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Good day, and welcome to the Minerals Technologies Second Quarter 2026 Earnings Conference Call. Please note this event is being recorded. I would now like to turn the conference over to Lydia Kopylova, Head of Investor Relations. Please go ahead.
Thank you, Dave. Good morning, everyone, and welcome to our second quarter 2026 earnings conference call. Today's call will be led by Chairman and Chief Executive Officer, Doug Dietrich; and Chief Financial Officer, Erik Aldag. Following Doug and Erik's prepared remarks, we'll open it up to questions. As a reminder, some of the statements made during this call may constitute forward-looking statements within the meaning of the federal securities laws. Please note the cautionary language about forward-looking statements contained in our earnings release and on the slide. Our SEC filings disclose certain risks and uncertainties, which may cause our actual results to differ materially from these forward-looking statements. Please also note that some of our comments today refer to non-GAAP financial measures. A reconciliation to GAAP financial measures can be found in our earnings release and in the appendix of this presentation, which are posted on our website. Now I'll turn it over to Doug. Doug?
Thanks, Lydia. Good morning, everyone, and thanks for joining today. I'm going to kick us off with a review of our second quarter financials. Erik will then take you through the numbers in more detail and provide our outlook. And at the end of our presentation, I'll briefly share some of the highlights from our sustainability report, which we just published, and provide a preview of our upcoming Investor Day on September 22. After that, we'll open the call to questions. First, a quick overview of the quarter results. Sales were $548 million, up 4% over last year, with operating income of $75 million. Earnings per share were $1.60, up 3% from last year. We continue to be a strong cash generator with cash flow improving over last year, and our balance sheet is in great shape with our net leverage reducing to 1.6x EBITDA. Our top-line momentum has continued, with sales growing 7% for the first half of the year. I'll highlight that this has been quality revenue growth driven by higher volumes from our new growth projects and from stronger end-market conditions. Another highlight is that our Engineered Solutions segment delivered a particularly impressive performance this quarter, generating a record margin of 17.8% and a record quarterly income of $49 million. Both segments continue to be positioned for solid growth this year, with our strategic projects in each segment remaining on track. As a result, we have a clear line of sight to hitting our mid-single-digit growth guidance for the company for the full year. In our Consumer & Specialty segment, our cat litter sales have grown 9% through the first half of the year, driven by the introduction of new products, and this business remains on track for a mid- to high single-digit growth year. We're also excited about our bleaching earth expansion, which is now ramping up, and we can begin working through a very strong order book from sustainable aviation fuel customers. Our new Fabric Care product production is also ramping up, and we expect sales to strengthen early in the fourth quarter. Paper and Packaging sales were also strong, up 7% so far this year, and our three new satellite facility launches are all progressing. In our Engineered Solutions segment, High-Temperature Technologies is having a strong sales year driven by our Refractories business, where sales were up 14%, driven by MineScan installations and the corresponding contractual refractory volumes as well as from higher foundry sales in Asia, which are up 11%. We also saw strong sales in Environmental and Infrastructure where sales were up 19% this year, driven by higher volumes of environmental lining products, building materials and drilling products as well as from strong demand for our offshore energy services business. Our main challenge this year has been dealing with the higher level and persistent inflation. As we mentioned would happen this quarter, we absorbed quite a bit of higher energy, transportation and raw material costs, the majority of which hit our Consumer & Specialty segment. We've adjusted pricing across all product lines but due to contractual price increase timing to many customers in the Consumer & Specialty segment, the majority of the positive pricing impact is only now beginning to take effect. Margins in the quarter for the Consumer & Specialty segment were impacted as a result. Erik will outline all of the price-cost dynamics for you in detail, but we continue to make contractual price adjustments and expect to recover segment margins as we move through the second half of the year. A few other items I'd like to touch on before handing the call over to Erik. First, I want to mention that we've made organizational changes that I believe will result in even closer collaboration and greater efficiency across our four product lines. We've elevated four experienced leaders to oversee each product line, leveraging their deep