雅保公司 (ALB) 2015 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the first-quarter 2015 Albemarle Corporation earnings conference call. My name is Matthew and I will be your operator for today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session toward the end of this conference. (Operator Instructions) As a reminder, this call is being recorded for replay purposes.

And now I would like to turn the call over to Mr. Matt Juneau, Senior Vice President, Corporate Strategy and Investor Relations. Please proceed, sir.

Thank you and welcome, everybody, to Albemarle's first-quarter 2015 earnings conference call. Our earnings released after the close of the market yesterday and you will find our press release, earnings presentation, and non-GAAP reconciliations posted on our website under the investor section at www.Albemarle.com.

Joining me on the call today are Luke Kissam, Chief Executive Officer; Scott Tozier, Chief Financial Officer; Silvio Ghyoot, President, Refining Solutions; Joris Merckx, President, Chemetall Surface Treatment, and Michael Wilson, President, Performance Chemicals.

As a reminder, some of the statements made during this conference call about the future performance of the Company may constitute forward-looking statements within the meaning of federal securities laws. Please note the cautionary language about forward-looking statements contained in our press release. That same language applies to this call.

Please also note that our comments today regarding our financial results exclude all nonoperating or special items and reconciliations related to any non-GAAP financial measures discussed may be found in our press release or earnings presentation, which are posted on our website.

With that, I will turn the call over to Luke.

Thanks, Matt, and good morning, everyone. I will begin the call by commenting on the Company's first-quarter results and accomplishments. Scott will review select highlights related to business segment performance and financial results. And I will end by providing some updated perspective on our full-year outlook. At the end of our prepared remarks, Silvio, Joris, and Michael will join Scott and me to address your questions.

Scott will discuss complete Company results in just a few minutes, but to start the call, I would like to focus on the first-quarter performance of Albemarle's three GBUs -- performance chemicals, refined solutions, and Chemetall's surface treatment. On a constant currency basis, with the first quarter of 2014, these businesses delivered revenue growth of over 4%, including the 12 days of unreported January sales for the former Rockwood businesses. On the same basis, adjusted EBITDA grew by over 6% in the quarter.

We are very pleased with our start to 2015, which demonstrates the resilience and margin power of our businesses and our ability to cope with challenges in some of our key markets and currency headwinds caused by the strengthening US dollar. Indeed, the combined adjusted EBITDA margins of our three GBUs was 28% in the first quarter of 2015.

Scott will talk business segment performance in more detail and will help reconcile to the reported numbers, but at a high level, performance chemicals had a strong quarter in all segments with our lithium and performance catalyst businesses both showing strong improvement versus the first quarter of 2014 pro forma results, and our bromine businesses delivering a solid quarter that exceeded our January expectations. Chemetall surface treatment showed excellent growth on a constant currency basis with both volume and price improvement compared to the first quarter of 2014. Refining solutions was weaker than expected, driven by weakness in clean fuels technologies, related to delayed changeouts, weaker mix, and fewer first fill opportunities.

After closing the Rockwood transaction on January 12, we continued to make strong progress toward all of our key 2015 objectives. First, our integration team has already initiated projects that deliver $40 million of synergies in 2015 and we are confident that we will achieve our full-year 2015 goal of $50 million through ongoing projects. The $40 million in 2015 savings will become $48 million of full-year savings in 2016, putting us s well on our way to our $100 million target for 2016.

Second, our businesses are already being run in a structure consistent with the global business unit realignment announced in January. This new structure is helping to increase our market focus and push the organization to capture additional synergies.

Third, our first-quarter adjusted EBITDA, free cash flow, and net debt only increased our confidence in our ability to rapidly delever in line with our target of 2.5 times net debt to EBITDA by the end of 2017. Consistent with the confidence in our cash generation power, we increased our dividend by 5% to an annual rate of $1.16 per share in February, marking our 21st consecutive year of dividend increases.

