雅保公司 (ALB) 2011 Q1 法說會逐字稿

Good day ladies and gentlemen, and welcome to the first quarter Albemarle Corporation earnings conference call. My name is Gina and I will be your coordinator for today. At this time all participants are in listen only mode. We will be facilitating a question-and-answer session towards the end of today's conference. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today, Ms. Sandra Rodriguez, Vice President of Investor Relations Communications. Please go ahead.

Thank you Gina and welcome everyone to Albemarle's first quarter earnings conference call. Our earnings were released after the close of the market yesterday. Our Press Release, earnings presentation, and non-GAAP reconciliations are posted on our new website under the investors section at albemarle.com. Joining me on the call today are Mark Rohr, Chairman and Chief Executive Officer. Mark will comment on what we're seeing in the markets and how those trends drove our results this quarter. Luke Kissam, our President, will give a brief update on the Company's strategic efforts. John Steitz, Chief Operating Officer, will follow with specifics about performance in each segment, and Scott Tozier our CFO will cover the financial highlights before I open it up for Q&A.

As a reminder some of the matters discussed during the call may include Forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Please note the cautionary language about our Forward-looking statements contained in our Press Release. That same language applies to this call. Also, to the extent that we discuss any non-GAAP financial measures, you will find reconciliations in our Press Release, which is posted on our website. With that, I will turn the call over to Mark.

Thank you Sandra and good morning everyone. I'm pleased to have the opportunity to share with you the results of another strong quarter for Albemarle. You know these results have as a backdrop a number of major global distractions. Like the European debt crises, Japanese tsunami, and political unrest in North Africa and the Arabian peninsula. In spite of these events, demand for our products and our technical capability reminds robust, especially in consumer electronics, automotive, refining and especially polymers. In addition, other markets that we are slower to rebound in 2010 are starting to show meaningful recovery. For example, we are seeing a strong rebound in our completion of fluids business as global offshore drilling increases and companies are returning to the Gulf of Mexico.

These positive market trends and our teams ability to execute and deliver value to our customers, is what sets Albemarle apart and positions us for superior earnings capability. With that background, I'm very pleased to report Albemarle's first quarter 2011 performance resulted in an all-time record results in revenue, income and EPS. Strong volumes and pricing gains drove net sales for the quarter to $697 million, up 20% year-over-year and 15% sequentially. Consolidated gross profit margins of 34%, increased over 500 basis points year-over-year. Operating profit of $142 million, improved over 85%, compared to $76 million for the same period last year. With all three segments posting record profits. Positive performance and strong market conditions due to consolidated quarterly earnings of $107 million or $1.15 per share, an increase of 55% compared to first quarter of last year EPS of $0.74.

Strong demand for brominated and mineral flame retardants, drove polymer solutions to post exceptional results this quarter. Steady volumes and a marked improvement in pricing, drove segment net sales of $258 million up 19% year-over-year and 17% sequentially. We posted $69 million of segment income in the quarter, a 66% increase from where we were a year ago and 36% sequential increase. This is roughly 20% higher than our last segment income record set in the third-quarter of 2010 and $8 million more than Polymers earned in all of 2009.

Success in passing through announced price increases, contributed to Polymers record quarterly segment margin of 27%, a year-over-year improvement of 760 basis points. Rising cost of raw materials particularly in the petrochemical chain, could put short-term pressure on these margin levels, however we expect these costs will be covered by her pricing initiatives as we move through 2011. Fine chemistry's outstanding performance resulted in a record net sales of $177 million, up 30% from the first quarter 2010. Business delivered segment income of $30 million for the quarter and improvement of over 150% compared to $12 million in the first quarter of 2010, and up 12% sequentially. Driven by strong volumes and pricing in our performance chemicals division.

Fine chemistry's margins improved by a robust 800 basis points to 17%. A major contributor to the segment top and bottom line improvement is from our clear brines business that saw a sharp year-over-year increase with volumes more than double first quarter of 2010. Also contributing to our high Bromine production rates that continue to be at maximum levels and we do not see this environment changing for the remainder of this year as Bromine and derivative supply remains very tight. Our Catalyst business also delivered outstanding results in the first quarter. Net sales totaled $261 million, up 15% from the first quarter of 2010, and up 13% sequentially. Catalysts also achieved a new record in segment income of $73 million on margins of 28%. That compares to segment income of $55 million on margins and 24% in the first quarter of 2010. These results were driven by strong volumes in hydro-processing Catalyst and Polyolefins Catalyst and as expected FCC volumes were down in the quarter which is typical for this time of year. I will speak more in a moment about rise in raw material energy cost but let me just say that we are managing a dramatic rare earths price increases and working with our FCC customers to find solutions that suit their refinery Catalyst needs while helping them minimize the cost impact to their business. Positive refining in Polyolefin margin trends should position the business for continued growth through the year.

