雅保公司 (ALB) 2005 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Second Quarter 2005 Albemarle Conference Call. My name is Shawn, and I will be your coordinator for today.

At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session following today's presentation. If at any time during the call you require assistance, please dial star, followed by 0, and a coordinator will assist you.

At this time, I would like to turn the call over to Ms. Laura Ruiz, Director of Investor Relations. Please go ahead.

Thank you, Shawn.

Good morning, everyone, and thank you for joining us today for a discussion of Albemarle's second quarter results, which were released prior to the market opening this morning.

Participating with me on the call this afternoon -- or this morning, rather, are Mark Rohr, President and CEO; John Steitz, Senior Vice President, Business Operations; and Paul Rocheleau, Senior Vice President and Chief Financial Officer.

I'd just like to add that we're conducting this call today from our Refinery Catalyst offices in Houston and are very grateful that Hurricane Emily cooperated with us and steered far enough west for us to be here.

Please note that our earnings press release, as well as tables on net sales impact of price, volume, foreign exchange, joint ventures, and acquisitions are all posted to our website, and that can be found at www.albemarle.com under the Investor Information section. We will also be posting an updated non-GAAP reconciliation, as well as a transcript of this call, within 24 hours of the call today.

I would like to remind you that some of the information to be presented in today's discussion may constitute forward-looking statements. So I'd ask that you please refer to our caution statement posted on the website also under the Investor Information section for a list of factors that could cause actual results to differ materially. You may also refer to our earnings press release and other filings with the SEC.

I would now like to turn the call over to Mark Rohr, who will provide you with a summary of the highlights for the quarter.

Thanks, Laura, and good morning, everyone. I appreciate all of you taking the time to listen in to our earnings call and webcast.

Earlier today, we reported our second quarter results, which were -- which indicated a very strong performance and continued margin improvement across all of our business segments.

Net sales for the totaled $503 million, up $176 million from last year. Second quarter 2005 net income, excluding special items, totaled $29 million, an increase of 50% over the prior year and 15% sequentially, yielding earnings per share of $0.60, increased from $0.46 per share in the second quarter of 2004 and $0.54 per share versus the last quarter.

If we include special items, which we'll talk about in a minute, second quarter 2005 net income totaled $32 million, or $0.67 per share, compared to second quarter 2004 net income of $20.7 million, or $0.49 per share.

We're obviously very pleased with these strong results, which show the value of the recent Refinery Catalyst acquisition and also the significant impact of our pricing strategies in each business segment. This momentum has allowed us to stay ahead of the year-over-year cost increases in energy and raw materials, which continue to be significant.

Second quarter 2005 saw year-over-year increases of $19 million in raw materials, excluding Refinery Catalyst, and another $1 million in increased energy charges. However, throughout this period, we were able to realize operating margin improvement, including our joint ventures, of roughly 260 basis points from last year and a 220-basis-point improvement sequentially. Margin expansion was achieved in each segment, driven by price improvement and a $3.7 million increase in equity income from joint ventures quarter to quarter. That's really fantastic performance.

In Polymer Additives, we successfully drove price increases in many areas, most notably, brominated flame retardants. Sequentially, volumes rebounded nicely in most end markets, allowing us to achieve record net sales and operating profit for the quarter.

We announced expansion of production capacities for our mineral-based flame retardants, which will allow us to continue to meet the global trend in low-smoke wire and cable and other plastic and rubber applications.

While volumes have shown some signs of weakness in the third quarter, we are optimistic the fundamentals, driving growth in the additives areas, remain very positive.

The Catalyst segment again had a very strong quarter due to good performance in the Hydroprocessing Catalyst business, an excellent contribution from joint ventures. We are approaching the anniversary of this acquisition and continue to be pleased with the pace of the integration and overall synergies of roughly $10 million annualized experienced to date.

This week, we also announced a major expansion of our Hydroprocessing Catalyst capacity, having now approved a new 10,000-metric-ton catalyst plant at our Bayport, Texas facility to satisfy growing demand of HPC Catalyst.

With additional capacity expansions in Netherlands and Japan already announced, we are showing our commitment to maintain a leadership position in this important business segment.

Turning to Fine Chemicals, this segment continued its turnaround that began in the second quarter of last year, delivering both sequential and year-on-year profit gains. A major factor contributing to this performance is the strength of price increases across our bromine franchise and the improved profitability in JBC, our Jordan bromine joint venture.

We announced an increase in bromine price to a level of $2,000 per metric ton effective July 1 and are working this through our customer base.

Bromine demand continues to outpace supply, and we are evaluating the best options for increasing capacity in this area to keep pace with global demand growth.

Additionally, our Fine Chemistry Services business continues to accelerate, built on the success of our new product pipeline. We recently announced the establishment of an R&D group at our Orangeburg, South Carolina site, as well as plans to update our CGMP facilities there to enable large-scale production for commercial products emerging from this pipeline. It is exciting to see the bottom-line success of our new product development effort, driven by increased expenditures in R&D, which are now justifying new capital. We're also expanding this dynamic service-oriented model to traditional Albemarle sites and are quite excited about potentials that may bring us.

As many U.S. companies have experienced, we are facing a challenge with regard to the growing obligations of benefit plans. For the year, our net pension expenses will increase approximately $8 million over 2004, a trend that has been significant since 2000. We have begun to take steps to moderate this cost. In the second quarter, we have modified the Company's retiree medical benefit plans to reduce further liabilities for the unfunded medical premium subsidy. The impact of this change will be described in more detail by Paul, but it's designed to help moderate cost in this area.

Across the Company, we continue to contain cost and drive pricing to ensure we are delivering the margins necessary to support further investment. We also remain on track to exceed the three-year $50 million manufacturing cost-saving programs by the end of this year.

As part of our continued emphasis on global growth, we have recently announced the construction of a technology center with associated production and packaging facilities in Nanjing, China.

Additionally, we've signed definitive agreements for our second joint venture in China for polymer stabilizers and intermediates. These two developments represent a significant milestone in our Asia plans and allow us to maintain the leading antioxidant position in China, increasing our technical support for this rapidly developing polymer market throughout Asia.

Looking forward, we have a new round of previously announced price increases taking hold July 1 in a number of bromine phosphorus organometallic-related products, which should help offset the continued pressure we have on raw materials and energy.

Now, for more detail on our segment performance, I would like to turn the call over to John Steitz, who heads our business operation.

Thanks, Mark.