As a result, in February, we were proud to be added to the S&P high-yield dividend aristocrats index that recognizes companies with 20 years or more of increasing dividends, a streak we expect to continue.

Finally, we have kicked off the planned divestitures of minerals, metal sulfides, and fine chemistry services, which will allow us to focus completely on our key businesses and will accelerate debt reduction. All three processes are well underway and we are seeing strong interest in all three businesses. With that, I will turn the call over to Scott.

Thanks, Luke, and good morning, everyone. First of all, before getting into the numbers, let me remind you that we are now reporting in our new organization structure, which became effective in the first quarter. Our businesses are now aligned and operating in three global business units, refining solutions, Chemetall surface treatment, and performance chemicals.

Refining solutions includes our heavy oil upgrading and clean fuels technologies catalyst businesses. Chemetall surface treatment will continue its focus on the pretreatment of metals. And finally, performance chemicals is comprised of the bromine, lithium, performance catalysts, and curative businesses.

This realignment should accelerate growth and focus even more attention on the identification and achievement of both strategic and cost-based synergies.

We released an 8-K in April, detailing eight quarters of pro forma financial results for 2013 and 2014 for the combined Albemarle and Lockwood businesses in the new reporting structure. This will allow for a better understanding of underlying business trends.

There are two items of particular note that I would like to address. First, the all other category reflects the businesses' plan for divestiture. Minerals, metal sulfides, and fine chemistry surfaces.

Second, the corporate line item includes foreign-exchange gains and losses related to cash balances and various legal entity accounts. Historically, this has not been significant, but with the acquisition of Rockwood, there was notable impact in the first quarter as I will talk about.

As a reminder, our year-over-year financial comparisons will be based on pro forma 2014 results as shown in that April 8-K to facilitate a cleaner comparison. Overall, for the first quarter, we reported all in diluted earnings per share of $0.40 or $1.17 per share, excluding special items.

There are a number of one-time special items during the quarter. The largest of these related to that Rockwood acquisition. The inventory step-up resulted in a pretax charge of $48 million or $0.34 loss per share after taxes. And one-time acquisition and integration costs resulted in a pretax charge of $59 million or a $0.39 loss per share. A full reconciliation is in the press release.

Net sales totaled $884 million and adjusted EBITDA was $266 million for the quarter. While profitability as measured by adjusted EBITDA margin improved to 30%, EBITDA sales were down 7% compared to the first quarter of 2014. The stronger dollar impacted our results by reducing sales by $41 million and adjusted EBITDA by $14 million with most of the impact from the euro and the Japanese yen.

Another unique item in the quarter was a gain of $52 million in EBITDA or $0.36 per share, driven by a non-cash foreign-exchange gain related to cash held in foreign entities after the acquisition and before we paid down our bridge loans. Our European entities held a significant amount of cash in US dollars and the drop in the euro during the quarter created an accounting gain. The situation has always been in our numbers, but never to this magnitude, which was driven by the combination of the amount of cash on hand and the steep drop in the euro.

Additionally, the year-over-year comparison was impacted by stub period sales for the former Rockwood businesses that are not reported in our Q1 results. The 12 days in January that represents the stub period would have increased total Company revenue by $33 million and adjusted EBITDA by $3.4 million.

If I normalize our results for the impact of foreign exchange, the non-cash foreign exchange gain, and the Rockwood stub period, sales would have been up slightly and adjusted EBITDA would have been up by 7%.

We now expect our effective tax rate excluding special items, nonoperating pension and OPEB items for 2015 to be about 26%, again driven by the level and geographical mix of our profits, including those generated as a result of the recently completed Rockwood acquisition. While this is a bit higher than what we expected in January, it is fully within the range of our acquisition modeling.

In January, we forecasted capital expenditures in 2015 to be close to the top of the 4% to 6% of revenues that we expect to spend on capital over the next few years, with completion and startup of the La Negra lithium carbonate expansion in Chile, one of the items pushing capital to the top end of the range. As we work to complete this project, we now see a need to spend additional capital that could push us a little over that 6% of revenues in 2015.

