雅保公司 (ALB) 2003 Q1 法說會逐字稿

Good afternoon. My name is Sorrell. I will be your conference facilitator today. At this time, I would like to welcome everyone to the Albemarle Corporation's first quarter conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer period. If you would like to ask a question during this time, simply press star, then the number 1 on your telephone keypad. If you'd like to withdraw your question, press the pound key. Thank you. Mr. Whitlow, You may begin your conference,

Thank you, this is Michael Whitlow, Vice President of Investor Relations for Albemarle Corporation.

Participating with me on this call are Mark Rohr, President and CEO, John Steitz, Vice President of Business Operations and Paul Rocheleau, Senior Vice President and Chief Financial Officer. Welcome to Albemarle Corporation's first quarter 2003 conference call. We will report on both our market segments today, polymer and fine chemicals, and John Steitz will take care of this responsibility.

As always, I'm available to discuss products and services that make up views of these segments. We have extensive information on our website, www.Albemarle.com. and expanded Investor Relations segment of the site later in the second quarter.

For today's call, Mark will have some opening comments. John will address business performance and Paul will address cash flow, pension and other financial areas before we open up for Q&A. As you can appreciate it, we'll be making some forward-looking statements during the conference call.

The cautions stated on our website on our earnings news release indicate there are many factors which could cause actual results to differ from current expectations and our forward-looking statement caution that's changed since our last call to reflect some additional specifics for your attention. Please heed those cautions and feel free to call me with questions you have about our business.

The information on volume, price and effects on the company in each segment is included in the charts, on our website, in a presentation that accompanies the comments we're making this morning or this afternoon. If you haven't done so, visit our website under Invertor Information teleconferences with financial analysts.

Again, I'll be happy to answer questions about these charts in the Q&A area. You can contact me after the call. Mark, I'll now turn it over to you,

Great. Thanks, Michael. First I'd like to thank our analysts, the representatives of our institutional shareholders and individual shareholders for joining us on the call and welcome to Michael. We're very pleased to report earnings of 50 cents per share on a diluted basis for the first quarter, which include a favorable impact of approximately 14 cents per share due to a tax refund that Paul will talk about a minute.

Net of these special items were able to achieve earnings equal to our first quarter last year with 38 cents per share against a backdrop of some very strong economic headwinds. A significant accomplishment.

Higher volumes were offset by the impact of natural gas and raw material, inflation and lower pension income.

Our gross margin slipped about 200 basis points versus the first quarter of 2002. We're especially pleased with our sales gain of 14.6% aided by volume improvement and currency effect [inaudible]improvement as John will discuss that in a moment.

However, this sales increase did not pull the bottom line due to premeasured headwinds. Energy costs of $3.5 million, a temporary closure of a Pasadena co-producer with associated one-time costs of approximately $1 million. And raw material costs of about $4 million. As a result, operating profit was essentially flat both year on year and sequentially.

Higher costs of goods sold, including some higher selling and administrative expenses related to intellectual property and upgrading our enterprisewide software system, were also evident in this quarter. We believe that the specific expenses we have incurred in this area are warranted and expect a return on the additional investments in the future.

In fine chemicals, sales were boosted by 8% versus last year. We have particular improvement in the bio[inaudible] area, pharmaceutical actives and the fine chemistry services intermediates business. We have continued to generate dozens of customer inquiries each month and are growing our reputation as a trusted supplier, particularly true in pharmaceutical intermediates this quarter versus the same quarter in 2002. We're also increasing our strength in the ag business with a portfolio of products directed at our large multinational customers such as DuPont Dow and [inaudible].

Operating profit in fine chemicals was reduced 18% quarter-to-quarter. John will discuss some of the specific profit impacts, but in summary, we were hit with materially higher energy costs, fuel costs, lower volumes in methyl-bromide and products sold in the paper markets.

In polymer chemicals, we had solid revenues up over 20% and operating profits up 37% over first quarter of last year. Targets mineral and brominated, our new catalysts and polymer additives were all significant factors in driving these increases.

Our acquisition of the fuel and lube additive business from ethyl is already surpassing our expectations and proving to be a strong addition to our portfolio. Recognizing the world conditions that exist in the first quarter, this performance was outstanding.

As predicted in the final conference call of 2002, we assume pressures from energy and raw material increases. Our raw material energy purchases in the first quarter were at $7.5 million premium to last year's first quarter.

