Minerals Technologies (NYSE:MTX) reported third-quarter financial results on Friday. The transcript from the company’s third-quarter earnings call has been provided below.
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Summary
Minerals Technologies reported Q3 2026 sales of $555 million, up 4% from last year, with Engineered Solutions achieving a record performance.
The company is facing challenges in the Consumer and Specialties segment due to rising energy and raw material costs, but pricing adjustments are expected to recover margins.
Operating income was $72 million with EPS of $1.53, slightly below guidance due to cost pressures.
Strategic initiatives include growth in high-temperature technologies and new contracts in steel markets, alongside innovations in high-purity calcium metal and waste stream repurposing.
Q4 sales are expected to be approximately $525 million, with operating income between $60 and $63 million, impacted by fewer business days and seasonal factors.
Cash flow from operations is strong, with year-to-date free cash flow up 32%. The company increased its regular quarterly dividend by 8%.
Management remains confident in achieving mid-single-digit revenue growth through 2027, supported by innovation and expansion in higher-value markets.
Full Transcript
OPERATOR
Good morning and welcome to the Minerals Technologies third quarter 2026 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the Star key followed by zero. After today’s presentation, there will be an opportunity to ask questions. To ask a question, you may press Star then one on your telephone keypad. To withdraw your question, please press Star then two.
Please note this event is being recorded. I would now like to turn the conference over to Lidia Kopylova, Head of Investor Relations. Please go ahead.
Lidia Kopylova (Head of Investor Relations)
Thank you, Gary. Good morning, everyone, and welcome to our third quarter 2026 earnings conference call. Today’s call will be led by Chairman and Chief Executive Officer Doug Dietrich and Chief Financial Officer Eric Alduck. Following Doug and Eric’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 this 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 an appendix of this presentation, which are posted on our website. Now I’ll turn it over to Doug.
Doug Dietrich (Chairman and Chief Executive Officer)
Thanks, Lidia. Good morning, everyone, and thanks for joining today. I’m going to kick us off with a review of our third quarter numbers before Eric takes you through the financials in more detail and provides our outlook. After Eric’s comments, I want to take you through some highlights from a recent investor day which took place at one of our R&D facilities in Bethlehem, Pennsylvania. After that, we’ll open up the call to questions. This is a quarter that I would characterize with some significant highlights. Solid top-line growth for the company and a record operating performance in Engineered Solutions, and also some challenges dealing with another round of energy and raw material inflation in Consumer and Specialties. As we projected, we continued along our target growth track this quarter with sales of $555 million, up 4% over last year and up 6% year to date. Both segments are executing on their growth initiatives.
In the Consumer and Specialty segment, we are seeing strong demand for our newest cat litter formulations in North America, and our fabric care and natural oil purification volumes are growing, supported by the expansions that came online a few months ago. In the Engineered Solutions segment, we see solid growth across the board in high temperature technologies. We continue to see good traction for our MN scans with six new installations this year and more coming online next.
We have also secured new contracts for our calcium wire products at two greenfield steel plants that are scheduled to come online next year. Volumes of foundry greensand bonds continue to grow, driven by strong automotive EV production in Asia, offsetting continued soft agricultural equipment and heavy truck markets in the U.S. Stronger environmental remediation markets and solid drilling product sales have contributed to several quarters of growth in the environmental and infrastructure product line.
Overall, we’re executing on the strategic projects we laid out for this year and remain on track to hit our full-year mid-single-digit revenue growth target, and we see this rate continuing through 2027. Our operating income in the third quarter was $72 million and earnings per share were $1.53. Our Engineered Solutions segment had another very strong quarter with 9% sales growth, 9% operating income growth, and generating 17.6% operating margins.
This segment’s performance puts it on track for a record year. Total operating income for the company was slightly below our guidance this quarter, driven by a challenging operating quarter in Consumer and Specialties due to the significant increases in energy, transportation, and raw material costs. However, our teams around the world continue to work closely with our customers to adjust prices. Previous rounds of price increases have taken hold, and these latest price changes will take effect this quarter and carry over into the next.
We expect to fully recover segment margins, which historically have been around 14%, as our pricing catches up with these inflationary costs. Doing so will drive full company margins back to the 15% level. Despite the inflationary challenges, we continue to generate strong cash flow. Year to date, our cash from operations is $171 million, up 32% compared to last year. Our balance sheet remains solid, and we improved our financial flexibility by extending debt maturities and expanding our revolving credit facility. Lastly, we announced that we increased our regular quarterly dividend by 8% to 13 cents per share. This is the fourth year in a row that we have announced an increase, which reflects the continued confidence we have in our future cash generation.