Free cash flow defined as cash flow from operations, adding back pension and postretirement contributions and subtracting capital expenditures, was about breakeven in the first quarter at a negative $5 million. 2015 will have a number of moving parts and one-time charges as we work through the integration and acquisition-related projects.

In the first quarter, there were about $100 million of these one-time cash outflows, including various transaction fees. Despite the changes in tax rate and capital, we remain on track to be within our January guidance of $100 million to $200 million of free cash flow for the full year. Excluding the one-time items, our full-year free cash flow will be between $450 million and $550 million, demonstrating the tremendous cash generation of our businesses.

In addition, we are working to update our working capital targets. We believe there is substantial upside in this area with opportunities in both the legacy Albemarle and Rockwood businesses. We closed the quarter with working capital at just under 25% of revenue and our long-term aspirations are to reduce this to about 20%, which represents a substantial cash opportunity.

There are a number of complicating factors but we will work to develop initial targets toward that 20% aspiration over the next several months.

At the end of Q1, Albemarle's net debt to EBITDA ratio as measured by our bank covenants was 3.6 times. As the full impact of the acquisition rolls into our leverage ratio, I expect net debt to EBITDA to creep up toward 3.7 to 4 times by year-end before any help from the divestitures.

We are focused aggressively on deleveraging based on our strong cash generation, disciplined capital, and cash management, and by delivering on our synergy targets. We are seeing a high level of interest in the three businesses targeted for divestiture and our goal is to complete these by year-end and the proceeds will be used to drive additional debt reduction.

Our initial guidance of $40 million to $50 million of adjusted EBITDA risk related to foreign exchange was based on the US dollar to euro range of $1.12 to $1.18 and a Japanese yen-US dollar range of 117 to 121. While the yen remains in that range, the strength of the dollar against the euro has created additional foreign-exchange risk. And based on that adjusted expected US dollar to euro range of $1.04 to $1.12, our adjusted EBITDA risk has increased to $50 million to $60 million on the full year.

Now, let me turn to business unit performance in the first quarter. Before I address our three GBUs, note that we had a weaker start to the year in some of the businesses planned for divestiture, which negatively impacted both revenue and adjusted EBITDA. Refining solutions reported first-quarter net sales of $179 million and adjusted EBITDA of $42 million with adjusted EBITDA margins of 24%. On a costing currency basis, sales and adjusted EBITDA were down 3% and 23%, respectively. About 5% of that EBITDA declined related to higher freight costs as a result of the West Coast port strike as we spent more on freight to ensure our customers received their products. The decline was driven primarily by clean fuels technologies and, to a lesser extent, by an elevated number of commercial trials and heavy oil upgrading as we discussed in January.

Heavy oil upgrading business performance was in line with expectations and we do not expect ongoing impact from these customer trials. Our expectations for the year in heavy oil upgrading remain unchanged with both volumes and profits expected to increase versus 2014.

In January, we noted our concern that low oil prices created risk to our clean fuels technologies forecast. That concern was borne out in the first quarter as clean fuels technologies saw a more negative EBITDA impact than initially expected from delayed change outs, weaker mix when compared to 2014's unusually strong mix, and fewer first fill opportunities.

As a result, we are now more cautious on the outlook for clean fuels technologies in the remainder of the year and we expect 2015 EBITDA to be down versus 2014.

Clean fuels technologies remains a lumpy business and while there may be some near-term impact, especially associated with the delayed change outs and a low oil price environment, on a long-term basis, this business should continue to perform and grow.

Performance chemicals reported first-quarter net sales of $388 million and EBITDA of $131 million with EBITDA margins of 34%. On a constant currency basis, sales were up 3% and EBITDA was up 17%. Normalizing for the equity income from the Talison JV, which closed in the second quarter of 2014, EBITDA was still up 10%. The improved earnings in margins were driven by a combination of improved PCF sales and volumes in improved sales in our lithium business.