knowledge of our markets, operations and technologies. This change will more closely align the people, products, facilities and core technologies that serve similar markets and strengthen execution across the organization. We expect these changes to drive efficiencies, further accelerate innovation and speed to market for new products and accelerate best-practice sharing and adoption across our business. Second, as we previously announced, this past quarter, we also filed a plan of reorganization in the Chapter 11 cases of our subsidiaries, DMI OldCo, formerly known as Barrett Minerals and its affiliated debtors, to comply with the court deadline. Concurrently with the filing of the plan, we recorded a charge of $290 million to increase our reserve for funding the proposed potential trust and for estimated costs related to this matter. More recently, the judge has abated the bankruptcy court cases in order to await the outcome of a district court proceeding on the underlying talc causation issue. We continue to maintain that all talc sold by BMI OldCo has always been safe and remain committed to a fair and final resolution for the company and all stakeholders. Lastly, I'm pleased to announce that we published our 18th annual sustainability report earlier this week. It's packed with information about the company and our journey over the past several years. I'm going to take a moment at the end of our presentation to run you through some of the highlights. Now let me hand the call over to Erik, who will take you through our second quarter financials in more detail. Erik?
Thanks, Doug, and good morning, everyone. I'll start by providing a summary of our financial results, followed by a review of our segments and I'll wrap up with our outlook for the third quarter. Following my remarks, I'll turn the call back over to Doug. Now let's review our results. Second quarter sales were $548 million, up 4% versus last year, driven by strength in High-Temperature Technologies and Environmental and Infrastructure. After a strong first quarter, second quarter sales in Consumer & Specialties were down slightly from last year, primarily due to some volume that shifted into the second half in Household and Personal Care. Second quarter operating income was $75 million. You can see from the bridge on the lower left that volume contributed $4 million and pricing contributed $8 million to income. However, overall cost increases totaled $16 million in the quarter as we experienced higher freight, energy and energy-linked costs such as mining. The cost environment remains dynamic and further price adjustments will be necessary until costs stabilize and we fully offset these increases. Moving to the top right side of the slide: Sales have grown 7% in the first half over last year with 5% growth in Consumer & Specialties and 10% growth in Engineered Solutions. We'll show year-to-date figures in a few places today to highlight the growth so far this year and to highlight the magnitude of the cost impacts that we expect to fully recover once these higher costs play over. The first half operating bridge on the bottom right shows that volume delivered $13 million of additional income and higher pricing contributed $14 million. The biggest challenge this year has been the higher costs I just mentioned, which ramped up significantly in the second quarter. Earnings per share, excluding special items, grew 3% in the second quarter and are up 11% year-to-date. I'd also like to note that EBITDA is up 5% year-to-date. Now let's turn to a review of our segments, beginning with Consumer & Specialties. Second quarter sales in the Consumer & Specialty segment were $275 million. Sales in our Household and Personal Care product line were $123 million. Following a very strong first quarter, cat litter sales moderated in the second quarter. Q2 is typically a slower seasonal period for cat litter, and customer orders also ease off following the new item fill in Q1. It's worth noting that cat litter sales have increased 9% in the first half versus prior year, and our outlook for this business remains solid. Our edible oil and renewable fuel expansion hit target production levels at the end of the second quarter. Our order book is solid, and we expect sales to ramp up steadily through the third quarter. Lastly, in Personal Care, we had a large customer campaign in the second quarter of last year and this year a similar campaign has moved to the second half. Second quarter sales in Specialty Additives were up 1% from prior year and are 3% higher year-to-date. Global sales to paper and packaging customers are up 7% year-to-date, driven by higher volumes from our newest satellites in Asia, and this growth is helping to offset slower demand for residential construction products. Segment operating income was $29 million in the quarter and $62 million year-to-date. I'm showing you a first-half operating income bridge on the bottom left to highlight the price versus cost lag in this segment. In the second quarter, we saw a significant increase in freight and energy costs. As we mentioned on the last call, this segment and the Household and Personal Care product line, in particular, is bearing