Mike Harrison

Mike Harrison inquired about Project Catalyst's impact on surfactants capacity utilization, whether closed facilities were profitable, the net savings from Project Catalyst after accounting for inflation, the timing of oleochemical raw material cost impacts and pricing actions, and the anticipated cadence and growth of 2026 earnings, including potential Q1 weather effects.

Answer

Luis Rojo, President and CEO, explained that Project Catalyst aims to optimize cost structure by shifting volume to more efficient sites, not due to closed sites losing money, and confirmed remaining capacity for growth in key surfactant areas. Ruben Velasquez, VP and CFO, stated that the $60 million pre-tax savings for 2026 would be partially offset by a 3%+ inflation rate on fixed costs. He detailed that the full impact of higher oleochemical costs was felt in H2 2025 due to inventory lag, with benefits expected in H2 2026. Velasquez also projected overall EBITDA growth for 2026, with H2 expected to be stronger due to improving oleochemicals, skewed Catalyst savings, anticipated demand recovery from interest rate cuts, and a recovery of at least half of the $6 million Q1 EBITDA impact from historic weather.

Mike Harrison asked about the impact of Project Catalyst on surfactant capacity utilization and the profitability of closed facilities, the net savings from Project Catalyst after accounting for inflation, the timing and impact of oleochemical raw material costs on Q4 2025 and Q1 2026, and the anticipated cadence of earnings and EBITDA growth for 2026, including any Q1 weather impacts.

Answer

Luis Rojo, President and CEO, explained that Project Catalyst optimizes cost structure by moving volume to more modern, cost-efficient sites, maintaining capacity for growth in key areas, and that closed sites were not losing money but rather volume was shifted to improve utilization elsewhere. Ruben Velasquez, VP and CFO, confirmed $60 million in pre-tax savings for 2026 but noted that ongoing inflation (3% plus in areas like healthcare and insurance) would offset some of these savings. Velasquez detailed that oleochemical impact was felt in H2 2025 due to inventory lag, with improvement expected in H2 2026 as the CNO/PKO spread normalizes, meaning H1 2026 would still see lower margins. He also committed to EBITDA growth in 2026, heavily skewed to H2 due to oleochemicals, Catalyst savings, and expected demand recovery from interest rate cuts, noting a $6 million EBITDA impact in Q1 2026 from historic weather, primarily in surfactants, with at least half expected to be recovered later in the year.

Mike Harrison from Seaport Research Partners inquired about quantifying one-time impacts in the Surfactants business, the margin pressure from raw material inflation, the timing of price recovery, and the effects of the new collective bargaining agreement at the Millsdale site.

Answer

Luis Rojo, President, CEO & Director, clarified that a $6 million impact included Pasadena startup costs, an environmental reserve, and a recoverable EPA fine. He highlighted significant raw material inflation, noting that recent price increases should help recover margins in the second half. Rojo explained the new collective bargaining agreement is a routine four-year event and mentioned an associated inventory build impacted cash flow.

Mike Harrison asked for details on the drivers behind the positive 5% price/mix in the Surfactants segment and its outlook for 2025. He also requested help establishing a normalized 2025 EBITDA baseline by clarifying the impact of numerous 2024 one-time items, and specifically questioned the expected Q1 impact from the Pasadena facility ramp-up.

Answer

President and CEO Luis Rojo attributed the strong Surfactant price/mix to high-single-digit growth with higher-margin Tier 2 and Tier 3 customers, as well as strong performance in the oilfield market. While declining to provide specific EBITDA guidance, Rojo noted that over $30 million in one-time negative events from 2024 should not repeat. He confirmed the Pasadena facility's pre-operating costs will continue in Q1 but will be offset by revenue and savings in the second half of 2025.

Mike Harrison sought details on the MDI margin outlook for the next one to two quarters, areas of optimism within polyurethanes, and an update on market share gains for spray foam insulation in North America and its rollout in Europe and Asia.

Answer

Peter Huntsman (Chairman, CEO and President) anticipates volume recovery in Q1/Q2 from construction and auto, expecting pricing initiatives to offset rising raw material costs. He noted steady progress and market share gains in North American spray foam, with Europe/Asia focusing on third-party opportunities.

Mike Harrison sought details on the expected MDI margin trajectory over the next one to two quarters and areas of optimism within polyurethanes, as well as an update on spray foam insulation market share gains in North America and its rollout in Europe and Asia.

Answer

Peter Huntsman, Chairman, CEO, and President, anticipates volume recovery in March-May due to stable interest rates and more affordable homes, alongside pricing initiatives to offset rising raw material costs. He confirmed a primary focus on North America for spray foam insulation, where steady market share gains are being made with increasing margins, while exploring opportunities in Europe and Asia.

Mike Harrison of Seaport Research Partners asked for an explanation for why European MDI is being imported into North America and inquired about the outlook for the MTBE joint venture in the second half.

Answer

Chairman, President & CEO Peter Huntsman expressed confusion about the European MDI imports, stating he couldn't imagine the rationale but confirmed it was happening. Regarding the MTBE joint venture, he indicated it would be a 'struggle' to see much improvement in the second half of the year.

Mike Harrison from Seaport Research Partners inquired about the reasons for the significantly lower corporate costs in Q4, specifically asking if it was due to reduced incentive compensation, and requested guidance for corporate costs in Q1 and the full year 2026.

