雅保公司 (ALB) 2006 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Albemarle Corp. 2006 fourth quarter earnings conference call. (OPERATOR INSTRUCTIONS)

As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to the Director of Investor Relations, Nicole Daniel.

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 yesterday. Our press release contains preliminary results for the quarter and this information is subject to for the review by the Company and our auditors as part of our year-end audit process.

Please note that we have posted supplemental sales information as well as reconciliations for Net Debt and EBITDA on our web site under the investor information section at www.Albemarle.com. I'd also like the caution that the remarks today contain forward-looking statements. Factors that could cause results to differ from expectations are listed in our annual report and our Form 10-K.

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

Thanks, Nicole. Good morning, everyone. All of us are looking for it to sharing performance details for the quarter with you this morning and answering your questions after our brief remarks.

Before we go into the results, I would like to mention a few highlights from the last quarter, some of which are reflected in those results we published last night and others which will help business performance in the future.

During the first quarter we recognized several individuals on our senior leadership team. Let's start with Ron Gardner, who was named our new VP of Fine Chemicals. Ron previously headed up our Performance Chemicals unit and has extensive knowledge of the bromine industry and global chemical markets. Rod's immediate focus will be on reaching and sustaining our targeted 15% margins by growing our capability as a solutions provider through technology and service to our customers. Our new South Haven acquisition plays well into these growth plans.

In addition, Ron will look for ways to move effectively and use our assets in better ways, which may result in some modest asset restructuring in the first half of 2007.

Ron replaced John Nicols who we've asked to head up our Catalyst segment. John has extensive experience in Asia and broad knowledge of the Company and Albemarle Technologies. John's leadership will further strengthen our catalyst team and bring a growth perspective to the segment molded by his recent experience in Fine Chemistry services, which I believe will help us expand our technology base faster and help us move in the new catalysts market.

Ray Hurley, who joined us from [Axa Nobel] as VP of Catalyst is now leaning our focus on return to fuel technologies. Ray's extensive industry knowledge and broad catalyst experience positions him while to oversee our research and commercial efforts to expand our catalyst businesses in areas such as oil sands, coal to liquids, gas to liquids and perhaps most importantly (indiscernible) fuel technologies.

John's leadership over the existing refinery of polyolefins catalyst divisions along with Ray's growth objectives for alternative fuels should allow this segment to grow both bottom and topline. In 2007 we will bring HPC capacity online as we complete our Bayport expansion, enabling us to market our products in areas where we typically have not focused.

We also expect to deliver on a number of growth opportunities before us today in polyolefins [metalicine] catalysis. Our venture with [UOP] is off to a very good start having been awarded a high percentage of new HPC opportunities which bodes well for future growth as new conversion units come onstream around the world.

We also promoted Tony Parnell to VP of Global Sales. With over 25 years' experience in Albemarle, Tony will be responsible for managing all global accounting initiatives in our regional organizations. Tony will also focus on expanding our reach into the Middle East, India and Russia. It is great to have the opportunity to work with such a talented group of individuals.

Now let's switch to raw materials and energy. While oil and natural gas prices have dropped over the last several months, raw material inflation remains a challenge for the industry. 4Q raw materials excluding [Moly] were up 7 million compared to the fourth quarter of 2005. We have seen increases across the board and particularly with metals such as tin, nickel, cobalt and aluminum. During the quarter [posted] prices were stable averaging $25 a pound, roughly $5 per pound below the level of one year ago. Energy was down $6 million primarily due to lower natural gas in the U.S. and also oil which was offset in part by higher natural gas prices across Europe.

For the full year raw materials excluding Moly were up $31 million and energy was up $9 million. Moly was down $44 year over year heading a $4 million decrease overall in our raw materials and energy spend.

To offset this ongoing margin pressure and to price our products more appropriately to the value they deliver, we continue to implement selective pricing initiatives. While I'll say raw material inflation remains important it is vital that our products and services are priced to properly reflect the value to bring they the market. This focus allows our customers to continue to benefit from our innovative solutions as well as allows us to make the necessary investments to develop new products and technologies in support of our customers' future needs.

In 2006 we filed over 100 patents, ending the year with approximately 28% of our sales from products that were not in our portfolio five years ago. You may have noted we increased research spending in 2006 by 11% and we expect to increase R&D spending by another 30% in 2007.

With those highlights, let me now address the Company results. I am pleased to announce net sales of $585 million which resulted in earnings of $1.29 per share, roughly two times the $0.67 per share we earned in the fourth quarter of 2005. Our fourth quarter 2006 results included $0.11 of non-recurring tax benefits that Rich will describe in more detail in a few minutes. Our net income was $63 million compared to $32 million in the same period last year.

We have been talking about our Fine Chemicals turnaround for quite some time now and I believe we are finally delivering on our promises. The Fine Chemicals segment income excluding specials improved over 700 basis points going from 6.7% in the fourth quarter of 2005 to 13.8% in the fourth quarter of 2006. We have a solid pipeline of products in our Fine Chemistry Services portfolio and continue to see strong demand for the solutions we offer.

Our former pipeline has over 168 projects in it. We also have another 58 projects in a non former pipeline. In 2006 we had a total of 612 inquiries from 178 different companies for our Fine Chemistry Services capability and we executed on 55 of them. Fantastic performance.

Our South Haven acquisition has been immediately accretive and gives us the capacity and the people we need to grow this business. In addition we have seen very positive growth both topline and bottom line in our Performance Chemicals business driven by the strength of our broad bromine portfolio.

Last, this segment has seen bottom line improvements resulting from the timed divestiture that we anticipated. I expect the hard work of our Fine Chemicals team to bring this segment to our 15% margin target later this year.

Our Catalyst business delivered as planned in the fourth quarter, down from the very very strong third quarter results but in line with our view at the end of the last quarter. The growth in quarterly results reflects the $400 per metric ton increase, FCC price increase, that we announced during the fourth quarter of 2005 and we expect to see incremental benefits in future quarters on our most recent FCC price increase that will go into effect January 1st of this year.

As we began to fill up our order books for the first half of 2007 we are seeing stronger orders in HPC catalysts than we had initially expected and previously reported to you, which gives us confidence our technology advantage will carry us through 2007 without any negative year-over-year volume impact in HPC.

Catalyst profit growth in 2007 will come from new product introductions, new markets that we penetrate, FCC pricing improvements and the continued growth in our polyolefins catalyst business. We are very excited about 2007 Catalyst prospects.

Polymer Additives is performing exceptionally well. We continue to see strong growth in this segment, driven by our innovative and diverse product line; and believe we have a good chance for polymer additives to become our first billion dollar market segment.