the majority of the cost increases. It's also the segment with the majority of the contractual lag on pricing. Due to the nature of our contracts in this business, we typically have a lag between cost increases and price increases. You may recall that several years ago, it used to take us three quarters on average to catch up from a price-versus-cost perspective. Since then, we've shortened that time to around three to four months on average by making changes to our contracts to better line up our cost-price timing, and we continue to drive improvement in this area. However, until cost pressures play over, we're still about 90 days away from fully catching up in this segment. Looking ahead to the third quarter, we expect segment sales to increase in the 3% to 5% range versus prior year, driven primarily by growth in the Household and Personal Care product line. Now let's turn to the Engineered Solutions segment. Second quarter sales in the Engineered Solutions segment increased 9% from prior year to $274 million, extending the growth momentum we saw at the start of the year. In total, segment sales are up 10% through the first half of the year. In High-Temperature Technologies, sales of $190 million were up 7% for the quarter, and sales are also up 7% year-to-date for this product line. Sales to steel customers in North America remained strong, and we've started to see signs of improved demand in Europe as well. Sales growth to foundry customers in Asia was very strong with second quarter sales up 14% versus prior year. Environmental and Infrastructure sales were $84 million in the second quarter, representing a 15% increase from prior year, and year-to-date sales are up 19%. Demand for our building materials products was strong this quarter with sales up 41% versus prior year, driven by some large projects in the quarter. Growth in Drilling Products also remained strong with sales up 20% versus prior year. And sales for Environmental lining solutions were up 18% in the second quarter driven by higher project activity levels, particularly in the mining sector. Operating income for the quarter was $49 million and totaled $88 million year-to-date. You can see in the year-to-date operating income bridge that sales growth is translating well to operating income, which is up 13% versus last year. And price adjustments are keeping pace with the cost increases we're seeing. Operating income represented 17.8% of sales in the second quarter, a record for the segment. Looking ahead to the third quarter, we're expecting sales growth of 3% to 5% versus prior year for the segment. Now let me turn to a summary of our balance sheet and cash flow highlights. We had another strong cash flow performance in the second quarter, bringing year-to-date cash from operations to $95 million, up $37 million from last year. Capital expenditure was $27 million in the second quarter, and we continue to expect full-year CapEx in the $90 million to $100 million range. Year-to-date free cash flow of $45 million is up significantly versus prior year. Cash flow is expected to continue to build through the second half and we expect full-year free cash flow to be in the range of 6% to 7% of sales. Our balance sheet remains solid, with our net leverage ratio at 1.6x EBITDA. Now I'll summarize our outlook for the third quarter. Overall, we expect a similar performance sequentially with third quarter sales of approximately $550 million representing an increase of around 4% from prior year. In the Consumer & Specialties segment, we expect sales to grow 3% to 5% versus prior year, driven primarily by the Household and Personal Care product line. We're seeing stronger sales for cat litter early in the quarter, and we expect this will continue. And with our natural oil purification expansion running at target rates, we're expecting a solid quarter of growth for this business. The only area where we're not seeing improvement for this segment is the residential construction market, which remains soft relative to last year. In the Engineered Solutions segment, we also anticipate third quarter growth in the 3% to 5% range versus prior year. And overall, we expect similar market conditions sequentially for this segment. We're expecting growth in High-Temperature Technologies to be driven by another quarter of steady demand from steel customers. And in Environmental & Infrastructure, we expect year-over-year demand improvement to continue into the third quarter. Overall, for MTI, we expect similar operating income sequentially of around $75 million and earnings per share of between $1.55 and $1.60. We expect to fully leverage these higher levels of sales into income as soon as our price/cost dynamics take hold in Consumer & Specialties. We expect overall operating margin to recover in the fourth quarter to slightly above prior year levels with the normal seasonality moving from Q3 to Q4. We remain confident in our growth trajectory and we continue to expect full-year sales growth in the mid-single-digit range. And with several growth initiatives ramping up in the second half of this year, we expect this growth rate to continue into next year. With that, I'll turn the call back over to Doug.