Answer

Executive Vice President and CFO Ian Cleminson confirmed that the lower corporate costs in Q4 were primarily driven by reduced personnel-related expenses. He provided guidance for 2026, expecting corporate costs to be in the range of $18 million to $20 million per quarter.

Mike Harrison from Seaport Research Partners asked about the drivers behind the Q4 volume decline in Performance Chemicals, the effectiveness of pricing actions against raw material costs, the outlook for Oilfield Services' top-line growth in 2026 including potential Latin American opportunities, details on the tax impact from an internal reorganization, and the reasons for lower Q4 corporate costs with guidance for 2026.

Answer

President and CEO Patrick Williams attributed Performance Chemicals' Q4 volume decline to market uncertainty and tariffs, noting effective pricing actions and a strong new product pipeline. He projected 5%-7% revenue growth for Oilfield Services in 2026, driven by the Middle East and new technologies, and anticipated a return to sales in Mexico and potential opportunities in Venezuela. Executive Vice President and CFO Ian Cleminson clarified that the internal reorganization provides a $600K annual tax benefit for 15 years and confirmed lower Q4 corporate costs were due to personnel-related expenses, guiding for $18M-$20M per quarter in 2026.

Mike Harrison from Seaport Research Partners inquired about the Performance Chemicals segment, specifically the drivers of margin pressure, including the mix of lower-margin products and the impact of rising oleochemical costs. He also asked about the sustainability of the exceptionally strong margins in Fuel Specialties and sought guidance on the overall earnings outlook for Q3.

Answer

President and CEO Patrick Williams explained that the Performance Chemicals margin pressure was partly due to a market shift to commoditized products but emphasized it was primarily an internal issue of pricing discipline that the company needs to fix. He confirmed rising oleochemical costs are a major driver and expects the margin lag to persist into Q3, with improvement likely in Q4. For Fuel Specialties, Williams attributed the strong margins to price discipline, favorable product mix, and growth in non-fuel applications, but noted that while margins will remain high, they will likely moderate from Q2's peak. He projected that in Q3, Fuel Specialties might come off slightly, Oilfield Services would be flat to slightly up, and Performance Chemicals would not improve until Q4.

Mike Harrison asked about the electronics business margin performance, specifically the impact of metal price pass-through and spikes, and the underlying sustainability of margins considering operational efficiency, mix, and cost structure. He also inquired about the potential effects of rising memory prices and shortages on logic demand in consumer electronics, automotive, and industrial applications for Element Solutions' electronics business in 2026.

Answer

CEO Ben Gliklich explained that Q4 margins were impacted by a corporate allocation shift, increased investment in Cuprion OpEx, and a $several million hit from metal pricing dynamics and associated hedge losses, which are expected to be recaptured in 2026. He anticipates normal incremental margins of 30-40% for 2026. Regarding memory prices, Mr. Gliklich acknowledged the risk but noted that rising memory prices are driven by data center demand, where Element Solutions benefits from higher value per server board, offsetting potential softness in consumer electronics.

Mike Harrison asked about the electronics business's margin performance, specifically how it was impacted by metal price pass-through and spikes, and the underlying sustainability of margins into 2026. He also inquired about the effect of rising memory prices and potential shortages on logic demand in consumer electronics, automotive, and industrial applications within Element Solutions' electronics business for 2026.

Answer

CEO Ben Gliklich explained that Q4 margins were impacted by a corporate allocation shift, increased investment in Kuprion (OpEx), and a $several million hit from metal pricing dynamics and associated hedge losses, which are expected to be recaptured in 2026, restoring normal 30-40% incremental margins. Regarding memory prices, Mr. Gliklich acknowledged the risk but noted that rising memory prices are driven by surging data center demand, where Element Solutions has higher value per board, thus benefiting the company. Element's 2026 forecast assumes strong data center growth, offsetting weaker consumer electronics.

Mike Harrison asked for additional details on the precision clad strip quality event, the corrective actions taken, and the implications for 2026 volumes, including the key customer's FDA approval timeline. He also inquired about the Electronic Materials business's sequential VA sales growth not translating to proportional EBITDA growth and the outlook for margins in 2026. Finally, he questioned the status of beryllium capacity, the $65 million defense prime investment, and the potential for government strategic mineral reserves.

Answer

CEO Jugal Vijayvargiya explained that a control failure in the production process led to the quality issue, which has since been addressed with robust revised quality systems and additional resources, ensuring readiness to support 2026 volumes. He noted that the customer's FDA approval timeline remains unknown. For Electronic Materials, he attributed the margin profile to significant mixed factors and one-time items, emphasizing overall business improvement and expected continued progress in 2026. Regarding beryllium capacity, he confirmed the $65 million fully funded investment over 2026-2027 will provide additional capacity starting in 2028, while current capacity supports 2026-2027 needs. He declined to comment on strategic mineral reserves.

Mike Harrison from Seaport Research Partners inquired about the specifics of the Precision Clad Strip quality event, including root cause and corrective actions, and the outlook for the key customer's FDA approvals and 2026 growth. He also asked about the Electronic Materials business's sequential EBITDA leverage despite strong sales growth and the future margin performance, as well as the status of beryllium capacity, the $65 million defense investment, and the potential for beryllium to be added to strategic mineral reserves.