Now let me touch on input costs for a moment. At the start of the year, we reported that year-over-year raw materials and energy cost inflation of roughly $70 million. By the mid-quarter we adjusted our forecast to $120 million and our latest projection is roughly $160 million of year-over-year inflation. Approximately half of that is in metals used in our refinery Catalyst products. Rare earths are you know, have increased dramatically in value over the past year from under $10,000 a ton to a current level of approximately $130,000 per ton. We have no issues with securing the rare earths that are used in our FCC Catalyst as a footnote however, these costs are passed on to our refineries, without impacting our income, however they will reduce segment margins by approximately 300 basis points for the full year. We are working with our customers to mitigate these costs by employing other substitutes for activity, which is needed to manage challenging crude slides and we're having good success helping refineries mitigate these costs.

The other half of the projected inflation is spread across our three segments with most of that cost increase in Ethylene, Benzene ethanol and other Olefin's used in Polymers and fine chemicals. We are working hard to see that our pricing actions offset these projected headwinds. As you may know, Albemarle has offices in joint venture operations in Japan. We were very fortunate that our employees, their families and our facilities suffered no direct impact from the events. However all families have been indirectly impacted in one way or another and Albemarle like many other organizations, is working hard to provide support for them as best we can. It is amazing to see the resilience of the Japanese people and how they began building back almost immediately. This may explain why we have seen very little disruption to our businesses. There were some hiccups in the supply chain in the quarter, but mainly timing issues on some orders which had only $0.01 or $0.02 impact for the quarter. We expect similar, minimal impacts the remainder of the year as we're working with our customers to mitigate these supply chain disruptions.

I'm very proud of our performance this quarter. It clearly reflects the strength of our technology, portfolio and our ability to innovate, develop and commercialize new products. These products drive value for our customers and in turn, drive value for our shareholders. I'm confident that our performance over these last several quarters is indicative of new base level for Albemarle Corporation. Our technology business fundamentals are outstanding. And despite the raw material headwinds, we will exceed our 2012 earnings target of $4.00 a share, a full year ahead of schedule. With that, let me now turn it over to Luke to talk about some of our strategic initiatives underway.

Thanks Mark and good morning everyone. We are extremely pleased about the performance of our business this quarter. As we've talked with you about previously, we have taken steps to allow us to operate more efficiently and these steps are paying off. We have a strong pipeline in each of our businesses and continue to build on our base technologies to solve problems for our customers and build value for our shareholders. Let me spend a few minutes updating you on some of our strategic investments under way around the world, that will better position Albemarle both geographically and technology to maintain our leadership position in some critical growth markets.

In Yeosu, South Korea, our new Polyolefin Catalyst lab and power plant are up and running, producing Catalyst for qualification by Asian customers. We've received great feedback from customers so far and expect continued successes. Our full scale commercial production is targeted to come online in the second half of 2012 and will produce a full slate of new high-performance single site Metallocenes Catalysts. Last week we announced the selection of Samsung Engineering as our contractor for the engineering, procurement and construction of our new Organometallics plant in Saudi Arabia, the joint venture between Albermarle and SABIC. Groundbreaking is scheduled for June, with plant start up targeted for the second half of 2012. This facility will initially manufacture Triethylaluminum, the key co-catalyst used in Polyolefin production, and is designed to meet the growing demand for these products in the Middle East.

At the end of 2010 we announced an agreement with Petrobras to build a world scaled HPC plant in Santa Cruz, Brazil, on the site of our current FCC SA joint venture. Those plans are progressing well. The engineering phase of the project has begun in collaboration with Petrobras and our targeted startup is 2014. That timing is consistent with an anticipated surge in Petrobras' HPC demand on the back of ultra-low sulfur diesel regulations in Brazil, prior to the World Cup and the Olympics and the startup of new HPC units over the last half of this decade in the region. This venture constitutes a major milestone for our strategy to further establish Albemarle as a global leader in ultra-low sulfur diesel technology as emerging technologies join North America, Western Europe and Japan with tighter sulfur specs for fuels.

Equally as exciting is the expansion of our technology in cooperation with Petrobras to develop these new HPC products. As you know, Bromine has been a key part Albermarle's business for nearly 25 years. Demand for Bromine derivatives remain strong and global supplies are strong, creating a very tight market. Last fall, we started debottlenecking our Bromine assets in Arkansas and Jordan, to meet increased global demand. That 10% to 15% capacity expansion is now online and needed to satisfy 2011 orders. As we look out over the next several years, expanding uses of Bromine and it's derivatives will drive the need for additional global supply.

