target range remains a realistic baseline for us.
If you could just drill a little bit more down into the Fluid Intelligence piece. How big is that business today? And are you seeing momentum accelerating there? What's the growth rate?
It's difficult to define precisely. We measure it by the amount of fluid sales that are tied to a fluid intelligence offer as part of the service. Right now, somewhere between 10% and 20% of our revenues have some fluid intelligence component as part of the service. Our ambition is to penetrate across the entire business and use it as a growth engine to enter customers we don't serve today.
Are the margins associated with Fluid Intelligence higher than your fleet average, given the way the equipment works and the personnel you dedicate to it?
Not necessarily. Fluid intelligence is a digitized service model. It doesn't replace people, but it enables product sales and service. Our margin profile is fairly consistent across the business. The value is in penetration and retention, and it helps sell product and services more effectively.
So apologies, this might take a little time to get out. But along with your very strong results this quarter, I would call out maybe the incremental margin performance — growth in operating income or EBITDA relative to the growth in sales. I'm thinking that 7% volume growth largely from new business wins, that does strain your skilled labor force to a certain extent. I'm just wondering if from your perspective, Joe, you're able to handle continued quarters at this mid- to high single-digit new business win pace with your installed base. Under your predecessor, there was some volume erosion, and it's not apples-to-apples, but you are regaining that volume now. Should I look at some of the very attractive incremental margins you're reporting now as a sign that maybe your skilled labor force was underutilized and you were able to take on a fair amount of new business without meaningfully staffing up or adding incremental resources? If that's the case, how much more capability do you think you have before you would have to meaningfully invest in new talent or other resources to service your growing customer base?
Great question. We did go through a period where, because of system complexity, master data and a complex manufacturing network, subject matter experts were spending too much time on internal activities rather than with customers. Over the last 18 months we've focused on reducing that complexity so our people spend more time with customers. We've been improving business processes, master data, and ERP systems to clean up the back end and free up the front-line team. That's working, and we do have capacity in our team to continue to execute. Long term, we want to continue investing in subject matter experts and commercial talent because our people and service model are a differentiated advantage. We intend to flip the equation to invest more in commercial resources while improving back-office efficiency.
Yes. To add to that, we have ample production capacity in our manufacturing network to meet customer needs. The focus on cost and complexity reduction and strengthening the commercial organization is geared toward driving EBITDA margins to 18% over time. Part of that will come from scale through top-line growth and part from cost and complexity reduction, which we've been addressing through our transformation initiatives.
Yes, sustainably above 18% is our aspiration. Looking at the near-term, that's about a 200 basis point plus improvement target, and we feel we have a line of sight to get there.
I'll have to relisten to that another couple times on replay. But I did want to go back to the capital allocation or share repurchase question. There's a lot of moving parts. You're repurchasing shares at a level well above displacing any options-related issuance. Your debt did rise a little bit sequentially. You raised your dividend, et cetera. Should I look at the $24 million that was spent here in this quarter as something more opportunistic in nature? Or is this something that we should think about as programmatic? In other words, with the new authorization and your healthy cash flow, does opportunistic share repurchase at the current price constitute a core part of your capital deployment strategy? Or is it more of a flywheel dependent on M&A opportunities and other things?
Good question. Our overall capital allocation philosophy is to invest for growth first, whether organic or inorganic. We view share repurchases as opportunistic, evaluated in the context of our capital structure, leverage ratio, M&A pipeline and internal investment needs. I wouldn't characterize our repurchases as programmatic; rather, they are opportunistic and flexible as market conditions and opportunities present themselves.
This is Adam on for Arun. My understanding is that gross margin outperformance was mostly on volumes for the quarter, but maybe if we could double-click on price a bit. It seems like you're doing quite a good job at pushing that through to offset inflation. So I guess I have two quick questions on that. How much of the price you've already implemented has yet to flow through in third quarter? And how much of your year-over-year growth do you think is mostly from the outperformance in the first half? Meaning how much do you think you're going to have some of this flow through in the second half versus purely in the second quarter?
On pricing and gross margins: the majority of pricing has flowed through since prices have stabilized at elevated levels. A few index adjustments are still timed and will come in at the start or middle of quarters, so we don't expect much additional selling price per kilo expansion in the short term unless external conditions demand it. The second quarter was a strong volume quarter and should be comparable to Q3; traditionally the second half is better than the first half for us. Europe may be slower in August due to holidays, but the Americas are showing improvement. We are confident demand will hold for a third quarter similar to Q2, and for the full year we are tracking toward mid-single-digit to high single-digit EBITDA growth.
Okay. Great. And maybe if we could go back to the bolt-on piece. It kind of sounds like you're saying that India and China are consistently providing the most opportunity for maybe acquisition potential. How are you thinking about that in terms of end markets? There are several reasonably depressed end markets like building construction, et cetera. How are you thinking about acquiring things at discounted multiples to bring in accretive bolt-ons versus bringing things in that are not necessarily at their growth part of the cycle? Or is that not how you're thinking about it at all and you're more concerned with the cross-selling and synergistic piece?
You captured the variables well. For bolt-ons, we look for portfolio additions or IP/capabilities we don't have, which might be technical capabilities, new market access, or channel additions. We consider opportunities that provide commercial channels, new product technology, or assets that broaden our portfolio. We also look at regional players where multiples may provide arbitrage; the space is fragmented. When we acquire, we evaluate the commercial fit and synergies and prefer EBITDA- and cash-flow-positive businesses that are accretive. We also maintain dry powder for larger, more transformational opportunities, which are rarer and take longer to execute.
I would just add that we have a track record of acquiring good businesses that are EBITDA positive and cash flow positive and making them accretive. We evaluate acquisitions through the lens of how our global footprint, capacity and capabilities can accelerate growth in those businesses.
Sure. Thank you. Thank you for joining us today. We appreciate everyone's continued interest in Quaker Houghton. I also want to thank our colleagues around the world for their hard work and dedication to our customers. Our people are our greatest asset. Please reach out to John if you have any additional follow-up questions. Thank you.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.