2006 was a great year with revenue up 12% to $2.4 billion, delivering net income of $201 million or $4.15 per share. As I look to 2007, we have every indication that it will be another very, very good year for Albemarle. With that, let me turn it over to John Steitz.

Thanks Mark. As I walk through the results today I would like to point out that comparisons exclude the impact of special items from the fourth quarter of last year.

Polymer Additives had strong net sales for the fourth quarter of 2006 of $229 million. Up 15% over the fourth quarter of last year. Our Polymer Additives segment income was $38 million, a 78% increase over the fourth quarter of 2005. Segment income margins were 16.7% and half the performance that yields us three consecutive quarters with margins above our 15% corporate goal and 16% overall for the year. Great results from our Polymer Additives team.

Overall we saw year-over-year revenue growth and operating profit growth in our flame retardant portfolio and in stabilizers and curatives. Brominated flame retardant volumes in the fourth quarter were down slightly year-over-year and sequentially. However, net sales grew approximately 10% compared to the fourth quarter of 2005. We continued to have solid pricing performance and success in growing our proprietary products.

Within our portfolio, we continue to see phosphorus flame retardant volumes remain flat with net sales up slightly year-over-year. However as we have reported before. this business remains challenged from a profitability standpoint.

Our plans for a phosphorus flame retardant plant in China scheduled to start up later this year will help turn this business around. Mineral flame retardants delivered another strong quarter as volumes and net sales up year over year and roughly flat with our third quarter results.

Our MAGNIFIN joint venture is now complete for service that rapidly growing polyolefins wire and cable market.

I would like to highlight an announcement we made yesterday regarding our new proprietary high purity Decabrome. This development really highlights our focus on maintaining our leadership position in flame retardants and is in response to lack of clarity around the sale of commercial grade Decabrome in the EEU. In less than six months we were able to produce this high purity product and we will begin selling in the coming weeks. True testament to our leadership position in developing innovative technologies and response to market needs.

Catalyst net sales for the fourth quarter 2006 totaled $192 million, a 21% decrease from our extremely strong fourth quarter of 2005 and in line with our expectations. Segment income for the fourth quarter was $30.4 million, a 7% improvement year-over-year. Overall segment income margins were 15.8% or 400 basis points higher compared to the fourth quarter of last year. Joint venture income from our unconsolidated investments was $2.7 million in the fourth quarter essentially flat with equity earnings of last year.

As expected Nippon Ketjen, our HPC joint venture in Japan, saw seasonally soft orders as most of the Company's business is typically in the first half of the year. Our Catalyst regeneration joint venture [Eurocat] continues to produce strong results for us.

As expected, our HPC catalyst sales in the fourth quarter were softer, both sequentially and year-over-year. FCC volumes and net sales in the quarter remain strong; and our pricing initiatives are clearly sticking, providing us with needed profitability improvements. Our polyolefins catalysts again delivered strong results in the quarter, with net sales of 34% compared to the fourth quarter of 2005.

Overall, our catalyst team did a tremendous job executing this business over the quarter and year.

Our Fine Chemicals segment income was $22.5 million, up 132% over the fourth quarter of '05 and up 39% sequentially. Fine Chemicals net sales for the fourth quarter totaled $163 million, a 13% improvement over the fourth quarter of '05 and a 9% improvement sequentially. Margins were up over 700 basis points year-over-year and up 300 basis points over the third quarter results. We are proud to deliver these results as we have made considerable progress in meeting our target margins in this segment.

Our Performance Chemicals division delivered strong results over the fourth quarter of '05, led by strength across the bromine chain. Our Fine Chemistry Services and Intermediates division saw significant top and bottom-line growth year over year. We finished delivering under the Tamiflu contract during the fourth quarter and at this time do not expect to continue that work in '07. However we have several proprietary products stepping up to take its place and gives me confidence we can continue to improve segment performance. Great job from our Fine Chemicals team; and at that I would now like to turn it over to Rich.

Thanks John. The items I would like to cover today include taxes, corporate and other expenses, our strong cash flow -- including a full report out on our working capital reduction project which I promised in October -- and our year-end balance sheet and financial position.

Let's start with tax which I suspect is top of mind, given our prior guidance of 21% and the low effective tax rate in the quarter even adjusting for the onetime item we spiked out for the change in the Dutch tax law. First, The Netherlands enacted tax legislation this quarter that reduces future Dutch tax rates by some 400 basis points. Accounting standards require that we revalue deferred taxes already on our books to those new rates resulting in a one-time gain.

Beyond that, the primary reason for the lower-than-expected rate was the favorable mix of income sources we experienced during the quarter. By way of explanation, it makes a big difference to our effective tax rate if we produce bromine in the U.S. where we are subject to a tax of 35% versus at [JBC], our Jordanian-based venture that is not subject to taxes.

In addition to the favorable geographic mix, our rate was also lower due to the benefits of foreign tax credits from taxes paid on overseas operations. For example in 2006, we paid the dividend from one of our subsidiaries due to a tax election, the effective tax rate paid on the dividend was higher than the U.S. rate. As a result we received tax credit that can be used to offset other income.

In 2007, we will do our best to continue being tax-efficient but feel that incremental income is more likely to be earned in locales with higher incremental rates. Our guidance for full year 2007 is 23%, but I can pretty much guarantee that our reported rate will be something different. There continues to be a number of countries where we expect tax law changes and lower future rates. For example, Germany and Japan and others are discussing decreases in their tax rates.

Next is Corporate and Other expenses. Unallocated corporate expenses were $15 million in the quarter, down $3.5 million from the prior year and consistent with our 2006 and expected 2007 run rates. The principal difference compared to 2005 is timing of accruals.

Moving on to cash flow. EBITDA in the quarter was $104 million and $391 million for the full year, up 30% over 2005. While we will not publish our full cash flow statement until we file our 10-K at the end of February, I can report our current view on cash from operations is $376 million for the year. We ended the year with cash and equivalents of $149 million. CapEx for the quarter was $27 million and $100 million for the full year. We expect CapEx in the $90 to $100 million range in 2007. Depreciation and amortization was $27 million in Q4 and $113 million for the year. We expect 2007 depreciation and amortization of approximately $27 million per quarter or $108 million for the year.

We stepped up our repurchase program in the fourth quarter, buying back some 250,000 shares for $17 million, paying on average $68.58 per share. Full year repurchases were approximately 565,000 shares, spending $32 million or on average $56.30 a share. We still have 3.3 million shares available under our current repurchase authorization and plan to continue repurchasing shares each quarter in 2007.

When you add our repurchase activity with our dividend payments, we returned over $63 million to shareholders in 2006.