Answer

CEO Jugal Vijayvargiya detailed the Precision Clad Strip quality event, citing a control failure, subsequent production halt, root cause identification, and implementation of robust quality systems, expressing confidence in supporting 2026 volumes. He noted no new information on FDA approvals. For Electronic Materials, Mr. Vijayvargiya highlighted strong top-line growth driven by AI and HPC, attributing lower sequential EBITDA leverage to mix factors and one-time items, but affirmed expected continued margin improvement from cost actions. Regarding beryllium, Mr. Vijayvargiya confirmed the $65 million fully funded defense investment for capacity expansion by 2028, while declining to comment on strategic mineral reserves.

Mike Harrison asked for details on the equipment downtime in the Performance Materials segment, including its nature, affected product lines, resolution status, and whether such disruptions are inherent to the business or can be mitigated. He also sought initial thoughts on Materion's top-line and bottom-line growth outlook for 2026, considering key growth markets and cost actions.

Answer

CEO Jugal Vijayvargiya clarified that the equipment downtime affected beryllium and non-beryllium materials in their largest plant, was mostly resolved, and they expected to catch up sales in Q4 and Q1. He acknowledged that such issues are more impactful in a vertically integrated business but emphasized focus on capital improvements and maintenance to improve operational reliability. Regarding 2026, he highlighted strong momentum in high-growth markets (semiconductor, energy, defense, space) with 20% order rate increases, aiming to offset challenges in China (down 20% YTD) and monitoring the Philip Morris FDA approval for potential impact.

Mike Harrison requested initial thoughts on the 2026 outlook, specifically regarding top-line and bottom-line growth, considering the strong order book, backlog in key markets, and cost actions.

Answer

Jugal Vijayvargiya, President and CEO, expressed excitement about high-growth markets (semiconductor, energy, defense, space) with order rates up 20% YTD. He noted challenges in China but aimed to offset them with growth in other regions. He also mentioned monitoring the Philip Morris FDA approval for its impact on 2026 sales, expecting overall momentum to continue towards the 23% midterm EBITDA margin target.

Mike Harrison of Seaport Research Partners questioned if temporary factors drove the high Electronic Materials margins and if strength outside China was a positive mix factor. He also asked for an update on the new and old Precision Clad Strip facilities and inquired about the sustainability and drivers of the turnaround in the Precision Optics business.

Answer

CFO Shelly Chadwick confirmed that regional mix is a significant factor for Electronic Materials margins and that business outside of China tends to be a positive mix item. CEO Jugal Vijayvargiya clarified that the new Precision Clad Strip facility is fully equipped and ready for increased orders, while the legacy facility continues to produce for other markets. Regarding Precision Optics, he attributed the strong sequential improvement to leadership changes and structural cost actions, stating the goal is to continue this momentum and return the business to its historical 20%+ EBITDA margin levels over time.

Mike Harrison asked about the potential impact of GLP-1 drugs shifting from weekly injections to monthly or oral dosages on Avient's drug delivery product line within healthcare.

Answer

Ashish K. Khandpur, President and CEO, indicated it's too early to determine a definitive impact, as both oral and injector pen markets are expected to coexist. He noted that injector pens are also used for other applications, and the overall drug delivery market continues to expand robustly. Avient expects continued strong performance in drug delivery devices, remote monitoring, and injector pens through 2026.

Mike Harrison asked for more details on the Dyneema process innovation, including what changes are being made, if it allows for product tailoring, the amount of additional capacity gained, and its impact on the Dyneema business's margin. He also inquired about the potential impact of GLP-1 drugs shifting to monthly or oral dosages on Avient's healthcare drug delivery product line.

Answer

Ashish K. Khandpur, President and CEO, explained that the Dyneema process innovation, a trade secret, involves modifying equipment and processes to produce high-performance fibers faster without compromising tenacity, providing sufficient capacity until 2028. He could not disclose specific capacity numbers but noted it helps meet higher-than-expected defense growth. On GLP-1 drugs, Khandpur stated it's too early to assess the full impact, but customers anticipate a robust market for both oral and injector pens, with Avient performing well across various drug delivery devices.

Mike Harrison of Seaport Research Partners requested more color on the specific growth drivers within the healthcare business and the typical qualification timeline for new materials. He also asked about current trends in China and potential warning signs for the second half.

Answer

President, CEO & Chairman Ashish Khandpur detailed that healthcare growth is strong (17% in Q2), driven by medical devices (e.g., glucose monitors), medical supplies (catheters), and drug delivery systems. He noted qualification timelines can range from 2-6 years for FDA-regulated products. Regarding China, Khandpur pointed to pressure on the Color business due to government-led "supplier structural reform," which is tightening credit. This is being offset by growth in the SEM business tied to high-performance computing and AI.

Mike Harrison asked about the current penetration of Ecolab's IQ suite, its potential penetration over the next 2-3 years, and where its growth is expected to show up (digital sales, institutional volume growth, margin expansion, or all three).

Answer

Chairman and CEO Christophe Beck stated that the IQ suite's penetration is currently in the low single digits, indicating a very early stage of adoption. He confirmed that its growth is expected to show up in all three areas: digital sales, institutional volume growth, and margin expansion, primarily due to the higher margins associated with digital sales.

Mike Harrison inquired about the current penetration of Ecolab's iQ suite of digital solutions versus its potential over the next 2-3 years, and where its growth would be reflected (digital sales, Institutional volume growth, margin expansion, or all three).