Given these factors, we believe about 6 to $7 million of extraordinary costs or about 10 cents per share were incurred in the first quarter of 2003. The majority of which will continue as we go forward over the next several quarters. I want to announce a new effort to further reduce our operating costs by $50 million over the next three years. This effort touches every facet of our business from chemical faucets improvements to better transactional efficencies. For this all will not fall to the bottom line, I expect these steps to allow to us eventually reach a GS&A rate of approximately 10 to 11% verses the 13% we have today.

Along with this comprehensive department by department implemenation of cost reductions, John and his team will continue to push for price increases whenever and wherever possible. The potential for volume increases we are seeing in the new antioxidan business, our flame-retardant products and the expansion of additives and curatives businesses in polyurathane form of PCV products the uses we're finding for ADH derivatives and our fine chemical sales and effort continue to encourage our team.

Even in this difficult economy we believe we have a product line and cost position to continue real earnings for our shareholders as we go forward. With this, let me turn it over to John Steitz.

Thanks, Mark. Fine chemicals delivered $13.4 million in operating profit if the first quarter of 2003. This represents an 18% decline year on year and a 13% decline sequentially. Despite the negative comparisons there, were a number of positive developments in the quarter.

I first want to discuss some broad perspectives that cut across the entire fine chemicals area in the quarter. First, as we communicated in prior quarter calls, we foresaw multimillion dollar raw material headwinds as we entered this quarter.

We overcame all of these anticipated raw material increases in the first quarter. But it was the unexpected events in the quarter that account for our fine chemicals operating profit decline. Specifically, fine chemical profits would have been essentially flat year on year and up sequentially with the effects of the natural gas price spike and the disruptions at our Texas plant had not occured.

Let me focus a little more detail comparing the first quarter of 2003 to that of 2002. The main highlights of this comparison is our relatively strong 8% revenue growth performance.

The majority of this revenue growth came from the fine chemistry services and intermediates area, as well as pharmaceutical assets, which were also strong contributors to profit growth. The ag market continued to be off somewhat compared to first quarter '02, but turned out better than we feared as we ended our difficult last year.

In the performance chemicals area, success growing our brominated product volumes to support our recently-started Jordan facility was a notable high spot. Additionally, we posted strong gains in our specialty biocide and our oil field most of our products. The major profit declining products were the larger energy consumers, such as Zeolites and the products affected by the Pasadena situation, like our paper sizes and [inaudible] products.

Now, let me discuss the fine chemicals performance comparing sequentially with fourth quarter of '02. Most of the comments made for the year on year comparison also applied to our sequential performance with some notable exceptions. Our Aguilar [inaudible] segment posted a strong recovery from 4th quarter '02 performance.

This was offset by expected seasonal declines for our methyl-bromide fumigant. Overall, the first quarter performance puts us back on a normal historical performance pattern in the important segment. Stronger first and fourth quarters than second or third would appear to be possible in 2003.

Additionally, we saw some volume weakness in our oil field products used in the Gulf of Mexico and we see coming back to normal as we started the second quarter.

As we look forward into the rest of the year, we continue to face short-term pressures that we believe will subside and unfold into a more favorable performance in the second half of the year. We faced one more quarter of unfavorable costs from the Pasadena situation and other schedule issues in our pharma facilities.

Looking into the second half, we continue to feel good about performance as we benefit from the fundamental improvements we've been building in the recent past. We've shown success in dealing with our short-term challenges with our disciplined approaches to driving cost reductions and selective price increases. In addition, we will continue to benefit from penetration of our new products as well as deriving increased benefits from improved utilization of our flexible manufacturing assets.

Next, I will talk about the polymer chemical segment. As Mark already shared with you, we saw significant improvement versus the first quarter of 2002 with 20% sales and 37% profit improvement.

Flame retardants, new catylsts, [inaudible] heat stabilizer intermediates and the addition of the recently-acquired lube and fuel additive business drove the increase. Favorable exchange rates also provided a tailwind.

Sequential performance in the fourth quarter of '02 also improved subtantially in the polymer chemical segment with gains of 9% per revenue and about 14.5% profit. Drivers were essentially the same as those mentioned for the year on year comparison. Given the world conditions that existed in the first quarter, this is exceptional performance.