Thanks, Erik. A couple of other items I'd like to touch on before we finish. This month, we're proud to publish our 18th annual sustainability report. Sustainability has always been a part of the DNA of our company, not only because it's one of our core values, but also because we believe it supports our continued growth as well as our customers' growth. You can download the full report on the Sustainability page of our website at mineralstech.com. But let me take you through some of the highlights. In 2025, we achieved a company-best and world-class safety performance, reflecting our continuous improvement culture tied to our deep commitment to keeping all employees safe. 2025 was also the target year for achieving the 12 environmental goals we set for ourselves back in 2018 and we are pleased to report that most of our results exceeded our expectations. Let me give you some highlights of what we accomplished. First, we reduced our CO2 emissions by approximately 40%. We also eliminated the use of coal at all but one of our facilities, reducing consumption by 70% and converted 34% of our fuel oil usage to renewable alternatives. We reduced landfill waste by 44% and now divert approximately 56,000 tons of waste annually through beneficial reuse. We reduced water consumption by over 30% and water discharge by almost 60%, which equates to over 660 million gallons of water saved each year. That's enough water to supply a midsized American town annually. In this year's report, we also announced our new 10-year targets through 2035, which build on the successful achievement of the previous targets we established in 2018. We are aiming to reduce our environmental impact by another 20% on an absolute basis and 30% on a per-ton basis. Sustainability continues to be a meaningful driver of MTI's long-term growth strategy. Over the last five years, 67% of the products commercialized by MTI have had a sustainable profile. Many of these products, like adsorbents for sustainable aviation fuel, sorbents for PFAS remediation and our new yield line of products are examples of how we have tied together our minerals and our technologies to create sustainable solutions. These efforts are impressive by any measure and were achieved by the employees at MTI who are dedicated to continuous improvement in all that we do. And I'd like to thank all of our employees for their support. Lastly, a plug for our upcoming Investor Day, which will be held on September 22 at our R&D facility in Bethlehem, Pennsylvania. At our last Investor Day, we showcased the innovation and technical capabilities that support our bentonite-based businesses at our R&D facility in Hoffman Estates near Chicago. This time, in Bethlehem we'll focus on innovations related to our crystal engineering technology in the calcium carbonate side of our business as well as the engineered blend technologies used in our high-temperature products for steel and other metal industries. We're excited to take you through these innovation pipelines and introduce some exciting new strategic projects that we see driving growth over the next five years. If you'd like to attend in person, please reach out to Lydia Kopylova, our Head of Investor Relations, and I hope to see many of you there. With that, let me open the call for questions.
分析師問答
Our first question comes from Daniel Moore with CJS Securities.
To start, obviously year-to-date there's still really good strength in Consumer & Specialties and cat litter, personal and household products. Could you dive a little deeper into the timing trends in Q2, particularly on the cat litter side, and then discuss your confidence about getting back to a mid-single-digit growth trajectory in Q3 and the back half?
Yes, sure. So I think you're talking more about the sales in Household and Personal Care. I think it was really in the first quarter driven by cat litter. You remember, I think sales were up like 19% in cat litter in the first quarter. A lot of that, we think, was due to channel fill to distribution centers as all of our new products really came in strong. As Erik mentioned, I think, over the second quarter, with those distribution centers full, I think some of the order patterns slowed down a bit, but we're seeing that pick up again to a regular pace during the third quarter, and we still have a really strong outlook for that business for this year. D.J., you want to add any color to some of the new products, things that are going on?