With that, I’d like to hand the call over to Eric. Thanks, Eric. Last month we held an Investor Day at our R&D labs in Bethlehem, Pennsylvania. Thank you to all who attended in person and online. We certainly enjoyed the opportunity to spend more time with you and give you a firsthand look at another one of our R&D facilities. At the event, we reconfirmed our strategic growth and long-term financial targets, which you can see here on the right, and highlighted what will drive Minerals Technologies’ near- to midterm sales growth. We discussed how the company has delivered 4% compound annual revenue growth over the last five years and how we’re set up to continue to deliver an average of 5% through the cycle going forward. We provided an overview of our growth strategy and shared how we are applying our capabilities and technologies in higher-value markets.
We also outlined our path for margin expansion, which we see returning to an operating margin of 15% in the near term and the potential to move above 15% through our strategy execution. Eric covered Minerals Technologies’ strong cash flow profile and deep financial resources, which provide the company with the flexibility to fund our organic growth, continue to return capital to shareholders, and pursue M&A opportunities. Simultaneously, the past five years we’ve converted an average of 6% of our sales to free cash flow and are maintaining our target of a 7% conversion rate along with a 12% return on invested capital target.
Another objective of the Investor Day was to outline our new product pipeline, which we currently estimate at $1.4 billion in revenue potential. To highlight part of what makes up this potential, we showcased two new innovations that are near commercialization and that will drive long-term value creation, and I’d like to provide a quick recap of those on the next slide. First, we shared details about a new technology associated with the production of high-purity calcium metal.
Minerals Technologies produces calcium metal at our facility in Canaan, Connecticut, and we’ve been doing so for over 40 years. Recently, our R&D teams have established the capability and process to manufacture it in high-purity form. High-purity calcium metal is required in the production of rare earth metals, and a U.S.-based supply of this type of calcium metal is essential for the establishment of a domestic rare earth supply chain. We see demand for high-purity calcium increasing rapidly over the next three years and are well positioned to be the domestic supply partner for this critical mineral, critical market.
We have high-purity production in place and are in the process of expanding capacity. Several companies are currently scaling heavy rare earth metallization in the U.S., and we have qualified our calcium metal in their production process. I will also add that our capability is very well understood by the U.S. government’s national security and critical minerals initiatives. We estimate that the high-purity calcium metal opportunity will drive over $100 million in incremental revenue for Minerals Technologies in the next three to five years.
The second emerging opportunity we discussed at our Investor Day is derived from our crystal engineering technology, specifically the technology that is the foundation for our proprietary NewYield product, which repurposes waste streams for the paper and packaging industry. We recently developed ways to apply this underlying technology to other waste byproducts. One area that we are currently targeting is the steel slag waste stream from the steelmaking process.
Our solution repurposes the slag into commercially viable critical metals like magnesium and manganese. These metals, which are currently almost 100% imported to the U.S., are needed to support infrastructure development and the production of batteries, electric vehicles, and aerospace and defense technologies. We plan to pilot this technology with our partner over the next year and explore opportunities to apply it to recover critical minerals and materials from other untapped domestic byproducts.
There’s a broad palette of waste streams to work from, and the estimated addressable market for the steel slag opportunity alone could be greater than $250 million in the U.S., with similar opportunities in a variety of other sectors. Let me conclude by saying that innovation has always been a core tenet of Minerals Technologies’ strategy, and it remains a key driver of long-term value creation. We’re excited about these new technologies, but they are only two of the many new solutions moving through our innovation pipeline. We look forward to sharing how these two new projects evolve and how our other products under development will continue to open up higher-growth, higher-value markets for us going forward.
With that, let’s open the call to questions.
OPERATOR
We will now begin the question-and-answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time we will pause momentarily to assemble our roster. Our first question today is from Daniel Moore with CJS Securities. Please go ahead.
Daniel Moore (Analyst at CJS Securities)
Thank you. Doug and Eric, good morning. Thanks for taking questions. Wanted to start with price/cost. I just want to make sure I heard correctly. Starting with the assumption that, you know, inflationary pressures in raw material and transport and everything else start to level off, which is anybody’s guess, but if they do, sounds like by sometime in Q1 you would expect to sort of catch up so that we are back to a more normal kind of margin level in Q2. Did I hear that correctly?
Eric
Yeah, thanks for the question, Dan. This is Eric. So yeah, I think you have that right. What we’re facing right now is another increase in costs in Q4 relative to Q3. We’re looking at another roughly $5 million of cost increases sequentially just based on how a lot of these energy-linked costs moved in the third quarter and how it’s flowing through into the fourth quarter. So yeah, let’s assume costs stabilize in the first quarter. You know, we’ve talked about how this price/cost lag is primarily in the Consumer & Specialties segment.
