Executive Summary / Key Takeaways

• Strategic Pivot to High-Margin Growth: Minerals Technologies is successfully transforming its portfolio towards higher-growth, higher-margin consumer-oriented and specialized industrial markets, exemplified by double-digit growth in areas like animal health and renewable fuel purification, and strong penetration of advanced solutions like MINSCAN and FLUORO-SORB.
• Operational Excellence Driving Record Profitability: Despite mixed market conditions, MTX achieved a record 15% operating margin in 2024, a year ahead of schedule, and sustained strong profitability into Q2 2025, demonstrating robust cost control, productivity gains, and the effectiveness of its operational excellence culture.
• Robust Financial Health and Shareholder Returns: With nearly $700 million in liquidity and a net leverage ratio of 1.7x EBITDA, MTX maintains a strong balance sheet, supporting a balanced capital allocation strategy that includes a new $200 million share repurchase program and increased dividends, alongside strategic M&A capacity.
• Technological Differentiation as a Competitive Moat: The company's proprietary technologies, including advanced PCC/GCC, automated refractory systems, and PFAS remediation solutions, offer tangible, quantifiable benefits to customers, reinforcing market leadership and driving future revenue and margin expansion.
• Managing Talc Litigation and Macro Uncertainties: While the ongoing BMI Oldco Chapter 11 case introduces a degree of uncertainty, the company has established a $215 million reserve and is actively pursuing a resolution. Macroeconomic headwinds like tariffs are being mitigated through agile operations and diversified manufacturing.

The Foundation: A Specialty Minerals Powerhouse Forged by Innovation

Minerals Technologies Inc. (MTX), incorporated in 1968, has evolved into a leading, technology-driven specialty minerals company. Its journey, marked by strategic acquisitions and continuous innovation, has shaped a diversified portfolio serving a wide array of global consumer and industrial markets. The company's core strategy centers on expanding its presence in higher-growth consumer-oriented markets, deepening its positions in core industrial sectors, and consistently introducing innovative, higher-margin products. This foundational approach is underpinned by MTX's unique combination of world-class mineral reserves, proprietary technologies, deep applications expertise, and an intimate understanding of its customers' processes.

MTX's competitive advantage is rooted in its ability to deliver specialized, value-added mineral-based solutions. Unlike broader chemical or commodity producers, MTX focuses on tailored applications that enhance customer efficiency, product performance, and sustainability. This strategic positioning allows it to command stronger pricing and foster deeper customer relationships, particularly in niche, high-value segments. Its global manufacturing footprint and vertical integration further differentiate it, enabling stable supply and rapid adaptation to regional demand shifts, a critical capability in today's dynamic global trade environment.

Technological Edge: Driving Performance and Competitive Moats

MTX's technological differentiation is a cornerstone of its investment thesis, providing tangible benefits and reinforcing its market leadership. The company's innovation extends beyond product development to encompass operational advancements, creating a powerful competitive moat.

In its Specialty Additives product line, MTX is a leader in Precipitated Calcium Carbonate (PCC) and Ground Calcium Carbonate (GCC) technologies. Its NewYield technology, for instance, repurposes paper-making waste into high-value PCC, offering customers significant environmental and cost benefits. Three of the five contracts signed in 2024 were for this innovative, sustainable solution, highlighting its market traction. The company's expertise in crystal engineering allows it to develop unique crystal morphologies that provide functional benefits in paper, packaging, automotive, and food/pharmaceutical applications, enhancing product performance and reducing customer input costs.

Within High-Temperature Technologies, MTX's automated MINSCAN LSC systems exemplify its commitment to advanced solutions. These systems improve safety and operational efficiency in steelmaking by precisely applying refractory materials, extending furnace life. With 17 units installed to date and 8 more agreements signed for 2025, including the first MINSCAN LSC sale in Europe, this technology is gaining significant traction. The system's ability to reduce costs and improve performance for steel customers translates directly into a compelling value proposition, fostering long-term contracts and higher-margin refractory sales.

Perhaps one of the most impactful technological differentiators is FLUORO-SORB, MTX's solution for PFAS remediation. This technology addresses a critical environmental challenge, offering effective and cost-efficient removal of "forever chemicals" from water sources. In 2024, FLUORO-SORB was deployed in 51 projects, and MTX is actively running over 250 pilots globally, including collaborations with the U.S. EPA on eight water utility studies. The product's ability to be used in existing municipal equipment minimizes capital outlay for customers, making it a highly attractive solution. A large-scale municipal drinking water project in the Northeast, commissioning in July 2025, will utilize FLUORO-SORB in large reactors, marking a new, high-volume application that could significantly expand its market reach and revenue contribution.