Excluding the negative impact of foreign exchange, and including the stub period in the results, lithium revenue and EBITDA were up 17% and 34%, respectively, compared to the first quarter of 2014. The primary performance drivers were pricing improvement, and the impact of the Talison JV, which delivered stronger-than-expected equity income on strong volumes and margins for technical grade spodumene. We continue to be bullish on the outlook for battery grade products.

Note that the portable electronics market grew 10% to 12% in the quarter and the growth in battery, electric vehicles continued with global sales up more than 25% compared to the first-quarter 2014. Year-on-year comps were also impacted by the large butyl lithium customer lost in the second quarter of 2014.

Overall, the lithium business continues to perform well, meeting or exceeding the expectations we set at the beginning of the year.

On a constant currency basis, bromine-related sales and adjusted EBITDA were both down 4% but were above our January expectations. Completion fluid volumes were better than expected in the Gulf of Mexico and we also benefited from deepwater fracking sales there as well.

These two factors helped to counter weak completion fluid volumes in the rest of the world.

Brominated flame retardant volumes continued to improve as did volumes in a number of other brominated derivatives. While pricing was down year over year in the quarter, it was sequentially stable and while still early, we are seeing encouraging price and volume trends in this business, even if our outlook for the year still remains down compared to 2014.

Finally, performance catalyst solutions, which also includes curatives for reporting purposes, had a very strong quarter as the polyolefins market continued to show steady global growth. And we benefited from some one-time sales as well as timing of customer demand for a key catalyst component. Net of foreign exchange impact, sales were up 17% and adjusted EBITDA was up 65% year over year.

In addition to the customer wins, low raw material costs and improved plant utilization benefited the quarter and helped to counter ongoing price pressure in the base organometallics segment.

Chemetall surface treatment net sales were up -- were $192 million with adjusted EBITDA of $46 million, resulting in margins of 24%. Excluding the negative impact of foreign- exchange, and including the stub period, sales and adjusted EBITDA were up 8% and 11%, respectively, compared to the first quarter of 2014.

Surface treatment is continuing to benefit from broad-based volume growth and pricing gains in most end markets, particularly driven by higher sales in automotive OEM and automotive components, general industry, coil and aerospace applications. Overall, market dynamics remain favorable with continued opportunities for bolt-on acquisitions, similar to the recently concluded acquisition of our partner shares in our Shanghai JV.

Now, I will turn the call over to Luke to talk about our guidance.

Thanks, Scott. In January, we projected 2015 adjusted EBITDA of $875 million to $965 million and adjusted EPS of $3.15 to $3.70 with an earnings cadence of 40% in the first half and 60% in the second half of the year.

As you have heard from Scott, in the first-quarter 2015, our overall business performance exceeded expectations generating adjusted EPS of $0.81 per share, exclusive of the non-cash FX gain that Scott explained. A great start to our year.

One month into the second quarter, we expect continued solid results from the three businesses -- bromine, lithium, and performance catalyst solutions -- that make up performance chemicals. Similarly, Chemetall surface treatment continues to meet our expectations.

Refining solutions is mixed. Heavy oil upgrading, our FCC catalyst, should deliver volume growth in line with our January forecast. However, volumes and profitability in clean fuels technology will be more negatively impacted by delayed changeouts, fewer first fill opportunities, and negative mix than initially projected.

Combining all of these factors, we are more confident in our 2015 outlook and now see adjusted EBITDA in the range of $935 million to $1 billion, including the FX gain related to the US dollar cash on hand at the completion of the Rockwood acquisition. On an earnings per share basis, this results in updated guidance of $3.65 to $4.05 per share.

This improved outlook reflects the strong first-quarter results as well as our confidence in business forecast for the remainder of the year and in our ability to overcome the additional headwinds we face from a strong US dollar, low crude oil pricing, and weaker clean fuels technologies performance.