A lot of it sits in the Household & Personal Care product line. But for that segment we’ve got this near-term margin improvement opportunity of about 200 basis points from this price/cost catch-up. And so assuming costs stabilize in the first quarter, that segment is well positioned to be at 12% plus in the second quarter of next year. That puts the company at 14% plus in the second quarter of next year. Importantly, I’m assuming here Engineered Solutions 17% right now.
We’re assuming that holds for next year. So we have got one side of the business at 17% operating margins. We’ve got Consumer & Specialties with a near-term kind of 200 basis points uplift as soon as costs stabilize. And yeah, you could see us at a company level at 14% in the second quarter of next year. And then as we move into the second half, with the volume leverage that we’re getting from continued 5% growth with the growth of these higher-margin products like bleaching earth in the Household & Personal Care product line, we should be getting back to that 14.5%, 15% run rate in the second half of next year.
Doug Dietrich (Chairman and Chief Executive Officer)
Dan, let me just add a little bit, maybe give you some more kind of dynamics on the pricing and how it works. You know, we’ve been very active throughout the year as we’ve seen these cost increases come in, working with customers on a daily basis to make sure that we’re following the contract and moving things through. D.J., you want to give us some color on kind of some of those discussions and how we’ve been doing some work on actually compressing this timeline from our current 90 days into something much shorter as we go forward?
D.J.
Sure, Doug. So Dan, as both Doug and Eric had mentioned during this, it’s been kind of an extraordinary time with increases, especially as it relates to fuel and all of the commitments that we make on delivered product. So over the last several months we’ve been increasing the prices and trying to catch up on that lag. But more importantly, over these last couple of months, we’re working hard to restructure the contract so that we’ve got more dynamic pricing models and we’re able to reduce that lag.
So starting next year we’re getting commitments now that start reducing that lag, and so we’re comfortable that we can work through this on a more profitable footing. I would, for those who have been with the company for a while, I would bring it back to the time where we had some significant structural lags in the paper PCC contracts. And this is a little bit different, but our approach is very similar to that. As we’re able to demonstrate kind of long-term value, long-term partnerships, even with these retail partners, we’re able to over time reduce these lags yet still come up with an economic equation that is mutually beneficial to both parties.
Hope that helps. Dan?
Daniel Moore (Analyst at CJS Securities)
No, no doubt. Dan, D.J., thanks for the color. And Doug, appreciate—I was going to ask anyway, but you got out ahead of me on the two new opportunities, or two of the new opportunities that you described or detailed at the Investor Day: high-purity calcium metal as well as recapture from steel slag. Can you maybe talk to the relative cadence or ramp that you expect of these opportunities over the next one, two, three years and just remind us how much CapEx is involved, and just a little bit more color on how, why, and how you’re kind of uniquely positioned to take advantage or capture these opportunities from a competitive perspective?
Doug Dietrich (Chairman and Chief Executive Officer)
Yeah, sure. Let me start it off. I’ll give you kind of where they are in kind of staging. I’m going to pass it off to Brett and D.J. to give you more color on how these things are rolling out. First, I would say the high-purity calcium metal is probably nearer term. It is something that we’re producing in quantities today, small quantities today, and that we’re scaling up as we speak. That scale-up probably early first half, mid first half of next year will give us the capacity to continue to follow the rare earth metallization ramp and the demand that we see ahead of us, albeit small, and it’ll ramp slower as these customers continue to build their processes.
We’ll say that we’ve already qualified the high-purity calcium metal in their process. So it’s more a matter of kind of the forward-looking, that forward curve of that rare earth metallization kind of production process. I’d say the steel slag and the general technology—it’s not just steel slag, but we’re looking at other waste streams. So this is a capability and a technology that we have that we’re applying currently, you know, because we actually do sit on a lot of steel mills. We know this material well and have partnered with one to explore how this will work with steel slag. But there are other waste streams that, you know, are in development. We won’t talk about them right now, but there are other pretty valuable waste streams out there, or there’s waste streams that have some valuable constituent parts that we have a capability of separating effectively.
Now, how that works and how that develops, we’re going to be exploring that opportunity a little bit more over next year. I think we’d be in a position to probably pilot the steel slag opportunity, you know, probably mid next year. And that’ll take some time to build and ramp and test, and then we can explore. And in that time, we’re going to be exploring some other waste streams as well. So, I don’t know, Brett or D.J., if I left you anything to talk about. Why don’t you give—Brett, why don’t you go ahead with the high-purity calcium and give a little more detail on what you think the timing and maybe the capital could be as we ramp that over the next three years.