Answer

Christophe Beck, Ecolab's Chairman and CEO, stated that the iQ suite's penetration is currently in the low single digits, indicating a very early stage of adoption. He explained that the growth will be reflected in all three areas: digital sales (which are included within the traditional reporting segments), Institutional volume growth, and margin expansion, as digital sales typically carry significantly higher margins due to lower hardware costs on the software side.

Mike Harrison asked for more details on the underlying market dynamics driving the strong organic growth in the Food and Beverage segment, inquiring whether new business wins were primarily from share of wallet with existing customers or new customer acquisitions.

Answer

Christophe Beck, Ecolab's Chairman and CEO, noted that 4% organic growth in Food and Beverage is strong and significantly outperforms the market, which is closer to flat. He attributed this to the unification of hygiene and water services, currently implemented only in North America. Beck explained that new business wins are a combination of gaining new customers and expanding share of wallet within existing ones. By offering combined water and hygiene solutions, Ecolab helps customers achieve higher quality, safer food, and reduced costs, while also monetizing digital technology and capturing value pricing from generated savings.

Mike Harrison asked for more detail on the underlying market dynamics in the Food and Beverage business, given its strong organic growth, and whether new business wins are primarily from share of wallet with existing customers via One Ecolab or from entirely new customer acquisitions.

Answer

Christophe Beck, Chairman and CEO of Ecolab, expressed satisfaction with the 4% organic growth in Food and Beverage, noting it significantly outperforms the market where consumer goods are closer to flat growth. He explained that the strong performance, achieved while increasing margins, is driven by the unification of hygiene and water services in North America under One Ecolab. Beck clarified that new business comes from a combination of gaining new customers and new plants within existing customers, as Ecolab's comprehensive offering helps them produce safer food, reduce costs, and allows for monetization of digital technology and value pricing.

Mike Harrison of Seaport Research Partners asked about the elevated cash balance on the balance sheet and whether it was expected to remain high.

Answer

Scott Kirkland, CFO, explained the Q2 cash balance was temporarily inflated by a $500M bond offering ahead of a ~$525M debt maturity in July. While cash remains high, he stated the company values the optionality it provides for disciplined investment in the business and opportunistic M&A, noting the net leverage of 1.7x is below their long-term target of ~2.0x.

Mike Harrison asked if moving the Healthcare business into the Institutional segment was merely a reporting change or if it involved deeper operational integration.

Answer

Christophe Beck, Chairman and CEO, confirmed the move formalizes an operational strategy that has been underway. After divesting the surgical business, the final step was to leverage Institutional's scale to better serve hospitals by combining food service and infection prevention. He noted the future focus for Healthcare will be on instrument reprocessing, a business model that aligns well with Institutional's strengths.

Mike Harrison (Seaport Research Partners) inquired about the mix trends in refinish, specifically the growth rate in mainstream economy versus premium, its potential as a mix headwind in 2026, and how the AkzoNobel combination might enhance opportunities in the economy segment. He also asked about new business wins in Light Vehicle, whether expected growth faster than underlying markets in 2026 is due to prior wins or recent contributions.

Answer

CEO Chris Villavarayan confirmed record body shop wins in the economy space last year, aided by the CoverFlexx acquisition, which is a positive for overall Axalta performance coatings margins despite a slight impact on refinish margins due to the premium focus. He stated the strategy to grow economy share (from 9% to 11%) is working and will continue. He reiterated the complementary nature of the merger in refinish. For Light Vehicle, he noted that $30 million of the previously announced $70+ million in Brazil new business wins will contribute in 2026, with continued stable growth and execution in Asia, China, and North America, and strong, consistent margin performance in Mobility.

Mike Harrison asked about the mix in refinish, specifically the growth speed in mainstream economy versus premium, and if this would continue to be a headwind to mix in 2026. He also asked if the AkzoNobel combination enhances refinish opportunities in the mainstream economy segment. Additionally, he inquired about new business wins in light vehicle, asking if expected growth faster than underlying markets in 2026 is due to prior wins or recent contributions.

Answer

CEO Chris Villavarayan confirmed that the acquisition of CoverFlexx and growth in the economy space led to a record number of body shop wins, positively impacting overall performance coatings margins but having a slight impact on refinish margins due to the premium focus. He stated the strategy is working, and they will continue to drive growth in economy. He reiterated the complementary nature of the merger for refinish, enhancing opportunities in the mainstream economy. CFO Carl Anderson explained that light vehicle new business wins, particularly $30 million from Brazil announced a year ago, will contribute to 2026 results, alongside continued execution and wins in Asia, China, and North America, contributing to stable growth and strong margins in Mobility.

Mike Harrison asked about the nature of Axalta's cost reductions, distinguishing between structural and temporary/discretionary costs, and whether discretionary spend might return in the next year.

Answer

Carl Anderson, SVP and CFO, stated that the vast majority of cost actions taken over the last couple of years are structural reductions, enabling more efficient operations. He acknowledged some tactical, discretionary reductions (e.g., T&E) that might partially return next year. Anderson expects the conversion rate of incremental revenue to EBITDA to improve from 35% to closer to 40%, reflecting the stickiness of structural reductions.

Mike Harrison asked about Entegris's expected growth rate in 2026 relative to the underlying market, historically 3-6 percentage points faster, considering opportunities in advanced nodes and NAND content per wafer. He also inquired about the margin trajectory for 2026, specifically EBITDA margin, factoring in seasonality, production rates, and the ramp of Taiwan facilities.