Yes. Thanks, Doug. So Dan, just to bring into it a little bit, these new products that we're launching, we're pretty excited about them. And right now, as we're going into the third quarter, we're getting some good traction on that. But as I look back, I'm pretty happy with the top-line growth with pet care. I mean it's at that 9%, it's double what the ongoing markets are in North America and Europe. We're well above what the market rates are, and that's been mostly driven by these new products and just lining up with some major retailers. So we see that continuing strong for the second half of the year. And in the meantime, working as Erik was talking about on getting pricing up to offset some of the persistent inflationary increases that we're seeing.
Dan, on the other go ahead. The only other thing I'd add to that, you were talking about timing and some of that Erik mentioned in his comments was our bleaching earth or the oil purification business. Strong order book. As Erik mentioned, that facility expansion is now fully ramped up. It came fully online at the end of the second quarter. We thought some of that—some of those new sales would come into the second quarter, but it looks like with that ramp-up late in the second, those are going to be ramping up into the third. So the timing should be some growth in Consumer & Specialties not only from pet litter, but from the sustainable aviation fuel orders that we have on the books for the back half of the year.
Helpful. On the cost side, you've been very effective taking pricing to offset inflation over the last several years. This environment is clearly unusual. If costs level off to some degree, should we be able to get back to that, say, 14% plus operating margin next year? Again, that's assuming not necessarily flat but a more normal environment. Just talk to where you think the business should be as things normalize over time?
Yes. Thanks, Dan. So right now, year-to-date, we're at around 13% operating margin. We're guiding to about 13.5% for the third quarter. The fourth is going to be between 13% and 13.5%. So this year, we're looking at between 13% and 13.5% for the full-year operating margin. That's going to depend a little bit on how costs play out for the rest of the year. The reason that we haven't caught up on the cost increases yet is because costs are still increasing for us. We had increases from Q1 to Q2, and we're actually seeing increases from Q2 to Q3 as well. So the pricing that we have going into place in Q3, which is meant to cover the cost increases from Q2, is catching us up—but we're still going to be upside down from a price-versus-cost perspective in the third quarter by something like $5 million to $6 million. That being said, when costs do play over, we do expect to make up that gap. And I think we've shown historically that on the back end of that, we actually expand the margins. So I think we're going to be exiting this year, assuming our current outlook on cost, in a much better position to get back to our target margin level. Assuming we're at 13.5% in the fourth quarter, that's not a bad place to be for a full-year run rate; you would want to be closer to 14% perhaps. We do have the typical seasonality in Q4 and Q1 every year.
Very helpful. One more, I'll jump out. Maybe just a little bit more color on sort of update on the BMI case. How did we come to the determination of the funding, the trust and the $290 million charge? And I know it's not apples-to-apples, but obviously, J&J just came to an agreement. How does that impact your confidence about the ability to get this settled and put it behind you? Any commentary there would be helpful, if possible.
Yes. So maybe I'll answer the second part first. We saw the news on other companies and their settlements. That really doesn't have much bearing on ours — it's a different matter. It doesn't have much bearing on ours, though it is some positive news for the industry in general. What I will say is, yes, we determined to increase our reserve for the potential funding of a potential plan that we filed to meet that court deadline. We were in mediation for many weeks before that. We wanted to put in a plan that we felt provided finality to the company and that we felt was a fair settlement. And through that mediation and those discussions, we determined that that was a very substantial offer to be able to put down and get finality for the company. Since then, I think you might have seen that the bankruptcy has been abated, and the causation issue has been moved into district court, and that's where we sit now. Right now, we're just in scheduling. So there's not much to talk about there, but we're in the scheduling aspects of that trial and resolving that issue. So that's where we are. That's how we came to that determination. We wanted some finality for the company and to get this behind us and we'll see where we go from here.
The next question comes from Mike Harrison with Seaport Research Partners.