Brett
Yeah, sure. Hi, Dan. Thanks for the question. Let me just give you a little bit of a recap of the project. So, as you know, the U.S. government is really promoting bringing heavy rare earth manufacturing into the U.S., you know, of course, for aerospace, defense, electric vehicles, medical technology, and several things. And in order to domestically manufacture the heavy rare earths, they need a high-purity domestic calcium source, and that’s used for the metallization process.
So as you know, our Refractories group has a plant in Canaan, Connecticut that has been producing calcium metal for decades. It’s well established and it’s perfectly suited for this process. So our R&D and ops teams have successfully developed this purification process, and we’re working really closely with the rare earth manufacturers to assure that we can ramp up and meet the 2027 demand. And then we’re building a scalable model so that as these rare earths expand, we expand with them, so that capital will clearly grow as we need to grow with the market.
So our calcium, as Doug mentioned, has been successfully tested in rare earth elements such as dysprosium and yttrium already. So that’s really positive. That puts us in a really good position. So, you know, we’re saying right now the rare earth market—well, let’s say this, the rare earth market is fluid. So we’re not sure how fast it’s going to ramp up. But as we stated at the investor day and today, we expect really to generate $100 million over the next three to five years.
Doug Dietrich (Chairman and Chief Executive Officer)
Dan, I’ll only add on the capital with that. We don’t see that this is any significant outsized capital that wouldn’t be already contained probably in our $100 million per year. Right. So from the growth capital, as we stage this over the next three years, we think we can well adapt or well absorb that into kind of our routine growth capital that we have outlaid for the company. If that would be different, it would probably only be a $5 to $10 million kind of range above an average number.
So it’s nothing outsized at this point.
Daniel Moore (Analyst at CJS Securities)
That’s very helpful. We’ll jump back with any follow ups. Thanks.
Doug Dietrich (Chairman and Chief Executive Officer)
DJ, want to take us through the steel slag?
D.J.
Sure. Glad to. So, Dan, if you heard Brett saying he can purify things now and then kind of grow with the market, the steel slag project is a little bit different. We’ll be putting out a pilot plant and, as Jim Wright and the specialty additives leader had highlighted during investor day, that pilot plant will be able to generate some revenue. So we’ll make a decision on a pilot plant probably early next year and get that deployed. I guess what we’re weighing is what Doug was alluding to earlier. We’re really confident about pursuit of that $250 million opportunity that converts these mountains of steel slag, of which there’s 3 million tons of steel slag made every year. We are comfortable we can convert that mountain into four value streams that include going into cement, calcium carbonate products, and iron oxide. So there’s a whole host of value streams, including in that is the capture of rare minerals and metals.
And I mix them both because we have some flexibility to provide these metals in the mineral form or in the metal form. So it’s a very flexible process that is all born from our crystal engineering that we had expanded into NewYield. I guess the part that we’re exploring is where do we best deploy that pilot-scale facility to explore the broad range of recycle streams, recycle opportunities. But what they all have in common is inorganic materials that we can refine, precipitate, shape, and design for very specific markets. And that is what’s unique about this process. We are the only ones that can do it for basically every aspect of that waste stream. Capital of that is a little bit more TBD in terms of full scale.
I think the pilot plant is something in the probably a $10 to $15 million range or thereabouts. But then, depending on how that works and how we scale it, we’ll determine the capital for a fuller scale—or what that size of a fuller scale—plan should be at that point. Okay, what do we have next?
Daniel Moore (Analyst at CJS Securities)
That’s great, thank you.
OPERATOR
The next question is from Mike Harrison with Seaport Research Partners. Please go ahead.
Mike Harrison (Analyst at Seaport Research Partners)
Hi, good morning. Mike was hoping that we could dig in a little bit on the household and personal care business and the sales there, up 1% year over year. You mentioned that you were seeing some headwinds in Europe, but just hoping that you could maybe address kind of higher level demand trends as you see things over the coming quarters. Just in terms of some of the new business wins and contracts in pet care, how you see the competitive environment with private label pet care, and then I guess the contribution from new bleaching earths capacity, maybe some of the other consumer-related opportunities that you guys are working on.
D.J.
Okay, D.J., you want to take that? Absolutely. Thanks for the question, Mike. So let’s talk about just the general market trends in pet care that we’re seeing in both North America and Europe. We’re seeing, call it, low single-digit sort of growth that seems to be bifurcated, Mike. A little bit, brick and mortar is a little bit lower. E-commerce seems to be a little bit higher growing in both of those things. And we’re finding that our customers, our private label customers, those ones that are successful at putting an e-commerce component in have been growing at or above market rates, and those that have less successful e-commerce have been stale or a little bit slow.