Answer

CEO Dave Reeder indicated a constructive industry backdrop for 2026, with advanced logic fully utilized and growing content, mainstream mixed but stable, and memory performing. He noted that node transitions drive outperformance, but timing is uncontrolled, and CapEx is volatile. For Q1, Entegris guided +4% at the midpoint, with Q2 expected to see 1-3% sequential growth. CFO Linda LaGorga explained that gross margin has stabilized, and volume leverage, the Taiwan ramp, and facility rationalization (one exited in Q4 2025, another planned in H1 2026) are expected to improve gross and EBITDA margins.

Mike Harrison inquired about the margin trajectory for 2026, specifically addressing the sequential contraction in EBITDA margin guided for Q1 and how benefits from ramping Taiwan facilities and facility rationalization will impact margins throughout the year.

Answer

Linda LaGorga (CFO, Entegris) explained that gross margin has stabilized, and future improvements will be driven by volume leverage from increased production. She highlighted the ongoing ramp of the Taiwan facility and the rationalization of manufacturing sites (one exited in Q4 2025, another planned for H1 2026) as key factors that will enhance gross margin and subsequently EBITDA.

Mike Harrison asked for more details on the $50 million shortfall in new product sales for 2025 (reaching $200 million instead of $250 million) and factors that could drive 2026 new product revenue towards the higher or lower end of the $300-$400 million range.

Answer

Pierre Brondeau, Chairman, CEO and President, attributed the 2025 shortfall primarily to Isoflex registration delays and lower-than-expected fluindapyr direct sales in Brazil. For 2026, he explained that the speed and number of new registrations, particularly for Isoflex and potential exceptions, would be the main drivers influencing whether sales land at the higher or lower end of the guidance range.

Mike Harrison asked for more details on the $50 million shortfall in new product sales for 2025, which came in at $200 million instead of the expected $250 million, and discussed factors that might drive 2026 new product revenue towards the higher or lower end of the $300-$400 million range.

Answer

Pierre Brondeau, Chairman, CEO and President, clarified that the $50 million shortfall was primarily due to Isoflex registration delays, but also partly due to lower-than-expected direct sales in Brazil, which included Fluindapyr. For 2026, he explained that the higher end of the $300-$400 million range would be driven by the speed and number of new registrations, particularly for Isoflex, and potential emergency registrations.

Mike Harrison of Seaport Research Partners asked for more details on the pheromones offering, the upcoming commercial pilot, and the long-term viability of the $1 billion revenue target by 2030.

Answer

Chairman and CEO Pierre Brondeau stated that a full-scale commercial pilot for pheromones is launching in the second half of 2025. He emphasized that the results from this pilot will be critical in assessing the realism of the $1 billion revenue target for 2030. A more definitive, fact-based update on this long-term outlook will be available after the current season's campaign concludes at year-end.

Mike Harrison asked about the differentiation and importance of low nitrite celluloses in Life Sciences. He also requested more detail on the $5 million innovation contribution in Specialty Additives, specifically which product lines or technologies are showing commercial traction.

Answer

Alessandra Faccin Assis, SVP, Life Sciences and Intermediates, explained that low nitrite grades (Plasdone, Benecel) enhance product quality by reducing nitrosamine levels, meeting regulatory requirements. Dago Caceres, SVP, Specialty Additives, stated the $5 million innovation is across the board, focusing on rheology modifier protection, expanding into other additives (defoamers, wetting agents), and leveraging platform technologies like TBO and TiO2 spacer. Guillermo Novo, Chair and CEO, highlighted the regulatory strategy for new products like EasyWet 310 to accelerate commercialization.

Mike Harrison with Seaport Research Partners asked for details on low nitrite celluloses in Life Sciences, specifically their differentiation and importance. He also sought more information on the $5 million innovation contribution in Specialty Additives, inquiring about the specific product lines or technologies showing commercial traction, such as the superwetting agent.

Answer

SVP, Life Sciences and Intermediates, Alessandra Faccin Assis explained that low nitrite grades for Plasdone and Benecel enhance product quality by addressing nitrosamine levels, which is a key regulatory focus for pharma companies. SVP, Specialty Additives, Dago Caceres stated that the $5 million innovation contribution is broad-based, focusing on differentiating rheology modifiers, expanding into other additives like defoamers and wetting agents (including superwetting agents), and strategically advancing platform technologies like TBO and TiO2 spacers. Chair and CEO Guillermo Novo emphasized the importance of regulatory approvals for new products like Easy-Wet 310 to accelerate commercialization.

Mike Harrison asked about Minerals Technologies' capital deployment strategy for 2026, including plans for M&A, the remaining share repurchase authorization, and overall expectations for cash spending given the strong balance sheet and anticipated free cash flow recovery.

Answer

Chairman and CEO Douglas T. Dietrich stated the company maintains a balanced capital deployment, aiming to return 50% of free cash flow to shareholders and retaining the rest for inorganic growth. He mentioned approximately $140 million remaining on the share repurchase program and an active M&A pipeline for bolt-ons in consumer products or larger scale opportunities.

Mike Harrison inquired about the margin performance in the Consumer and Specialties segment, specifically the 150-200 basis point decline year-over-year, and the factors contributing to it, including pet care discounting, mix, specialty additives volume, and temporary expansion costs. He also asked about the dollar amount and capacity expansion of the bleaching earth investment in Turkey, and the trends in working capital, particularly inventory levels in pet care and MGO.

