雅保公司 (ALB) 2005 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Albemarle Corporation fourth quarter earnings conference call. (OPERATOR INSTRUCTIONS). As a reminder, this conference call is being recorded for replay purposes. I would now like to turn the presentation over to Ms. Nicole Daniel, Corporate Director, Investor Relations. Please proceed, ma'am.

Good morning everyone, and thank you for joining us today for a discussion of Albemarle's fourth quarter results which were released after the close of market last night. Our press release contains preliminary results for the fourth quarter and the full year. Such information is subject to further review by the Company and our auditors as part of our standard review process.

Please note that we posted supplemental sales information, as well as reconciliations for net debt and EBITDA, on our website under the Investor Information section at www.Albemarle.com. We also posted the pro forma impact of consolidating Jordan Bromine Company in our results, something we began in August of 2005. Last, we posted some slides on the website that provide an overview of our results discussed today.

Participating with me on the call this morning are Mark Rohr, President and CEO, John Steitz, Senior Vice President Business Operations, and Richard Diemer, Senior Vice President and Chief Financial Officer. Now I would like to turn it over to Mark.

Good morning everyone. I appreciate all of you taking the time to listen to our earnings call and webcast today. We are very proud of our results and are looking forward to sharing our performance details and answering your questions.

Before we go into the results that we published last night I would like to mention a few noteworthy highlights from the last quarter that reflected in our results, and I believe set the stage for further growth in our earnings this year.

I would like to begin by saluting our employees for an outstanding year of safety and environmental performance. You have likely seen our press release where we announced a 15% improvement in safety performance for 2005. In addition we improved our environmental performance by more than 25% compared to the previous year. At Albemarle we take our obligations to maintain safe and environmentally sound facilities very seriously. And this year's performance is really great, and I'm proud of our employees' efforts to help us achieve these record setting results.

You have likely also seen the press release announcing our groundbreaking in Nanjing, China where we are building a technology center for research and support of Polymer Additives in the Asia-Pacific region. This location is also the site of our new repackaging facilities for polyolefin catalysts. This facility is expected to be operational in July, and provides a solid technical foundation to accelerate our growth in China.

In December we announced our new ACTION family of FCC catalysts, based on a new zeolite technology. This catalyst helps to maximize the volume of products from an FCC unit used in a gasoline pool, and it alternatively helps boost octane value without reducing the gasoline volume. In the U.S. the timing of this product coincides with the phase out of the use of MTBE. Using our product we believe will offer refineries a solution to help boost octane value it in the absence of this product.

We also expect to announce several new FCC catalysts in the coming months as we continue to leverage our technical expertise in developing new refinery catalysts.

The other was a brief period late this summer when I felt we may see raw materials start to slide. Let me be very clear. That didn't happen. Our raw material cost in the fourth quarter increased roughly $32 million compared to the fourth quarter of 2004. In addition, energy cost in this quarter were approximately 11 million more than the fourth quarter of 2004. That is $43 million in inflation in the fourth quarter year-over-year. Sequentially the fourth quarter saw raw material increases of approximately $7 million, with large increases in ethylene, other olefins and sodium silicate, with approximately another $7 million increase in energy cost due primarily to record natural gas prices.

For the full year in 2005 we saw raw material increase approximately $167 million compared to full year 2004, with the largest impact from molybdenum, chlor alkali products, BPA, ethylene olefins and sodium aluminate. In addition, energy spending was up 24 million in 2005 compared to the prior year. I hope you have the picture. The raw material inflation, while perhaps moderating with gas softness is still a major challenge for Albemarle and the chemical industry.

Natural gas prices have begun to ease somewhat in the US, which expect to help us a little bit in the first quarter. However, we continue to face significantly higher electrical prices in France that are not being completely offset by pricing. Again for reference, we consume roughly 500,000 million BTUs of natural gas per month in the U.S.

To deal with the inflation we have worked hard, as you know, to drive pricing since we last visited. We have implemented a number of pricing initiatives across each of our business segments to offset raw material and energy inflation, and to help bring margins to levels warranted by the value addition of our products and technology. Most notably in late November we announced price increases for FCC catalysts of $400 per metric ton. This was preceded by our FCC catalysts surcharge that we implemented in October to help cover the rapidly escalating natural gas cost.

We also implemented the surcharge -- we successfully implemented the surcharged, and in working with our customers to implement the $400 per metric ton price increase. We are committed to restoring FCC margins to a level reflective of the value these products bring to the market.

In our Polymer Additives segment we announced a 10% price increase for our Saytex brominated flame retardants, which are used in rigid foam insulation. And we also increased prices for ANTIBLAZE Phosphorus Flame Retardants used in rigid and flexible foams for furnishings.

In our Fine Chemicals segments we announced increases in elemental bromine to $2,500 per metric ton. That is approximately a 25% price increase. We followed this announcement with price increases across our brominated Fine Chemicals portfolio and our oilfield drilling chemicals to begin working this price through all segments. We also increased prices for potassium carbonate products to help cover substantial energy costs in France and rising KCL costs.

While these price initiatives have been successful in offsetting inflation, we will continue to work until we obtain a margin level reflecting the intrinsic value provided by these services and products.

In the chemical business, along with pricing, cost control is an important element of any successful strategy. You may recall in 2003 we rolled out a $50 million manufacturing cost savings initiative, recognizing that in our economic environment in addition to raising prices we also need to find ways to operate smarter and leaner. I'm pleased to report that we achieved this goal. Highlights of this effort include approximately $19 million in savings through productivity improvements, and another 23 million in plant cost reductions through raw material efficiency gains and wage minimization.

These savings are largely sustainable into the future; however, we believe that more is needed. And as part of a new corporate initiative we call Vision 2008, we have expanded the scope of our manufacturing efforts by committing to $100 million in additional cost and profit improvements over the next three years. While that is a huge challenge, I've got a good degree of confidence that our manufacturing teams can achieve this stretch objective.

Over the last few years we have been dealing with pension challenges like many corporations. We have worked to keep our plan fully funded through the market downturn. Nonetheless, it has become obvious when looking forward defined benefit plans like ours are not sustainable for our employees. So we recently announced plans to move away from a DB plan to a DC plan for all non-union US employees. This transition will be complete in January 2011, and provides a mechanism to continue to recognize service while making this transition. Restructuring our pension program allows us to continue to provide good benefits in a way that is portable, it is more flexible for our employees and economically viable for the Company. Projected expenses under the plan will reduce by this change toward the end of this decade by roughly $20 million.