Moving on to the balance sheet. At year-end, we have consolidated debt of $733 million, which includes $68 million of JVC debt, of which $333 million is floating and $400 million is fixed -- a 45/55 split. Our floating debt interest rate is 5.54% at quarter end or at year-end. The weighted average interest rate for the fourth quarter was 5.2% and for the full year was 5.12%.

Net of cash on hand, which is $149 million, and the nonguaranteed yet consolidated portion of JVC debt, which is $38 million, our net debt is $546 million -- down $112 million this quarter and $186 million this year. Excellent conversion of our profits to cash.

Our quarter-end debt-to-cap ratio is 41% and our net debt-to-cap ratio is 35%. During the quarter, Moodys joined S&P with a positive outlook on our current credit rating. S&P has had us on positive outlook for about a year now. With our performance in 2006 and continued reductions and debt expected in 2007, we are hopeful that one or both will act to improve our credit rating in 2007.

Working capital has been an area of intense focus for our entire organization this year. Hope to recapture working capital investment we made last year as input costs soared but also to improve overall working capital metrics. I am happy to report on our success in reducing working capital. Inventories were down $33 million, a 14-day gain year over year despite continued input inflation.

Despite 12% topline growth, receivables increased only $13 million, a five-day improvement. Payables were down year over year hurting us by eight days. So I shouldn't have to answer any questions on whether we did anything unnatural in that area. One thing worth mentioning is that with these metrics we absorbed a 40 million or 6 to 8 increase in back receivables which was a structural cost of our new European trading company structure.

So I feel pretty good about our achievements in working capital; and while I am not in a position to comment on next year's targets quite yet, I feel confident that we will continue to focus on this area and have pay-at-risk until we rank in the top quartile of our peers on all working capital components.

Last, before I turn it back to Nicole, a little bit of housekeeping. At year-end we adopted the provisions of FASB 158 on pensions that effectively brings on balance sheet the difference between our projected benefit obligation or PBO and funded status of our benefit plan. In so doing, our equity was reduced by $98 million, net of tax -- about $20 million less than the amount we disclosed in our third-quarter 10-Q which was based on year-end 2005 numbers.

In spite of all of the accounting that I just mentioned, our U.S. defined benefit plan is well funded by all measures and enjoyed an annual return of about 16% last year. With that I will turn back to Nicole for the Q&A portion of the call.

Thanks Rich. We would now like to open it up for your questions.

(OPERATOR INSTRUCTIONS). Laurence Alexander with Jefferies.

Good morning. First question is on Fine Chemicals. Can you quantify, so it makes sense, how much of a gap you need to feel with Tamiflu being done? And then also translate if you have 58 products in your pipeline, I mean how should we translate that into subsequent growth expectation?

We have always had a view in Fine Chemicals that the revenue would decline in '07, primarily driven by the exit from the time-based potassium and chlorine product line; and that, in fact, is helping us achieve our target margins in that segment. While I can't go into specifics and quantify the sales revenues and volumes for you on Tamiflu opportunities -- that just wouldn't be right -- I can tell you that the pipeline we believe through the course of '07 will help us offset the declines in the Tamiflu opportunity and help us approach revenues at the '06 level. We always had a view that revenues would decline, profitability would improve for the year.

And then in the Catalyst business you have given the pullback in oil prices can you address more generally how Catalyst volumes and also margins might be affected by shifts in refinery activity? I mean how -- you know what sensitivity do you have to end market trends?

Let me -- I will give it a shot. That is a pretty broad question, but you have to go back and recall when you look at Catalyst we have many different segments there. The two primary ones are FCC and HPC. HPC has been impacted largely by regulation changes around the world, which will continue to go forward in a very aggressive way. In October of this last year, of course, we went ultra [low sale] for diesel in the U.S. which led to that very extraordinarily strong third quarter of sales.

We had forecasted last year a weak first half of the year and stronger second half of the year and, essentially, being flat in HPC. As I noted in my comments, we are very pleased that our technology seems to be carrying the day as we go into 2007. In reality we are not seeing a drop-off in volumes even though, historically, if you look at trends you would say there should be one.

So we feel pretty good that our technology is going to continue to shine and we are not seeing [our nor] refineries telling us of any major changes whether it's $40 barrel crude or $60 barrel crude and their production plans or their feed sleigh.

As you look at FCC units, the need to convert to different fuels is higher than ever. The need to push the yields more towards diesels and other heavier products is very high. The need to pull sulfur and other components out of the feedstreams to FCC is high. And all that plays to the strength of our zeolite matrix.

So we -- and I am reflecting what I'm hearing from customers. We do not see any adverse impact of moderation in oil prices in a reasonable fashion in the near term.

One last broad question is with the Bromine chain can you address market trends in December and January and particularly for flame-retardants? And how confident you are that you can maintain margins, given those trends?

We saw through the course of the fourth quarter a very strong November. And going into December what we were typically concerned about is customer-based inventory reductions and we did see some of that primarily in tetrabrom. Matter of fact having anticipated that, we actually had both of our tetrabrom manufacturing plants down for the majority of December so we corrected for that working capital issue. And we took the corresponding amount of Bromine wells down. So we are really operating our business to customer demand and not to capacity.

In January, all of our businesses remain fairly robust. I'd say with the exception of tetrabrom and there's the Chinese New Year. It's a little later in February this year so we are kind of in a wait and see mode right now but our indications for the first quarter are that it will be flat to down in terms of tetrabrom volumes. But with our diversified product line we are seeing some pretty good growth in the other areas.

So, overall, we see our profitability starting out in '07 fairly robust, and have a fair amount of confidence for the year that will continue to build $1 billion business here with margins in the 16% range.

Thank you.

Jeff Zekauskas with J.P. Morgan.

I was looking at the catalyst results where your operating profits are up a couple of million year-over-year and you've got 3% positive prices and -24% volume. And you are kind enough to show I think the revenue impact of that which is $60 million. I'm puzzled as to how you could possibly have up operating profits under that scenario because the positive price increase is only $7 million so are there true-ups or is there something going on with the way that you report the Catalyst segment, such that your results are so good versus the volume performance in the fourth quarter?

First, our HPC is really dependent -- profitability there is strongly dependent on mix. So we had a good mix in the fourth quarter. As you point out, our volumes were down sequentially and both year-on-year fairly significant. We are seeing -- we've always describe this business as being fairly lumpy and then you compound that with the fact the Moly impact which is really a pass-through issue. So you see higher margins when Moly drops as opposed to when it increases. So there's a number of moving parts here in our Catalyst business.