In early March, we announced the plan to double our Bromine and derivatives capacity at our Jordan site. This strategic investment of approximately $125 million will increase our Bromine capacity in Jordan to roughly 120,000 net tons. Initial bromine capacity will be available in 2012 and we will bring home the Bromine and derivative capacity in phases as needed to meet global demand. Before I close out, I'd like to salute Albemarle's employees around the world for their efforts in operating in a responsible and sustainable manner. We recently learned that Albemarle once again was named one of the best corporate citizens for 2011 by Corporate Responsibility magazine, a nice recognition for our employees efforts. With that I'll turn it over to John.

Thanks Luke and good morning everyone. I will start with our Catalysts segment. First, our Polyolefin Catalyst business delivered strong results again this quarter topping last quarter's revenue record by 16%. Primarily driven by stronger volumes in our Ziggler-Natta and activator businesses. We continue to see strong demand for these catalysts especially in the Middle East and Asian markets. North American and European producers are also reevaluating their resin grades and looking for top-performing catalyst which bodes well for this business. Our HPC volumes, as anticipated, were up nicely this quarter, fresh catalyst demand for conventional applications is increasing with strong growth in India, the Middle East, Russia and China. At NPRA a few weeks ago, that's the National Petrochemical and Refinery Producers Association, the tone was very positive. Margins are improving in the refining world and it's showing in their fresh catalyst orders as refiners are processing more catalytically intensive feed stocks.

Our current view for the year looks very promising. As expected, FCC volumes were down in the quarter but we expect solid sequential improvement throughout the remainder of 2011. Heavy light crude price spreads have increased in the last several months, encouraging the processing of heavier fees which uses more catalyst. Longer term, new FCC units coming on stream within the next few years in India, China, Korea, Taiwan, and Russia, are continuing to build our confidence in longer term growth projections. These new units are supported by increasing global demand for refined products, including Propylene, especially in the developing world. Combination of these drivers should continue to support above-average growth rates for this industry well beyond 2011. As Mark said earlier, our pricing is keeping up so far with the increased costs of rare earths. Virtually all of our FCC volume is covered at this point. Overall our Catalyst team did a tremendous job on execution in a complex commercial environment.

Moving on to Polymer solutions. Steady volumes and very healthy pricing drove strong, year-over-year gains in our fire safety portfolio. Demand for our brominated flame retardants continues to be robust. In fact, our order book currently reflects sequential volume improvement in the second quarter and our customers, particularly in Asia, say market demand for electronics remains healthy. We are very pleased with the advances we've made in our pricing initiatives. It comes at a good time to offset the impact of rising raw material costs. It also demonstrates the value of our products. The value our products are bringing for customers, and was a key driver in Polymer's strong performance this quarter. Our mineral flame retardants also contributed nicely to Polymer strong profit improvement this quarter. Improved pricing offset slightly weaker volumes in the quarter and our current view shows strong volume trends in minerals for the remainder of the year. With better pricing we expect the division to post strong profit gains in 2011.

Our Curative products continue to do well year-over-year volumes were flat but are up roughly 20% on a sequential basis and should run near the first quarter rates for the remainder of the year. Our fine chemistry segment gets a gold star for its triple digit profit improvement this quarter. Our performance chemicals business delivered 30% year-over-year increase in sales revenue. Record segment income of $30 million, was more than double the same period of last year, and a 12% sequential improvement. As expected, our bromine production rates were at maximum levels in the quarter, as demand for our derivatives remained steady. Disciplined business strategy and asset management in this business is clearly paying off. Our pricing initiatives in Bromine have been successful. Average global Bromine prices are reaching levels of over $4000 a ton, reflecting the value and use across current applications, as well as a growing range of new applications.

Our Clear Brines business saw very strong demand this quarter, which was a key contributor to the segments strong performance. Clear Brines volumes have improved globally including in Africa, Middle East, North Sea, Malaysia, and finally in the Gulf of Mexico. We are very encouraged by the 10 new Gulf of Mexico deep water issued in February and March. These are the first approvals since the moratorium was lifted. Early indications for our Clear Brines business in the second-quarter, also looked very positive. And we are having success in achieving full price increases that we announced earlier this year. Our Clear Brines business is back on track, and our teams are doing a fine job of managing supply out of Arkansas and Jordan to meet customer demands.