The highlights, the benefits we're deriving from our successful new product and [inaudible] acquisition programs.

Going forward, we expect to see continuing volume improvement in flame retardants, however, this will be somewhat dependent on the economy. We have mentioned the printing wiring board book to build ratio in the past as one indicator of demand trend. While this number has moved back above 1 for the second month in a row, indicating bookings are greater than shipments, the overall magnitude of both the numerator and the denominator is still down year to date.

Flame retardant pricing has been a tough road and this has been an ongoing effort for over a year. We began to see some success toward the end of last year and this is continuing into the first half of 2003. However, these are increases are only compensating for higher raw material costs at this point.

We will continue to drive cost reduction efforts to meet dramatic runnup in raw material and energy costs seen this year. In catalyst and additives, we expect to see continuing improvement in our results from the Stanica joint venture, single site [ inaudible ] and the anti-oxidant products acquired from the Apple Corporation. These new efforts combined with our ongoing success in managing the base business to broaden our [inaudible] antioxidant and curative product lines gives us confidence for a solid year performance.

I could give additional comments on the outlook, there are so many moving pieces with the international environment and economic challenges that I don't know any special insight. An important final note, though, in light of current circumstances, is that we have not disrupted operations in our Jordan venture throughout the period and our skilled team near Sofie continues to produce product for the world market from the new venture.

We're excited about the possibilities as the situation in the Middle East continues to sort out and we look forward to many years of a fruitful and productive relationship with this important part of our world. I'll turn it over to Paul Rocheleau now.

Thanks, John. As you may have already noted, there are a number of clarifying financial comments I want to talk you through this afternoon.

Let me start with the P&L statement. Please note that the revenue figures for the first quarter in 2002 are restated upward by $7.2 million as we adopted a standard to report outbound shipping costs and costs of goods sold as opposed to netting the costs against gross sales revenue.

The standard has been in place since 2000 and over the past 24 months, our outbound freight has become more significant, driven by acquisitions. We felt the timing was right to adopt the standard at the beginning of this new year. This has the effect of increasing revenues and costs of goods sold by a like amount with no effect on earnings.

As Mark mentioned, we had very good top line growth of over 14%. Approximately half of this was due to currency since we're exporting almost half of our U.S. production and have a profitable European business.

We also benefited from the antioxidant acquisition completed in January, which contributed $5 million to revenue and we received a boost from our joint venture Stanica. After factoring in these adjustments, the underlying base business grew at a 3% annual rate of solid performance in a difficult environment. The beneficial impact of our recent acquisitions is clearly visible.

You'll notice a $7.1 million income benefit or 17 cents a share associated with the recording of a tax refund receivable. We received notice from the IRS that they accepted our position for a number of tax issues dating back to 1996 and '97. These issues involve a review of some of the U.S. asset values at the 1994 spin-off, a review of business values associated with the 1996 sale of our oil business and benefits from a detailed review of foreign corporation taxation.

The full refund receivable is actually $11 million, including interest calculated through March 31 of just over $4 million. We expect to receive a check in the near future.

You may remember that we recorded a similar benefit last year in the second quarter. While I would love to have this occur every year, we do not expect tax adjustments to this magnitude in the future, but should be able to maintain an effective tax rate of 30 to 31%.

I also want to point out the special charge associated with the new accounting regulation. SFAS #143, accounting for asset retirement obligations. This is the recognition of legally mandated closure and dismantling costs incurred at the end of the useful life of an asset. The accounting convention requires a cumulative adjustment from the time the asset was placed into service to the present and we will amortize the balance over the remaining useful life of the asset.

For Albemarle, we're affected with several assets, including the cost to cap of Brian wells in Arkansas and the potential dismantling of assets on a long-term lease facility being the most significant.

We estimate a legal obligation of $10 million will be required over 50 years from now. Therefore, you see an after-tax cumulative non-cash adjustment of $2.2 million or 5 cents a share and will incur an ongoing non-cash pretax charge of about $250,000 per year going forward.

Let me now move onto something more immediate and tangible, our cash flow. During the quarter, our net debt position was virtually unchanged at $144 million. But there was significant movement of cash during the period.