This quarter saw the results of significant efforts by our global business teams and support groups, which allowed us to drive margin expansion further than expected. I'm going to take a minute and highlight these efforts in each of our three business segments.

Polymer Additives once again set a quarterly record for net sales and operating profit. Year-over-year, Polymer Additives' quarterly net sales of $204 million were up 13%. Operating profit improved 18% year over year to $27 million, driven by strong gains and pricing across flame retardants. Operating profit margins, including joint ventures, which we refer to as segment income, of 14.4% represents a 180-basis-points improvement year over year and a 240-basis-point improvement sequentially as a result of truly excellent execution in our pricing and cost-reduction programs.

Looking ahead, we believe we are still on pace to achieve a record year in both sales and profits. High raw material pricing and end-market drivers, such as a sluggish U.S. automotive demand and slowing polyolefin production, were real. However, on the positive side, we typically see a pick-up in consumer electronics in the third quarter as orders are filled for the holiday season. The next two months should provide a better indication of what to expect for the full second half from a volume perspective.

Pricing is and will continue to be an area of management focus. Our second quarter results demonstrate our successful execution in this area and the importance of maintaining this discipline as we move forward.

Switching to our Catalysts segment, net sales were $147 million, up $123 million for the second quarter versus 2004. Catalysts segment income was $24 million, up $22 million year over year, driven by the addition of the Refinery Catalyst business.

During the quarter, we experienced strong sales volumes in Hydroprocessing Catalysts, an exceptional performance of our joint ventures. Operating profit margins, including joint ventures, improved 200 basis points sequentially to 16.5%.

While our overall Catalysts results were strong, FCC Catalysts volumes continued weaker through the second quarter due to timing of some shipments.

Polyolefin Catalyst volumes in the second quarter were above 2004 levels, and new sales opportunities continued to develop in metallocene polyethylene. However, the phasing of manufacturing campaigns in the second quarter impacted the profitability negatively in this second.

Switching to Fine Chemicals, this segment delivered both sequential and year-on-year profit gains built on strong net sales growth of 24% versus second quarter of 2004. Second quarter '05 segment income increased to $14.9 million, or 29% improvement sequentially. Higher bromine and derivatives prices, accelerating new pipeline successes, and joint venture performance are the major contributors for these improvements. These factors allowed us to continue to offset headwinds in the more mature product lines and overcome rising costs, primarily on the raw material front.

Mark highlighted the investments we were making in South Carolina to enable continued growth in Fine Chemicals. We now have 99 new products in our pharmaceutical-related pipeline, up from 96 in the first quarter. Additionally, we have 48 non-pharmaceutical products under various stages of development.

New product revenues are accelerating, and as a result, we expect a 45% increase in sales for new products introduced over the last five years versus 2004. Clearly, our focus for profit improvement will remain on delivering this increase as we continue to expand margins in our bromine franchise.

I would like now to turn over the call to Paul Rocheleau for a more detailed overview of the financials.

Well, thanks, John.

Let me first mention that the press release issued today contains preliminary, unaudited results for the second quarter and the first six months of the year. These figures are subject to further review by the Company and our external auditors.

In the second quarter, our net sales increased 54%, primarily due to the inclusion of the Refinery Catalyst business, continued growth of our Polymer Additives business, and improvement in Fine Chemicals.

The Refinery Catalyst business added $121 million of revenues during the quarter. Also in the quarter, we recorded net income of $32 million, including $3.1 million of special items, which I'll talk about in a minute.

The Refinery Catalyst acquisition continued to be strongly accretive to our results. You'll note that as we did in the first quarter, we have highlighted the strong performance of the joint ventures across each segment. In the quarter, unconsolidated JV net income was $11.1 million, compared to $0.7 million last year. On our website, we will post the historic unconsolidated JV income by segment; we'll give you a more complete picture of the improvements.

I also want to mention that our unallocated corporate expenses were $11.5 million, a decrease of $2.2 million compared to the first quarter. This level of unallocated cost is more in line with our forecasts for the rest of the year.

Our effective tax rate for the quarter was 30.3%, slightly above the 29.5% rate that we considered to be the long-term norm. We now have more experience with the geographic contribution of income and cash flow as generated by the Catalyst business and expect further reductions in the effective tax rate as we go through 2005.

During the quarter, we reported two special items. The most significant is the impact of a change to our retiree medical benefits plan. Effective with retirements after January 1, 2006, the Company will discontinue retiree medical subsidies except for employees nearest to retirement, where we'll give -- they will receive limited support. As a result, we have recorded a one-time non-cash gain of $3.6 million after tax as the future liability of these programs has been reduced.

Looking forward, there will also be an ongoing benefit as the accruals and cash payments to fund retiree medical obligations are reduced. In addition, we have increased the reserve for future potential settlement of legal claims by $400,000 after tax.

We continue to generate strong cash flow, as measured by EBITDA. As you'll see in the supplementary schedules on our website, EBITDA in the first -- in the second quarter was $85 million. That is $165 million year to date.

In the press release, we have provided selected cash flow information as the results are still subject to final review. You'll note that our capital spending for the year to date was $39 million, and we made further investments in and advances to joint ventures of $9 million.

As announced earlier this week, we acquired a minority interest in another JV in China, and we continued to support growth of our JV in Jordan.

We have a number of important expansion projects underway, and we expect this level of capital spending to increase slightly as we move through 2005. I'm also pleased to report that the purchase price allocation work associated with the Refinery Catalyst acquisition is effectively complete, and the detailed balance sheet analysis will be issued in its next 10-Q. As referenced, we expect depreciation and amortization charges to run approximately $29 million per quarter through the balance of 2005.

Due to increased Refinery Catalyst receivables and inventory build-up to support future sales, our working capital increased this quarter by approximately $15 million, somewhat reducing the benefit of strong operating cash in-flows.

As of June 30, we had total consolidated debt of $884 million, of which $558 million is floating and $326 million is fixed.

At the end of June, we amended our loan agreement with our bank group, which will reduce interest costs in a variable portion of our debt. At current levels outstanding on the facilities, these changes are expected to reduce financing costs [to] approximately $1.1 million on an annualized basis.

Our cash on hand as of June 30 was just under $100 million, giving us a net debt of $819 million, or approximately $8 million lower than the level at the end of the first quarter. This cash level is higher than we believe is efficient, particularly in some of our foreign subsidiaries, and we plan to tax efficiently and repatriate funds under the Homeland Investment Act. We expect to begin repatriation in the third quarter of 2005.