Our fine Chemistry Services and Intermediates business continues to deliver solid profitability, normal seasonality drove our crop protection business up nicely on a sequential basis, and also up, compared to the first quarter of 2010 when customer inventory corrections negatively impacted revenues. Our Custom Service business continues to do well and we expect even stronger volumes next quarter and in the second half of this year. All in all fine chemistry is on track to achieve exceptional profit and margin growth in 2011 and is positioned for very attractive long-term growth as we begin turning on our additional Bromine capacity in 2012. Our results this quarter demonstrate combined strength of our people and our portfolio, fantastic progress and a great start to 2011. And with that I'll turn it over to Scott.

Thank you John and good morning everyone. Before I get into the financial highlights, I'd like to say how pleased I am to have joined Albemarle and to be part of this talented group of people. I am equally as excited about our first quarter earnings results. What a way to start. It certainly sets a high bar with 20% revenue growth and 55% EPS growth. As CFO, I look forward to helping drive the growth, earnings and cash flow of the Company and to further increasing shareholder value. I also look forward to working with all of you and to meeting many of you at our Investor Day next month. Let's turn to the results.

Once again, Albemarle set a new EBITDA record of $171 million for the quarter, up 45% from $118 million last year. Our EBITDA margins are up 430 basis points year-over-year to 25%. This EBITDA is generating ample free cash flow to fund organic growth, capital investments and strategic acquisitions while delivering returns to shareholders. This quarter we increased our quarterly dividend by 18% to an annualized rate of $0.66 per share. Cash flow from operations this quarter was $47 million. This includes $52 million of pension contributions made in the quarter that we told you about during the last quarter's call. So, excluding pension contributions, we generated $99 million this quarter, more than double the $45 million generated in Q1 2010 on a comparable basis.

Net working capital increased by $52 million, net of foreign exchange from year end due mainly to the business upturn. This is only a 10% increase in working capital in a quarter where revenue was up 15% sequentially from the fourth quarter. Our past due balances continue to be well controlled and we stay focused on inventory management to optimize our cash flow. Capital expenditures for the quarter were $32 million as we invest for growth in Korea and Jordan and continue to de-bottleneck our plants to produce at higher capacity levels. We now expect full year CapEx to be near $150 million, reflecting an increase from our expansion investment in Jordan.

Depreciation and amortization in Q1 was $23 million and is on pace with our full-year expectation to be at or near $100 million. We also paid $10 million this quarter to the Albemarle SABIC joint venture as part of our already agreed investment. Our effective tax rate for the quarter was 24.2%, down slightly compared to the first quarter 2010 rate of 24.4% excluding specials. At this time we expect our full year rate to approximate our first quarter rate as we continue to benefit from higher profitability in lower tax countries. Unallocated corporate expense in Q1 was $24 million and is in line with our expected orderly average for this year. This is a $7 million increase and is an indication of our response to the growth opportunities before us. We ended the quarter with $441 million of cash and equivalents and net debt of $299 million, excluding $28 million of non guaranteed debt from our JBC joint venture.

Our debt to cap ratio was 31.7% and our net debt to cap ratio is 16%. Both are slightly down versus the prior quarter, due to debt reduction and strong profitability. Our average -- our weighted average interest rate for Q1 was 4.76% Which is about 140 basis points higher than the Q4 average rate, driven by an increase in our average floating-rate. Approximately $56 million of our debt is floating and $712 million is fixed rate. Roughly a 7%, 93% split. Our weighted average floating rate at March 31 was 4.52% up 225 basis points versus year end. This increase is attributable to the repayment of all of our US revolver debt in the fourth quarter last year. Leaving most of our floating rate debt at subsidiaries located in countries where borrowing rates are higher than average. Our average fixed interest rate stayed at a constant 4.8%. We are obviously pleased by our performance in the quarter and are eager to take our company to the next level of profitability in 2011. The same fundamentals that drove our 2010 performance and our first quarter 2011 performance combined with favorable end markets will provide a solid foundation for us to seek our ambitious earning goals for 2015 which we will share in detail at our investor meeting on May 3. With that I will hand it back to Sandra for Q&A.

Thanks Scott. Gina, let's open it up for Q&A please.

Thank you. (Operator Instructions) Please standby for your first question. And your first question comes from the line of PJ Juvekar of Citigroup. Please go ahead.

Yes, hi good morning. (multiple speakers) Hi, good morning. I think on the call you mentioned that bromine prices in China have surprise $4000 per ton level. Is that a spot price or a contract price? And at this price can more Chinese capacity startup?