Second I'd point out is the strong momentum in FCC pricing, reflecting the value that we are bringing in that product line. Volumes continue to be steady and growing there; but pricing is really the order of the day and that is helping come down to the bottom line to deliver the margins that that business needs and deserves to make.

The third aspect of it is in the aluminum alkenyls polyolefin Catalyst business. We've been successful in raising prices there. We actually made more money in the fourth quarter of '06 than we did in the entire first half. So we're very pleased with progress there. We're certainly not finished in the work we need to achieve. But in terms of true-ups, or anything like that. No. There is none of that going on and it's just good basic blocking and tackling in that business.

I won't belabor the point but I mean, you are kind enough to have both price and mix in your data which is 3%. I'm just saying it is hard to reconcile the 3% price mix effect and the -24% volume number.

If you just stop for a minute and consider that we pulled out $44 million of topline in Moly price alone. I mean that's the Moly impact of that and that gives it a lot more clarity around what has happened there. So you've just got to realize there is a lot of volatility in Moly price as it relates to that topline.

Most of that decrease for the year, that $44 million, not most -- a good good percentage of it occurred in the last quarter as we've worked off all our higher priced inventory of Moly in there.

I guess, secondly, sort of one of the puzzles with Albemarle is what your average price growth rate is on a consolidated basis because you have some many different businesses. And prices are going up all the time. And it is a very important component to your growth. And this quarter I think that you said your average prices were up 5.3% and they were up 9.8 for the year so call it 10.

So when you look at the price increases that you put in place for January for the year, do you expect your prices on average to be up 5% or 10% next year? Or what is the right order of magnitude when you look across your businesses?

We look at '07 when we are successful in getting that price up. The absolute dollar number is many times bigger but on a percentage basis it's smaller. So just by the physics and calculus of it, the amount -- the momentum in '07 will be less than what we saw in '06. We are looking at pricing in a few areas. FCC is a very important one for us. Bromine continues to be on top of the list. Tetrabrom, if we get some traction on volume through the course of the quarter -- and then you look at the specialties that we bring. We are really trying to drive improved pricing in the specialty portion of our portfolio.

Our proprietary 8010 product that has a Decabrome alternative for example. We have been successful in getting that price up, the order magnitude 5 to 6%.

It depends on the environment we are operating in if we will be able to get prices up closer to 10. I see that as a real stretch for us, but it all depends on the market and the specific product we are looking at.

Thank you. And then just lastly, why is your margin goal in Polymer Additives below your current margin? Why wouldn't it be above it?

What we are given there is the annual average number; and I think just for the reasons you've mentioned we have many, many products. Many, many different mix impacts go through that. So the 16% number we feel is a good number for us to achieve before we start talking about 17, 18 or 20 or whatever it should be.

So you are being conservative? Is that it? Are you being conservative or are you reporting numbers that are above your normal trend?

I didn't really understand your last question, are we being conservative. I think we are being prudent.

Prudent. Okay. Thank you very much.

Ray Kramer with First Analyst.

A couple of questions. I guess first we've talked about polymer additives margins what they can be next year. We've touched on Fine Chemicals. What do you think you can do in Catalysts margin-wise next year?

I've always thought, going back over the course of the last year, if we could sustain margins in the 15 to 16% range over the next 18 months, that that would be a success. So as Mark just pointed out in '07, if we can hit margins in that 15.5 to 16% range, including the JVs, I think that would be a successful '07 for us. And then we can look at real step-up opportunities in HPC to drive further growth, further margin improvement in '08 and beyond.

Then could you kind of staying with Catalyst then, could you talk a lot more on in terms of the FCC pricing? Are your competitors being more agreeable there and how do you see that unfolding over the next couple of years? I know there are some contractual and other issues that may limit how rapidly you can push through a price there.

We've been successful. We announced as you remember earlier in the year that $400 ton increase and, with the results in the fourth quarter, we have been able to achieve that goal. We've recalibrated our goal and are now looking at continuing increases in that $400 to $500 a ton range to achieve that over the course of '07 and into '08.

We are sold out. There is a good demand for our product line. So we remain optimistic that our product is worth that in the marketplace. There was a public tender in Mexico, however, where I'm only led to the conclusion that some of our competition is just selling an inferior product. But you always have a little bit of oddities that occur in the marketplace. But, overall, we are seeing good traction on the price increase.

Then maybe a question for Rich on the tax issue. You said you will guide towards 23 but there are a couple nations that maybe changes some tax laws and it may not be lower. If all of those countries adopt the policies on the table, what do you think tax could look like next year? Sort of a best case scenario?

Well, Ray, let me say this. When you talk about countries changing tax rates, you really have two impacts. So the first impact is similar to the one we experienced in The Netherlands this quarter which is, to the extent you are doing business in that country, you have deferred taxes that are on your books and you revalue those. That could be up, that could be down and that has nothing to do with the 23% that I talked about; because as we did this quarter, we would spike those out and tell the world, "Hey, this has got nothing to do with operations. It's just revaluing existing deferred taxes." So that's one part of the impact.

The other part of the impact obviously is a positive one from a structural point of view. Because if you are doing business in a country and you are paying taxes in a country you much prefer paying lower rates than higher rates. But that is something we look at and forecast and take into account.

So for instance, when I say 23% this year, I am factoring the fact that in The Netherlands we are going to be paying taxes at a 25% rate this year as opposed to 29% that we did in '06.

So that's -- I hope that answers your question. If you want because I was getting a little lonely here, I want to talk a little bit about how we go through and think about taxes and do a little walk for you.

We talked about objectives and working capital. One of my objectives next year is to talk less about tax although I don't want to talk less about the fact that we do a pretty good job of planning structurally where we pay tax and how we pay tax. Because that's I think a positive thing about our Company. But let me do this for you and I hope this addresses tax for everybody who is wondering about it out there.

In the quarter we basically had about a 13% rate, if you take out the one time -- if you adjust for the onetime Netherlands adjustment. So when I think about that 13% rate and I try to walk that to a 35 or 36% rate which is really the U.S. statutory rate and state taxes, there's really two pieces. It's the two things I mentioned in my comments.

One is country mix, geographic mix and that is about 14 basis points or 1400 basis points. 14%, that is a benefit that we enjoy and that's in the structure of how -- our mix of earnings.

There's about nine percentage points that are around the foreign tax credit issue that I talked about in my comments. And I think the mix is structural and the foreign tax credits are really more tactical. It depends on the dividends you bring back. It depends on the things you do structurally and in any one year. And you are always going to work that, but it is not anything you take for granted, I guess is what I would say.