At the end of the quarter, our ratio of debt to total cap was approximately 50% and will continue to drive our business to generate cash and further strengthen the balance sheet.

Let me now turn the call over to Laura for the Q&A.

Okay, Shawn, we'd like to open it up for questions now if we could.

Thank you. [CALLER INSTRUCTIONS].

Jeffrey Zekauskas, J.P. Morgan.

Just a few questions. First, can you take that gain that you've got on a pretax basis and allocate it to your segments so we can see what the segment profit is?

Jeff, as you know, when you work through the numbers and you look at the schedules at the end of the press release, you'll see that the segment income does include the gain. So we would -- you know, when you back out that gain, it primarily does affect the Polymer and Fine Chemical segments. But it's still showing the -- so the segment shows that it's [still a] year-on-year improvement in the op margins.

I'm sorry. Maybe I didn't read the releases carefully as I should. That is, does it precisely allocate the pre-tax gain to the Fine Chemicals and the Polymer segments?

It does not -- it doesn't highlight what is the special, you know, with or without, in those segments. It's something we may want to come back and post to our website subsequent to this conversation.

That would be helpful because it's hard to make. So from your point of view, there's nothing in the Catalyst operation, I guess, because that was newly acquired, just in Fines and Polymers?

That was --

That's correct, Jeff.

Catalyst number is, you know, quite clean in terms of the before or after [specials].

Right. So, secondly, you know, in Polymers, obviously, you have a very, very nice pricing gain that's driving the operating profits. But, you know, volumes are down and for the second quarter in a row, and you know, the price benefit is more or less the same as it was in the first quarter. So is the -- so is the inference that we should draw from this that sequential pricing is not improving? That is, it's sort of flattish, and that all things being equal, you would expect some sort of volume pick-up in the second half? Is that the right conclusion to draw, or no?

Jeff, this is John Steitz. Let me just try to give you some more numbers around that.

Thank you.

First, in total polymer chemicals, sequentially, volumes were just down slightly, like less than 1%.

All right.

And primarily, that was in the antioxidant arena, where we just had some fairly major customers curtail some shipments at the end of June, okay? But if you look at brominated flame retardants, those volumes sequentially are up about 8% sequentially.

But what are they year over year?

They were up about 6% year over year.

Oh, is that right?

Brominated flame retardants. But another big area, a big volume impact, was in our ATH family of products, which is primarily automotive related. And year on year, we have seen a fairly significant drop in that area. That's in the order of 15 to 20%. Sequentially, it's about flat. That's primarily automotive related.

On the pricing front, in total, Polymer Chemicals, we've continued to see for the entire business now a 4 to 5% sequential pricing improvement. Now, some of that's going to be mixed as well because we're selling less ATH-related products and more of the higher-priced brominated flame retardants, but -- and, also, it's almost a 20% year-on-year gain in total average pricing in polymer chemicals year on year.

In the area that you spoke about where there was the volume decrease, I'm sorry, it's ATH or HTH?

Yes, aluminum -- the aluminum trihydrate family of products, primarily related to wire and cable manufacturing in automobiles. So we did see a decline there for certain year on year.

Okay. Thanks very much. I'll get back in the queue.

Thanks, Jeff.

Thanks, Jeff.

Robert Koort, Goldman Sachs.

A couple quick ones. Can you speak about the seasonality within the Catalysts business, and do you require your customers to take maintenance turnarounds to recharge their catalyst beds, sort of with the supply change seasonality there?

On FCC, the seasonality is generally, you know, in the winter and spring months as the big refineries go through their change-outs and turnarounds. So that's primarily FCC related.

On the HPC side, the fundamentals there on volumes are so solid; we're just continuing to see a lot of refineries prepare more for the ultra-low sulfur diesel requirements kicking in next year. So that's the primary driver, I'd say.

So, John, I recognize the refinery would take a down time in those periods to get ready for demand. When would they actually be procuring your product? How does it affect your revenue stream?

We're seeing a -- we did have some on the ultra-low sulfur diesel side. We're seeing some volume drivers towards the end of this year and early next and through next year. So that drives us to this fairly significant expansion we're talking about that will kick in at the end of '06.

FCC -- on the FCC side, we're seeing a back-half-loaded volume, stronger volumes in the back half than the first half. So we've seen in the FCC side fairly flat to just down sequentially, maybe 4 to 5% from the first quarter.

And then --

As I mentioned, we go through a very rigorous revenue-recognition process across our businesses. We did have some large FCC shipments at the end of June that are not counted in our numbers.

Okay. And then a broader -- maybe a strategic question. Mark, you highlighted, rightfully so, your expansion into China and again the technical center and whatnot. But my understanding is you still have a very limited presence in the Catalysts business there. Does this new investment in the Additives side give you a leverage point into the refining industry there, or is it -- how can you break into that industry?

A great question, Bob. We do have a fairly limited presence in China. Having said that, we do make sales there, and we have a couple of tech service people in [Guanjo] that manage that business for us.

The Tech Service Center we're building is going to start from the predominantly in Polymer Additives and the Fine Chemicals areas, but we have provisions to consolidate more catalyst technology in that in the future in Nanjing. We also are putting in facilities to enable expansion in the polyolefin catalysts area there with some blending capability.

We've got enough property to build a plant there, and it's our intention to start construction on a multi-purpose facility in the not-too-distant future there, yet to be determined exactly which product line, but John Steitz and his team have several opportunities there -- they are pursuing there.

Regarding Catalysts, you're right to say that Catalysts has been kind of hard to break into because the [indiscernible] family of industries tend to -- you know, they like that technology, and they tend to play in it. Nonetheless, we're fairly confident in the hydroprocessing area over some period of time, as China especially prepares for the 2008 Olympics, that the kind of catalyst technology we can bring in will start to be of interest. And we're trying to position ourself, Bob, to be able to take advantage of that as that happens. But today you shouldn't have a view that we're going to be announcing any time soon a catalyst manufacturing plant in China. I think that's a ways off yet.

Great. Thanks very much.

Thanks, Bob.

Thanks, Bob.

[Ray Kramer], First Analysis.

A couple questions. First, on the gross margin front, given your comments that you continued to get traction in terms of prices relative to raws and energy, a little surprised to see they're basically flat. Are there some mixed components in there, or what was sort of going on?

Oh, we still had another $20 million of raw material inflation in the second quarter. And there's also, you know, some additional pension-related costs. But just from a pure gross margin point of view, as we look at it, we continue to gain primarily in bromine and brominated flame retardants. We did have the volume effect, as I mentioned earlier, in the aluminum trihydrate product area related to the automotive industry.