With these highlights let me now address the Company results. I am very pleased to announce record net sales of 588 million for the fourth quarter, which is up 30% from the fourth quarter of 2004 and up 16% sequentially. For the full year in 2005 we achieved 2.1 billion in sales, which is up 40% over the full year 2004. And perhaps most importantly you should note that 24% of these sales in 2005 are from new products that were not in our portfolio five years ago. By any standard that is pretty impressive. I can assure you we are working hard to keep sales from new products growing in all segments.

Our net income, including special items for the quarter, was 34 million. That is a 73% increase over fourth quarter 2004, and a 30% increase sequentially over third quarter 2005. For the full year of 2005 we achieved 114 million in net income, excluding special items. That is up 51% from 2004 net income of 75.7 million, in spite of the $190 million of inflation I mentioned earlier.

Segment margin improved year-over-year by roughly 100 basis points, excluding special items, and each segment contributed to this improvement. Joint venture income from our unconsolidated investments was 3.9 million in the fourth quarter of 2005, up over 100% from prior year.

For the full year our income from unconsolidated investments was 26.5 million, up primarily due to our refinery catalyst joint ventures. Keep in mind that our JVC joint venture results are no longer part of this line item, and are now consolidated in our results.

To further improve Fine Chemicals segment margins we have now ceased production of bromine from seawater at Port de Bouc, France. Bromine production at the site is costly and represents less than 5% of our total bromine capacity. We have completed the Works Council consultation process, and have recorded a 3.5 million special charge -- that is $0.05 per diluted share after taxes -- this quarter related to the closing of this unit.

Other special items this quarter, all of which are reconciled in the press release, relate to a pension curtailment gain in the Netherlands, a reduction in force charged to our Pasadena Texas plant, and a 2.2 million charge incurred due to the sale of one of our facilities to the state of Louisiana. In total, we have 3 million in pretax special items this charge to this quarter.

We also recognize the benefit of structural changes in our tax management program this quarter that Rich will walk you through later in the call. Now before I ask John to make a few comments, I would like to take a minute to express how positive I am on the outlook for our Company. Our Fine Chemicals segment has reversed a three year trend in profit declines, and is beginning to show the growth we expect in 2006 and beyond. Catalyst sales should continue to be robust in 2006, as low sulfur specifications go into effect this year. We also have a number of new products slated to enter this market allowing us to differentiate our Company's technical strength and refinery catalyst. We expect polymer additives to have a strong growth year as we begin in our push further into the Asian markets, as well as capitalize on regulatory changes.

The number of unique opportunities we have in each business segment is far greater than those I have ever seen in the past. And absent a global economic slowdown, I'm confident we will had a very positive year ahead of us. With that, let me turn it over to John Steitz for a few comments on each segment.

Thanks. As I walked through the results today I would like to point out that all segment income comparisons are on a pro forma basis, excluding special items, if Jordan Bromine Company had been consolidated at the beginning of each period. As we mentioned, you can find these pro forma numbers on our website.

First, let me talk about our polymer additives business. Net sales for the fourth quarter of 2005 were just under $200 million, up 6.5% over fourth quarter 2004, and up over 2% sequentially from third quarter 2005. For the full year net sales were just under $800 million, a record of 10% over full year 2004. Our polymer additives segment income, excluding specials, was $23.3 million, a 21.5% increase over fourth quarter of 2004, but down 1.8% sequentially.

Segment income for the full year was 99.6 million, a 20% increase over 2004. Segment income margins grew from 11.4% in 2004 to 12.5% in 2005, great work from our polymer additives team, especially considering the dramatic inflation we faced.

Bromide flame retard volumes in the fourth quarter were up approximately 6% sequentially, but flat compared to fourth quarter of last year. For the full year brominated flame retard volumes remained at essentially the same level as the prior year. Our mineral flame retardant volumes dropped 10% sequentially, and were down 12% for the full year compared to 2004, due primarily to the softening in the automotive market. Phosphorous flame retardant volumes remained flat sequentially, but were also down 12% for the full year compared to 2005, again primarily due to the softening of our automotive market.

Despite these volume reductions our flame retardant net sales increased sequentially year-over-year and for the full year, reflecting the success of our pricing initiatives. Volumes in our stabilizers and curatives business were essentially flat for the full year of 2005 and flat sequentially; however, net sales increased approximately 13%.

As Mark mentioned, raw materials remained a difficult challenge in 2005 and had a significant impact on these results. With higher costs primarily related to BPA, chlorine, caustic isobutylene, tin tetrachloride, and phenol.

Switching to our catalyst segment, catalyst net sales for the fourth quarter of 2005 totaled $244 million, a $114.4 million increase -- that is just under 90% -- over the fourth quarter of 2004, and the $70 million increase over third quarter 2005, or 41%. Full year 2005 net sales were $738 million, up 160% over full year 2004 net sales.

Segment income, excluding specials for the fourth quarter, was $28.5 million, a 100% increase over the fourth quarter of 2004, and a 93% increase sequentially. The majority of the increase in the fourth quarter is attributed to higher volume on global hydroprocessing catalyst sales. Our refinery joint venture in Nippon Ketjen also had higher volume HPC sales. However, our Brazilian FCC joint venture continued to be challenged due to weaker than expected volumes and higher costs.

Our polyolefin catalyst volumes were up in the fourth quarter compared to the fourth quarter of 2004. However, net sales were down slightly. For the full year polyolefin volumes increased approximately 11% and net sales were up 5%. In addition, higher ethylene, olefins and alumina raw material prices also negatively impacted the quarter in this business. Overall, our catalyst team did a tremendous job on execution this quarter.

Fine Chemicals, net sales for the fourth quarter of 2005 totaled $144 million, a $10.5 million increase over the fourth quarter of 2004, and a $6.5 million increase over the third quarter 2005. Our Fine Chemicals segment income, excluding special items, was $10.8 million, a 16% decrease both sequentially and year-over-year, including JVC on a pro forma basis. For the full year of 2005 segment income was $50.1 million, an 18.4% increase over the full year 2004 results.

Year-over-year results were impacted favorably by significant bromine and clear brine fluid price increases. These gains were moderated by higher raw material prices in chlorine, ethylene, caustic and olefins. In addition, the fourth quarter 2005 results were negatively impacted by seasonally low methylbromide sales and a planned shutdown of our ibuprofen plant to install equipment to help us lower our production costs going forward.