Look, I will start that PJ. Maybe ask John to give some color. But China tends to be a spot market and so you don't tend to have these long-term contracts because it's so distributed. So, broadly speaking that's a current price, in China. The -- we are clearly at $4000 a ton I mean there's other options available but as we've talked before regarding bromine, there is no market for bromine really, it's all the derivatives market that really drives this business. And that technology is pretty hard to practice and it's hard to manage. And that's what we do. So I guess I'm not very concerned about $4000 inviting more people than say $3000 would. What is open and current concern is important to us, is that we satisfy all of our customer needs and we are working very hard to keep doing that through this period of bromine tightness.

But, PJ I think because of the dilution effects in China are quite dramatic, we really don't see any additional capacity coming on. Could be some consolidation in that arena, but we don't see additional capacity coming on.

And just further on electronics, you know LCD business seems to be slowing a bit and then you got the Japanese earthquake, that seems to have impacted at least the supply chain in electronics. So do you expect an impact in second quarter, given that most of your Jordan bromine goes to Asia?

You know, PJ I think we reported $0.01 or $0.02 here in the comments a few minutes ago. As best we can tell right now that's kind of a run rate impact. We're not seeing a huge ripple effect impact and that's what our customers are telling them. They're all very quickly back up and running and seem to be running pretty well. I understand the automotive may be a bit stronger but so far we are not seeing any impact of that primarily. Of course, we sell in the US and then in Europe so that's not been big. Our Korean customers have reported some volume pickup, and so there me be a little bit of geographical shift in supply chain over there and even some Chinese customers we have, have reported some pickup. So, I think this is going to be, at least for Albemarle Corporation, reasonably modest impact.

And PJ this is John Steitz. I'd just add to build on that, is you know, we are well into hopefully a recovery period there in Japan. But April has started out very robust for us in the electronics market place. So, we seem to have really worked through that issue.

Alright, so not a huge impact?

Not a big impact PJ.

Thank you.

Thank you.

Your next question comes from the line of Dmitry Silversteyn with Longbow Research. Please go ahead.

Good morning guys and congratulations on getting out of this black so quickly and so well.

Great thanks Dmitry.

I guess kind of the obvious question on margins. Number one on the polymer solutions business, you had a year-over-year growth in revenues of about $40 million, and I'm rounding off here, and you had a margin growth or a profit growth of $30 million. So, you mean, I'm assuming your contribution margin is not 70% or 75% so what kind of -- how did you do it and what should we look for margins in that business going forward and perhaps you can expand that to the catalyst business as well which seems to be setting new records for margins?

Dmitry those are some very broad questions but let me, I'll ask Johnnie to get into the details in a minute. But let me just say that you know Albemarle has done a really good job over the years of moving up the value chain. So, you're seeing a combination of our continued ability to get better and better products to our customer which drive our value to them you know in conjunction with or in combination with that the broad business team makes sure we get our fair share of that. And that has put us in a position really to drive these higher margins. And we broadly feel pretty good about our margin base that we have today so John?

Yes Dmitry. I have thought a lot about this question and it used to be we considered a real high watermark to be 20% in these businesses. And probably slightly less than that in fine chemicals. But, I really believe we are going to continue to raise this bar and especially chemicals industry is really unique and adds tremendous value. And I think as we look at the situation, out longer term, you know, something that begins with a three for our catalyst and polymers business is really insight. So we have some unusual effects of rare Earth this year. So, we have some unusual effects of rare earth this year and as Mark said, that's 300 basis point issue on margins in catalyst. But overall, longer term, were looking for 30% margins from our really value adding businesses of catalysts and polymers. And I would add that with our success in fine chemistry in both fine chemistry services and our performance chemicals business, we are really going to set up site of longer-term in the 20% to 22% range. So, we are pleased with the success but want to build on it.

Got it. Got it. Okay thank you. Second question on the pricing components between the polymer additives and the fine chemicals. We've seen about a 20% increase in pricing in polymer additives and about 7% in fine chemicals now. You know, bromine in derivatives about two thirds of fine chemicals so let's say that business went up about 10% and the custom synthesis business was flat. But that still doesn't explain, I mean it doesn't explain, what I'm trying to understand is you are getting pricing in polymer solutions it looks like, way above the price increases in bromine. So is that a mix factor or is that a strictly price factor?

Yes to answer that question you really have to go into the, into the mechanics and the details. But generally, year-over-year in polymers, where prices up on an apples to apples basis about 20%. And close to double digit sequentially. And that is really, you know when we look at that whole portfolio, as Mark said earlier, it's really in the derivatives. Because bromine itself is such a tiny piece of the total equation. You know it's less than 5% of our volume across the company. So in fine chemistry, I think the success there is two factors. Really our new products machine and new applications of bromine and to food safety, mercury control, SOx and NOx emissions and, and also the rebound that we have been hoping for in clear brine fluids. And that seems really to be sustainable.