Okay. And then on the Polymer Additives front, can you comment on what you're seeing competitively there with, you know, Great Lakes, hopefully, moving to a more price-friendly situation there? Do you expect to continue to see good pricing traction there, or can you comment on sort of the industry dynamics as you see them evolving?

Yes, I sure would, Ray. John Steitz again. First, in July, the volumes have softened a bit right out of the gate. So I think we're just going to have to take a wait-and-see attitude and see how the build-up prior to the holiday season is. And, you know, that's a lot of Tetrabrom, Decabrom, and some of our specialty brominated flame retardants. So that's kind of a wait-and-see. We're a little bit cautious now. We had been forecasting continued sequential growth in the third quarter, but we're getting a little bit concerned as we see some softness in July right out of the gate here.

On the competitive front, you know, frankly, in the second quarter, yes, with the distractions at Great Lakes, obviously, you know, they've been a bit rudderless. So we're hoping -- so the market -- if the demand picks up, that we'll get some more pricing traction. You know, it's always supply and demand and the competitive activities. So we just -- we're just taking a wait-and-see attitude there. We've announced some increases in bromine, and we're continuing to try to drive our bromine pricing going forward.

John, this is Alan Coin. During the second quarter, a number of the polymer processors, the compounders and the like, saw their customers do an inventory takedown presumably related to some of the commodity polymers, [if you will], flattening and peaking in price, and nobody wanted to keep much inventory around relative to when prices were increasing. Could that kind of adjustment be starting to feed into the additive business in the third quarter, broadly speaking, and perhaps what you're seeing in July?

Alan, it could be. You know, I wouldn't discount that. But I think it's really too early to tell. We continued to have all the way through the second and third week of June a pretty strong order book, you know, across the board. It just started to soften, you know, around the end of June, early July. We've had some orders roll, you know, in Tetrabrom, Decabrom, but we're dealing with weeks, not months. So I do believe what we're hearing from the customer base is that there's a correction in July, inventory correction, but they're seeing things pick up -- pick back up in August. So we're just kind of really keeping in close contact with them on what they see volumes towards the back end of the third quarter. So we're trying to stay in close touch with that.

Thank you.

Thank you.

[Marshall Reid], Banc of America.

Just a couple questions for you. First, on Catalysts, I just wanted to follow up on a question previous. A competitor reported, I think, a 27% increase in Refinery Catalysts sales last night. I think you guys were up 5% on volume and price. Was there some share shift going on there? And, you know, how did FCC do relative to the segment as a whole, and what's sort of your expectation for FCC for this quarter?

No, I don't believe there is any significant share shift, Marshall, to any degree. I think it's just a combination of customer mix, timing, and just basic fundamentals. I really don't see any fundamental shift in FCC market shares. And HPC is just very -- as I said, very solid fundamentals, solid growth going forward as well.

Okay. And on Polymer Additives, again, just to follow-up, you know, Polymer Additive pricing was up 14%, but I think you guys actually put in a state tax price increase on April 1. Why would pricing decelerate, I guess, from the first quarter after putting in the price increase? And with July volumes sort of softer, is there now some incentive to start getting back on price and improve volumes here in the second half?

Well, it really is a combination of, again, supply and demand and volumes -- volumes softening a bit. The pressures on raising prices at our end have been less. As I mentioned, there has been some disruption with the Great Lakes/[Crompton] merger, and we're just hopeful that we can gain some additional traction. Hopefully, we're being conservative here, but the gains in the first quarter were significant.

If you look at Tetrabrom, for example, compared to last year, it's still up 60%. We're a little bit concerned about, you know, continuing pressure on raw material front. You know, with oil vacillating in the high 50, $60 range, that tends to drive benzene and phenol, which are key constituents in a lot of our raw material base. So we're hoping to absolutely hold on to the gains we've made and continuing to drive high sustainable earnings power through pricing.

So for the back half of the year, should we think about, you know, higher raw material pricing maybe putting some pressure on margins, or do you guys think you can certainly keep pace and maintain margins where they are?

Yes, I think we can keep pace with that level, you know, flat with that level of raw material increase that we see in the second half.

Okay, great. Thank you.

You're welcome.

Thanks, Mark.

Mike Sison, Key McDonald.

Regarding the charge, if I applied, just roughly speaking, two-thirds of it to Polymer Additives and a third to Fine Chemicals, considering prior to Catalysts, that's roughly the mix of op income, you know, it looked like Fine Chemicals was flat in terms of year-over-year growth in op income despite, you know, a pretty strong growth in sales. Could you sort of remind me what -- or maybe better quantify what the negative headwinds were in the quarter?

Yes, I sure can. We had good -- very good success, I'd say, with all our Bs -- bromine, bromides, brines; our biocides business did well in the quarter. We still have, you know, business in Europe, potash and chlorine related, that did not do well.

That's right.

It's continuing to be a headwind for us there. And we do -- we have some pressure on ibuprofen and pricing. So that's the other significant headwind. The ibuprofen business, volumes in the quarter were down sequentially a bit, and -- but they're up nicely year over year. But the pricing drop, as we've talked about many times, is real and fairly significant. We're seeing pricing in the range of a 20% drop year on year. So it's probably a fairly significant headwind for us that you ought to consider.

And in terms of raw materials, what was the headwind?

Raw material, you know, chlorine is year on year a fairly significant raw material headwind. And after that, you get into a lot of different type products, all that add up to be a fairly significant amount of money.

ATH, for example, for our [margins work] performance chemical product line year on year is a couple million dollars. Then you get into a fairly broad range of other products.

Would you cover the increases in raw materials with your pricing in Fine Chemicals?

Mike, could you repeat that? You're breaking up a bit there.

Oh, I'm sorry. Did you cover your -- the increase in raw materials with your pricing? It looked like pricing was up 10 million.

Yes, I really believe we have -- in the bromine/bromides/clear brines area, we've had a lot of success there.

So the raw materials are essentially neutral then?

Yes, in Fine Chemicals.

In Fine Chemicals.

The biggest headwind, I'd say, would be that potash and chlorine business in Europe and ibuprofen pricing.

So ex that, everything else did pretty well?

Yes, everything else did, I think, very well --

Okay.

-- as till the end year on year.