Similarly if you do that same walk for our full year and you adjust for the ton taxes and you adjust for the tax rate change that we've already mentioned, we got about a 17 -- call it 17% rate this year that we are paying. And to get again up to a 35% rate, there's two pieces again. The same mix subject which is about 13% for the full year, and then the foreign tax credits, which is about 5%. So we are walking from 17%, 13% and 5#. So you add that altogether it's about 35%.

So let me take one more step and tell you how I view that for next year. Starting again from the 35% as kind of the effective tax rate for a U.S. company. The mix topic which, again, is structural we are pretty much counting on delivering about 14%. 14% down; so a good adjustment. But then and then what I would tell you included in that 14% is, as we've discussed, it's about $1 million a month from the trade co. which we only had in effect for six months of this year. It will be in effect for the full of next year.

So if you go from the 35% and take 13% out for the mix, that kind of roughly gets you around the 23% that we are saying for next year. I'm sorry, I think what I should have said is 14% is mix. So 35 less the 14 and then the difference really is other things that we need to work on and do tactically to work our effective tax rate for the year.

So all in all, what we are going to do next year is enjoy higher income and we assume that most of that income is at higher rates. And when you put that into account you get to the 23% guidance that we are giving.

I appreciate the thorough walk-through there, Rich. And just, lastly, I have to ask it. Mark, can you give us at least a conservative bottom end for what EPS can look like next year?

Yes. I would be happy to do that in the fashion that we normally do it. You know we don't give absolute numbers, but when I look at our business and each business segment I think what we try to communicate generally speaking is that in Fine Chemicals with the shutdown of [ton] we've pulled $100 million out in that business. So there's going to be push and take there but there shouldn't be any view out there that we are going to grow revenue and Fine Chemicals year over year. We don't see that kind of upside growth on a short term in that area on the revenue side.

Polymer Additives, I think we've got a reasonable chance to exceed $1 billion with that. And the team is certainly focused on doing that so good growth in Polymer Additives is forecasted.

In Catalyst, we expect it to continue to [flush] new Moly which pulled $40 million away from the top line this year. I think that is going to happen some more next year. That will be offset by pricing in FCC as well as growth in other areas. So I think you should have a view out there that our revenue growth, if you look at it in a very simple sense, topline revenue growth year-over-year is more modest than it has been in the past.

Now when you look at margins, John has taken you through his perspective on margins and in a strong belief system that we have the chance to drive higher margins in all of our segments next year. We had a 15% corporate operating profit target. I would like to see us in the year or say it another way enter 2008 running pretty close to that level if not at that level.

It is going to take us through this year of good performance elsewhere to get there. When I net all that out in my own mind, from a calculus point of view and I look at the range of estimates out there -- which are really pretty broad for 2007 -- I think that pushes us at the high end of that range versus the low end of that range. So to the extent that we ever give guidance, which we try not to do, I would say towards the high end of the consensus estimate.

Thanks a lot.

Marshall Reid with Bank of America.

On raw materials, your net raw material headwind declined I think to about $1 million in the quarter. Can you talk about your outlook for '07 and given where oil is where you can see potentially the biggest relief?

Yes. To say it quite simply, I think it is pretty flat. There's a lot of give and take in there. We are expecting some relief in energy, relief in Moly as we said. There is a fair amount of inflation out there. Metal areas is coming through. Some other raw materials are insulating out there. So net, net we put our hands around all but we think it is pretty flat.

And a question for John on Fine Chemicals. You announced a number of price initiatives in the quarter and volumes were up almost 11%. Was there any prebuying there?

Actually no. We did not see a lot of prebuying in the quarter. It just seems to me that people, many customers are overwhelmingly driven by watching your inventories and working capital-related issues which kind of if you balance that with pricing initiatives. So it tells me we've got a little more strength there going forward. But, no, we did not see any prebuying activity in the fourth quarter.

And on Europe, can you discuss the potential implications of the new Reach legislation and the potential cost of compliance there? And do you think this could accelerate the shift away from [brominade] flame retardants?

Yes. Great question. From a cost point of view on a short-term basis it is not very material. There are a host of products -- there's 30,000 that are going to be involved in Reach. It is a fairly limited number that will be impacted. That will impact us. You should think in terms of less than 20 kinds of products will be in that portfolio. Stuff that is analyzed. We have done screening on most of those products and do not see toxicity levels of a point that we are concerned about them. There is cost associated and we hope consortiums that they will be able to reduce those costs and I will be able in the future quarters to talk to you about that.

Brominade flame retardants are not going to be impacted by Reach. [Realize] the Ross initiative -- restriction of hazardous substance in electronics that has driven the debate on BFRS that has largely run its course with [Decabrome] from getting a clean bill of health but yet in the political scheme of Europe, there's a fair amount of confusion about what that actually means for Decabrome.

Corporately I think what I would like to say to you and all the listeners is we have a belief system that is very difficult to debate trace levels of anything in the relative merits of those trace levels. We are driven to make sure that our products first and foremost are safe to use and, second, that they never get in the environment. And that's the broad approach that we are taking to make sure that this debate on BFRs doesn't go beyond Decabrome and these products continue to be used for a long time.

Last question for me. On share repurchase you bought back shares in the fourth quarter but the count was up, giving you strong cash flow. What would it take for you guys to get more aggressive on share repurchases in '07?

We will be more aggressive. I would tell you that it all comes to the mechanics of the weighted average share that you use for EPS; and basically for every option we have outstanding only about 4/10ths of those shares are factored into EPS Calc.

So given the level of option exercises last year it would have taken a hell of a lot more buyback, so to say, to keep even on that. Now we haven't issued options as kind of a corporate compensation for four years now. So we are eating into the number of outstanding options very quickly, but I would say is I have a commitment to be on top that this year and make sure that those shares outstanding stay flat, if not reduced.

Thanks, everyone.

P.J. Juvekar with Citigroup.

Just a couple of questions so that you take a step back and look at the big picture. You have been raising prices in flame retardants for a while. Are you in the second innings or maybe in the eighth or ninth innings of the price increase?

That's a great question.

(MULTIPLE SPEAKERS) cycle, yes.

That's a great question. I think what -- let me be as clear with this as I can be. There's nothing commodity like about these products. So the real question is what value do you bring to the customer and what value and use do they draw from? And can they as a result of your innovation differentiate themselves in the market?

Our portfolio today has got about 28% of the products in it on a revenue basis that weren't in it five years ago. So we are turning our portfolio in a very dramatic fashion. You may have noted when I gave the prepared portion of my talking points that we are increasing R&D even 30% as we enter 2007. I expect even going beyond that, you'll see further and further increases in research.