Beyond product-specific innovations, MTX is also leveraging AI-based tools in its operations for predictive maintenance and process optimization, and has partnered to deploy autonomous mining capabilities. These initiatives aim to increase employee safety, improve productivity, and drive higher equipment utilization, potentially enabling 24/7 operations. These operational innovations contribute to cost leadership and efficiency, further enhancing profitability. The company's commitment to R&D is evident, with 18% of its 2024 revenue generated from new products, many of which possess a sustainable profile, aligning with global ESG trends and customer demands for pollution prevention, filtration, and energy savings.

Financial Performance: A Trajectory of Resilience and Profitability

Minerals Technologies has demonstrated remarkable financial resilience and a clear trajectory towards enhanced profitability, even amidst a challenging global economic backdrop. The company's strategic realignment and operational discipline have translated into strong results.

For the full year 2024, MTX achieved record operating income, EBITDA of $406 million (19.2% of sales), and earnings per share of $6.15, an 18% increase year-over-year. Crucially, its operating margin reached 15% in 2024, a year ahead of its stated 2025 target. This performance was driven by disciplined pricing, effective cost savings, and significant productivity improvements, with overall productivity savings exceeding 5% across the company. MTX's TTM Gross Profit Margin of 25.41% positions it competitively against peers like Tronox (TROX) (17%) and Cabot (CBT) (24%), though slightly below Ashland (ASH) (29%) and FMC (FMC) (39%).

This indicates a solid foundation, with ongoing cost savings programs aimed at further enhancing operating and net margins.

The first quarter of 2025 presented a challenging start, with sales impacted by customer inventory adjustments and tariff uncertainties, leading to a 7% drop in the January sales run rate from Q4 2024. However, order patterns significantly improved in March, with the average daily sales rate rising 10% from January, suggesting customers had reached critical inventory lows. This rapid adaptation and underlying demand rebound set the stage for a stronger second quarter.

In Q2 2025, MTX delivered a strong performance, with EPS of $1.44 (or $1.55 excluding special items), up 36% sequentially. Sales reached $528.9 million, an 8% sequential increase driven by higher volumes in both segments. Operating income was $74.6 million (or $79 million excluding special items), up 25% sequentially, with the operating margin recovering to 14.9%, "reverting to our natural level of 15%." This sequential improvement was fueled by a $9 million contribution from higher volume and an additional $4 million from lower costs due to improved productivity and the ramp-up of the cost savings program. While Q2 2025 margins were lower year-over-year due to volume leverage and higher raw material/energy costs, the company is actively working to pass these through.

Strategic Initiatives and Forward Outlook

MTX's strategic initiatives are designed to capitalize on secular growth trends and enhance its long-term profitability. The company's outlook reflects a cautious yet confident approach, backed by concrete guidance and a clear roadmap for growth.

For the third quarter of 2025, MTX expects sales to be between $525 million and $535 million, with operating income projected at approximately $75 million. This guidance reflects a balanced view of potential upsides and ongoing macro uncertainties, particularly around trade and tariffs. The Household & Personal Care segment is anticipated to see sequential sales increases, driven by improving demand and the ramp-up of growth initiatives, while Specialty Additives and Engineered Solutions are expected to maintain similar sequential sales levels. The company anticipates a $1.5 million increase in tariff costs in Q3 but is confident in its ability to mitigate this impact through supply chain and commercial efforts.

Looking at the full year 2025, MTX anticipates organic sales growth of between 3% and 5%. This growth is expected to be driven by a positive outlook in the Consumer & Specialties segment, with cat litter gaining market share and new sales in North America, Europe, and Asia, supported by new packaging options and technologies. High-margin specialty consumer products like animal health, natural oil filtration, and personal care are projected to continue their double-digit growth rates. In Engineered Solutions, the North America steel market is expected to improve from Q2 through the second half, with potential for increased demand from steel import tariffs. The metal casting business is anticipated to remain stable in North America and continue its growth in Asia.

A key driver for future growth and margin expansion is the company's capital investment strategy. MTX projects approximately $100 million in CapEx for 2025, with about $50 million allocated to growth investments over the next 12 months. These investments are expected to generate an additional $100 million in annual revenue at above-average margins, particularly in areas like sustainable aviation fuel, animal health, fabric care, and pet care. The $10 million cost savings program initiated in Q1 2025 is expected to be fully realized by early 2026, providing an accretive boost to margins.

Capital Allocation and Financial Strength

MTX's financial strength provides significant flexibility for capital allocation. The company ended Q2 2025 with robust liquidity of nearly $700 million, $319.9 million in cash and short-term investments, and a net leverage ratio of 1.7x EBITDA, comfortably below its target of 2x. This strong balance sheet is a result of strategic debt refinancing in November 2024, which extended average debt maturities to over five years, with no significant maturities until 2028 and 2031.

The company adheres to a balanced capital allocation strategy, aiming to return 50% of its free cash flow to shareholders while retaining the other 50% for opportunistic mergers and acquisitions. In Q2 2025, MTX returned $22 million to shareholders through dividends and share repurchases, contributing to $73 million returned over the last four quarters. The authorization of a new $200 million share repurchase program in October 2024, alongside a 10% increase in the quarterly dividend to $0.11 per share, underscores management's confidence in sustained cash flow generation. For the full year 2025, free cash flow is projected to be in the 6% of sales range, translating to approximately $150 million to $160 million, further solidifying its capacity for shareholder returns and strategic investments.