Due to the strong first quarter, and to better-than-anticipated volumes in our oil field completion fluids business in the Gulf of Mexico, our projected earnings cadence is now less tilted toward the second half of the year than initially forecasted. While we still expect higher operational earnings in the second half of 2015 compared to the first half, especially in refining solutions, the projected EPS split, with the inclusion of the foreign exchange gain previously noted, is now closer to 50%/50% than 40%/60%.

As we look to the rest of 2015, we see the same macro issues that have impacted us year to date -- strength of the US dollar, sluggish global economy, and crude oil pricing continuing to be major factors. Just as in the first quarter, our focus will be on what we can control. And you can expect disciplined operation of our businesses and our assets, strong cash management, and a continuing push to deliver on our integration and synergy targets.

In closing, while we are only one quarter into the year, I believe our first-quarter results underscore the earnings power of the new Albemarle and demonstrate our ability to deliver results regardless of the business environment. I am more excited than ever about the combination of Albemarle and Rockwood and our ability to delivering increasing shareholder value through our industry-leading businesses.

Operator, we are ready to open the lines for Q&A. But, before you do so, I would remind everyone to please limit your questions to two per person at one time so that everyone has a chance. And feel free to get back in the queue for follow-up if time allows. Please proceed.

(Operator Instructions) Bob Koort, Goldman Sachs.

I was wondering, Luke, if you could talk a little bit on the bromine side. You mentioned some improvements and encouraging trends, but not really changing your view yet. Is that just a function of maybe once burned, twice shy, or what is the reason for the greater conservatism maybe (technical difficulty) production issues in the industry get rectified? Why not a little bit more bullish?

Yes. I think that we are seeing positive trends -- and I will let Michael comment on some specifics, but we are seeing positive trends across the pricing front. We are seeing positive trends on volume, but we also understand that the operational issues of some competitors is, ultimately at some point, going to come to an end. And so it is hard to gauge what will happen when that does.

So we feel very good about where we are going in bromine. This price increase is necessary for us to continue to operate assets, and we are not going to chase volume. So we are going to lose some volume in accordance with this pricing announcements, we expect that. It is built into what we expect to do for the rest of the year, but we are in this for the long term.

And so don't hear in our comments a hesitancy in what we are doing is right or a concern about the long-term value that these products are going to bring. We are committed to this price increase and we are going to push it through.

Bob, I guess, just a comment. We obviously got off to a very solid start in the first quarter. I think clear completion fluids were a positive surprise for us. We really benefited from ongoing activity in deep water. So I think that gave us a bit of a tailwind that we were cautionary about at the beginning of the year. So I would say that is a real positive from a volume standpoint.

We still have some caution about the second half of the year. Everybody knows that the number of drilling rigs is going down. If deepwater continues to hold up, though, I think we will be fine. I have really not changed the outlook on that since the beginning of the year.

If I think about the brominated flame retardant side of the business, we are for now, maybe two quarters in a row, seeing higher year-over-year volume growth. It is low single digits, but it is positive.

And then I think to Luke's comments on the pricing front, it is too early at this point to try to quantify any impact from that. But I am optimistic. I do believe we are seeing traction in the marketplace, which is a positive. And I can give you sort of one anecdote. The one place where prices are published publicly is in China and since the announcement that we put forward, prices in China are up about 20%. So I see all those as positive signs for our business going forward.

And can you talk on the lithium side what you see the ramp of the carbonate plant down in Chile? It seems like we are getting some positive news swell out of the EB markets (technical difficulty) [our sell]. Could you give us a sense of when you have to make a decision on the new hydroxide plant where you might have [played back] what the expense would be? Thank you.

Yes. To answer your first question regarding the capacity on Chile, nothing has really changed from my comments at our fourth-quarter call. I indicated at the time that we expected the plant to start up in late second quarter, beginning third quarter. So midyear timeframe. We are still on track for that.

But I also caution that we would not expect any significant volume benefit from that plant probably until mid-2016, just because that plant is designed to produce battery grade lithium carbonate and it is a very rigorous modification process that we will have to go through.