We are doing that specifically to make sure that we are selling differentiated products in the marketplace. So from a belief point of view you can take any one product out there and say what may be in the second inning or ninth inning of it; but our concept is to continue pushing that portfolio such that we get -- we go down in innings. In other words we have a newer portfolio that has more value addition through it.

So that is the approach that we are taking with it. I don't think pricing momentum on average has been, is in the later innings. Because we are going to continue to rebuild our portfolio.

I think we are in a cricket match rather than baseball.

One quick question on the FCC side. A couple of years ago, there was a lot of oversupply on the FCC catalyst. That supply overage has been going down. Can you just discuss how you see the supply demand in '07?

Yes. We are seeing things pretty snug in FCC and we think, as I said earlier, we are sold out. So we get pretty indifferent on the incremental pricing for additional volumes. So this makes pricing a real gain for us.

We continue to see at given points in time where there is very tight supply. So I think we are really on the cusp of supply and demand being equal.

Interesting. You said you are sold out. Do you think the industry is in that condition as well, running pullout?

I think it's approaching that very rapidly.

So your pricing gains should continue in '07 on the FCC side?

We believe so.

And you think the FCC increases would offset the decline in HPC business at least in the first half year-over-year?

Well, first half we are actually seeing pretty strong volumes on HPC. So as we went through the balance of '06 into the fourth quarter as Mark pointed out technology being the order of the day in HPC, we are seeing very strong volumes in the first quarter for HPC. So the first quarter for us in Catalysis will be strong. The second quarter HPC volumes drop off a bit so it is more like the fourth quarter. And then we are seeing pretty strong trends for the back half of the year.

So, overall, we are looking at flat to up slightly in HPC at this point in time, which is certainly more optimistic than what we said on the last call. FCC, that momentum is purely price-based so we continue to see that. We have got our team coming in on almost a monthly basis to review this activity around the globe and we feel that that momentum can continue.

Thank you.

David Begleiter with Deutsche Bank.

Mark, how much of your flame retardant portfolio is differentiated right now in your view?

Yes; probably in differentiating terms of being unique and proprietary -- probably half.

And how much higher are the margins on that differentiated portion of the portfolio?

I don't have the calculus in front of me and maybe John can look for a second and see, but it is higher, but -- yes. It's higher. I don't know. It's just higher.

Yes if you take brominade flame retardants, for example, as Mark said half proprietary, those prices are higher than the tetrabrom prices, for example, by 30, 40%. What you get into, the mineral flame retardants just inherently due to the volume nature of that business and their applications are certainly lower in terms of price, but higher in volume. So that's where that overall mix gets.

We look at the bottom line in terms of overall Polymer Additives and we are comfortable in '07 with that 16 to 17% margins on that billion dollar business.

Fair enough. And John, on FCC at what point do you add capacity?

That's really not in our vocabulary right now. If we could do some minor debottlenecking, we could possibly choose to do that at this point in time, but pricing is really the order of the day.

Just on FCCs, John, given the price increases you have announced this year do we get to double-digit operating margins in FCC at some point in '07?

Yes. I think we could envision that towards the end of '07 and so we are just making up from years and years of not making any money on that business.

Very good and last thing, John, just on tetrabrom, we could have -- I guess -- six months of down volume which seems how do we collate that with generally good and market demand you see in overall electronics on a general basis?

Well, we've seen a pretty significant decline in the book to build ratio in November. So the question is, what is that market really doing? We don't believe that there has been any significant market share shift at all and it is just a correction and we go through these corrections periodically in December. Primarily in tetrabrom. We saw that in the fourth quarter; and in the first quarter, we started out a little bit slow but we still remain optimistic for the year to see growth in that business.

Thank you very much and very nice quarter.

Mike [Siran] with KeyBank.

Nice quarter. In terms of just a quick point of clarification. The pricing declines in Moly, did that largely come in volumes for Catalyst or was that in price mix?

The price design -- no it's just in price mix. Well, no. I mean, Moly is really a price (indiscernible) so I'm not sure the essence of your question. So you are going to see it on the topline; that's where you're going to really see that.

So when you add that back looks like pricing left to Moly declines were up pretty significantly in the quarter. Up 31 (MULTIPLE SPEAKERS).

That's right. Pricing mix is up pretty significantly. That's right.

That's right, Mike.

I think that's a simple way to do it but that's a good indication of the correct calculus. Yes.

And that should be -- considering the FCC pricing increases -- appeared pretty good that should be sustainable going forward that sort of plus.

On HPC, it's a real mix issue. It depends on the application. It depends on the levels of Moly in it, so that the mix issues are a much bigger factor in HPC pricing. But there's no question on FCC, you're right. Dead on.

Quarter to quarter volatility can be pretty big in that stuff, too. You know if we can see 2x swing from the low quarter in a year to the high quarter of a year in terms of volume and HPC. That is just huge as it ripples through. So we continue to caution all of you guys that it is very difficult to predict, ourselves included, exactly what that quarter to quarter volume movement is going to be. We are much better at looking at year to year; and we have been very very accurate on a year to year basis but quarter to quarter, it is tough.

Fine. For Polymer Additives, you averaged close to 17% operating margin. For most second quarter to the fourth quarter, first quarter was a little less. Is there any seasonality in the first quarter that typically is lower now?

Yes. A little bit. Yes. I mean we typically see -- December tends to be slower and then with the Chinese New Year and the importance of Asia to the overall flame retardant business. We generally see a slower January and February depending on when the Chinese New Year falls.

With sales growth to a billion I mean I would imagine there should be improvement in margins versus if your sales are up 7, 8%. Is there any reason why there wouldn't be another 100 basis points improvement versus the 16?

We are always going to strive to achieve that; but at this point, I mean if I were modeling it I would put it in at 16 plus or minus a little bit but not -- 100 basis points is pretty extreme.

So the negatives that would offset the improvement would be --

Just -- Potential negative on tetrabrom volume but then we've got strong volumes in the other areas. We've got [ATH costs] going up in mineral flame retardants. (MULTIPLE SPEAKERS) and overall that's it. (indiscernible) and the organic chain. Those prices from a raw material perspective have remained very fairly high even with the decline in oil prices.

Last question for you, Mark. You know your comfort zone with the high-end of guidance was sort of similar to what you had mentioned in last year in '06 and, clearly, there were significant positives that throughout the year that caused that comfort zone to be beaten pretty handily. What do you see as a major positive that really could come through in '07 that could really cost upside from that comfort zone that you have for this year?

It's a good question. I'm a little cautious as I look at '07. When you look at the forecast for GDP growth around the world and there's a pretty good drop-off in GDP and industrial growth forecast. Your 20% kind of drop and so I'm cautious a bit with regard to that. To me if we continue to see the kind of global growth that we saw in 2006, that's the good side of it.