You know, if you do the same math with Polymer Additives, and I apply sort of two-thirds, your op income is up modestly on fairly good growth. And I wanted to, again, get a better understanding what the headwinds were there because if you covered your raw materials, the $10 million in Fine Chemicals, that only leaves $10 million left in what you told us in the beginning of the conversation, and your pricing was up $25.9 million in Polymer Chemicals. So you had a surplus, in essence, right, in terms of pricing minus raw materials?

Right.

Yet, the op income really didn't move to the degree I would've thought on the sales growth.

Yes, well, sequentially, it still went up -- I mean our operating profit ex special was up 20%. I mean it is very strong on sales growth of, say, 5% or so. So I think we are capturing in Polymer Chemicals a lot of that.

But, as I mentioned, we had one drop in the aluminum trihydrate product line, where we have curtailed production there to keep the inventories in line. We'll probably be doing some more of that in the third quarter. And then the antioxidant additives portion of our business did slow up due to some major customers delaying some orders at the end of the quarter.

Were brominated FR volumes, up in the quarter?

Excuse me?

Were brominated FR up in the quarter?

Yes. Yes, brominated FR sequentially is -- volumes are up about 8%, and year-on-year, about 6% in the total brominated flame retardant family of products.

So you had a pretty big drop-off in the other areas then. Are the other areas more related to auto and those other sectors?

Yes, mineral flame retardant is down year on year about 20%, and --

Wow.

-- that's a big-volume number, so that affects our mix, also, in Polymer Chemicals.

No market share shifts there, just --?

No, we don't believe -- it's strict -- well, you know the automotive market.

Yes, right. Okay. That's fair. And in Catalysts, what was the pro forma year-over-year sort of increase in sales or volumes? Or maybe you could give me what the pro forma number was in '04?

In Catalysts?

In sales, yes, for Catalysts; I’m sorry.

Oh, boy.

Mike, we'll have to get back to you.

We'll have to get back to you on that, Mike. I don't have that.

Is your sense that the segment was up?

Yes, a lot of it you have to remember is molybdenum related, so there's been a lot of inflation there year on year. Now, we have covered that, obviously. You can see our margins have expanded.

Yes, right.

Yes, and our polyolefin catalysts business, our revenues are flat to up slightly, but we did have a lot of production campaign timing in that business, and that's actually rebounding nicely in the third quarter.

Right. I mean you said volumes in HPC were strong, polyolefin catalysts up, and FCC weak, so the segment year over year pro forma probably was up?

Yes, I would think so.

And our revenue was certainly up because of the moly values, but your general direction there is correct in terms of the HPC being up and then FCC flat to down a little bit.

Then when we go to the third and fourth quarter, would you expect sequential improvement in the Catalysts business as the FCC side starts to pick up?

No, I think we're -- this quarter exceeded our original forecasts, the second quarter did. So I think if we can hold on to this kind of profitability level for the segment, we'd be quite pleased with that.

And the drop-off sequentially second quarter versus the first was pretty -- was that mostly FCC?

Yes.

Okay. And last question. In terms of the minority performance, why was it so strong on a year-over-year basis? I mean --

Well, our Jordan joint venture is doing well.

Okay.

Okay? That's a big part of it.

And that's in Fine Chemicals?

Some of it's in Polymer Chemicals as well because we -- some of the profit is Tetrabrom related.

Okay.

[ABC]. And then our Catalysts joint ventures did quite well. You know, primarily -- well, HPC, to a degree, with our Nippon Ketjen venture in Japan and our FCC Brazil, did better than we expected, and we've got a small joint venture called [Eurocat]. That's regeneration of used cat -- spent catalysts. Net, that did just fine.

Is that a pretty good run rate for the rest of the year?

No, I'd say -- I'd say flat. I mean we --

Flat sequentially?

Flat sequentially going forward.

So sort of that high-single-digits/low-teens in the third and fourth quarter?

Mike, let me give you an example of the Nippon Ketjen joint venture.

Sure.

They're very strong first half of the year because there were so many refinery turnarounds they were providing material for. The second half of the year is going to be much weaker there as they build up for sales for the first half of the following year. So we don't have a crystal ball to go through that, but I think, you know, broadly speaking, holding this through the next couple of quarters is going to be pretty good performance.

Okay, great. Thank you.

Thanks, Mike.

Thank you.

[Lawrence Alexander], Jefferies.

Can you give a -- what your rough estimate is if all of the pricing that you're implementing July 1 sticks, what the run rate benefit should be on a full-year basis?

Excuse us. Can you repeat that again?

If your July 1 price increases all stick, what do you expect the ongoing run rate improvements in pricing to be?

Well, bromine, for example, we've announced $2,000 a ton. That could create, I'd say, the order of magnitude of, you know, a penny or two a share in that whole bromine family, a sequential improvement. But, again, we're also anticipating some additional, you know, raw material inflation in the second half as well, Lawrence. So we're a bit cautious, you know, on net gains in the announced price increases, and we haven't achieved those increases yet at the customer level. So we've announced them, we're working on them now, and we're working on the execution of those price increases across the board. But we're a bit cautious at this point.

Okay, thank you. And if you look at the FCC markets, how much of the -- how large was the timing hit this quarter, and how much would you expect to recoup in Q3 just on a -- just for the difference in the order of timing?

Yes, I'd say -- I mean that's probably, on a volume basis, a 4 to 5% swing on the volumes, okay?

Okay.

For the quarter. So I mean it's nothing dramatic, but it did contribute to a slight decline sequentially. We've started out the gate here in the third quarter in recently good shape on the FCC Catalyst side, and we're still working hard to drive pricing improvement in that business as well because that business is very subject to a lot of energy costs, and so we're really working hard on driving pricing improvement in that family as well.

Thank you.

[Demetri Silverstein], Longbow Research.

Most of my questions have been answered, but if I could follow up on a couple of issues. Can you give us an update? You talked about the Jordanian plant being a contributor on a joint venture strength as far as Fine Chemicals and a little bit in the brominated FR area. Can you give us an update on where the plant is in terms of total capacity? I know you were bringing it online slowly as the market demand was justifying it. Is this plant riding as efficiently as it can be riding, or is there further up side that we can look for margins and income from the joint venture as it becomes more and more efficient with higher volumes?

Great question. This is Mark. The plant is running at -- it has a nameplate capacity of 50,000 metric tons of bromine. Take that through the different derivatives. We have run it for short periods of time at capacity. Say, on average, we're running probably at 85 and 90%, that kind of level on a bromine-related basis of capacity. We've starting up our new chlorine plant there, and it's running fairly well, but we're not quite able to yet balance the two units together. So there is some incremental up side as we get chlorine running fully at capacity and we have to buy less chlorine. We're looking for ways to bottleneck that plant up to 60,000 metric tons, and I would think within a year from now or so, we'd probably be at that level or approaching that kind of level. So there is some up side clearly with that as we go through the next 12 months or so.