Okay. Okay. Okay but that's a , I guess the final question in polymer solutions you saw a little bit of a volume decline there on a year-over-year basis. Was that just you know a strong comp that you're going up against (technical difficulty) a year

That's a good question Dmitry. Let me kind of explain that just a little bit because it's a bit complicated. First, the biggest part to the year-over-year decline in volumes that you see was really in mineral. And in the first quarter of 2011, we had really, the majority of that impact was one major customer who went through a pretty significant turnaround. And they are back running now and going extremely hard. So that volume will, will come back to more normalized levels in the second quarter. The other impact that we had was primarily a fairly large tetrabrome customer who held off purchases in the fourth quarter of '09 and really stepped up at pretty extraordinary levels in the first quarter of '10. Now sequentially our volumes in 2011 are improving back to where we saw it. And as we anticipated, sequentially from the fourth quarter of '10 to the first quarter of '11 we saw it, you know, the business rebound strongly volume wise. And that has continued. So if you look at the second quarter, our volumes are going to be better than the second quarter of last year and better sequentially in polymers.

Thank you very much. I'll go back in que. Thank you.

You're welcome.

Thanks Dmitry.

Your next question comes with a line of David Begleiter with Deutsche Bank. Please go ahead.

Thank you good morning.

Good morning David.

And David just for the record I'll say Begleiter.

Thank you very much. And Mark and John on the new bromine capacity is it now sold out and will you guys be sold out until mid-2012 until Jordan comes on stream?

Hi David this is Luke. Right now we are running our total capacities of bromine ether and we are allocating that, that bromine as best we can to manage the needs of our customers and the expanding business uses we have. The new larger doubling of the capacity that I said will come online in 2012 and we will manage that appropriately in the interim, to service the customers needs and drive the value of the Corporation.

And I think higher bromine ether price is there any evidence of demand destruction or new source of supply, i.e. seawater potentially coming on here?

David this is John. I will talk about that for a minute and turn it over to Mark. You know, I think the real issue there is, is explaining and making sure our customers understand the level of investment we're putting in this business. The raw material inflation that we are living with. And continuing to drive the value of our products in use. Because they take really inexpensive polymers and add a lot of value to them. So to answer your question, no we haven't seen demand destruction. But a lot of our time and energy is dedicated to making sure our customers understand the situation.

And just lastly on FCC's real pricing over and above the surcharges can you talk about that element in the quarter?

David, John again. FCC, this rare situation is, is just one of the most amazing things I've experienced in my career. We are, we are dealing with a really difficult, complex situation there. And I'd say in pure FCC pricing, beyond rate earth, that's really not happening, because we are just so occupied with this rare earth situation. I mean it is changing every week. We are dealing with it extraordinarily well. We don't have a choice. But it's really occupied all of our thoughts and energies right now.

Thank you very much.

Thanks Dave.

Your next question comes from the line of Laurence Alexander, Jefferies & Co. Please go ahead.

Good morning. (multiple speakers) Good morning Laurence. A couple of questions. First it sounds as if for most of your businesses volumes in Q2 at least appear to be on track or above normal seasonality. Is that fair?

That's correct yes.

And in terms of, can you quantify the -- what you expect is the raw material hit this year, excluding rare earth and in particular in curatives and stabilizers? Is pricing their given the current demand environment, allowing you to sort of keep up with the raw material pressure?

Let me answer that. I'm not going to break out rares and metals. But roughly half of it. So, if we're up 160 which includes about energies, five or six of that, so let's just say we're up 160. About 80 million of it is in metals and maybe 85 is in metals And, the balance of that is in the petrochemical chain really. Some in aluminum. So, that's kind of the broad split and we have been able to today to stay ahead of that, and push those prices through David. What I'm worried about to be honest, there's so much volatility right now in these markets, as you kind of don't know what you need to protect yourself against. So short-term you could see some bumps in the road with that. But all in all we've been able to manage that and I think we will be able to continue to through the year.

And then lastly, polyolefin catalyst pricing? How is that been doing?

That's been very steady. It's flat sequentially and flat year-over-year. But, very similar I'd say analogous situation, Laurence to the bromine situation. We are really derivatizing our position in organometallics to go up the value chain in other total catalyst systems, metallocene base. And really helping add a lot of value in the plastics industry. And we're focused. That's been a big, big focus for us over the last year. And we're going to talk a lot more about this May 3, at the investor conference to try to give you more detailed understanding of our efforts and strategy here.