John has already mentioned some of this pullback and printed wiring board. Rigid printed wiring boards and the book to build ratio. Yes we haven't seen that in quite a few years. So we actually ended this year with more downside on that indicator, that leading indicator than we had seen in the last couple of cycles, annual cycles.

So I think we've got to be a little cautious if perhaps the global GDP growth projections at least as we entered this year could be true. And that is what moderates me just a little bit on my enthusiasm but we had a great year in 2005. We had a great. great year in 2006. I think 2007 is going to be a really good year now.

Dmitry Silversteyn with Longbow Research.

Good morning. This is Eugene sitting for Dmitry. Congratulations on a great quarter.

Most of my questions have been answered. I just want to make sure that I understood you correctly. Are you expecting for Fine Chemicals? Are you expecting for the full year '07 higher than 15% upgrade in margins?

It's kind of like Palmer's. We are always going to shoot for more margin. We don't want to limit ourselves in a 15% goal. But if we achieve 15%, that's been our long-term goal for several years now. And I think that would be a successful year for us.

So do you think you would be able to achieve that?

I think the probability is on the low-end.

And what we are really saying is, we expect -- we really -- the end of the year to be at that kind of run rate. We are not starting the year at that run rate.

Fair enough. Then just an old broad question I guess on Polymer Additives. You never mentioned anything about housing market slowing down and how that affects volumes and as well as pricing initiatives for a sale in Polymer Additives.

Yes; I would be happy to comment on that. We have a very unique, very broad portfolio in our Polymer Additives business. We have seen -- we continue to see some strength for example in our PVC stabilizers business. We have continued to see strength in our curatives, specialty applications. And the housing sector in some of the products in the portfolio we have seen that soften a bit. But nothing really dramatic. We have a flame retardant for insulating polyurethane insulating foam for example that has slowed a bit from a fairly torrid level of growth in '05 and early '06. That slowed down a bit.

But, overall, I think you have to look at the strength of our portfolio and the diversified nature of it, which is a strength for us.

Thanks a lot.

Edward Yang with CIBC World Markets.

Good morning. Mark, could you give us a little bit more color in terms of how you want to grow the alternative fuels business? Is it going to be more R&D, organic driven or do you plan on making acquisitions?

Yes. It is really all of the above. We have a number of initiatives underway with the multinational corporations. We are reenforcing those initiatives and trying to make sure that we are putting more focus on R&D there and so that would be in things like bio-diesel, in particular. Some on gas to liquids area. So reenforcing the relationships with our customers and expanding our technology is very important. That is one way.

Another way is in relationships with engineering firms, in ventures groups like UOP and other groups that we are starting to talk to. And we think we will be engaged where we go into this growth cycle offering a complete package, catalyst package plus technology package that we think will win the day as we start to develop these properties.

The third way is really pure research. When you look at biomass conversion -- the Holy Grail is if you can take really any cellulose material and make a liquid hydrocarbon directly out of it. Not the ethanol but directly to a liquid hydrocarbon. Which is what happens to produce oil over millions of years. Can we expedite that and do that over a short period of time through the use of catalysis. That is an area we have done some work in and we have a lot more work slated to do.

There are some acquisition opportunities and as you know is pretty well, so we are always out there aggressively looking for those opportunities and I hope that some will present themselves as we go forward.

And in general, I would think that acquisitions in this area would be more embryonic and more buying technology versus revenue. So does that change your criteria in sense of how you look at acquisitions in terms of payback period and how quickly you could get the margins (technical difficulties) 15% level?

Well it -- no, not philosophically. I think the shareholders expect us to continue to grow net income year-over-year-over-year. And so when you go out and start investing money you've got to get a return on it. I kind of don't believe in investing in something with a view that they will eventually come. I think you have got to make money on day one.

We continue to look at acquisitions that do that and the reason we haven't pulled the trigger in the last year or so in acquisitions is we don't feel that the ability that acquisition to add income over a year or two is consistent with our base business. So it will be dilutive in terms of the rate of growth. And that is even a (technical difficulties) you can look at.

On HPC, what's driving your more bullish outlook for volumes in 2007?

I think the start of 2007 we really -- our anticipation was as we ended the first half of 2006 and we talked about the third quarter and the fourth quarter, we anticipated a very strong third and a weak fourth. And certainly as we were ending the third we were still seeing a weak four. We had a number of orders come in as John has kind of mentioned. As we ended the year we ended up building inventory to meet some of those orders in the first quarter. A fair amount of inventory, $20 million or so worth.

So we are seeing a stronger first quarter and second quarter.

Were you looking for a stronger volume year overall (MULTIPLE SPEAKERS)?

Yes. Yes I made the projections we put out before I think that the original never we talked about was down 3% with a plus 3% coming from new products. They will be flat year-to-year and I cautioned all of you guys that there was some risk in that because some years had been down as much as 10%. Now we are looking at flat year-to-year and then new products, if we have success with those, should be added on top of that. So we are -- I was cautious at the flat before. I'm not cautious on the flat now and I think there's upside potential in volume and HPC, based on what we're seeing in the first half of the year.

And just an update on the 20% HPC capacity expansion. Is that still on target to hit in the second or third quarter?

Yes. You should think that it will be completed in the first half of this year and started up and contributing in the second half. We are having a lot of time getting steel and we set out to -- we are trying not to expedite that because there's a lot of cost associated with that. We have seen some cost overruns in that project. Just getting things done in the Houston area is very difficult. But yes, fundamentally, we see no difference in that. It's going to be done about the middle of this year.

And given the stepwise nature of the growth and the order patterns, '08 should be a pretty strong volume year for HPC. How much of the new 20% capacity expansion do you think could of sort that or are you planning any additional expansions over a two-, three-year period.

Our current view, we've picked up some orders already for the back half of '08 and early '09 for some new megarefineries. It all depends on the construction schedule of those facilities on whether or not it would hit in '08 or '09. But those -- virtually, those orders do a good job of filling up a big part of that capacity. So the view now would be some time in late '08, early '09, we are going to need to be considering an additional expansion in that business.

I would think that you would move up the pricing on that product as well as you have done the past.

Well, you sound like my boss. Yes, we always think that these products generate tremendous value in what they do. Appreciate the plug.

And just a final question on just on fourth quarter Catalyst results. HPC pins were down pretty significantly and you are guiding towards that. And HPC Catalyst are your highest margin product in the Catalyst segment and yet the overall margins held up very well.

If HPC volumes were flat in fourth quarter, what do you think the margins could have been?

Much better than they were. Better than they were.

That's a pretty exciting thought for us.