The particular thing that Eric was talking about in Europe that caught me a little bit off guard was just some delays that they had in some major customer promotions. I don’t think that that’s an overall macro driver. That just seemed to be something that is sliding out of the third and into the fourth. But overall, we remain positive about that market in general and our ability to meet the needs of private label and also work with branded partners as well as they pursue especially geographic growth.
On the other parts, I bring you back to our bigger strategy of kind of growing into higher-value markets, and that’s where the bleaching earth and the fabric care come in. Bleaching earth has got off to a little bit of a slow start, but that facility has come up, is pretty close to being at capacity, and we look to expand and debottleneck even further. That market in general is growing GDP plus with sustainable aviation fuel growing substantially in that, and both the consumer pull—I’d say the consumer sentiment, or public sentiment possibly is a better way to put it—and the regulatory environment are lining up to have sustainable aviation fuel grow closer to the double-digit sort of growth number. And we’re working as hard as we can to keep up with that demand, because that is where our product from Turkey imports in particular excels.
The product works very well in that market. The fabric care market as well—so this is particularly addressing the dry detergent—we put an investment there along with our other investments that we had announced late last year, early this year, where we were helping a specific partner with a new launch in dry fabric care market. That launch was a little slow, but it seems to be on track now. And we’re going to see—we got to see a little bit of growth in the third quarter; we’ll see more substantial growth in the fourth quarter—and it’s on pace.
Just to give you a dimension on that, Mike, that’s probably a $20 million growth opportunity for us. And we’ll just see—there’s some upside to that depending on how successful our partner is in the market.
Mike Harrison (Analyst at Seaport Research Partners)
All right, very helpful, thank you. And then wanted to understand, just within Refractories and some of the strength that you’re seeing in steel. We’re hearing that some of that is maybe related to data centers and some of the related infrastructure there. Was just hoping that you could talk about the trends you’re seeing from steel customers in North America and Europe and how they’re talking about the drivers of their business.
Doug Dietrich (Chairman and Chief Executive Officer)
Go ahead, Brett.
Brett
Mike? Yeah, thanks. Let me just give you a little overview of both North America and Europe. The markets, the demand in the U.S. is strong. It remains strong. We’re seeing service center inventories remain at low levels. Lead times are increasing. The steel pricing is up. So it has remained strong. When you look for that data center, true data, we were looking at it and it’s about 2% of the steel production in the U.S. right now, so really a couple of million tons a year on an annual basis.
So it is contributing. There’s no doubt it’s contributing to the strength of the U.S. steel market. But in general, the steel industry is strong. The automotive is stable, the construction is holding. So we feel pretty good about the North American market. The European steel market—now, they put in the CBAM import measures—that is starting to help. It’s still a little sluggish, of course; it’s not up to where we’d like to see it, but steel pricing has started to hold. It’s pretty steady. Of course, the Iran conflict continues to create some supply and export issues in the Middle East market, particularly with our Turkey business and our Saudi business. So all in all, the steel market we feel pretty good about.
We think next year it’s going to continue in the right direction, and if we can see an uptick in the European business, we should have another good year.
Doug Dietrich (Chairman and Chief Executive Officer)
Yeah. The other thing I’d add, Mike, is that I think, you know, Brett said we’re seeing some improvement in the European steel market and particularly in Germany, but with a relatively stable market, even though some of that certainly is buoyed by some data center builds. But even at that stable level, the performance of the High-Temperature Technologies business has been much more around growth and penetration in these businesses in the EAF markets with the minscans and our new bank and bottom materials that are really taking, and we think some share, but not only that, but also at higher price point and higher value to both parties—to both our customer and to us. So what you’re seeing in that margin expansion and what you’re seeing in these growth numbers is really being done in more of a flat steel market in North America.
And so I think that just speaks to the innovation, that speaks to the team’s performance and, in partnership with our customers, being able to sell these new solutions to them. So just want to highlight that.
Mike Harrison (Analyst at Seaport Research Partners)
All right, thanks for that. And then just wanted to talk a little bit about Environmental and Infrastructure and the sales growth that you’re seeing there. It’s kind of like mid-teens year to date. Understand that the comps are getting a little bit tougher, but I just want to understand, how does the backlog look, and maybe I think there’s probably some pent-up demand when you look at commercial construction, maybe some of the drilling and environmental applications.
So how should we be thinking about growth into next year? Is that something that kind of levels out and stabilizes, or could we still see, you know, a double-digit type growth number in 2027?