Overall, our annual results show positive improvement over 2004, even in the face of significant raw material and energy pressures. We have strong bromine and clear brine fluid sales, along with pricing improvements. Our joint venture, Jordan Bromine Company, is profitable for the first year since we began operations. We continue to rebuild the business for many new product opportunities. Almost 15% of our Fine Chemicals sales were for products introduced in the last five years. And at the end of 2005 we had 146 pharmaceutical products in our pipeline and 58 non pharma products in it as well.

In addition, we have transformed our Orangeburg Naproxen asset into a multipurpose production facility, changing this from an underutilized asset to one that is booked now for most of 2006. We will continue our focus in 2006 on driving profitability in this segment, and we will continue our evaluation of underperforming assets. Great job from this team, and we expect to see more of this throughout 2006.

And now I would like to turn it over to Rich Diemer.

Our strong quarter 4 results on an operating basis had been amplified by a tax credit in the quarter of about $2 million on a reported basis, and slightly less than $1 million on an ex special item basis. So we had tax income in the quarter. Q4 taxes were significantly lower than I expected and discussed during our Q3 earnings call. The finalization and filing of our 2004 tax return included elections that enabled us to take advantage of tax planning opportunities and benefit from foreign tax credits heretofore not anticipated.

While I mentioned that we were working on a number of tax strategies and structures, the realizable tangible benefits occurred sooner than anticipated. Q4 also benefited by an approximate $3 million credit, about $0.07 a share, from lower statutory tax rates in the Netherlands, and their impact on recorded deferred tax balances.

For the full year we are reporting an effective tax rate of 18.4% on both a reported and ex special item basis. On a go forward basis we would pay our sustainable current state effective tax rate at 25%. We are currently working on a European tax strategy that could further favorably impact our 2006 effective tax rate and result in future tax structure efficiencies.

Unallocated corporate expenses were 16.3 million in the quarter, an increase of 8.9 million from last quarter, and 3.5 million from last year. This was principally due to higher levels of bonus and incentives directly related to the reported results.

Turning to cash flow, EBITDA for the fourth quarter was approximately 72 million, resulting in 302 million for the full year. We ended the quarter with cash and cash equivalent balances of 59 million. CapEx for the year came in as expected at $70 million. We expect CapEx in 2006 to be about $100 million as we are investing in a number of catalyst projects to enable future growth in that business, and continue to look for opportunities to make sensible additions to existing assets to increase capacity, operating flexibility, and yields.

Depreciation and amortization for the quarter was 31 million, which resulted in 117 million of depreciation and amortization for the full year. We expect depreciation and amortization of approximately 30 million in Q1, and full year D&A of approximately 115 million next year.

Turning to the balance sheet, as of December 31, 2005 we have consolidated debt of 833 million, including 75 million of JVC joint venture debt, of which 43 million is not guaranteed by Albemarle. Of this amount 433 million is floating and 400 million is fixed, an approximate 52% to 48% ratio.

Our floating debt interest rate is 5.25%. The weighted average interest rate for Q4 was 4.6%. Net of cash on hand and a nonguaranteed portion of JVC debt, our net debt is 731 million, or 54 million less than September 30. We had extremely strong cash flow on collections during the fourth quarter, especially in the closing weeks of the year.

Our quarter end debt to cap is 46%, and our net debt to cap ratio is 44%. While we have made some headway on working capital in the fourth quarter, we believe this is an area were added process and focus could lead to a big payoff over the next two years.

Now I will turn it back to Nicole for the Q&A portion of the call.

We would like to go ahead and open it up for your questions.

(OPERATOR INSTRUCTIONS). David Begleiter with Deutsche Bank.

Mark and John, can you just comment a little bit more on the pricing environment in bromine flame retardants over the last three to six months and expectations going forward?

I sure can. This is John. We have been -- continue to be pleased with overall the environment in pricing on brominated flame retardants. We had roughly sequentially about a 5% increase, and also year-on-year about a 17% increase. Going forward, we believe we can continue to sustain something in the 6 to 8% range into the first quarter. We have been fairly pleased with the overall pricing environment, a fair amount of discipline out there and it has been good.

And, John, what has that meant for operating margins in that product line?

I think as you can see from the results we overcame tremendous raw material pressures, as you are all too aware. But we did expand margins in the overall Polymer Additives business, and that is primarily due to the brominated flame retardant increase in margins. Because we also had weakness in mineral flame retardant volumes just because of the overall condition of the automotive market, as I mentioned in prepared statements. Going forward we believe we can continue the margin expansion of this business, and we're not satisfied where it is today.

Longer-term '07, '08, John and Mark, where do you think op margins can be in Polymer Additives? Can they be in the 14, 15% range?

That is the stake we put in the ground, and we're moving heaven and earth to make that happen. In these businesses, without getting into too much detail, you have product lines that are well above that and you have product lines that are well below that. Each business has a specific strategy as part of this Vision 2008 to address those things. You get those margins to the 15% range.

Lastly, it looks like Fine Chemicals is turning the quarter. Again, what do you think is the longer-term margin structure or goal in this business over the next couple of years?

We have mentioned to those guys -- they have it clearly as an objective. They've got to be in the same range as the other businesses. And clearly Fine Chemicals has a number of structural challenges in front of it. You have seen some of the moves we have made recently in France to shut down bromine seawater plants. That is part of a longer-term strategy to address those areas of weaknesses we have in the portfolio. And if we could just address those areas of weaknesses, we could come close to closing the gap between those groups right now. So we think that it is also 15% -- that is what that business should reflect. There is tremendous value addition there, especially in our services component of that business, and they've got the same challenges everybody else does.

Jeffrey Zekauskas of JP Morgan.

My first question has to do with some of the tax issues. You put them into three baskets. Are those -- it sounds like a number or all of these tax issues relate to tax returns that are not exclusively 2005? Is that correct?

Let me -- maybe the best thing to do is give you a big picture of taxes, because it is obviously an area that influences the earnings a lot. And I think -- let me put it this way. I will set it out how it happened over the course of the year.

I think in the first half of the year we took -- we knew that given that we have had the acquisitions, and that has changed where our income comes from and how it flows, we pro forma that out. We looked at it as part of the acquisition. But we took what I would say in hindsight a very conservative approach to the rates we used to book taxes for the year.

And then, as we saw the sources of income and the opportunities that were there -- we didn't file our tax return for 2004 actually until the fourth quarter, but as a Louisiana-based Company we actually got some extra time to do that. But in doing that we saw there were certain opportunities and elections we can make, not only in that 2004 tax return, but also in future tax returns that really changed the landscape of taxes.