Thank you.

Your next question comes from the line of Paul Mann of Morgan Stanley. Please go ahead.

Hi there. Just a quick question on your bromine during the quarter. Looks like one of your competitors in the Dead Sea had a number of workers on a strike during the quarter. What effect did that have -- did that have any effect on you guys at all? Does it make it easy to pass through price increases or was there minimal effect from that?

No Paul there was no real effect from that. I mean they have had from time to time strikes in Israel and those guys can manage them pretty well. So, no there's not been an impact.

Thanks very much.

Your next question comes from the line of Mike Sison with KeyBanc Capital Markets. Please go ahead.

Hey guys great start to the year. In terms of HPC, can you give us just a little bit of direction of how strong it was in the first order double-digit volume growth, single, and you know what the outlook should look like for the rest of the year?

Yes Mike, I'd be happy to give you a little -- yes it was up double digit sequentially and year-over-year. And, so we are pleased with that. We kind of expected that. And you know, this might not need to be said, but generally when we see strong quarters like we have in HPC, there's a much weaker offset in FCC. Because of the entire refinery tends to be in a turn around mode. We see in the second quarter, slightly weaker volumes but will probably up a bit year-over-year in the second quarter. And then right now, we're seeing a very strong third quarter, fourth quarter is a little bit too far out now to predict at this point.

Okay.

But the HPC volumes we are pretty pleased with. We try to describe this issue around, you know, we're finding margins improving, and I think that's a real good thing.

Got it. And then in clear brines, when, did you see, some of the pricing in the first quarter or is it going to flow-through a little bit more in your P&L as the rest of the year unfolds?

Yes. Yes, we did see some improvement in volume and mix there. Which is good. So we had, in that business in the first quarter, both volume improvement and pricing improvement. Looks like that will continue. Our volumes are back to a pre-recessionary levels and obviously the pricing traction is there. So we are actually pleased. We have been through a real drought in that business and it's good to see it come back.

Okay. And then when, when you think about the pricing that was achieved in the first quarter, looks like $67ish million or $68ish million in pricing. How much of that was sort of bromine related? And how much of that was related to offsetting you know, just regular price inflation for raw materials?

Yes, you know if you look at the rare earth impact. That's probably the biggest single piece.

It's mostly price -- it's mostly inflation offset.

Okay.

Bromine was positive but it wasn't the majority of it.

Got it, and last question. Of the 160 that you are forecasting for 2011, how much of that hit in the first quarter?

About 20, mid 20s I think.

Mid 20s. So the rest of it's coming pretty -- in the second and third?

Yes. And the rare earth situation changes literally everyday.

Probably we will be in the 40s probably 45 or so in the second quarter.

Okay great thank you.

Thanks Mike.

Your next question comes from the line Bob Koort with Goldman Sachs. Pease go ahead.

Thanks good morning. (multiple speakers) Good morning Bob. I've got two questions first, Mark if you had the chance to sign the Centura arrangement today, would you do it given how much better profitability in the industry's developed over the last -- well since you've signed that deal?

Yes. Yes I would.

And then secondly, what do you do for an encore here? Obviously you are spending some money in your core positions, but do think there's of skillset at Albemarle that can find some assets that maybe don't have 20% to 30% margins that you could improve? Or is it just the function of the businesses you're in and the way you've executed, lends itself to these particular areas?

Well, Bob when we -- we'll get into this in pretty good detail in a few weeks, but with our investors presentations. But let me -- let me talk to that. Albemarle has done a really good job moving our technologies into adjacent areas so we can continue to remake ourselves. You know, last year was 28% of our sales were from new products that were last five years was 30%, the year before that it was 28%. The year before that. You know, this Company's being remade on a three to five year kind of basis. And I have never seen the kind of opportunities, the technical opportunities and commercial opportunities that are in front of us today, to push these technologies. So there is a good traunch of organic growth that is going to carry us through the next -- the next five years. And that number is probably in the 10% to 13% to 14% kicker kind of range, just organic growth. And you add on top of that the ability to bring in a strategic M&A opportunities and you push that to then 13% to 15%. Kind of (inaudible) numbers. And that's a process where we are -- you know, that's where we're really focused.