Doug Dietrich (Chairman and Chief Executive Officer)
Well, I think as Eric mentioned, you know, we’re coming off of a couple of years of rather slow markets for this product line, especially in the environmental and the mining lining systems and tailing ponds, also commercial construction. So we’ve seen about four quarters now in a row, four or five quarters in a row that have seen increases, and that’s really due to activity kind of across the board. I think we will see continued growth into next year.
Mike, I’m going to be hesitant to say that we’re going to see 11, 12, 15 kind of percent growth, but there’s a couple elements in there, and that’s really the reason I’m hesitant is where are we with interest rates in some of these big construction projects? Right. I think they’re going to continue to be elevated next year. That’s not to say that there isn’t some pent-up demand. I think that’s what we’re seeing today. So we’ll continue to see some of that.
But a real outbreak of more construction activity will probably need to see a more improved interest rate environment. That said, though, we are seeing a lot of improvements in the environmental markets and lining systems and also in our drilling products. We had about a 20% growth this quarter over last year in drilling products. And so Brett, what’s behind those two things? And I think that’s what’s really going to carry through into 2017.
Brett
Yeah, go ahead. Yeah, let me add to that. As Doug said, you know, since pre-COVID years we haven’t really reached that point, so there’s really a lot of room for us to improve. Let me give you a little bit of details on where we are year to date. Year to date, really, you know, we’re showing a 15% growth plus, and that’s really focusing on our key growth initiatives. So the environmental products revenue is up about 18%, and that’s really focusing on our geosynthetic liners for groundwater leachate systems in the mining sector in both the US and in Europe and Africa.
Our drilling products, as Doug mentioned, revenue is up over 20%: increased work in the oil and gas, fiber optics, and other infrastructure projects in North America and Europe. And then the building materials business — you know, we successfully completed two really large projects for waterproofing in both California and New York. We anticipate seeing more of that as the interest rates come down. So hopefully next year, as we see the improved economy, we’re going to see more capital going into construction.
So that should be good. And then really lastly, our energy services business — we’ve improved our service activity across the globe and process equipment for our offshore business by nearly 10%. So the whole product line is really doing much better. So we feel good about it, and we think with a little bit of an improvement in the market conditions next year, we could maintain another pretty good year.
Mike Harrison (Analyst at Seaport Research Partners)
All right, thanks for the color.
Doug Dietrich (Chairman and Chief Executive Officer)
Thanks, Mike.
OPERATOR
The next question is from Pete Osterlund with Truist Securities. Please go ahead.
Pete Osterlund (Analyst at Truist Securities)
Hey, good morning. Thanks for taking the questions. So I just wanted to start by following up on the H&PC discussion. So you’ve talked about the potential for that business to be kind of a high single-digit grower. Just wanted to ask first, what level of growth are you assuming for H&PC that is embedded in your 4Q guidance? And maybe within that segment, you called out some of the areas within the consumer specialties portfolio where you’re seeing some strength.
Is there anything in that broader portfolio that’s currently underperforming what you’d expect longer term?
Eric
Yeah, let me take the guidance question. Pete, this is Eric. So fourth quarter, as I mentioned, we’ve got fewer days, which is a little bit of a different situation for the fourth quarter versus last year. But despite that, we’re looking at probably mid- to high single-digit growth for household and personal care. If you adjust for the days, you’re looking at probably close to double-digit growth.
Doug Dietrich (Chairman and Chief Executive Officer)
Yeah, I think that if you’re going to ask, Pete, where we see some underperformance, I think in the fourth quarter this is more the high season for pet care. And the other areas in there were the bleaching earth and the fabric care, which I think probably underperformed a little bit in the third quarter because we had anticipated that ramp being early in the third. That’s moved to late in the third. But now, as we mentioned, we exited the quarter in bleaching earth at 33% growth over the second quarter.
But that was kind of a last part-of-the-quarter rate, and so that’s carrying into the fourth. So I see the slowness — or the, I guess, the underperformance, or the delay, not the underperformance — that we saw in fabric care and bleaching earth, that’s over. And we see in the fourth quarter that’s starting to ramp nicely. And that’s where Eric’s giving you that kind of high single-digit, perhaps double-digit growth going into Q4.
Pete Osterlund (Analyst at Truist Securities)
Great, very helpful. And then just also wanted to ask, on the specialty additives business, I guess just based on what you’re seeing now between the trend of closures impacting the paper and packaging market and then your comments around customers in the construction market potentially looking at extended shutdowns, do you expect the specialty additives business will still be able to grow as you look into ’27?