Competitive Landscape and Market Positioning

Minerals Technologies operates in a competitive landscape with both direct and indirect rivals. Direct competitors include global players in specialty chemicals and minerals such as Tronox Holdings, Cabot Corporation, Ashland Inc. , and FMC Corporation. MTX's competitive positioning is reinforced by its differentiated technology and integrated service model.

Compared to Tronox, which focuses heavily on titanium dioxide and raw material extraction, MTX's diversified portfolio of value-added mineral products, particularly in PCC and GCC, offers greater specialization and efficiency in end-use applications. MTX's emphasis on integrated systems and services, especially in non-residential construction and infrastructure, provides a stronger market position through tailored solutions. While Tronox's financial performance can be more volatile due to commodity price exposure, MTX's focus on specialized applications tends to yield more stable profitability.

Against Cabot Corporation, a specialist in performance additives like carbon black, MTX's bentonite and mineral-based products offer versatility in construction and environmental projects. MTX's end-to-end solutions foster stronger customer loyalty and potentially superior margins in shared markets. While Cabot may lead in R&D for certain emerging materials, MTX's operational execution and focus on integrated systems for non-residential construction provide a distinct advantage.

Ashland Inc. , with its focus on specialty chemicals for adhesives and personal care, presents a different competitive dynamic. MTX's offerings in limestone and talc for building materials and refractories provide superior performance and efficiency, leading to lower operating costs for customers. MTX's direct sales force and tailored solutions enable it to lead in customer-specific applications, potentially translating to stronger growth trajectories and net margins compared to Ashland's more fragmented approach.

FMC Corporation, primarily an agricultural sciences company, has some overlap in industrial mineral products. MTX's refractory and mineral products offer notably greater durability in industrial applications, leading to stronger customer loyalty and better margins in construction and energy sectors. MTX's strategy of leveraging direct sales and focusing on non-cyclical infrastructure demands provides a more resilient business model compared to FMC's agriculture-dependent revenue streams.

Overall, MTX distinguishes itself through its deep applications expertise, proprietary technologies, and a customer-centric approach that delivers tangible value. This allows it to compete effectively by offering superior product performance, cost efficiencies, and integrated solutions, rather than solely on price. Its global footprint enables it to adapt to regional demand shifts and tariff impacts, a capability that few competitors can match.

Key Risks and the Talc Litigation Overhang

Despite its strong operational and strategic positioning, Minerals Technologies faces several notable risks. The most significant is the ongoing talc litigation. Its subsidiary, BMI Oldco Inc., and Barretts Ventures Texas LLC filed for Chapter 11 bankruptcy in October 2023 to resolve talc-related claims. As of June 29, 2025, there were 775 open cases. While MTX maintains that Oldco's talc products are safe and do not cause cancer, the company recorded a $215 million provision in Q1 2025 to fund a trust for estimated costs to resolve current and future claims and related litigation. The Bankruptcy Court's recent recommendation that the District Court determine whether Oldco's talc contained asbestos is a critical development, which the company supports. However, the ultimate resolution remains uncertain, and it is "reasonably possible that the Company will incur a loss for liabilities associated with talc claims in excess of the amount accrued."

Macroeconomic uncertainties, particularly changing tariff structures, also pose a risk. While MTX primarily manufactures and sells locally, limiting direct exposure, tariffs can negatively affect demand, increase input costs, and disrupt customer order patterns, as seen in Q1 2025. The company is actively mitigating these impacts through supply chain and commercial actions. Additionally, fluctuations in foreign currency exchange rates and interest rates could impact financial results, though MTX uses derivative instruments to manage these exposures. The cyclicality of some industrial end markets, such as commercial construction and steel, also presents demand volatility, which the company aims to offset through its growing consumer-oriented businesses and diversified product portfolio.

Conclusion

Minerals Technologies Inc. stands as a compelling investment opportunity, having successfully transformed its business model to focus on high-growth, high-margin specialty minerals and solutions. The company's strategic pivot towards consumer-oriented markets and its relentless pursuit of technological innovation have yielded impressive results, including record profitability and robust cash flow generation. Its differentiated technologies, such as MINSCAN, NewYield, and FLUORO-SORB, provide a strong competitive moat, offering quantifiable benefits to customers and driving future revenue and margin expansion.

While the ongoing talc litigation and broader macroeconomic uncertainties present challenges, MTX's strong balance sheet, disciplined capital allocation, and agile operational culture position it to effectively manage these headwinds. The company's commitment to returning capital to shareholders, alongside its capacity for strategic acquisitions, further enhances its investment appeal. As MTX continues to leverage its technological leadership and operational excellence, it is well-positioned to unearth significant long-term value for investors.