# DEAR SHAREHOLDERS

_Source: `DeepSeekOCR_Ardian_pruned_1k/basic-materials-specialty-chemicals/NYSE_MTX_2018/NYSE_MTX_2018.mmd` · pages 3-9_

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DEAR SHAREHOLDERS:

MTI has a strong growth strategy and a proven record of value creation. 2018 was another year in which we demonstrated this by delivering strong financial and operating performance. We generated record-setting sales and earnings per share, strengthened positions in core product lines while extending further into new geographies and introduced many new innovative solutions to the market.

In my more than eleven years at MTI, I am even more impressed today with the strength of our organization and the work we are doing to provide innovative minerals-based solutions to our customers around the world. Over the past year, I had the opportunity to visit many of our facilities globally, and I continue to be encouraged with the high level of engagement of our employees and the strong relationships we have built with our customers. Through these visits and conversations, I saw what truly makes our company unique. It is our people, our culture of continuous improvement, our values and our customer-focus that make the difference for our business and have enabled our success.

Our vision is to be the preeminent value-added minerals company globally with leadership positions in our key markets, product lines and regions. We are achieving this vision through our geographic expansion initiatives, robust new product development pipeline and acquisitions, each of which we advanced during the year. While executing on our strategy, we also focused on deepening our high-performance culture and strengthening our sustainability efforts.

## A STRONG YEAR IN A TOUGH ENVIRONMENT

2018 was marked by strong performance across our businesses, advancing our growth strategy and tightly managing what was in our control. Our initiatives and disciplined execution drove sales growth of 8% to \(1.8 billion and earnings per share of \)4.84, a 5% increase over last year. Sales in all four of our business segments increased and we delivered solid growth across all geographies and the majority of our product lines. Additionally, our cash generation remained strong with operating cash flow of $204 million.

Notably, sales in our Minerals businesses, the growth engine for MTI, increased 9% to \(1.4 billion, driven by higher volumes of greensand bonds in Metalcasting in North America and Asia, higher pet care revenue and increased European fabric care sales.

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Douglas T. Dietrich | Chief Executive Officer

IT IS OUR PEOPLE, OUR CULTURE OF
CONTINUOUS IMPROVEMENT, OUR VALUES
AND OUR CUSTOMER-FOCUS THAT MAKE
THE DIFFERENCE FOR OUR BUSINESS AND
HAVE ENABLED OUR SUCCESS.

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NET SALES / OPERATING INCOME \( ^{*} \) 
($ in Millions)

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 \( ^{*} \) Excludes special items and unallocated corporate expenses

MTI's performance in 2018 is a testament to the resiliency of our organization and the strength of our culture. Our team demonstrated its significant capabilities and ability to adapt to changing market conditions as we took decisive steps to mitigate a persistent inflationary environment that put significant pressure on our costs. Our continuous improvement foundation enables this type of agility and the engagement of our employees is critical in driving these efforts.

## ADVANCING OUR GROWTH STRATEGY

We continue to make progress on the three pillars of our growth strategy, strengthening our position as an industry leader:

• Geographic expansion

• New product development and innovation

• Acquisitions

Paper PCC and Metalcasting Driving Geographic Expansion
Asia remains a very compelling growth region for MTI as we continue to capitalize on the large market opportunities to implement our product substitution strategies in both Paper PCC and Metalcasting. The substitution strategy is driven by the strong value proposition of our products which help improve both our customers' product quality and capabilities and reduce their operating costs.

As the leading producer of precipitated calcium carbonate (PCC) worldwide, we are at the forefront of opportunities to drive penetration in the Asia paper markets. During the year we signed a contract with Chenming Paper for a new satellite PCC plant, which will add 165,000 tons of capacity to our portfolio. We also began construction on our plants in Indonesia and expanded capacity at our India operations.

RECORD EARNINGS PER SHARE IN 2018 \( ^{*} \) 

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 \( ^{*} \) EPS from continuing operations, excluding special items

In total, we have secured contracts for over 400,000 tons of PCC capacity in the past two years, which will drive considerable volume growth in 2019 and into 2020. When fully operational, these additions will increase our global capacity by more than 10%, positioning Asia to surpass North America as our largest PCC production region.

Our penetration strategy for Metalcasting in Asia also progressed considerably in 2018, with sales in the region increasing by 7%. We continue to leverage our deep technical expertise and value proposition in the foundry market to demonstrate the superiority of our product formulations and capture new opportunities with foundry customers in Asia, as well as other regions. As the world leader in greensand bonds, we are well-positioned in large foundry markets to continue our growth trajectory through further penetration of our tailored products.