We paid $27 million for the antioxidant business, repurchased over 1/2 million shares of stock for $13 million, paid dividends of $6 million and continue with our normal capital spending program. This is over $50 million in aggregate and we funded all these activities through our internally-generated cash without a significant increase in debt. Let me also point out that this cash flow does not include the tax refund. That will be picked up later.

We purchased the stock at values near today's prices and will provide an uplift of approximately 2 cents per share based full year projections.

As a final note, let me repeat our priorities for using available cash flow. First, we want to invest to profitabley grow the business through internal development and acquisition. Second, continue to pay dividends and third, review the value of our equity and make selected repurchases when we believe the opportunities are right.

I'll turn over to Michael Whitlow for the Q&A session.

Thanks, Paul. Sorrell, we're ready for questions from our shareholders, media and analyst listeners.

At this time, I'd like to remind everyone, in order to ask a question, please press star and then the number 1 on your touch-tone phone. Now we'll pause for just a moment to compile the Q&A roster. Your first question comes from Bob Koort of Goldman Sachs.

Good afternoon.

Good afternoon, Bob.

I wondered if you could help us out. I always have a little bit of frustration trying to figure out exactly how much chlorine you buy and when it's going to hit you. Can you give us any more clarity around that issue as well as your direct natural gas purchases just so we can handicap what we think the raw material and energy problems may be going forward?

Yeah, just in big numbers, we purchase, Bob, about 70 to 80,000 short tons of chlorine per year. You know, in the U.S. and purchase a little bit offshore, but not very much.

For the first quarter, I mean the variance 2002/2003 was about 1/2 million dollars on chlorine alone, so, pretty material impact out of that total. In terms of natural gas, you know, the rule of thumb that we had out there is a dollar million BTU is roughly 10 cents per share before tax. That's a good kind of number I throw out there for you.

Natural gas is a bit of an enigma -- it's not easy for to us explain to you because we have, as we said before, a number of options with energy, not the least of being the ability to burn wood chips in the Carolinas, which is a very profitable venture for us. Sour gas in Arkansas and the ability to pass on some of that to our customers contractually. But a good rule of thumb is a dollar million is about 10 cents a share.

All right, if I could follow-up, you guys eluded to some pricing weakness against some product lines, can you give us a little more specificity on that?

Yeah, Bob. John Steitz here. Primarily the biggest issue in pricing was in the fine chemical side. Where we've had some resultant prices drop in Zeolites, the builder's area. And in some means products, [inaudible] means, and generally in the oil field side. When demand slowed up we had some prices drop. So, the majority of the price weakness we've has been in the performance chemicals segment of the fine chemicals business.

Okay, thank you.

You're welcome.

Your next question comes from David Begleiter of Deutsche Banc.

Thank you. Mark, can you expand upon the pricing trends in flame retardants, you're geing some price increases right now, are you seeing more rationalality in the marketplace? And where do we stand versus a year ago or two years ago?

David, let me ask John to -- to answer that, if that's ok.

Hi, David.

Hello.

David, in particularly in brominader flame retardants, we've seen year on year about a 5% improvement . Some of that is foreign exchange impacted, but the majority of it is just good old getting the price up.

Now, last year in the second quarter is when we experienced the majority of the price erosion that we saw last year, so, we spent the back half of 2002 working to improve that, I believe we have, resulting so far into this quarter about a 5% gain year on year. So, we're -- we're pleased with that. We'd like to continue to build momentum to cover this dramatic increase in raw materials that we've been trying to absorb and we're trying to continue to drive continued improvement pricing in the marketplace.

And we -- we've generally seen good discipline out there among the major producers and we hope that that will continue and, of course, the best way to continue dry pricing is continue to get these volume gains and we hope for that to continue, too.

John, my next question, what were F4 volumes up in the quarter, both for the bromium based and non-bromium based products.

David, year on year, the bromium based flame retardants were up about 10%. The non-[inaudible] flame retardants, the mineral flame retardants were up slightly more than that, year on year, but they were down sequentially from fourth quarter of '02. The bromium flame retardants were.

Keep in mind the second quarter of last year was a very strong quarter volume wise. So, I think we'll be challenged to keep that kind of volume growth going, but so far, April is off to a pretty good start.

And the last question, John, about your Jordanian facility and you're thinking about bringing on the F4 capacity in Jordan, where do you stand on that key metric.

We're continuing to evaluate that David and it depends on what happens with the marketplace and if there's a need to bring that on, but we're just continuing to evaluate that.