Was hoping that we could get just maybe a little bit more color on what's going on in the Personal Care and Household business. Just really surprised that you guys were guiding to a high single-digit growth number, and I believe it was a roughly 3% decline. I understand there were some pieces that didn't play out relative to your expectations. But I guess, what were some of the key drivers of that meaningful shortfall? And what gives you confidence that you're going to see momentum pick back up in Q3?
Yes, Mike, let me start just with bridging the shortfall to our expectations. It was really three things. The easing off of the cat litter orders from the strong Q1 — we probably overestimated where we were going to be just based on how strong the first quarter was — but like D.J. said, I think we're pretty happy with the year-to-date 9% growth and then seeing the orders pick back up into the third quarter. No real concerns there, but it was a difference from where our expectations were. The other piece was the bleaching earth expansion. Doug already mentioned it was fully ramped up at the end of the second quarter, but we had assumed some sales in the second quarter for that expansion. The only other piece I would mention is the personal care campaign that was in the second quarter last year — we were expecting it earlier in the year this year; that's moved to the second half as well. So we had a few things shift from the second quarter into the second half, but we're still feeling confident about the growth rates for those businesses going forward.
Yes, Mike, I would just add to that. So Erik summarized what we were thinking going into the second quarter. What I'm seeing as we're going into the third is pretty strong pull that supports some promotional activity with some key retailers that we've got. That is a combination of new products with them and some new SKUs of old products, repackaging of old products. And so right now, that pull looks very strong on the pet side. We got some increased momentum really across the U.S. on pet. On the bleaching earth, we're very bullish about that. We had some minor delays in getting the project up and running, but we were also impeded by some shipping challenges that were associated with some geopolitical issues. We've worked through that. We've got the strong supply chain going forward, supplying the sustainable aviation fuels that also have a good base of edible oils underneath it. So we're feeling really good about bleaching earth supporting that pet care growth. And again, the personal care item was just a shift from the second quarter into the third versus last year. So that still looks like it's going to take off. So we feel very good about this quarter coming up.
All right. And while we're on the topic, I believe last quarter you referenced a new laundry innovation or new product that a customer was going to be launching. Any update on the timing of any benefit from the laundry business?
Yes. Thanks for the question, Mike. Glad to address that. We have done a great job on our end getting our portion of that lined up. It is in dry laundry. It is supporting some innovations out there in the market. So everything on our end is good. Everything is qualified. The supply chain is set and ready to go, and now our success will be dependent on how that new product responds in the market. So we feel good about that. I don't know that it's so much in the third quarter as the fourth, but it's entirely dependent on the success of our partner and how the market is embracing that.
Go ahead, Brett.
Yes, this is Brett. Mike, look, the European market is still soft, but it has improved over the prior quarter. There's been some carbon regulation safeguards that have finally been put into place, and that's really helped the threat of imports and it's improved production. We're seeing a lot of that production in Germany that is improving. But overall, we're starting to see some improvements. The U.K. just nationalized one of their major steel mills, which is going to be positive. It's a plant that we've had business with for many, many years. When that facility expands and puts a third blast furnace into production, that's positive for our business. We're also seeing some improvement in our Middle East business, which is part of the European growth. We're doing pretty well despite the Iran conflict, but of course, the lanes and the logistics have been challenged. Overall, we haven't lost any business. We continue to sell and we are seeing a bit of an uptick in steel production. So that's a good sign. As far as the MineScans in Europe, we have four units now outside of the U.S. and we installed one in Europe this year. So there's more to come when we see more opportunities in Europe as electric furnace steel production expands.
And the next question comes from Peter Osterland with Julius Securities.
So I wanted to start just by digging in a little more specifically on the Consumer & Specialties margins. You mentioned that higher costs haven't yet been fully recovered due to some contractual timing. What percentage of your sales within Consumer & Specialties are still awaiting contract resets? Is that the right way to think about it? And should we be thinking about maybe a 200 basis point or higher margin snapback specifically in the third quarter? Or will this more likely be a multi-quarter recovery trajectory?