We're preparing on Tetrabrom to bring on more capacity as we need it. That doesn't cost us anything from an efficiency point of view. It just puts John in a place where he can decide where he wants to make these products to be delivered around the world. So that's an opportunity advantage for us to have that there.

So I think some, you know slow improvement over the next 12 months should be possible and then perhaps as we enter towards the end of next year, some step changes as we push more volume through that facility.

Okay, great. Thanks a lot. And can you give us a little bit of color of how your Polymer Additives businesses is doing across geographies? Can you talk about different end-markets and, you know, [minerum] versus FR versus the ones that are related to the cable and wire in automotive. But can you give us an idea on what's going on on the regional basis?

Yes, I sure can. You know, a lot of the brominate flame retardant business is switching to the Asia region, and it's fairly concentrated with companies like Samsung, LG, you know, all consumer electronics related primarily. And it has -- that -- just the color commentary, Demetri, behind that is we have seen it slow down in the last couple weeks of July. We had a kind of a high-level meeting with LG Electronics, and their view is that things will rebound in August. But they're also waiting to see.

So I think the -- there is what I call some inventory corrections occurring. But we're hoping with the holiday season approaching as they build up for that in the third and fourth quarter, that volumes will rebound. But we're still, you know, fairly kind of in a wait-and-see mode.

On the automotive front, we're still seeing some slowness there in our aluminum trihydrate-based products that correspond to low smoke, zero halogen, and as a PVC alternative, primarily in Europe. So we are seeing that slow down as automobile product has slowed and waned. So that continues to be a bit slow. So we're watching inventories here closely, watching our working capital. We're paying a lot of attention to appropriate inventory levels, especially with the higher costs on the raw material front. So we're trying to really rejuvenate our emphasis on working capital, watching inventories -- inventory velocity, and watching -- trying to pay much closer attention to our receivables, especially in the Catalyst side. So, anyway, that's, hopefully, just a little color commentary for you.

Absolutely. Thank you. And just final -- I’m not sure if it's going to come out as a question or as an observation, but here goes.

You know, you announced the additional price increases in Polymer Additives and bromine products. You know, facing two quarters of a backlog for volume growth and easing raw material pressures [indiscernible] going to go down, but certainly the pace of increase seems to be slowing down drastically. You know, what are -- kind of what do you realistically expect to get in terms of these price increases over the balance of the second half of the year, especially given the fact that you said at the top of your prepared remarks that you're staying ahead of the raw material and energy costs. So it's difficult to use that as a justification for customers to get additional price increases.

Yes, well, I think what we're really working on is trying to -- if we execute some pricing improvement going forward, we want to make sure it's sustainable. And that's really driving us hard. So we're beyond -- you know, we're not at the level of getting the 10, 15, 20% increases going forward that we had earlier in the year and late last year. I mean that momentum has waned a bit. So we're going to need some kind of stimulus, you know, in the marketplace to get pricing improved. And as you said, the level of raw material, we're concerned about it, but it has waned a bit, so we're really working hard with our sales and marketing teams to sustain the level of improvement that we've made, and we're working very hard on that.

Demetri, this is Mark. I'd add a comment, kind of a color comment to that. If you look at it on a quarter-to-quarter basis, you know, you can be fairly right with your observation that they're [indiscernible] into a slow patch, and it's important in that period of time that you acknowledge, perhaps, some difficulties your customers are having and manage that as best you can.

But when you step back and get away from a 90-day window or 60-day window, the fundamental to this business look very good for ongoing continued growth. And you're growing in a way that fundamental raw materials and technology to provide intermediates has just been exceeded. The global growth in bromine capacity has really pushed that business to the fringes of the ability to supply it. And so inherently, those businesses need reinvestment economics. And the same can be said for a lot of the derivatives that go into antioxidants and other additives and catalysts and, frankly, in some fine chemistry areas.

So I think, fundamentally, if you look at it on a quarterly basis, you could be accurate with your assessment. We're going to struggle to get some of these through as much as we'd like, but backing up and saying longer term is the foundation there to keep growing, I think the answer is yes.

So if I could follow up on that, are we there yet in terms of reinvestment economics, or do you need to realize either further price increases or some give-back on the raw material costs to get your margins improved?

It varies by -- on a product-by-product basis.

And in some cases, yes, we are. In some cases, you know, I think we're not.

Okay, fair enough. And then just a totally different question on the Fine Chemicals part of the business. You talked about the ibuprofen struggles in terms of pricing and the successes you were having in bromine products. What about just in general in some of your smaller-volume production of [ATI]s in the Fine Chemicals business? Is that market improving, holding steady? I mean what kind of -- can you give us a little bit of color of what's going on there in the industry overall?

Yes, you bet. We're really excited about the progress we're making. And with some customers -- again, it depends on the customer, the portfolio. But with the customers we're choosing to be real partners with, we're seeing a lot of success in generating new product activities. When we talked about the vitality index, you will -- of our business in Fine Chemistry, and we're having a lot of success there, between that and the -- capitalizing on the bromine -- our bromine franchise or -- is our formula for success going forward. So we're very pleased with it.

We've had such a success in developing that new product portofolio that we're taking our Orangeburg, South Carolina, a naproxen plant, and turning it into a multi-purpose FDA-approved CGMP facility, and that's going to broaden our portfolio even further, and actually kind of reduce our dependence on what -- to the degree we were in naproxen. So we're basically shifting from naproxen into a multi-purpose facility, where the asset utilization and returns will be a lot higher.

Okay. Thank you very much, gentlemen.

Thanks, Demetri.

[Yona Wise], HFBC.

If you could just give some background on the overall pricing proceeds for brominated FRs in the past year, both on an annual and sequential quarter?

Yona, could you repeat that? We're having some technical difficulties with the phone here. Could you repeat that question? I couldn't quite make it out.

Sure. Could you give an idea of what the price increases for brominate FRs were for the past quarter and past year?

Yes. Brominated flame retardants, if you look at the whole portfolio of products, it's up just under 20% year on year, and sequentially, it's up 3%, okay?

In Tetrabrom, year on year, for example, which is the largest-volume brominated flame retardant, that's up about 60% year on year and up just under 10% sequentially. So that'll give you a feel for the momentum in that area. So we're working hard to sustain that.