What is your capacity utilization Magnolia right now?

We've got some room, but we're running at reasonably high rates. I'm just guessing in the mid- to upper 80% range, something like that.

Thanks a lot.

Thanks, David

Your next question comes from Allan Cohen of First Analysis.

Hi, this is actually Ray Kramer filling in for Allan. A quick question regarding the minority interest line. I'm assuming that that comes from Jordan. And my recollection was that that was supposed to be around break-even by this point. Is....

Ray, this is Paul Rocheleau. There are two primary elements in the line. One is the minority interest with Stanica, also, Jordan, JBC, and JBC is forecast to have a loss for the year, you know, as we're ramping up production, a loss between 3 and $4 million for the year.

Okay, so that 3 to $4 million will show up in the minority interest line for 2003?

That's correct. Let me just take this opportunity -- there is a -- another accounting regulation flowing through the system, which we call fin 46. Fin 46 is a new set of guidelines on consolidating, you know, special purpose entities and other joint ventures. This is in the post-Enron fallout.

We're evaluating whether JBC and others will have to be consolidated in the future. We're going to take a view on that over the next couple of months and keep you posted. So, JBC may, you know, get consolidated at the end of the day, but there would still be a minority interest, which is backed out, you know, within the P&L, which would be visible to you. We have a 50/50 joint venture there.

Okay. And going -- turning that to methyl bromide, I know it was supposed to be phased out this year, something like 20%. Is that the impact you're seeing? What are your thoughts on the potential impact there?

Yeah, Ray, this is John Steitz. Yeah, that is -- it's gone down another 20% and that happens to equate to about our decline for the year. I think you've got keep in mind that year on year that will probably result in a 5 cent a share drop for us. We're working to offset that with improved pricing but that's where we are today.

Okay. I think I heard last quarter, not you guys, but from other people saying there was maybe some potential for some delay in -- in the phase-down, have you heard anything about that?

Yeah, Ray, this is Mark. There's been a proposal put forth by the EPA to -- instead of going down that 20%, to go down half of that amount. The U.S. farmers have a strong coalition out there to say the levels should either stay where it is or even go up 10%. So, there is a lot of debate in Washington about this subject and we have some optimism that we won't go quite as far as we are today, maybe even stay where we were last year as we go forward. But I want to caution you, it's going going to take some period of time to sort that out. I think we can all expect this year that year on year volumes will be down as it gets sorted out.

Ok, that's helpful, thanks. To fine chemical services now, I think last quarter you said there were some issues both with timing in the industry and, you know, overcapacitization. Are you still seeing that situation there, has that situation gotten better?

Yeah, Ray, John Steitz. We have. Our team's has been working hard to bring new opportunitiesto fill up the assets, we're finding success out there. So, the answer to your question is yes, but I don't think a general trend in the industry.

How's the pipeline doing there?

The pipeline continues to get -- continues to blossom for us and we're getting encouraged by some larger volume opportunities, so, it's been good. We feel very good about that.

Do you have the usual statistics on the pipeline available with the latest figures?

Yeah, we sure do. We can get those out and the number in the pipeline is still pushing about 80 and we had some recent trade shows where we've got a lot of new opportunities in that we're working on. So, it's continuing to build up and we're really at the point now where we need to make choices on what opportunities really best fit our chemistries and technology, which is a good thing.

Okay. Yeah, definitely better than skrounging. And one last question with the -- the Apple business acquisition, I think you said that brought in $5 million in revenue. Is that correct.? I want to make sure that's correct, number one, and number two, was that profitable this quarter?

Yes it was generally higher profit margin than the rest of the business. So, we were pretty pleased with it. We closed that at the end of January, so, it's at a run rate exceeding $5 million a quarter.

Around 7.5 going forward is what you expect?

Maybe not quite that high. It won't be that high.

Thanks a lot.

You're welcome.

Your next question comes from the line of Jeff Zekauskas of JP Morgan.

Hi, good afternoon.

Hi, Jeff.

Hi, Jeff.

Just a few short questions. What was the currency benefit on an earnings per share basis in the quarter?

Hold on one second, Jeff.

Yeah, Jeff, certainly revenue as you know is 7% boost in the underlying sales. We really had approximately a 1.9% improvement in margin due to the currency. So, I'd have to -- back calculate that and put it on an after-tax basis for you but it was a significant tailwind for us. Pretax we're looking at somewhere around $4 million.