Thank you very much.

Amy Zhang with Goldman Sachs.

Good morning. Most of my questions have been answered. I have two left and really on the bromide market I think the reason that your key competitor can (indiscernible) a long-term bromide supply agreement with the oil (indiscernible) chemical producer Tetra. The key is like (indiscernible) on the potential impact from your perspective related to this announcement. The supply and demand dynamics in the bromide industry?

The agreement you are mentioning really doesn't have much impact on us because we weren't supplying that customer base. And so from a sales or volumes perspective it really didn't impact as. We assume that there is some positive impact for both of those companies. We have no idea of knowing that, but at the end of the day it does long-term keep additional capacity from potentially coming onto the market. And I think generally that is a positive thing.

Then in terms of supply and demand and (indiscernible) in the bromine industry. What is your expectation going forward? Any new capacity schedule online in (indiscernible)?

Well we -- I said earlier, Amy, that we really do not run our bromine to any kind of capacity. We produce our bromine to supply our customer need and we are going to continue to do that. We view it as a valuable resource and we are just not going to run it for capacity safety because we have capacity.

So we are just -- for example in the fourth quarter, when we brought both of our tetrabrom plants down we also brought the corresponding production of bromine down in the quarter as well. So we are intent on running our business in that fashion.

And a final question will be with the falling energy prices and also some maybe potential supply showed the following the Tetra announcement or what is your expectation. And then also on the pricing trend for the brome-based oil (indiscernible) going forward?

Yes. The impact of oil pricing on clear brine fluids I think is the nature of your question and we have not seen, I think due to the broad geographical nature of the business, we have not seem any falloff in oilfield production chemicals at this point in time. So we have continued to see supply and demand quite tight in the clear brines area. So I hope that answers that question.

Perfect. Thank you.

Dana Walker with Kalmar Investments.

Good morning. Well done. On the Consumer Electronics front, affecting your flame retardant portfolio, do you see any broadening of adoption of your products or your competitors' products so that this market expands more rapidly than it has?

We do see, in the connector market, the high-voltage small connector market, continuing growth in that area. We've continued to debottleneck that product line so the acceptance there is going quite well. Matter of fact we've also got a cost reduction project kicking in for that business towards the early part of the second quarter.

So that should help our profit of building during the year. But overall I'd see high-voltage applications continuing to help drive growth in that area.

What role did the Sony battery issues, if any, play in driving more OEs to taking the step in your direction?

Well it certainly helped from an awareness perspective. You know I think there was a report the other day that I believe it was on an airplane that somebody's cellphone caught fire. So this just highlights the importance to us of the basic principles and fundamentals on flame retardants and driving that to help save lives around the globe.

Worldwide, somewhat driven by ethanol demands and the effect that has on corn. Many of the ag commodities are at higher prices. What role might that play in driving demand in your Fine Chemicals business?

We have seen some pretty good opportunities come up in the ag chemical arena and so it's helping drive our overall Fine Chemicals new product portfolio. To that end when those markets are healthy, I think our business tends to be a little more healthy.

When you claim that your phosphorus flame retardant portfolio is not driving commensurately appropriate margin and yet you plan to add capacity in China, can you talk about the seeming contradiction in those two thoughts? Or will you be closing capacity elsewhere?

Yes. Thank you. Again, we are -- long-term we have a plant in the UK and we see driving its portfolio of new products really through technology, better technology, better value-added products. So there's that portion of the strategy is really important in getting that business to acceptable returns.

Then we have the flip side. The high-growth in China in the end markets. Polyurethane phones -- both flexible and rigid -- and the growth opportunities in China with phosphorus being fairly plentiful there. So we see the plant in China positioning as to capture the growth that is in China. So we don't see that capacity over the next two years taking out any existing capacity.

Is it a realistic goal to see phosphorus margins improve to the corporate FR average?

That's going to be a real challenge for us, and I think that is going to be a difficult hurdle. If we can get it up into the low double digits, I would be pretty delighted by that.

And what timeframe would you expect that goal to be attainable?

Two to three years.

Final question from me. Your polyolefin business was weak as recently as the latter part of '05, moving into the early part of '06. Can you better frame where profits bottomed? Where they appear to be now and what your goals happen to be?

In polyolefin catalysts?

Yes.

We had, I think through the course of the back half of '05 and early '06, We had a pretty biggie Katrina factor and Rita factor. You know with all the (indiscernible), the pressure on raw materials and then our customer base having some plant shutdowns and reconstruction activities going on. So we had to work through that through the course of '06. As I mentioned we had a really solid fourth quarter. We are going to continue, we're off to a good start in '07 and we are going to continue to really drive pricing improvement in that business for us as well. These products just make such tremendous value to the customer base.

So I'm very bullish on that business. It is one of my favorite businesses from an opportunity perspective and we have put some really great people through that business to help us drive it around the globe and (indiscernible).

That business would now the envelope $100 million range. Is that about right?

That's correct.

Thanks again.

[Jonah Wyfe] with HSBC.

Good morning. Just a few questions on the bromine side of your business. Bromine flame retardants.

First of all do you have a volume demand estimate for 2007?

For what? (MULTIPLE SPEAKERS) estimate for what? I'm sorry.

After the brominade (indiscernible) in general?

In general. Yes, I still believe volume growth year-over-year in the 3 to 4% range is an achievable number for us.

And do you have a price estimate as well to go along with that?

We are continuing to drive pricing and we generally do not put pricing improvements into any forecast until we achieve them. But as I mentioned earlier in the specialties, it appears we will be successful in getting 5 to 6% increase there and we are taking a more wait and see approach on tetrabrom depending on how the volumes build through the course of the first quarter.

All right and overall, you have expressed positive outlook for BFRs going into the next year. To what extent does this positive view rely on those specialty products or, in fact, new products launched during the year? Are they stripping out new product launches? Are you still positive or you're relying very much on renewing your portfolio quite aggressively?

We have really tried to build into the culture of the Company the vitality around technology, around R&D. And it's important to us. So it's really built into the fiber of what we do. So that all contributes to the projection that we have for '07 and beyond.

And would you by any chance be considering expanding capacity in raw Bromine production in the next couple of years?

As I said earlier, we really do not run our bromine plants based on capacity. We base our bromine production on what our customer need is. For the foreseeable future I think we've got adequate capacity to meet those needs over the long term.

At this time there are no more questions in queue. I would like to turn the call back over to Nicole Daniel for closing remarks.

I would like to thank everyone for participating on the call today. If there are any further questions, you can contact me at the number indicated on a press release. Everyone have a great day.

Thank you for attending today's conference. This concludes the presentation. You may now disconnect. Good day.