So in the third quarter -- come the third quarter, and that was my first quarter -- I didn't do anything too drastic there, but saw some of the opportunities. We were assessing them and analyzing them. And we also had the bulk of the benefits -- the onetime benefit from the Homeland Investment Act, the repatriation that we did. Now we are in the fourth quarter and just how our income is flowing for 2005 from a book point of view gets influenced by the elections we made not only in 2004 but that we can make going forward.

The last chance you get to show that is in the fourth quarter, right? And the fourth quarter benefited from those elections, and those approaches and strategies that we think are sustainable going forward.

What I would tell you is there are a couple one timers that we have spiked out, HIA, you know the repatriation, the change in tax rates in the Netherlands, which is down this year, and actually has tended down for the last early years. But that is and non-cash item.

But some of these elections that we can do going forward are real. They are cash. And they really structurally change the landscape. If you look forward in how you've got to think of the years past and where we're going, what I would say to you is that we are basically looking at structurally a 25% effective tax rate, which is fold 5 points less than how we entered this year. And we're confident with that.

We have an opportunity to lower that even more by doing some things in Europe. And depending how quickly we get that down this year, and it is running concurrently with some systems changes we're doing, both of which are very, very important to the Company, but as we implement that that could drive this rate down on a sustainable basis closer to a 20% rate on a full run rate basis. We are not going to get there -- I don't think we are going to get there this upcoming year. But that is the direction we're pointing in.

If I could follow up. In the first -- in the number one it says the realization of foreign tax credits related to tax structuring activities. What was the EPS effect of that?

Let me give you the story behind that and what that meant to us. I will give you one example, and this was about a $6 million number that flowed through our fourth quarter, which we think is structurally repeatable, put it that way, on a full year basis. More of it came through the fourth quarter, but going forward it will be more pro rata.

When we saw where the sources of income were coming and the amount of that income, we actually could make certain elections on a US return that allowed us to have more income in the Netherlands. And that then freed up our ability to take foreign tax credits offsetting that income. So while it was 6 million in the quarter, going forward we will have the ability to make that election again or do something else. And we would only do something else if it made it even better. That is an example of some of the things that came through in the fourth quarter.

One other thing I want to point out because it might be unclear, we do spike out the impact of the Home and Investment Act. Now, we had a dime of that in the third quarter. And it was only an additional $0.015 or $0.02 that came through in the fourth quarter. So on a full year basis that is about a 12% impact.

One last think I'll say, the fourth quarter -- it is a tough thing to say to a bunch of analysts on the other side of the phone -- but it was basically unanalyzable, unless you take a step back and look at it in the context of the full year. What I would tell you, and this is how we rolled up the numbers, we can justify a look at the fourth quarter as anywhere in the $0.56, $0.57, $0.58 range operationally -- operationally full year look. But obviously there's a lot of noise that comes through the tax line because this is our last chance to get this year right.

I guess just -- there are always honest men who disagree about all kinds of things. But I guess what I would say is that you presented the sort of earnings, excluding special items, on some kind of pro forma basis. And it doesn't really reflect a lot of these tax issues. I realize that there is controversy about that. But if your ongoing tax rate is 25%, or that is what you expect unless you can do more, it would seem that you might want to reflect that in your pro forma numbers. But I realize that people can disagree about that.

Let me explain why we do it the way we do. I think in the past, and I'm new to this, but in the past our history has been when we have had a settlement of some sort with the IRS that relates clearly to prior tax returns and our approach we have taken, and we get tax returns cleared, we have to spike that out as a special item. But the way I look at it we -- below the line we have used disclosure to try to give you a feel for what is and isn't repeatable, what comes through and what hasn't come through.

And to call those type items special, or cull them out, I guess maybe they're special in any one quarter, but if you take an annual view of it and it is structural, I would want to penalize us or anybody for doing the right thing there. Most of these things have cash behind it, and that is good. I like cash, and I like lower tax rates. That brings less pain into the IRS, or any other tax (inaudible).

I guess finally -- maybe this is a question for Mark -- the catalyst operations really performed exceptionally well. Has that business really stepped up to a different level? Sometimes the business is lumpy, sometimes it is not. Sort of how do you assess the strength of fourth quarter? And what is your outlook in that area for the first quarter of '06 or the coming quarters?

This is Mark. Let me take a stab at that. We have always worked hard, as you know, to have a solid technical foundation for our businesses. And this business is absolutely driven based on superior technology that it has been able to develop and bring to the marketplace.

Sales, some new products and technology in this business [bred] 50% of the total sales out of that segment. They're phenomenal. More new products were coming into the marketplace. So what we have is a foundation that we are continuing to support, trying to branch out in different areas. That is just almost too good to think about. It is just really positive. A great team, really focused on success. We have pulled money out of that business I think from an overhead point of view in manufacturing, to the tune of roughly $20 million since we have had the business. I don't know what portion of that is sustainable going forward, but some portion of that is probably sustainable going forward, so I would expect that impact to stay quite positive.

When I look at the first half of this year I think it is going to be pretty good. We've clearly got a tremendous number of orders relative to the lower sulfur specifications. The work we're doing at FCC to get those margins to a parity kind of level is pretty exciting. We are excited about the first half of the year. The second half of the year to us is just a little bit less certain. And I say it only because there will be some fall off in the number of HPC units that are charged. We have other products we're scheduled to make. So we will have to see how that all sorts out. But I would expect we're going to start the year pretty well.

The last comment, you mentioned lumpiness. This is a lumpy business. You've got a wide spread in margin between some products. All the products are necessary, so sometimes you just have to make the lower margin products to complement the higher margin products that out there. Deliveries are not ratable and you need -- you tend to get a full catalyst load before you send it out. So we will carry inventory from quarter-to-quarter. So I don't think you should have any perspective that that lumpiness is going to go away as we go forward. We will work hard to try to tell you what is coming there, but that business, as it always has been, is going to be a bit cyclical as you go through the year.

In other words, you believe that your operating income in catalyst will be higher in 2006 than in 2005 by a meaningful amount?

I think it is going to be higher by a meaningful amount, yes.

Laurence Alexander with Jefferies.

The first question is on the Fine Chemicals, or the ibuprofen plant shutdown. Can you quantify the impact on the quarter, and how much savings you should be seeing once the plant is fully up and running?

Yes. This is John Steitz. Let me give you just kind of an overview on Fine Chemicals, if I could kind of add to your question a little bit.