Answer

CFO Erik Aldag stated that Consumer and Specialties margins were as expected, primarily impacted by temporary logistics costs from a U.S. cat litter plant upgrade. He clarified that discounting with retail partners did not negatively impact margins due to increased volumes and fixed cost leverage. CEO Douglas Dietrich added that margins are expected to return to and exceed last year's levels due to the cessation of temporary expenses, returning volumes, and accretive new contract volumes. Douglas Dietrich detailed the $9 million-$10 million bleaching earth expansion in Turkey, increasing capacity by about 30% to meet 20% annual growth, particularly in renewable fuels and sustainable aviation fuel. Erik Aldag explained that while AR and AP are stable, inventory is slightly elevated in pet care and MGO due to strategic positioning and river closures, but is expected to normalize by year-end, with strong Q4 cash flow anticipated.

Mike Harrison of Seaport Research Partners inquired about growth dynamics in the Household and Personal Care segment, the drivers of strong Q2 operating income in Engineered Solutions, and the company's capacity for M&A.

Answer

Chairman & CEO Douglas Dietrich and Group President D.J. Monagle detailed mixed conditions in Household and Personal Care, noting strong growth in specialty products but slower, more competitive conditions in pet care, which are being addressed with promotions and capacity expansions. CFO Erik Aldag and Dietrich explained that Engineered Solutions' Q2 outperformance was due to strong productivity and cost management, while the Q3 guidance reflects macro uncertainty and higher tariff costs. Dietrich confirmed the company's strong balance sheet provides flexibility for M&A.

Mike Harrison asked what factors are preventing the expected repaint cycle (5-7 years) from playing out, given demand pulled forward to 2021, specifically inquiring about labor costs, contractor availability, paint costs, and consumer sentiment.

Answer

Heidi G. Petz, Chair, President, and CEO, attributed the delay to natural governors like the inflationary environment and impacted consumer confidence. She noted that paint remains an affordable home update but expects choppiness. Ben Meisenzahl, VP of Investor Relations, highlighted the wide range of uncertainty in existing home sales outlook.

Mike Harrison asked about the factors preventing the typical five-to-seven-year repaint cycle from playing out, considering demand pulled forward into 2021, and specifically inquired about the roles of labor costs, contractor availability, paint costs, and consumer sentiment.

Answer

Chair, President, and CEO Heidi G. Petz acknowledged the post-COVID cycle and identified inflation and consumer confidence as natural governors. She highlighted paint as an affordable and quick home update compared to larger projects. She expressed a desire for faster market improvement but anticipated continued choppiness throughout the year, noting that the DIY segment, representing about 40% of available gallons, needs to start moving. Head of Investor Relations and Communications Jim Jaye added that uncertainty in demand, as seen in varying existing home sale outlooks, also plays a role.

Mike Harrison requested more detail on contractor backlogs and visibility for the next three to six months, specifically asking which Paint Stores Group submarkets show more confidence versus caution.

Answer

President and CEO Heidi Petz pointed to the commercial segment, including multifamily starts, as showing some improvement and continued outperformance, though the company is looking for sustained positive signals. She noted that the sightline in this area is more like 9 to 12 months, with potential pickup in late back half of 2026 or early 2027, which is accounted for in the current commercial outlook.

Mike Harrison requested more detailed information on contractor backlogs and their visibility over the next three to six months. He also asked which submarkets within the Paint Stores Group are exhibiting more confidence and which are showing a more cautious outlook.

Answer

Heidi Petz, President and CEO, highlighted the commercial segment, including multifamily starts, as showing continued outperformance and some improvement in starts. However, she emphasized the need for sustained positive signals. She noted that their visibility in this area extends 9-12 months, with a potential pickup anticipated in late second half of 2026 or early 2027, which is already factored into their current commercial outlook.

Mike Harrison of Seaport Research Partners asked for more detail on the raw material baskets driving expected deflation in the second half and questioned if there was a risk of competitors cutting prices.

Answer

SVP of IR Jim Jaye identified petrochemicals like solvents and some resins as sources of deflation, while tariffs are causing pressure on packaging and certain pigments. He and CEO Heidi Petz dismissed concerns about price cuts, noting a major competitor actually raised prices mid-season and reiterating Sherwin-Williams' focus on value and pricing discipline.

Mike Harrison from Seaport Research Partners asked for details on the raw material baskets driving expected deflation in the second half and questioned the risk of competitors cutting prices in response.

Answer

SVP of Investor Relations James Jaye specified that deflation is expected in petrochemicals like solvents and some resins, while tariffs are causing pressure on applicators and certain pigments, leading to a flat outlook for the year. CEO Heidi Petz added that they are seeing competitors do the opposite—raising prices—and Sherwin-Williams will maintain its pricing discipline.

Mike Harrison asked for clarification on PPG's performance in China, specifically why it wasn't mentioned as running ahead of expectations, and the outlook for China heading into and post-Lunar New Year.

Answer

Chairman and CEO Tim Knavish clarified that his earlier response focused on business verticals, not geography. He stated that PPG is growing in China (Q4 2025 and expected 2026) due to its strong local-for-local position and presence in key industries. He added that the broader Asia Pacific region is strong, with India delivering double-digit growth in 2025 and expected to continue in 2026. China is projected to achieve low to mid-single-digit growth in 2026.

Mike Harrison asked for an update on PPG's performance in China and Asia Pacific, specifically what the company is observing as it heads into the Lunar New Year and expectations for recovery.