So, this continued remake of the Corporation both organically and supplemented with M&A has been the reason we've doubled every five years and it'll be the reason we double again over the next five years. Now, now we look at M&A it's hard to -- it's hard to predict that you can go out and do a big deal. And we have worked a lot of big deals and we continue to work hard on bigger deals. But to be really honest, they're structurally very difficult to do. There's people other than Albermarle that have cash out there so there's not a shortage of cash on the balance sheet for companies. And if they're bigger than we are then they're all cash in them, so I'm a little bit pessimistic on our ability to do a big deal. Not that we're not going to try and have one that makes sense. It's just hard to do. So that pulls you down to smaller deals and bolt on, what I call technology arenas, are areas that we're really focused in today. And I think as this your unfolds you'll see some activities there that will help reinforce this push of our technology foundation and commercial foundation, but the combination of those things is what we have been doing. And while we have had this success over the last decade and it's probably going to replicate over the next five years.

And Mark, not withstanding a nice pop today, you know, your stock really hasn't done much this year, and the multiple might sort of betray how strong your margin structure is. So, when you guys have board level discussions about you know market appreciation for what you're doing, do you think the market gets that? Or if they don't get it what don't they get?

Well, I don't think we are really feeling the love like we should feel the love Bob if that's what you're saying. And it hurts my feelings. So we do talk about that. I think you know what remains a bit of a challenge for Albemarle is to really explain our technology foundation and how it draws value. So, you're going to see a lot of effort this year for us to do a better job with that. You know, people tend to look at us a bit simplistically and so maybe that -- maybe that has an impact. But you know when you start, you know generating the kind of track record we have been generating for a number of years here, we are you know getting better and better traction everyday so I think it's just a matter of time before we get that proper recognition.

Great thanks very much.

(Operator Instructions) And your next question is from the line of Steve Schwartz, First Analysis Securities. Please go ahead.

Good morning everyone. John I think on the last conference call you talked a little bit about the dynamics around an antioxidant curative campaign that got pushed into the first quarter. Can you -- can you give us an update on how that might have impacted the results?

Yes. That helped a little bit. That particular product is doing really well for us Steve. And we had a campaign, the revenues on it are going well. And that won't occur in the second quarter but it probably will return in the back half of the year. Probably the third quarter. We are running that asset. The reason we wanted to campaign it is we got some other actually fine chemistry products we're running in that asset. And it's going, still going hard now. So that will help offset some, You know, I mentioned the seasonality in fine chemistry in the first quarter. But this new product, production in the second quarter will help fine chemistry. But polymers overall is starting out the second quarter pretty strong. But it was probably you know $0.03 to $0.04 favorable in the first quarter.

Okay. And in that, in the fine chems business John, you mentioned ag intermediates, I think you're one big customer there curtailed purchases in the first quarter last year and then the fourth quarter of last year. So it sounds like they are back, and buying according to their normal seasonal patterns and volumes?

You bet. Steve, that's right they're back.

Yes. Okay. And then just one last one on the 2012 Jordan expansion. Can you talk a little bit about how you expect to distribute that volume among what businesses?

Well the businesses would be across the facilities that we've announced at Jordan, we have a tetrabrome plant and we have clear completion fluids and we have bromine and a few others. So, the value will go into those to the extent that we need to move that bromine to additional facilities to put into other derivatives. We have (inaudible) as well to allow us to do that. So, right now it would be bromine, clear completion fluids and tetrabrome. But we'll have the ability to move that volume to meet the needs of other derivatives if we needed to.

Okay. So would it be what, if you could help me out with some numbers Luke, you know, what it be just simply 50-50? I also know you have a potential opportunity with brominated AC in China and some of the trials they're doing there. So can you give us maybe more of a quantitative split?

From a quantity split. It's hard to say right now. Right now today I would tell you that if you double that capacity of tetrabrome, it would use up maybe half to two thirds of that quantity of bromine. And what you have to remember we operate in Jordan as well as in Magnolia. So as tetrabrome more tetrabrome production moves from Magnolia to Jordan, that also frees up bromine in Magnolia to move to some of our other derivative products there. That allow us to service all of our customers needs better. So we will manage that global supply in a way that we allocate the bromine to meet our customer's needs and drive the highest profitability we can for the corporation.

Okay, got you on that one Luke. One then just one last one for John. Or I'm sorry Scott. But, as far as SG&A spending levels of the $73 million. A little bit light relative to the level of sales. What can we expect going forward?

Well, I think we are at about the level that we'd expect going forward. I mean, we have seen an increase year-over-year there in both our selling and R&D, both staffing and costs. And so, but I think we are at the level we expect going out for the rest of the year.

Okay that's great. Thanks everyone.

That concludes the Q&A session. I would now like to turn the call back to management for closing remarks.

Thanks Gina. Thanks everyone for participating on the call. If you have any further questions you may contact me at the number indicated on the press release Have a great day.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a great day.