Pete, thanks for the question. In terms of getting the Consumer & Specialties margins back to target, the biggest thing right now is the price-cost catch-up. And the fact that costs are continuing to rise means that's going to be pushed out to the fourth quarter. So we're not expecting a major improvement Q2 to Q3. I would say the other things we have going for us longer term are the growth of higher-margin Consumer & Specialties products that we talk about — that's going to help the mix overall — and just higher volumes in general which will help with fixed cost leverage. But in terms of your specific question around the percent of contracts with a delay, a lot of that sits in the Household and Personal Care product line within Consumer & Specialties. Historically, we've had more of a pricing lag within Specialty Additives, for example, in the Paper and Packaging business. We've done a lot of work there in terms of tightening up those lags and it's less of an impact these days in that product line.
Got it. Very helpful. And then also just on the record margins within Engineered Solutions: was there any degree of the second quarter margin performance that you view as over-earning as opposed to permanent operational efficiency improvements? Is it fair for us to be thinking about 17% plus as the structural floor for the segment going forward?
Those margins are solid. The segment is performing very well. I wouldn't call anything out as special or unusual for the second quarter. If you're looking sequentially Q2 to Q3, you do have some typical seasonality in terms of customer maintenance shutdowns in Europe for some of the more industrial businesses. But I think we're setting a new baseline for this business from a margin perspective.
And Peter, I think the only thing I'd add to that is we kind of signaled that there was some pent-up profitability in this business. So the High-Temperature Technologies business is operating really well — new products, MineScans, contractual volumes coming through. Steel markets in Europe are improving. North America has been strong for the past year or so. We've had a lull in our Environmental Products business, and that's starting to turn a little bit. We've had five quarters of growth in that product line. And as that starts to turn, that's a lot of contribution that comes through — it's project-based and a little lumpy, but we're starting to see our offshore oil business grow 22% in the first half of the year. Drilling products and infrastructure drilling have been doing well. Building products is starting to turn in our environmental products, water products and FLUORO-SORB is in there, too. So we still see more growth potential. As you start to see these volumes in any of the product lines start to move, that drops to the bottom line and that's what you're seeing. We think that's stable. The other side of the business still has good growth; we just have the lag to move through. When those costs are recovered, we'll leverage growth to the bottom line. With the Engineered Solutions margin strong and moving the other side up to 14%, you start to see 15% to 16% company margins as we push through. A lot of things have to line up, there's work to do, but I think we're setting up for margin improvement. It's unfortunate we have this delay still, but we'll move through it and we'll deliver that profitability.
The next question comes from David Silver with Freedom Capital Markets.
A little trouble joining the call at the beginning, so apologies if I make you repeat yourself. I wanted to drill down with D.J. on a couple of the expansion projects that are underway. In particular, there was a series of PCC satellites that were due to turn on this year. Just wondering where we are on that and what the contribution might have been in the second quarter? And then on the edible oil: you did explain the timing. It's complete, the order book is full, but revenues will probably start in the third quarter. With the full order book and the project complete, I'm wondering about next steps there: what might be the cadence for the next incremental expansion, assuming the SAF market continues to progress? Is the expansion program more modular, so additions can be added relatively quickly? Or is this more of a discrete project with separate off-sites or supporting utilities? Just what might be the cadence we should think about for growth in your capacity on the edible oil purification side?