Answer

Chairman and CEO Tim Knavish clarified that PPG is growing in China, having grown in Q4 and expecting growth in 2026, driven by a strong local-for-local position and presence in the right industries. He noted that Asia Pacific is strong overall, with India delivering double-digit growth in 2025 and expected to continue in 2026. China is projected for low to mid-single-digit growth in 2026.

Mike Harrison asked for more details on the role of AI in PPG's innovation process, specifically regarding the new AI-designed clear coat product.

Answer

Chairman and CEO Tim Knavish expressed excitement about AI's role, explaining that PPG uses AI tools to scrape over 100 years of proprietary formulation expertise. This allows for quicker optimization of product performance, competitive pricing, and faster market launches. The new clear coat is the first such product, with about 50 AI-commercialized products (new or optimized) expected by year-end across various businesses. CFO Vince Morales clarified that AI helps identify the best raw material composition at the lowest price.

Mike Harrison from Seaport Research Partners requested more details on the role of AI in PPG's innovation efforts, specifically regarding the development of the new Deltron Premium Glamour Speed Clear Coat.

Answer

Chairman and CEO Tim Knavish expressed excitement about AI's role, explaining that PPG uses AI tools to scrape over 100 years of proprietary formulation expertise to optimize product performance, competitive pricing, and speed to market. He noted that the clear coat is the first product developed this way, with about 50 products expected to be commercialized by year-end using 'formulation AI' for new products or optimization. Knavish highlighted AI's broader use for internal productivity and customer-facing speed. CFO Vince Morales clarified that AI helps identify the best raw material composition for optimal pricing and customer outcomes.

Mike Harrison asked about H.B. Fuller's Q1 2026 guidance, specifically the projected low single-digit top-line decline and mid-single-digit organic sales decline, and how December's performance influenced this outlook. He also inquired about the company's expectations for raw materials and pricing in fiscal 2026, including the cadence of pricing versus raw material impacts on margins.

Answer

President and CEO Celeste Mastin explained that Q1 2026 would see continued performance similar to Q4 2025, with EA strengthening, BAS improving but weak, and HHC facing challenges, particularly from CPG customers. She highlighted that the primary impact on Q1 revenue would be the timing of Chinese New Year, pushing some revenue into Q2. EVP and CFO John Corkrean quantified this shift as $15-20 million in revenue and $6-8 million in EBITDA moving from Q1 to Q2, confirming December tracked as expected. Regarding raw materials and pricing, Ms. Mastin stated that H.B. Fuller anticipates a combined benefit of approximately $35 million in 2026, building on a $25 million carryover from 2025, driven by sourcing reallocation and portfolio optimization. Mr. Corkrean added that this favorable spread is expected to be slightly weighted to the first half but will continue throughout the year due to new pricing actions, leading to expanded margins across all GBUs.

Mike Harrison from Seaport Research Partners inquired about H.B. Fuller's first-quarter 2026 guidance, specifically the projected low single-digit top-line decline, potential mid-single-digit organic sales decline, and the impact of December's performance on the weaker outlook. He also asked about the raw materials and pricing outlook for fiscal year 2026, including the cadence and year-over-year margin comparison.

Answer

President and CEO Celeste Mastin explained that Q1 would see continued performance similar to Q4, with EA strengthening, BAS improving but still weak, and HHC facing challenges due to CPG customer order patterns. She highlighted Chinese New Year timing as the biggest impact, pushing revenue into Q2. EVP and CFO John Corkrean quantified the Chinese New Year impact as $15-$20 million in revenue and $6-$8 million in EBITDA shifting from Q1 to Q2, confirming December's performance was as expected. Regarding raw materials and pricing, Celeste Mastin stated an anticipated $35 million combined benefit in 2026, up from $30 million in 2025, with John Corkrean adding it would be slightly weighted to the first half and result in a favorable spread all year.

Mike Harrison asked for an update on the $55 million price versus raw material cost tailwind target for the year, including how much has been realized and how much is expected in fiscal 2026. He also inquired about the potential for accelerated growth in EA and other segments through organic initiatives and bolt-on acquisitions.

Answer

Celeste Mastin, President and Chief Executive Officer, clarified that $15 million of the $55 million price/raw material benefit was realized through Q3, with another $15 million expected in Q4, and the remainder in early 2026, attributing the slower cadence to higher inventory for footprint optimization. She highlighted the rapid expansion of ND Industries products into new geographies and the doubling of EBITDA and 60% revenue growth in medical adhesives technology, noting strong performance and geographical expansion in BAS.

Mike Harrison inquired about the progress on the $55 million pricing versus raw material cost tailwinds for the year, the amount realized, and the outlook for raw material costs into fiscal 2026. He also asked about organic growth initiatives, cross-selling, geographic expansion, and expected growth rates for EA and other segments.

Answer

Celeste Mastin, President and Chief Executive Officer, confirmed the $55 million target, with $15 million realized by Q3 and another $15 million expected in Q4, with the remainder in early next year, noting a slower cadence due to inventory for footprint optimization. She highlighted rapid expansion of ND Industries products, significant growth in medical adhesives (EBITDA doubled, revenue up 60%), and strong BAS performance including 4SG insulated glass sealant adoption and Middle East expansion.

Mike Harrison asked for an update on the $55 million price versus raw material cost tailwinds for the year, how much has been realized, and the outlook for fiscal 2026. He also inquired about organic growth initiatives, cross-selling, geographic expansion, and growth potential across all segments.