So, is that 8 cents a share? Well, your tax rate is 20% in the quarter? Or --

Use the 30%.

So, right, 4 times .7 divided by 42?

That's pretty close.

Second question is, I don't recall that you mentioned anything about ibuprofen. I mean this was a pretty cold winter, I mean I would think you would have some benefit or was there some Indian competition or sort of what's going on in ibuprofen?

No, Jeff, John Steitz. Year on year we had a very good quarter in ibuprofen. Our volume was up about 14, 15%.

Okay.

Year on year?

Yep.

Prices are holding up nicely and we're -- we're pleased with it, we just didn't happen to highlight that in this report.

Okay. Before when Mark was going through the effects of the dollar change in million btu's. Was that an annual number you gave, Mark, or a total number?

That's annualized, Jeff.

Annual number. Okay. In which areas do you buy ethylene derivatives? And how much do you buy?

Jeff, John Steitz. Ethylene is used in some of the olefin derivative product lines because ethylene is a feed stock in the olefins and we pay based on the ethylene. It's also use in our end products, MEADEA. And probably just in a host of smaller products.

Can you give us an idea of how much that might have knicked you in the quarter, inflation and those costs?

Ethylene was, for the quarter, was under a million dollars, year on year, negative variation. Negative variance for us. And the Alpha olefins were much more significant, about a million and a half, a million 7 on the olefins.

So, when we -- Jeff, this is Mark, we speak of olefins and tend to talk of those things combined.

Sure. I guess a last thing is, do you have an estimate of what your corporate costs will be this year? I know they can really bounce around from quarter-to-quarter.

You mean total GS&A?

That is if you look at your income statement on a business segment basis. Sort of how do the corporate costs look for the year?

Jeff, I think if you take the first quarter, you know, the first quarter was reasonably clean without a lot of, you know, one-off issues and I think if you were to annualize that, I think we're going to be pretty close. I want to go back for a minute on the FX question you had on the P&L impact. The 6 cents was a little bit higher than we had back a way impact on SG&A underneath everything, as well. It was closer to 5 cents rather than 6 cents.

Okay, thank you very much.

Your next question comes from Mark Gulley of Albemarle.

It's Mark Gulley, Banc of America Securities.

I'm glad you cleared that up, Mark! We really appreciate you joining! [ Laughter ]

Anyway! A couple of questions, if I may, one is kind of strategic, a lot of people have -- have reduced their level of interest in the fine chemicals business over the years. People that got in with their toe, perhaps wished they hadn't. Is that creating opportunities for acquisitions or do you share their, you know, lack of enthusiasm for this business?

Mark, this is Mark Rohr. You know, what I say about this business is you have to work awful hard to make money in fine chemicals, but we believe we have the right technology base, the right formula to do so and we really have -- as you know, by following us as long as you have, we've redoubled our effort the last couple of years and have seen the front end of that very rewarding to us.

As John Stietz mentioned, we've got just great receptivity in the marketplace, we're getting very good level enquiries and have to be able to convert those in the next couple of years to remain probitability. That remains to be seen. We have a lot of enthusiasm for it and seem to be on the right track.

Looking at the marketplace, we're seeing opportunities surface in the fine chemical area and we are interested in making acquisitions there but, you know, a lot of businesses at surface are really not the kind of business you want to buy. In other word they may have a product or 2 that makes good margin but the base business doesn't have a lot of value. We're trying to find those businesses that bring us technology, bring us customer contact and enough cash flow to warrant the kind of business to buy into the business.

I believe there was a trade show, I think in meets in the spring. Informex or something like that. Was that just recently?

Yes, it's in New Orleans. It like part of the Society of Organic Chemical Manufacturers.

Can you -- I didn't get a chance to go, can you give me a feel at all for the mood you saw there?

Yeah, I was there, Mark. And, you know, it was just prior to the Iraqi invasion, but it was, I thought, generally upbeat. I think the attendance was down from prior years but we experienced a very positive result with a lot of new opportunities coming in.

So, we worked hard to make that a reality and we had organized probably over 150 meetings with companies looking to outsource chemicals and intermediates and we personally experienced a very successful meeting there. Now, we are closer because we're, you know, located in Baton Rouge, we had more people there, but we worked hard to make it a success.