Last quarter in the conference call we spoke about the planned ibuprofen shutdown. And I want to specifically address your question, but we also spoke about that through the third quarter of last year the regulated methylbromide sales had basically come to a completion. And we are also faced with the aftermath of the hurricanes and the subsequent impact on raw materials, which impacted Fine Chemicals.

With the ibuprofen shutdown itself in the fourth quarter, that was about a 200 basis point impact on profitability in Fine Chemicals. The methylbromide was probably another 200 basis point impact. And I would add that we got significantly impacted by dramatically increased electricity and energy costs in France, which impacted our potassium and chlorine business in Europe. And that was also about a 200 basis point issue.

So new products and bromine have really been leading the way. We plan on continuing to address this potassium and chlorine issue in Europe. And we have dramatically raised prices there. And we're looking to achieve increases in the 20 to 30% range, which we hope will offset that impact in the fourth quarter.

And as we mentioned in the script, the whole effort of improving our asset base is really important. And we have completed the turnaround of the -- transforming on the Naproxen asset into a multipurpose CGMP facility. And we're very proud of that activity. And we have business that has filled up that unit for 2006. Hopefully, in that discourse that has answered your question.

In the Catalyst business molybdenum has come down fairly sharply over the last couple of months. How does that affect your ability to implement and sustain pricing? And will you see margin expansion because of the lower molybdenum or do you have a hit because you have to the absorb higher cost inventory?

Let me take the first part of that, which is the last question, and I will let John talk about the margins. It depends on how steeply that price comes down. If it drops precipitously we will have to adjust the inventory value. That would be a onetime adjustment, if that happened. We have been working hard to keep our inventory levels at absolute minimums. And so far it has not been precipitous enough to cause that to happen. If we see it happening, we will give you guys a heads up with that one. John, do you want to talk about margins?

Yes. Specifically, I just add to what Mark said on the molybdenum. We did see a fairly dramatic drop in the early part of January, but it has come back up recently in the last ten days. So we, as Mark mentioned, manage that inventory very closely, and we're hoping to answer your real question about margin expansion, to expand margins in that business. HPC is sold out and we're going to do our best -- we have a number of contracts of course that have cost pass-through. We got impacted on the lag late in 2004. So that is a lead when it goes down too, but we also always balance of the inventory charges to revalue that inventory versus the lower cost going forward as well. But our hope is to hold onto it as much as we possibly can. And as Mark said, we really try to sell value here and the value that these products bring.

We have continued a very, very strong regional focus as well. There are differences in the region -- in the margins by region, and we're working to equilibrium that, if you will, to a more favorable position. HPC sold out. We're going to do our best to expand margins there. FCC sold out as well, but the real trick their is continuing to sell value that these products bring in the marketplace and that is the really important point.

[Cacis Parasona] with Goldman Sachs.

It is actually Bob Koort. A couple of questions. One, in the polymer chemicals business more broadly you guys had quite a bit of success this year on pricing, yet volumes weren't so hot. I'm wondering did the market actually shrink, or do you think you had to sacrifice some volume to some more aggressive -- or less aggressive folks on price? And then how does that dynamic change, if at all, going into '06?

I think that volume was impacted more by sort of the global -- sort of global economic situations. We saw in the US for instance, we saw a lot of volume declines in the automotive industry. And frankly we also saw a [broadening] in the chemical industry in the US -- a lot of softness in volumes. I saw something the other day that said the chemical industry volumes for the first time in recorded history were actually down year-over-year in the US versus strong growth of almost 4% volume growth around the world. So there is kind of a ripple effect of that that came through there.

To our knowledge we have not materially lost market share through these price initiatives. I don't think -- what I will say to you is I don't think anybody has gained any share that is material. I don't think anybody has lost any share that is material. There always is some payback activity, if you will, that goes on from some of your customers. If they are disappointed they may just buy from somebody else even at the same price to try to send you a message. But broadly speaking, we don't think there has been any share shift as a result of the pricing initiative.

Going forward what we need, as I have been saying, is that we need volumes to pick up in these businesses in a more material way. That which just would -- just helps everybody out there do the right thing. I'm hopeful this year we're starting strong. I am hopeful we have a good year this year, and get those volumes moving in a more positive direction.

If I could just add, we did see some -- our customers behave rather cautiously in the Decabrome front, primarily impact resistant polystyrene. Because of the clean bill of health we have seen volumes pick up there in the first quarter. The general cautiousness from our customer base and that impacted volumes in 2005 as well.

The challenge I'm trying to balance out is economic conditions globally were pretty darn good in '05. I don't think many forecasters expect them to be more robust, maybe as robust in '06. Was there just an inventory draw down broadly in plastics in '05 that doesn't repeat in '06? What gives you the confidence you can actually see upward progress in volumes this year?

Great question. We did see -- 2004 was very strong. And I think with the aggressive price movements across the industry there was some inventory build. So through 2005 we did see I think a pull down of inventories, especially in the third quarter. On -- especially in brominated flame retardants. We were encouraged by the volume growth we saw sequentially, which was over 6%. Sequentially in brominated flame retardants. We're off to a fairly good start. And January -- I am trying to be a little cautious here, but a good start. So hopefully we can see volumes rebound.

John, you guys have probably one of the broadest flame retardant suites. You mentioned your mineral in phosphorus base flame retardants. But those had pretty sizable volume declines as well. And I don't imagine auto builds globally were down as much as your volumes -- what was going on their? Was it the same thing, or is the downstream plastics had?

Yes. I think so. We did see, as you mentioned, in mineral flame retardants about a 10% decline. We were awfully aggressive on the price front there. So we continue to evaluate the market share picture there. But once again, we're off to a very strong start in that first quarter. And we continue to try to raise prices to offset the growing pressures on energy. But -- out of the gate began first quarter looks pretty reasonable. We did have in December a number of customers who reduced their inventory in the mineral flame retardant front as well.

If I could, one last question, and I will apologizes to those behind me in the queue, but you mentioned shutting down the French Bromine plant, can you give me some sense what that would help on a year-over-year annualized basis in terms of your margin structure?

Yes, a few million dollars.

Ray Kramer with First Analysis.

A question for Mark. I'm wondering back to your comment on market share of you are just being your usual conservative self. At least based on what we have heard from North American compounders, but all the turmoil and transition that some of your competitors was viewed as overly aggressive pricing mechanisms. You have not only gained some share but also salesmen. Can you comment on any of the dynamics there?

We have worked really hard to serve our customers well. We have not gone out and -- in routine products we have not gone out and been disruptive in the marketplace, nor have I seen anybody be disruptive in the marketplace. I frankly don't think there has been any material -- I'm talking about primarily in FRs when I say that -- any material market shift back and forth. It is a rounding error if it has occurred, or maybe just temporary if it has occurred.