So we will start that plant up. We will do some campaigning of it, producing products that we will send out for qualification and we will gradually bring that capacity on.

But, we are looking forward, obviously, to doing that as we continue to see strong demand for battery grade materials. We saw that in the first quarter of this year versus last year. Battery grade product demand was probably up 20%, which is in line with the comments that were made about what we are seeing in consumer electronics and EBs overall.

So with respect to the need for lithium hydroxide, that is a decision -- an activity that we have ongoing. We have got an active project to evaluate opportunities for investment, and we have just got to work through our internal processes on the approval of that and the process of development design, decide where we are going to invest and win.

But, as I look at that market, there is definitely a need for additional capacity in lithium hydroxide and we intend to serve that.

Vincent Andrews, Morgan Stanley.

Actually, this is Matt Andrejkovics calling for Vincent. Just wanted to clarify, in the CFT catalyst business, you mentioned the risk for delays. How long can the refineries typically delay these changeouts? And is that something you might expect to get back within this year or might it get pushed out?

And then a follow-up on that. The fewer first fill opportunities that you mentioned, is that lost business maybe that you expected to get? Just maybe a little color on that would be appreciated. Thanks.

If you look at the -- I will let Silvio look at talk about it, but it really varies. I can't tell you whether it is going to move out of the year or whether it is going to move to later in the quarter. Some of them that we look at will definitely move out of the year. Some of them that we had built into the forecast for 2014 -- I mean, for 2015, have definitely moved out to 2016. Some of those first fill opportunities would be lost business.

In some instances, if our partner, we were expecting to get a fill at a period of time and it is delayed, for the quarter or for the year, it would move out. But if our partner loses that design, we would obviously lose that business.

But we clearly have further line of sight into those. So for what we are talking about today, you are seeing -- the two questions would be, one, for the first fills, it really has a mix issue because we don't get those higher value first fills that we thought we were going to get in the year, and we are completing that with some lower value products. And then, from a -- when they are pushed out, it just really depends on each refinery.

Silvio, you want to add some color to that?

Yes. Thank you, Luke. On those changeouts, which are being pushed, we have fairly good visibility on how far they are being pushed out whether it is further in the year or whether it is into next year. Some of them are pushed out. Some of them have a short-term replacement of capital with, like you said, the lower mix volume.

Thank you.

Kevin McCarthy, Bank of America.

With regard to your free cash flow guidance, I was wondering if you could walk us through some of the one-time items, including cash repatriation taxes. And on the subject of working capital, it sounds like you are taking a fresh look at that. Maybe you can update us on what you have embedded in the current range for working capital and what opportunities you might foresee there.

Yes, as you look at that range, obviously, the big movers are around the acquisition cost and the transaction costs and filing the tax repatriation cost. So those numbers haven't changed so we are still in that kind of almost $200 million in terms of the acquisition and integration costs. Tax repatriation is going to be in the 100 -- just under $150 million. Those are on track.

Tax repatriation doesn't really affect Q1 yet, but it will layer in over the next three quarters.

Working capital, as you mentioned, is an opportunity for us. We have not -- we are not anticipating significant improvement in working capital this year. However, as I mentioned in the script, certainly something that we are looking for the long term to drive. So you can expect some minor improvement for this year in generation of cash flow.

Great. As a follow-up, you have elected to leave the one-time non-cash foreign exchange gain of $0.36 in the numbers. You have been very overt and clear about what you are doing there, but maybe you can just address why you have elected to leave that in when there is a whole variety of other adjustments in the quarter?

No. That is a good question. Foreign exchange gains and losses have always been in our numbers at the end of the day. So if you go back in time in terms of Albemarle's reporting, we have always had some level of foreign exchange gains and losses. It's the magnitude of the situation that is driving obviously the fact that we have to call it out. And, in this case, we had a significant amount of cash in our foreign entities related to the transaction and it was denominated in US dollars. And with a significant drop in that euro, that created that gain in those foreign entities.