Okay, and in terms -- you discussed in your opening remarks and early on in the call, the [sort of] bromine capacity. Do you have some views medium to long-term, perhaps, on where more capacity for both brominated FRs, in general, you know, as far as [indiscernible]?

Yes, the -- from a capacity point of view, we had brought on additional capacity in the mineral flame retardants late last year. So we are fairly comfortable with our capacity in that family of products. And we've got the capability, as we see fairly long-term sustainable growth in that market, to bring on our Pasadena facility and produce those fine, precipitated aluminum trihydrate products.

We've also -- we're in the process of bringing on some additional magnesium hydroxide capacity at our joint venture in Austria, and that's called Magnifin. And that product line has continued to do well.

And in the brominated flame retardants area, we're comfortable with our arranged capacity in brominated flame retardants, and we have added -- we've got a new product, a brominated polystyrene product, where we have retrofitted an old plant in Magnolia, Arkansas to make this high-potential product. We're getting a lot of customer acceptance on it, and it's used in a lot of high-voltage connectors and used under the hood in the high-engineered nylons.

So we're fairly comfortable with capacities going forward. Bromine is the key, so we always try to monitor and throttle our bromine capacities accordingly to what the market needs.

Okay, and, lastly, have there been in the past quarter, or perhaps this past half of 2005, any specific sectors within the brominated FRs which you see as increasing very much in demand?

Well, we started -- I can't really point a finger to any one product where we see just a really strong-driving volume growth at this point. If we were to sustain volumes going forward that were flat to up a couple of percentage points in the third quarter, we'd be pretty pleased with that. So as I mentioned, we have started out July a little softer than what we were originally expecting going into the quarter, so we're in a wait-and-see mode to see if things pick up, you know, in the August timeframe.

Okay. Thank you very much.

You're welcome.

[Alex Mitchell], [Scopist Asset Management].

This is Bob Goldbrick sitting in for Alex.

On the issue of raw materials, I think you mentioned that you expect more pressure in the third quarter. I assume that's year-over-year pressure? Can you talk a little bit about sequentially the -- what you're seeing in raw materials increases?

Yes, Bob. Year on year is most of the pressure. You know, if you look at last year in the third quarter was when we began to see the fairly rampant escalation of raw materials. So -- but still year on year in the third quarter, it's not as dramatic as, say, the second quarter. In the second quarter, we had in the range of $21 million raw material and energy inflation, just excluding precious metals and catalysts because that just goes off the charts. But in the third quarter, we're looking at less than that. I'd say in the 12 to $14 million range compared to last year. But I think that's more because of -- the comparison to last year is less severe because it was going up a lot at this time last year.

And sequentially, what does that imply?

That's, I'd say, pretty -- well, flat sequentially. These raw materials are flat with the increases that we've seen in the second quarter.

And on the Catalysts side, molybdenum came down in June, I believe. Did you see a benefit from that in -- late in the quarter, or did that flow through in the third quarter?

Well, we saw a little bit of a decline. Molybdenum, it's now sitting in the $31 range. At one point, we were worried about it going to $39 or $40, but it -- I don't believe it reached that level.

We try to -- what we're really trying to do is manage that -- our inventory levels and to make sure we're not sitting on any excessive inventories that we cannot sell in a fairly rapid period of time. So we've worked hard to get some pass-through in our contracts as things escalated, and if things decline, we're just working hard to mitigate that by watching our inventories very closely. That helps us on the working front as well.

Okay, and one other question. On the FCC Catalysts, that business, I think you mentioned that the volume impact from the timing of the shipments was 4 to 5% from -- I guess from 2Q to 3Q. But can you give us an idea of what that means on a dollar basis? What kind of revenue shift that would've been?

Yes, it's in the range of $1.5 million, something like that. I mean that's just a directional guess. I mean something along those orders of magnitude sequentially.

Okay, great. That's all I had. Thank you.

You're welcome.

[Joe Princiotta], Deutsche Bank.

Couple of quick questions. You mentioned leverage is 50%. Talk a little bit about what you see as a target there in debt reduction? I’m looking for the prior uses of cash and how you might use your free cash flow.

Joe, this is Paul. Yes, we've mentioned many times previously that we are looking to get our net debt down, get it below $700 million in that in the short term here. And that would drive our leverage ratio down into the low-40s. You know, we'd like to get it below that as we'd look into 2006, but, clearly, the cash flow is being used, you know, to support the growth in the business. The capital spending, which is going to be nominally this 80 to $85 million for the year, [you know, so] we're going to continue with the dividend payment. And we still think there is a lot of free cash flow to pay down debt, and that's going to be the key priority.

We're well aware that in the first half of this year, our working capital did move up, you know, in conjunction with the much-higher sales levels that we have. We are working very hard, as John mentioned, to try to liquidate some of that working capital as these receivables come through, and we are still very optimistic that we're going to see some significant free cash flow, you know, coming to the Company and getting this debt paid down to a level where fundamentally we're hoping that the Company could receive an enhanced rating sometime in the not-too-distant future.

Okay. So you're looking for an upgrade at some point?

Yes, we just went through with this loan amendment, talked to the rating agencies, and presented our story to them. And we are quite optimistic that we're going to be able to generate the cash flow and improve that investment-grade picture.

Okay, very helpful. Thanks, guys.

Thanks, Joe.

[Chris Katz], Black Diamond Research.

I just had some follow-ups on the Catalysts business. If you were to look at the pricing in the Catalyst business, if you were to back out the molybdenum-related pass-throughs, what would the prices have looked like for the segment sequentially?

It -- let me think about that. I'd say from sequentially first quarter to second quarter, with the run-off in molybdenum, I still think with the catch-up from prior quarters, fourth quarter, we still gained a bit. But it's pretty close to flat, Chris. Molybdenum, you know, very volatile. We average out the costs, and we've been working hard to pass through that molybdenum with the major customers. So as I look at it, sequentially, yes, I'd have to say pretty flat on the moly.

And then if you -- well, for the overall segment, if prices were flat then, would that imply that FCC prices were actually down a little bit sequentially? You mentioned your efforts to get FCC pricing up, but I was just wondering how they look sequentially.

Yes, sequentially, they were down just a hair, but a lot of that was euro-based as we translated that to dollars. So part of that is foreign exchange based.

Okay. And then if you had recognized the revenue for the late June shipments, is it right to say that the FCC business would've been up low single digits?