We have introduced a number of new products. And you can't discount the importance of having new products in your portfolio. Those are new sales. Those represent new income, and you are not challenging other customers or other competitors when you do that.

The antioxidant area is perhaps a slightly different arena for some folks in the commodity kind of basis. We are not in those spaces largely, so we have not been impacted by that.

Turning to the cat side, with the huge run ups in moly and in the pass-throughs there, I know I imagine that the gross margin -- the margin dollars stay the same, but the percentages go down just mathematically. Is 14 or 15% margin in catalyst still a reasonable goal given that?

John Steitz here. Absolutely. We are targeting over the next 24 months to get those margins up in that range. HPC of course being one area, FCC being another. We have got some momentum behind us on the pricing front. And that could really help get us across the finish line.

We have also fairly dramatically increased polyolefin organometallic pricing. And I think we will continue to be successful there in really driving that value. However, I would add we have a -- in the polyolefin catalyst business, we have a fairly major turnaround going on in Pasadena, Texas at our plant there. And that is putting in as we complete creating independence from BP as they have shut down their olefins unit there. That could be about a $0.03 issue for us in the first quarter. But we're going to work through that. And volumes continue to be strong in that area, and it is just a matter of getting that plant up and running quick and back online.

Sticking with cat for another question, do you have any perspective on the potential acquisition of Engelhard, and how that may affect the competitive landscape?

Not really. Englehard is a good company and those guys are working hard to provide good products to their customers. BASF is a great company, and they're doing the same. I think that is really between those guys. I don't think it is going to have any impact on us.

Then lastly with some of the catalyst joint ventures showing improvement, but I think still being weaker than you would like -- I know in the last call you had said that you may explore trying to take a bit more control of those relationships. Can you update us on any progress there or your current thinking?

I think right now what we're doing is we're being good partners. And by that I mean is we're really working through the board to set the kind of performance standards we expect those ventures to have. And the response has been good. We've got some work to do in Latin America and Asia as well. That is the focus we're taking right now.

Marshall Reid with Banc of America.

A couple of questions, first on catalyst. Sales are much higher than expected in the quarter. Was in any catch up from the third quarter, or any potential pull ahead from first quarter HPC sales?

It is John Steitz. Yes, I think so. But really the level of growth that we saw was pretty significant. Again, Mark mentioned the lumpiness of this business. Going forward the level we had in the fourth quarter was so strong. FCC in the first quarter -- generally we see some -- a higher level of turnarounds in the winter and spring months on the FCC units. Sequentially I think volume well mitigate a bit.

And on HPC, my view is that volume will be somewhat kind of an average between 3Q and 4Q going forward. It was strong. We are pleased with the margin gains. We are pleased with some pricing improvement that we have been making, and we want to continue that momentum for long-term drive margin improvement in the business.

Related to that, with natural gas now coming off of its fourth quarter peak, are some of these FCC surcharges going to start to roll off here?

The surcharges obviously will, but we're working hard to institutionalize the price increase, which is really the important point. And that is when we announced this $400 a ton price increase. And that is what our team around the globe is working to institutionalize that.

Switching gears, on Polymer Additives, are you still planning on debottlenecking your bromine plant in Jordan this year? And how much capacity is that going to bring on? And could that new supply put some pressure on bromine prices here?

We're very conscious of the issue of supply versus demand. We have shut down the facility in France, and we will need some additional bromine from Jordan to supply that unit. We will continue to have some minor debottlenecks, but nothing significant that will disrupt the marketplace.

And then lastly a quick question on the Akzo catalyst business. Was BASF part of the bidding process on the Akzo refinery catalyst business in '04?

I really don't know. They were not -- they weren't apparent to me, but that is not to say they weren't behind the scenes and went in early and maybe got out. I just don't know.

Mike Sison with KeyBank.

A quick one, Rich, on the tax benefit. Was in around $0.12 then for the quarter?

What I would say in terms of the onetime thing would be the lower tax rate in the Netherlands. As I said, the trend is they have been lower in their rates.

That was 7.

That is 7. And then $0.02 for the Homeland Investment Act, which is -- you know, we had $0.10 in the third quarter, $0.12 for the year. The other item you're probably picking up is the adjustment related to JVC. And JVC is -- there's no tax rate on that into the foreseeable future. That has been negotiated. So that is built into our structure.

Right. When you look at segment income less corporate expenses, they seem to be in line with what I was thinking. But the corporate expense line at 16.3 seems a lot -- seems higher. When you look at the previous two quarters you had 8 million in the third and 11 million in the second. Why was corporate expense so high?

Corporate expenses is influenced by the bonuses, so we had -- we actually took down our bonuses from one of our plans in the third quarter, and we spiked that out. But when the earnings come through there's an offset in terms of various compensation plans, whether they be annual -- in terms of the executives there is a couple of year plan. There is various things there. It is very formulaic, and as a result that will go in one direction when earnings come through.

(multiple speakers) Would that be largely a fourth quarter issue when these adjustments occur or can that happen --?

No, usually -- this is Mark. Usually we are a lot more ratable with that. But we were, as you know and as we spoke, we were pretty upset I think with our performance in the third quarter, and we were quite concerned about it. And we made some adjustments in that process, not to be overly aggressive in that area. We also have a variable pay plan for all employees which is a threshold kind of plan. And we really operationally came through strong, as you just noted, in the fourth quarter, and that popped us over a threshold. Normally those things would be normalized over a year, if you would, and you wouldn't see it.

What do you think it should sort of average in '06?

I think what you can do is model it out. It should be -- I'm hoping it -- I hope we get paid for great results. Let me put it in the context of that. I think that thing to do is you look at the taxes and you look at the bonuses, and you can prorate it over the course of the fourth quarters. And the lumpiness may come through in one way, shape or form or the other. That is probably -- steady-state is the best way of looking at.

The corporate expense level for '05 prorated equally throughout '06 is probably a decent run rate?

That is as good a place as we can get, so I think that is probably the way to approach it.

Then in terms of catalyst pricing, you were up 40 -- 40 plus percent in the quarter. How much of that -- or 49% -- how much of that continues into the first half of '06? Meaning a lot of that was due to not just surcharges but pure pricing.

You bet.

The bulk of that or -- should reoccur in the first and second quarter?

On the pricing front, I think Lawrence Alexander pointed out some molybdenum issue, so there will be some contractual reductions on that. But as we said, should not affect margins. FCC, we believe that will continue to live through. And that is a pretty good piece of that pricing improvement is in FCC.