So David, I'm going to try and unpack that. Let me deal with the first part of the question on the PCC. As Erik and Doug indicated, all three of those satellites are up and running, contributed in the second quarter, and they look like they're going to be a good business for us moving forward. There's another one that we have mentioned in the past; we're building another satellite right now. It's a substantial satellite that supports packaging growth in Asia, and that will be early in '27. So paper is looking solid. The pipeline remains healthy — 20-plus projects in the pipeline, a blend of packaging and new yield and PCC and the new products we've introduced. So we feel pretty good on that side of things. Shifting gears now to edible oil purification: you can think of that expansion as a modular expansion — relatively efficient to get up and running. We designed the products specifically for these customers, got them qualified with the customer, and we're up and running. You'll start seeing that running at full rates in the third quarter. We are looking further at expansions; the next one is probably a larger magnitude and we'll need to line up volumes on that. From what we've been able to do with both the quality of the ore and the reserves that we've got, especially in Turkey, plus the scientists that we've got working at Hoffman Estates, we feel very good about that product line and what it's able to contribute in the market, especially in sustainable aviation fuel. We're happy with this last expansion, happy with the qualifications we've achieved and the pace at which we've been able to bring customers on, and we'll get ready to expand further, but nothing to announce on that just yet.
Okay. Great. And I hope you'll indulge me here, but I wanted to go back to the $290 million charge that was taken. I want to make sure I have things lined up. There's a total potential funding of the 524(g) trust of $450 million. I believe in the first quarter of 2025 you allocated, I believe, $185 million of your total charge then for the trust. Is it correct to say that of the $290 million the balance was to get to $450 million, so $265 million of the $290 million goes to the trust and the balance of $25 million or so is for estimated other costs?
Dave, you're close. There's a portion in there that's to fund the ongoing process. Right now, there's about $450 million in terms of potential 524(g) funding and about $35 million in terms of ongoing process funding. And that's made up of the charge we just took and the one from 2025.
Okay, great. And then I don't know if you can answer this or not, but you set up a trust that you believe is acceptable to settle all the ultimate claims. However, the bankruptcy judge has abated his process in favor of letting the district court work on the issue of causation. Doug, how do you feel about letting the district court process run its course versus maybe pursuing something sooner but that may ultimately prove to be more expensive for the company? How do you weigh settling sooner versus letting the district court process run?
Dave, I'm not going to answer that question. We're right in the midst of the beginning of litigation, and I don't want to speculate on outcomes in the district court or the ramifications of that right now. We filed a plan that we feel is there and provides finality for the company. We've always maintained that Minerals BMI OldCo has been safe. The district court taking on that issue we see as a positive because we've always maintained this to be the case. But we're right at the beginning of that, and we're going to be going through the process of scheduling and seeing how that goes. I just don't want to speculate on where we land at the moment given where we are.
Fair enough. I appreciate that. And last thing for me: I wanted to get a PFAS update. I believe last quarter the plan was to have 10 commercial projects start up through 2026. I watched the EPA panel discussion where your company was one of a handful featured. I'm wondering if that presentation and that opportunity for interested parties has resulted in an acceleration of trial and beta testing. So just an update on progress commercializing PFAS and your take on what has happened since your participation in the EPA panel?
David, let me give you a quick update on FLUORO-SORB. It continues to gain traction. We do have the ten full-scale municipal drinking water plants up and running. The good news is we now have 18 municipal systems specified for upcoming installations. Most of those are under construction; several will start in 2026 and others will start in 2027. We also expect to see more of the pilot projects for small groundwater treatment plants move to full scale, so a lot of that will start to move over the next several months. We also use FLUORO-SORB for in-situ remediation and we're working with the Department of Defense and other aviation-related groups. Based on the success we've seen with the Department of Defense, we're expanding that work. We have two big projects starting in the third quarter at airports and one is a military site. So that is working and is really based on the absorption technology of FLUORO-SORB. The other update is we continue discussions with the U.S. EPA Office of Water and the Office of Emergency Management. Both are committed to PFAS remediation and disposal research. We're working with them to wrap this up and finalize the Croda agreement; once that is finalized, the research will expand more rapidly. Things are moving well and we expect to see additional municipalities adopting FLUORO-SORB.
This concludes our question-and-answer session. I would like to turn the conference back over to Doug Dietrich for any closing remarks.
Thank you, Dave. I appreciate it. I appreciate everyone joining the call today. If you have any follow-up questions, happy to answer them after the call, but we'll talk to you in about three months. Thank you.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.