On a volume basis, yes, probably still down on a revenue basis because of the foreign exchange impact, the euro to the dollar.

Okay. And then just, finally, you mentioned that you didn't think there's any real market share shifts going on in the FCC business. But more broadly speaking, I guess, with the slate of crude being skewed more towards sour, heavy, that there -- certain FCC catalysts tend to perform better than others apparently. Does that -- do you view that as a benefit to your business mix, vis-à-vis your competitors?

Yes, we think with the more difficult sour crudes coming in that our family of products performed very well in those low-[resid] applications. So we think we're pretty well positioned there. Again, you know, [to get value] -- the important thing in this business is really to hit prices up that reflect the value that you're bringing these larger primaries. I mean that's a really important aspect of this business that we've got to drive hard on.

Okay. Thanks a lot, John.

Thank you, Chris.

[James Sheehan], Deutsche.

Looking at your operating margins in Fine Chemicals, what do you think is the potential there?

Well, we've got -- well, I think the operating margin potential is up 3 to 400 basis points over the next two years. So we're working hard on number of plans to execute that and really driving the new products, maintaining our bromine improvements, and working on optimizing our asset base is really very critical and important to that business.

I described the Orangeburg activity of taking what had been a biblical product for us, naproxen, and turning that into a multi-purpose facility with a whole range of products. This is really the kind of activity that we're really encouraging from very high leadership levels. So we're encouraged by that, and we think we can drive some very nice, sustainable earnings improvement in Fine Chemicals over the next two years.

Okay, and talking about the competitive environment in the flame retardants industry, are the players there being rational? And is anyone not following through on price increases that you're seeing?

Well, you know, there's a big change that we're living through with the formation of [Temtura], and I think the last four to eight weeks of the quarter, of the second quarter, was a fair amount of disruption. But despite that, we saw some pretty good discipline out there in the marketplace. So we're hoping, you know, for a renewed impetus here going forward.

Okay, thank you.

You're welcome.

Jeffrey Zekauskas, J.P. Morgan.

I guess just some questions that are odds and ends.

The first is a question to Mark. Your businesses are going in various directions. That is, you're a little worried about flame retardant demand. Seems that Catalyst volumes will pick up. You have a positive pricing dynamic. You know, all things being equal, is your outlook for the second half stronger, weaker, or the same as it was at the end of the first quarter?

You know -- well, Jeff, you've known us for a long time, and we don't really give forecasts. But what I'd say is that fundamentally, the Street has a consensus estimate out there that has this company growing materially year to year. And we think that that can consensus estimate, based on what we see today, is good, and we think it accurately reflects probably what's before us. There are some different movements in the business that make any more accuracy in that. I mean commenting on that is kind of a ridiculous thing for me to do, but we think continued strong performance, and we're working hard to be in that kind of range or position at the end of the year.

Okay. Secondly, when Paul was doing his commentary, he said something about the tax rate being able to come down in the second half. By how much?

Jeff, you know, we've been indicating for the last couple quarters that we expect to have a full-year tax rate, you know, somewhere in the 29, 29.5% rate for the full-year average.

Right. So that's unchanged then with your previous commentary?

We believe that there are some significant tax-planning events that we're going to be able to roll through over the next several quarters -- I’m going to say double quarters because the other will be in 2005, so I'm going to be going into 2006 -- that we'll be able to bring into the income statement. You know, we do expect to have some significant benefits from that. At this point in time, I've just been hesitant to really put a number out there simply because, you know, you can imagine with the Catalysts business, the cash flows and distribution of income generation globally is much more complex. We have some really good planning in place, and we think we're going to see some fairly sizable benefits over the next few quarters.

So the 29 to 29.5% rate excludes the possible benefits you would get from these tax-planning actions?

Some of them that we had very high confidence in, and we're also trying to gain some additional benefit on this Homeland Investment Act. I think everyone's aware of that.

Right.

[I think it] generated a lot more cash offshore than we initially thought. And there are some interesting concepts in terms of bringing some of that cash back in a very tax-preferred basis that can drive that even lower.

So what does significant mean?

There may be some quarters that are, you know, in the mid-20s.

In the mid-20s, okay. One of the things that came up in the call, and I apologize for not knowing you guys better, you spoke of some potash operations?

Oh, it's our electrolysis [cell] operations in France.

In France.

And chlorine. And we then make some potassium carbonate, potassium hydroxide.

Great. Do you make -- so do you have any potash capability for fertilizers?

No, not at all.

Not at all.

No, that wasn't --

That wasn't right. That's fine. That was my assumption.

I'm sorry. Yes, I really didn't mean to indicate that at all.

Okay. Thank you very much.

[Mike Sison], Key McDonald.

Thanks for sticking around so long, guys.

I just wanted to get -- John, your opening statements, you mentioned that over the next 2 months should give you a better feel for what volumes should look like for the rest of the year. What do you need to see to, let's say, report up volumes in Polymer Additives for this year, and what would you need to see, if you will, to report down volumes?

Yes, I think what we need to see is in late -- in the coming 2 to 3 weeks some more significant order in patterns from our major customers in Asia balance of the third quarter and fourth quarter. Now, I think -- I believe, you know, inventories are pretty lean out there. All the indicators -- outside external indicators that we're getting, Mike, are fairly reasonable, that there's nothing significantly negative going on. But we have had a slow start to July. So I think over the next 30 days, we will have a good feel from our large customer base throughout Asia and Europe as to how things are playing out for the balance of the year.

Okay. And in brominated FR capacity, it's pretty tight, though. Wouldn't -- I mean I would imagine with the tightness in bromine, generally speaking, price increases should be fairly easy to get or at least you can shift it to more possible areas or customers who would like that type of capacity. Is that sort of a right way to look at it?

Yes.

Yes, capacities are absolutely snug, and as I mentioned, last six weeks, there wasn't really -- you know, one of our major competitors really didn't have much leadership at all. So there were -- I used the term rudderless, but, you know, we just have to wait and see. And if demand does pick up, if the competitive front, you know, is invigorating in terms of pricing improvement, then we'll be right there in that next.

Okay, great. I'll let you guys go. Thanks.

Thanks, Mike.

And, gentlemen, there are no further questions at this time. I'd like to turn it back for any closing remarks.

Okay, well, thanks, everybody, who's left on the line for sticking around, and we appreciate all the questions. If there are any further questions, you can contact myself, Laura Ruiz, at the numbers indicated on the press release. Thanks to all.

Ladies and gentlemen, this concludes today's presentation. You may now disconnect. Good day.