Doug Dietrich (Chairman and Chief Executive Officer)
Yeah, I do. Well, I think a large portion of that — a significant portion of that business — is in residential construction, which is at its lows. If we start to see some increase in home building activity, if we see some do-it-yourself improvements, we think that that will rebound. But on top of that, I think we’re going to lap the North American closures that we have. And we have two new satellites coming online. We have one ramping and two new satellites coming online in Asia.
I don’t know, D.J., want to give some color on the timing of that? But we think that that brings the specialty additives business to probably some growth, probably low single-digit growth. But if the residential market reverts, we think that that could be more significant next year.
D.J.
Yeah, Pete, I would say that just to further embellish that component of the specialty additives business that is around our mines, that is the most affected by the construction business. Eric highlighted on the pulp and paper side the growth that we’re getting out of Asia, so that will continue. There are some four satellites, five satellites that have been contributing that they’ll incrementally grow over next year. But we also have two new opportunities coming online right now, it looks like at the end of the first quarter, early in the second quarter, packaging-related opportunities.
Plus we’re further advanced in — if I look at that pipeline, the pipeline is pretty robust — in other opportunities that may not hit us in ’27, but we’ll still be in business development mode where we’re probably signing some new satellite contract deals. And as we’ve been emphasizing before, that spans the traditional application of PCC in printing and writing grades, still a lot of pull on the packaging side. And then we’re even getting some both Asia satellites and domestic interest in expansions in the US with the paper industry.
So the short-term outlook should still be that that’s growing at a lower rate than the household and personal care business, but the pipeline is still pretty good for longer-term growth.
Pete Osterlund (Analyst at Truist Securities)
All right, very helpful. Thanks a lot.
Doug Dietrich (Chairman and Chief Executive Officer)
Thanks, Pete.
OPERATOR
The next question is from David Silver with Freedom Capital Markets. Please go ahead. Mr. Silver, your line is open on our end. Perhaps it’s muted on yours.
David Silver (Analyst at Freedom Capital Markets)
I got the mute issue out of the way. Okay. You know, I did just want to go back on, I guess, your recounting of the progress on commercialization of the PFAS opportunity. So just to review, you’ve successfully commercialized four year to date, I guess through September, and you’re anticipating four more in the fourth quarter. And if I recall, I mean, that’s just a little bit below, I think, the total of 10 that you were anticipating. So just from your perspective, how would you rate the book of commercializations that are on tap for, I don’t know, the balance of this year, maybe first half of next year?
And have there been any unusual problems encountered in, let’s say, moving from a standalone pilot plant situation to something that needs to be fully integrated into an existing system? Each one probably a little different. Thank you.
Brett
Hi David, it’s Brett. I can hopefully answer that question for you. As we talked about, the global PFAS treatment market is still in its early stages, and we believe there’s really a significant long-term opportunity. Fluorzorb, as you know, is the newer technology, and it requires a really rigorous qualification process. That said, we do continue to see commercial adoption with 10 full-scale municipal drinking water installations. And as you mentioned, we have another 10 that are scheduled for next year and eight additional systems that have been specified, and we’re awaiting award for those.
So the pipeline is growing. We expect project activity to continue to build as the utilities move through these several piloting, design, and specification programs. So it’s just taking a while. We feel good about it. We’re also encouraged by the other activity outside of drinking water, which is, you know, we’re seeing demand on military bases remediation and also in the international markets, so those opportunities go even beyond drinking water opportunities. So we are promoting those as we’re waiting for these regulations to take effect for the drinking water. So we’re encouraged by the military and remediation opportunities, and we continue to promote those.
We are advancing drinking water and in situ remediation pilots across the EU. We’re in the UK now and also in Japan. We have initiated a reactive core mat with Fluorzorb in Sweden in the third quarter, and we have an additional expansion in the fourth and the first quarter already set up. In addition to that, we’ve initiated some soil remediation projects in Belgium. So we feel really good about the global acceptance. It’s just taking us some time, and I think as the regulations start to get closer, we’ll see that start to pick up.
We’re also in a process with the EU and Germany to go through a year-long qualification, and that has kicked off. But that is similar to an EPA acceptance, and so once we have that, we think that that’s going to be a nice catalyst in Europe as well.
David Silver (Analyst at Freedom Capital Markets)
Okay, great. Thank you for all the colors. I’m going to maybe ask Eric to just go back — you know, you discussed the lag between, you know, in full cost recovery in some detail, which I appreciate. But if I compare the cost effect, I guess, in operating income for the consumer and specialty segment, I guess over the past year, it’s at 15 million, and the corresponding figure for Engineered Solutions is at 4. And, you know, just at a high level, is that all fuel-related?