Answer

CEO Celeste Mastin confirmed $15 million of the $55 million price/cost benefit was realized by Q3, with another $15 million expected in Q4 and the remainder ($20-25 million) in early next year due to slower cadence from inventory for footprint optimization. She highlighted rapid expansion of ND Industries products, strong medical adhesives performance (EBITDA doubled, revenue up 60%), and BAS's performance on a strong prior-year comp, with adoption of 4SG insulated glass sealant and Middle East expansion.

Mike Harrison asked about monthly volume trends during Q2 and into June, seeking specifics on the timing of the pause in China exports. He also explored packaging trends, questioning if the strength in flexible packaging and weakness in end-of-line packaging was due to a market shift from cardboard to flexible formats.

Answer

President & CEO Celeste Mastin described Q2 volumes as consistently flat to slightly negative month-over-month, with some weakening in the Building Adhesives segment in May. She noted the China electronics pause occurred later in Q2 and may persist for another month or two. While acknowledging the shift to flexible packaging, she attributed H.B. Fuller's outperformance primarily to share gains driven by its ability to provide regulatory and supply chain solutions, and confirmed flexible packaging adhesives are more demanding, higher-value applications.

Mike Harrison asked about new use cases for AI that Linde has found to improve operational efficiency and productivity, and if any are being implemented for next year.

Answer

Sanjiv Lamba, CEO, stated that Linde has over 300 AI use cases across its operations, from sales to engineering and design, with robust deployment managed by an AI console. He noted a shift from standalone use cases to introducing AI tools across entire domains to harvest value. AI projects are tracked like other productivity initiatives, with stretching goals and exciting benefits expected to scale over the next two to three years.

Mike Harrison from Seaport Research Partners asked about new use cases for AI that Linde might be implementing in the coming year to improve operational efficiency and productivity.

Answer

CEO Sanjiv Lamba highlighted Linde's extensive work with data and machine learning over many years, resulting in over 300 AI use cases across sales, engineering, and design. He noted a shift from standalone use cases to introducing AI tools across entire domains to harvest value, with all AI projects tracked and validated on an internal platform with stretching benefit goals.

Mike Harrison asked for more details on the increased marketing spend in the Consumer Group, including specific product lines and the impact of manufacturing inefficiencies from plant consolidations, seeking quantification and trend analysis.

Answer

Frank Sullivan, Chairman and CEO, clarified that increased marketing spend is primarily higher advertising, disproportionately focused on social media and e-commerce, particularly for cleaners and The Pink Stuff. Russell Gordon, VP and CFO, quantified manufacturing inefficiencies at approximately $10 million in unfavorable year-over-year conversion costs and absorption in Q1, expecting this to continue in Q2 due to ongoing plant consolidations, such as the Toronto facility transfer.

Mike Harrison of Seaport Research Partners asked about the key drivers of the Q4 outperformance, recent demand trends, whether inflation is primarily tariff-driven, and for guidance on FY26 depreciation, amortization, and CapEx.

Answer

Chairman & CEO Frank Sullivan attributed the strong Q4 to new product introductions in Consumer, double-digit growth in developing markets, and strong unit volume growth in PCG and CPG, viewing Q3 as a weather-related aberration. He estimated tariffs account for a significant portion of inflation. VP of IR & Sustainability, Matthew Schlarb, provided FY26 guidance of ~$200M for D&A and $220M-$240M for CapEx.

Mike Harrison of Seaport Research Partners asked for quantification of the pure pricing component of average ticket growth and inquired about the nature of the eight store acquisitions in the quarter, as well as the pipeline for smaller deals amidst the pending Breeze transaction.

Answer

CFO J. Kevin Willis acknowledged a large franchisee's pricing action but highlighted premiumization and NOCR as larger growth opportunities. CEO Lori Flees added that while pricing is a contributor, no pervasive company-wide actions have been taken for new costs. Regarding acquisitions, she explained that six stores were a strategic transfer from a franchisee, and the other acquired stores were from multiple smaller operators. She confirmed Valvoline continues to pursue smaller acquisitions with strong returns.

Mike Harrison from Seaport Research Partners inquired about the drivers behind the 5% above-market growth, its sustainability, the factors causing margin weakness in Asia Pacific, and the expected earnings cadence for the second half of the year.

Answer

CEO Joseph Berquist attributed the growth to broad-based share gains, especially in Asia Pacific and with advanced solutions, stating confidence in sustaining a 2-4% above-market rate. He explained that Asia Pacific margins were impacted by new business incentives, product mix, and oleochemical costs, but expects modest improvement. Berquist and CFO Tom Coler projected a stronger second half driven by new business, cost actions, and acquisitions, without assuming market improvement, noting Q4 would likely not be sequentially higher than Q3 due to seasonality.

Mike Harrison inquired about current channel inventory levels in key regions, the specific drivers expected to lift EBITDA margins to the mid-teens target, and the anticipated earnings and margin cadence for 2025.

Answer

CEO Douglas Kaye stated that channel inventories are down, but customers are now buying 'just-in-time' due to capital costs instead of restocking. He outlined a path to mid-teens EBITDA margins by improving gross margins from 29% to ~32% and reducing OpEx as a percentage of sales from 26% to ~20%. He also projected that the second half of 2025 would be stronger than the first half, with lower margins in Q1 and Q2.