In terms of volumes I thought you said, Mark, that FCC and HPC is still sold out?

Yes, I think those units are both run -- around the world are running very hard. The exception being our facility that we recently expanded in Brazil, which is not yet up to capacity. But certainly in the U.S. and in Europe we're running flat out.

Yes, so --.

If it runs flat out in the first quarter there wouldn't be much of a decline versus the fourth.

We would hope not do though. You need to recognize the sale. I think fundamentally if you look at the first half of the year we think that is going to be strong. I don't want to just say yes yet because I don't know how many of those shipments are going to be going out at the end of March, and whether they had happen actually in the first quarter or second quarter. Time will tell that.

Last question, you sort of commented that FCC margins are sort of underperforming or weak or something in your prepared comments. What is it going to take to get you to where you want to be? And is it much lower than the segment or is it --?

We don't give out a lot of detail there. I would just say that we are not pleased with those margins. I don't think the industry is please with those margins. These are products that should command much, much higher price. And if you look at each of the competitors there, we all offer unique technology, some that is common, much of which is not common. And there's just absolutely no reason why products like this done command a higher margin. Rather than get into the details of what is, we're just focusing on making certain that we get that technology to market and get paid for it. And that is just an intense level of focus for us.

Alec Goldman with Morgan Stanley.

I just have a few quick questions on the Polymer Additives business. You have commented that in the first quarter of '06 you expect prices for the brominated flame retardant part of the business to go up roughly 6 to 8%. My question is, do you think that brings profitability to the level that you're comfortable with? If you add to it the plant cost reductions or should we expect additional price increases in the middle of the year as well?

No, the 6 to 8%, we would not feel that that is enough. We want to -- we really believe this is a marathon, not a sprint. We want to continue to price these products for value and use. And we think we have got a long way to go there. We are continuing to address pricing. We do it almost on a daily basis. We have got a team here at our offices today working on exactly that issue.

Longer-term we want to continue to expand margins and continue to drive reinvestment economics to do a good job on supplying our customer base. That is going to continue to take a vigilant effort on pricing, and with a keen eye towards what raw materials are doing. And I personally believe there is going to continue to be pressure on the raw material front. We've got to be prepared in the marketplace to deal with that.

When you look at your expectation for the raw material costs for '06, ballpark speaking, how much more prices do guys need to implement to so get to the desired profitability level?

Beyond the 6 to 8% I am thinking in the range of -- just ballpark -- I haven't premeditated my thinking here, but in the 5 to 10% range. And we're currently evaluating where we're going to do. So if demand does pick up, there is no better time to get prices up. We are encouraged. A number of our customers have also had very profitable quarters. And we are encouraged by some signs of growth in the marketplace. We just want to continue to price our products to value and get the margin we feel we have earned.

That is very helpful. Just to elaborate a little more on the strength you guys have seen in January, can you give some sort of a rough estimate where the volumes are trending, maybe on a year-over-year perspective when you compare it to the January of last year?

Compared to January of last year, we're looking at pretty -- I mean, an awfully nice start. A lot of it is pricing with raw materials now having appeared to be stabilizing. Then you have oil that spikes up to $68 a barrel. So we've got to be prepared to deal with that. But I am comfortable with growth above GDP levels, that's for certain in the first quarter. Right now we are encouraged. But we have just got to constantly stay on top of that.

For the first quarter in the Polymer Additives do you feel comfortable with roughly 3 to 5% volume growth?

Yes, a lot depends on how the automotive market responds, because that is a big part of our mix issue. And that has started out January on plan. So as long as the bottom doesn't fall out of that, I think we'll be in the good shape there.

Pardon the fact that I'm not as familiar as I should be on the mix of your businesses within the Polymer Additives portfolio. But the automotive is primarily relevant to the non brominated flame retardant product that you manufacture?

That is correct. Usually aluminum trihydrate, magnesium hydroxide flame retardants are used in wire and cable applications for use primarily in the car.

What percentage of your flame retardant portfolio is accounted by those products?

The mineral flame retardants is roughly -- of the Polymer Additives business -- 20% of the whole business -- of the entire business.

And the rest is brominated?

The rest -- half of the entire polymer additives business is brominated flame retardants, but then you have our stabilizers and curatives business which comprises the other 25%.

Got it. Would it be fair to say that while the expectation for the whole business in terms of volume growth for the first quarter is 3 to 5, the brominated portion of that should probably grow slightly faster because it is not as exposed to the autos market?

Yes. That is directionally correct.

[Yono Weiz] with [H.S. Bestake].

In regard to brominated flame retardants, add clear brine to it. With regard to clear brine fluids, if you do disclose this, do you have pricing and volume changes versus last quarter, versus last year, and looking forward to 2006?

Well we just talked about brominated flame retardants. So I hope -- do you have a good picture of that?

Yes.

Okay. So clear brines, we had a strong fourth quarter. But that business is again very volatile. We have seen it starting in the first quarter fairly weak. But we have been -- we are quite pleased with the success on the pricing front. Our clear brines prices year-over-year are almost double. And sequentially up in the 10 to 15% range.

Again, when you look at value and use for clear brine fluids, and that is calcium bromide, sodium bromide and zinc bromide compounds, we really feel there is a lot of additional progress and momentum we can make on the pricing front, assuming that there is industry wide support for that activity.

We feel very good about the pricing momentum, and the volume gains we are encouraged. Oil at 60 to $70 a barrel there's going to be a lot of continuing production, both in the Gulf of Mexico and the North Sea.

Do you have members on volume growth in '05 and looking forward to '06?

We don't break out our clear brines, so I'm sorry about that.

The volumes on brominated flame retardants, year-on-year they were the same, correct?

Year-on-year about flat. That is correct. That is on top of a strong 2004.

Have you see any changes in '06? Just talk about actually -- we just talked about that, but do you see sort of whole entire year of '06 anything different than in first quarter?

Yes, we're hoping in that 3 to 5% range, maybe a little greater.

In terms of the ways of growing the business besides pure price increases, you mentioned earlier on growth in Asia, regulatory changes, and perhaps, if I understood you correctly, maybe new products within the brominated FR portion of your business. Would you be able to go into to a bit more detail on those points?

Let me give you just a broad perspective of that, if I can. This is Mark. There are a number of markets that we really participate in. So if you think of it in terms of Polymer Additives, you ought to think in markets like connectors and housings and wiring cables. Each market has its own unique growth challenges. And the big growth challenges facing the world today is miniaturization. And miniaturization leads to a number of unique challenges for the makers of electrical connectors and things like that.