And if so, I mean, is that something to do regionally or something in the Western U.S.? In other words, I do recall there was a train availability or cost issue. So just on the cost side, how much of that is pure, you know, we’ve got higher oil and diesel costs, and how much of it might be due to just some local particular issue either with transportation options or other kind of things that you need to work with?
D.J.
Yeah, thanks, Dave. So, it’s not really anything idiosyncratic like that. The majority of it is energy-linked costs, and I would say the biggest one is transportation trucking. And that’s why a lot of it is sitting within that household and personal care business. We truck a lot of products around the country in the U.S. and also around Europe. And so when energy prices are higher, when diesel prices are higher, we get hit with fuel surcharges. And that’s been the largest impact.
I would say by far second to that is probably European natural gas. We’ve got plants in Europe that use natural gas, and that’s an impact as well. And then third is probably the, I would say, oil-derivative raw materials like packaging. And that’s also impacting the household and personal care business because of the packaging that they use for the products. So it has largely been driven by global increases in energy, and the largest impact for us has been in transportation.
David Silver (Analyst at Freedom Capital Markets)
Okay, idiosyncratic. I got to put that in my thesaurus. Okay, and then just last question, also related to consumer and specialties, I just wanted to follow up on that 21% sequential growth in edible oil and renewable fuel purification sales increase. And just, you know, briefly, would I be correct in assuming that it’s largely renewable fuel purification driven? And if so, would that bump, that 21% sequential pickup, would that be a new-customer pipeline-filling kind of effect?
Or is that, I don’t know, due to just broad-based increased demand? So just characterizing that bump up 21% sequentially on the edible oil and renewable fuel purification side. Thank you.
D.J.
Yeah, David, it’s D.J. The best way to think about it is I’ll take it back to those investments we made in growth and the fact that that mineral performs extremely well in sustainable aviation fuel. So we brought that new growth online earlier this year. It took a little bit of time to get qualified, and you may recall I was saying that we were a little behind in the third quarter for qualifications, and we had some shipping logistics to work through, but we’ve, for the most part, been qualified in those new locations.
And it’s the first time we’ve been able to qualify because of that new product process that came online in Turkey for us. And so it is reasonable for you to think that that is further penetration into this sustainable aviation fuel market that is growing at pretty high rates, and we will sustain that level of growth. And I’m already looking at debottlenecking and expanding further. There’s some significant sustainable aviation fuel refineries that have been developed and growing around the world, largely in Europe and in Southeast Asia.
This expansion has given us the capacity to be able to reach those new refineries. So similar customers in many cases.
Doug Dietrich (Chairman and Chief Executive Officer)
But being able to qualify with that refinery in Asia, and, you know, that took a little bit of time to get it ramped up. And like D.J. said, but now that that’s fully ramped, what you’re seeing is that volume that we anticipated from delivering to those refineries.
David Silver (Analyst at Freedom Capital Markets)
All right. So, again, just to beat it one more time, but that bump in the third quarter is not just a single-customer pipeline fill. It’s more like you’re on a ski lift now and you’re moving steadily up as qualifications and everything just open up your available market for that product. Is that fair to say?
D.J.
That it’s fair to say, but I’ll just peel that back one more time. Ski reference aside, I would say that it was more than one customer. One of those customers was substantial — the largest biofuel refinery in the world. And we’re ramping up both within these new customers that we penetrated into. We will. We’re going to be sold out soon, David. And so I’m already looking at debottlenecking and growing further. So I’m — you will see this rate continue.
And then I got to figure out a way to get more. There’s great demand for the market.
Doug Dietrich (Chairman and Chief Executive Officer)
Yeah, we’re on that ski lift, David. We made it through the ski lift line, but we’re on about, you know, seven or eight different ski lift lines, and they’re all in different stages. And yeah, I think it’s a great analogy. Sorry, D.J., I like it. But we’re going to make it through those lines and qualify, and we’re going to get on that lift as well. But we do see the long-term growth rate of sustainable aviation fuel, and we’re going to keep pace with that growth, and we have got a great product to do it.
David Silver (Analyst at Freedom Capital Markets)
Okay, great. Thanks for the extra color there. I appreciate it.
OPERATOR
This concludes our question and answer session. I would like to turn the conference back over to Doug Dietrich for any closing remarks.
Doug Dietrich (Chairman and Chief Executive Officer)
Thank you everyone for joining today. We hope it was informative, and again thank you to those who joined either in person or virtually to our investor day. We hope you enjoyed that, found it informative, and we’ll talk to you again next quarter. Thank you.
OPERATOR
The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.
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