Our geographic expansion efforts extend beyond Paper PCC and Metalcasting. We saw strong demand for our products across our Pet Care and Fabric Care product lines, our Refractories business and our Environmental Products and Building Materials businesses. This global growth led to overall double-digit sales increases in India, Turkey, Indonesia and Thailand.

New Product Development Efforts Aligned with Evolving Customer Needs
New product development – a key source of organic growth – is a core tenet at MTI and our actions to accelerate new product development and drive the pace of commercialization are delivering tangible results. In 2018, we increased the speed of development by 21% and commercialized 35 new products which have the potential to deliver over $100 million in annual revenue.

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We have a robust pipeline of innovative value-added products across each of our businesses that has been strengthened through our close alignment with customers and the application of Operational Excellence (OE) principles to improve the speed of development. Products such as FLUORO-SORB \( ^{®} \)  adsorbent, ENVIROFIL \( ^{®} \)  PCC and variations of NewYield \( ^{®} \)  technology demonstrate how we have adapted our pipeline to meet evolving demands in our current and new markets, which require environmental, recycling and remediation solutions.

## Acquired Sivomatic, Expanding Global Pet Care Reach

We also executed on the third pillar of our growth strategy in 2018 through the acquisition of Sivomatic, a vertically integrated mine-to-market company with leading positions in premium pet litter products in Europe. Sivomatic met all of our acquisition criteria and is an excellent strategic fit.

With the addition of Sivomatic, we now have a leading private label pet litter position in both North America and Europe. We doubled the size of our pet litter business, expanded our global reach, enhanced our portfolio of premium pet litter products and increased our bentonite mineral reserves. Sivomatic has performed above our expectations and was a solid contributor to our Performance Materials business. There are clear opportunities to expand our market positions, capitalize on attractive customer dynamics and further strengthen our global pet care platform.

SG&A AS % OF SALES DECLINED, INCLUDING SIVOMATIC OVERHEAD

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We completed the acquisition, integrated the business and largely paid down the acquisition related-debt – all in 2018. The speed of execution and discipline in integrating Sivomatic is a clear demonstration of our financial and operating capability to grow inorganically.

FINANCIAL STRENGTH TO INVEST IN GROWTH OPPORTUNITIES
In 2018, we maintained our disciplined and balanced approach to capital allocation and used our cash flow generation and financial strength to invest in the highest return opportunities. We deployed $76 million in capital expenditures to fund organic growth opportunities in our businesses as well as to maintain and improve the performance and safety of our facilities. We used another portion of our cash to purchase Sivomatic and paid down $80 million of acquisition-related debt. In addition, we returned $29 million to our shareholders through dividends and share repurchases.

DEBT REPAYMENT AND NET LEVERAGE RATIO
($ in Millions)

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# OUR HIGH-PERFORMANCE CULTURE, GROWTH PROSPECTS AND STRONG BALANCE SHEET POSITIONS MTI WELL FOR SUSTAINED, PROFITABLE GROWTH.

## STRENGTHENING OUR HIGH-PERFORMANCE CULTURE

Our culture is a key strategic differentiator for MTI. We promote integrity, transparency, accountability and an urgency to succeed. We are unwavering in our commitment to the safety of all employees with the goal of an injury-free workplace. Our people are the key to our success and their engagement and development within MTI is always at the forefront. As we continue to drive our growth strategy, we are pushing ourselves to be even more agile, more diverse and inclusive, more customer centric and more attractive as a company to new talent who will carry MTI's culture far into the future.

## BUILDING A SUSTAINABLE BUSINESS

Sustainability is a core value at MTI – everything we do is analyzed through this lens. In line with this commitment, during the past year we focused on advancing our Environmental, Social and Governance (ESG) initiatives and further ingraining sustainability across our organization through product innovation, facility management and environmental stewardship. In order to take our sustainability efforts to the next level, we are developing long-term environmental targets tied to greenhouse gas, water and waste reduction that will be published in our next Sustainability Report.

## POSITIONED FOR THE FUTURE

Overall, 2018 was a solid year as we achieved record sales and earnings and executed on each of the pillars of our growth strategy. We leveraged our operating platform, demonstrated strong cost control and implemented measures to respond to the challenges we faced across our businesses.
MTI has entered 2019 with strong alignment on all fronts. We are aligned on our strategy, objectives, customer commitments and focus on building MTI for the long-term. The coming year will bring opportunities to capture and challenges to navigate, but as we demonstrated in 2018, our team is well-positioned for both.

Our high-performance culture, growth prospects and strong balance sheet positions MTI well for sustained, profitable growth.

Thank you for your continued interest in our company and for investing in our future.

Sincerely,

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Douglas T. Dietrich
Chief Executive Officer

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