We're introducing a host of new products, directed towards those kinds of markets. That is an example and there are many other examples. I could do into curatives where some of our unique curatives do things like make Pro V1 golf balls fly the way they fly. So it is a very broad spectrum of products out there that satisfy the unique challenges being faced by our customers. We have a lot of focus there. To be honest we think we can do frankly even a better job than we have in the past, getting our sales from new products and polymer additives up in the next couple of years.

In terms of any regulatory changes for flame retardants?

Yes, regulatory, I'm sorry, I forgot that one. Broadly speaking when you get past the US, the UK, and Japan, fire safety standards in the world are very weak. And the number of fire related injuries that occur, deaths that occur around the world, it is tsunami-like numbers. On an annual basis 165,000 deaths from fire related injuries, on average, is the last number that I saw published. Around 4,000 or so in the U.S., about the same in the UK. What you're seeing is you're seeing globally a lot more attention to these standards and construction standards, the plastics that are used, intellectual housings and wiring cables and charges for your cell phone, Christmas tree lights, all those kinds of things are being produced to higher and higher standards.

We're actively engaged promoting fire safety broadly speaking around the world, particularly in emerging areas like China, frankly. And they are very concerned about the lack of good standards in their country as they seek to reach a kind of level of societal safety that you see around the world. We are engaged in a process, and we believe as those regulatory changes occur that it is going to be very, very good for our business.

I would add in the antioxidant arena, particularly in our lube and fuel antioxidant business that we have -- there is a reduction -- a continuing reduction in lube additives to reduce sulfur ash and phosphorus. Our antioxidant blends are really -- help solve that problem in the marketplace as well.

Dana Walker with Kalmar Investments.

A very informative call. When you mentioned that closing the facility in France where you make bromine might save you a few million dollars, can you also talk about the amount of money that you will now make on that volume where you source bromine more inexpensively? I presume that would add to that as well.

It probably will. You should just have a view that this is a small facility, and it was just part of a -- where it is a $2.5 million charge, which is not insignificant. And the savings at that facility for doing so will pay for itself over a couple of years. The longer-term picture is that we're driving all of these products in Fine Chemicals to that same 15% margin. This is just one of the steps in that process. Right now I think if you consider that a couple of million dollars that is -- with the ebbs and flows with the current in those kinds of businesses, that is a good first at for that little segment.

This is John Steitz. I think we mentioned in our prepared statement that we have recently announced a $2,500 a ton -- an increase to $2,500 a ton on commercial bromine. And we believe there is a fair amount of momentum to achieve that probably wouldn't really be taken completely until the second quarter, however.

John, in your comments you enumerated three items that affected Fine Chemicals profitability, methylbromide, ibuprofen, and the France electricity issues. How many of those do you consider to be transitory, that is disappearing here shortly versus those that linger?

Of those three, the potassium and chlorine issue in Europe is a concern. Because if there is any issue on the production front it leads to unabsorbed fixed costs, and that creates problems for us. That is the lingering concern, if you will. Everything else we believe -- we feel good about the cost reduction in ibuprofen, but there is continuing pressure on that business too. So our team is really working hard to improve that business and improve its profitability around the globe.

Just so I understand though you talk talked about how methylbromide and the ibuprofen plant turnaround cost you close to 200 points each in Q4.

That is correct. That is correct. So the methylbromide buy in will come back most likely this quarter, if not 2Q, 3Q for sure. And then the ibuprofen plant is back up and running and running quite well.

How about a couple of comments on working capital? Can you talk about the match between shipping volumes and production volumes, and what does your inventories look like at year-end versus where they were at the end of Q3?

This is Rich. What I would say is especially in the catalyst business we were producing for all of last year to meet the demand that we are seeing come through in Q4 and the first half of next year. We had inventories that got well over 100 days. But as expected in December and going forward, those will be coming down in that specific business. I think the other businesses -- and I looked at John here in terms of the linkage being a little bit better -- but certainly something we think we can improve on. Because inventory of all the working capital elements is where we think we have the most opportunity.

I would just add, Dana, in Fine Chemicals and polymer additives, we have matched sales with production quite well. And in catalyst in the quarter we dropped inventory quite nicely. But there's a lot we can do on working capital, and our team's are really focusing in on that. I think we mentioned before we've got an ERP process working quite well in the Company and we are encouraged by the progress they are making.

The comment that was made by Mark on the [time] benefit conversion to a defined contribution plan over the next five years, the $20 million number that you cited, is that a reduction in annual expense that you will witness sometime between now and the next five years?

Yes, it is. It is -- initially there is not very much change. As you get out a couple of years then we will start to roll through a lower expense prior to initiating the contribution portion of the plant. The view you should have if you want to model something, if you go out a couple of years, and start to roll in that 20 million over three years, so that is probably the right thing to do.

Is that a cash reduction or is that a non-cash -- or is it a combination?

At the end of a day it all depends on how good we are at managing the pension fund. We managed to get through this year without making a contribution and without sacrificing our funding levels. And we hope to continue to do that. Hopefully we will be without having to outlay cash. There's obviously less of a reason to outlay cash because you're putting pressure on top of the total pension obligation.

Two last quickies. The electronic food chain certainly picked up, and we see that from a variety of companies, as Q4 progressed. Can you talk in a linearity sense what you saw in your brominated family in the electronic food chain? And then finally, maybe you might update us on new product activity in Fine Chemicals, particularly in the pharma, ag and other such areas.

It is John Steitz. We saw a sequential improvement in the quarter, about 6%. It was more heavily weighted towards the electronic component type products. And that volume strength has continued into the first quarter. We are encouraged by that.

The Fine Chemicals progress, we have been very successful as we mentioned on filling out this former dedicated Naproxen asset. A lot of the work we do there is quite proprietary, as I am sure you can understand. But for a one major pharmaceutical company we're making an active pharmaceutical, and we have done quite a -- just a super job with this particular customer. And they are a global, international company.

And for another one we have been quite successful in putting a stake in the ground for making an intermediate for an antiviral compound. And I really can't say much more than that. We are really encouraged by the progress in that business. And that will turn that asset from a loser to a profit producer for us.

Well done, and thank you for your time.

There are no more questions in the queue.

All right. Great. Thanks everybody for your participation in our call today. Feel free to contact me at the number listed on the earnings release. If you have any further questions you can call us. And everyone have a great day.

Ladies and gentlemen, we thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a good day.