Sounds like you bought a lot of jumbalaya to entertain the folks! Remind me, on methyl bromide, have you converted your production facility to make it not an onpurpose by product that you can make it or not make it?

That's absolutely correct.

All your facilities have converted over to that --

That's correct.

Okay. And lastly, can you remind us if you bring on the slug of capacity that you had planned on in Jordan, I think was 50 metric tons, whatever, but that would be as a percent of your total capacity and maybe for the industry?

Yeah, when you look at the -- the industry, again, the rules of thumb, it may be just a bit dated, there is order of magnitude, 500,000 metric tons of bromine capacity in the world. This plant in Jordan has a nameplate capacity of approximately 50,000 net tons. We're currently running it at a run rate that's roughly half of that level and will be at that level probably for a couple of years, on purpose, you know, we're not trying to go out and be disruptive in the marketplace and we're moving that material as bromine and as first order derivatives of bromine go out today as compared to flame retardant.

That's very helpful, I'm also interested in the flame retardant piece of that, as well.

The flame retardant capacity, when we have the plant fully up and running, will be 37,500 met tons of tetrodome. The first phase of that would be like 12,500 met tons of tetrodome and I will have to get back to you on a percent of global capacity, but around 10%.

10% of global capacity.

Yes. And we're the largest buyer of bromine in the world. We try to balance it well where we run short of bromine all the time to participate in the market and make good incremental decisions. So, Jordan helps us balance that out and bring us into into a part of world that frankly we were largely absent from.

Thank you.

Again, if you would like to ask a question, please press star, then the number 1. We have a follow-up question coming from Jeff Zekauskas of JP Morgan.

When you look at the economics of your Jordan facility, how do the production economics compare to the facilities in Magnolia?

Well, you know, the -- the big picture, Jeff, when this thing is up and fully running, you know, the kind of mental picture you should is that the bromine costs that will come out of there are 1/2, 1/3 the cost out of facilities in Arkansas. That's the advantage the Dead Sea brings to you, simply because there are absolutely no, you know, bromine wells, resupply lines, those kinds of things.

You simply put a suction pump into the Dead sea and pull out a high concentration of sodium bromide. That's the kind of number you need to have. There are logistics advantages that come with it, that sort of thing. So, longer term, that's how I urge you to look at this, longer term we will be in a great position with that. Over the next several years, I mean it's always been our position that the fundamentally this business will come on slowly, we will continue to invest in it. 3 to $4 million this year, hopefully better than that. That's the right order of magnitude. I hope next year we're at half that level and making necessary '05, then growing it.

I know that the intention is to ship material from Jordan to Europe and to Asia. But if you did decide to ship to the United States, given shipping costs and, I don't know, tariffs for all I know, is it economical to shift to the U.S. from Jordan?

Yeah, yeah it is. I mean the bromine comes from the Dead Sea today to the U.S., not from us, but from other people, but it won't be necessary, there's a much bigger market for us in Europe and Asia Pacific and at this point is ideally suited to ship to places like China and Japan.

As you can imagine, so, that, you know, the -- the thrust here is for Europe an for Asia Pacific and that also -- that also applies to the flame retardants there because again, the easiest way to move those things.

When you look at things like clear completion fluids, frankly it opens up again a part of the world you can, a part of the Middle East and Africa that we will participate in, not to the extent we're going to be able to with this venture and doing things there, like going to small containers of these products, just make it advantageous for us longer term to be there.

I realize my question is a little academic, again, I understand that those are the interesting markets for you. But if you did ship from Jordan to the United States, what it turn out that that material would be lower cost fall-in than material that comes out of Magnolia shipping costs included?

Well, I've not really looked at it. But if you do that, but no, it's pretty much the same. It's very dense material that goes in lead line to isos, Jeff, so, you know, will it be cheaper, yeah, maybe a bit. I don't know. But it won't be -- it won't be half the cost, that's -- that's -- half the cost in Jordan versus the cost in Arkansas.

Okay. Thank you very much.

You're welcome.

And at this time, gentlemen, there are no further questions.

Thank you very much, thank you all for joining us. We'll see you next time and I'll be available for questions. Thank you.

This now concludes today's Albemarle Corporation's first quarter conference call. You may now disconnect.