So it is really no change in how we have been reporting, but it is a large item. We would expect, as we go forward, that we would be back into the normal range of $1 million or $2 million per quarter of plus or minus and we would be right back to where we have been in the past.

Thank you for the color.

Jeff Zekauskas, JPMorgan.

Your sales adjusted for FX were down 3% in the quarter. Can you describe what your volume change was and your average price change for the Company as a whole? And that is -- interested in the organic volume and price change. I know that there is some joint ventures, but sort of move around, I was hoping you would exclude that.

With the addition of Chemetall, Jeff, volume is less impactful because it is not a volume-based business, much more of a service and a technical delivery-based service. So it is a little more difficult to break that down. We can break down as we go forward into the other businesses, but as you look at the overall Company from a pricing perspective, we saw a good price traction within Chemetall. We have seen good price traction within performance chemicals business as we have talked about. Relatively flat, I would say, in the catalyst businesses.

And if I look -- just if I could clarify, if I look at our overall revenue and try to normalize it, there is two big factors. One is foreign-exchange, as you mentioned. That is roughly $40 million impact on the quarter. There is also the stub period, Which are the 12 days that -- we did not own Rockwood at the beginning of the year. And that represents around $33 million.

So if you adjust for both of those, we are actually up 0.5% so just about basically breakeven flat.

So basically, your prices are up, I don't know, 3%? And your volumes are down 3%? Is that the way to look at the Company?

(multiple speakers) For the quarter, that is probably right. I would say maybe 2% on price on average across the Company.

For the quarter, that is right. And remember that one of our bigger volume products is FCC catalyst. And on FCC catalyst, our volume is down in the quarter because of the larger turnaround -- not turnarounds, the larger customer trials that we talked about in the first quarter.

So I would expect over the course of the year that that would even out because we expect to see nice volume, particularly in the second half of the year for FCC catalyst.

So how much was FCC? What was the volume and price change in FCC and then HPC for the quarter?

Jeff, hold on one second.

Thank you.

If I look at (inaudible) upgrading, it is down roughly for the quarter, down about 10% for the quarter. And then, for the full year, will be up. Okay. And if I look at clean fuels, for the quarter, clean fuels roughly up a hair and I would expect it to be down for the full year.

Great. Thanks so much, Luke.

David Begleiter, Deutsche Bank.

Luke, you mentioned in bromine that you might lose -- you would expect to lose some volume, pushing this price increase. To whom and where would you be losing that volume, do you think?

Well, I mean, it goes across the board. I mean, there are only so many participants out there in the marketplace so -- but, the bulk of the time in the past, any time we have raised prices, what has generally happened is we lose some volume to some Chinese producers. And so I wouldn't expect this to be a whole lot different.

Fair enough. And maybe just in lithium, talk about lithium carbonate pricing trends and potential for higher prices going forward in lithium carbonate?

Yes. I am going to let Michael talk about that. If that is okay.

For 2014, we are going to see higher prices. We are going to have higher realized prices across the lithium salts, particularly for lithium carbonate and lithium hydroxide. So that is going to be sort of mid- to high single-digit price increases on average for the full year.

The time we closed the acquisition in January, a lot of the lithium volume was already contracted on an annual basis. So there is not significant opportunities, I would say, during the course of 2015.

But, as we see the market developing going into 2016, I would certainly say I am optimistic about the outlook for being able to raise prices further.

Thank you. And, Luke, just comment on FCC pricing trends and where we stand on the overall price increase here.

Yes. Silvio, do you want to talk about pricing?

Yes. Thank you, Luke. On FCC, I do not see any downwards trend for pricing. I think everything will be holding as we have scheduled earlier in the year.

Thank you.

Dmitry Silversteyn, Longbow Research.

Changed his mind. James Sheehan, SunTrust Robinson Humphrey.

On your commentary on lithium, you mentioned spodumene doing better than expected. I think that was in the more technical grades. Can you talk about what is driving the demand for spodumene and whether you continue -- whether you think it will continue to be in the more technical grade of lithium?

Actually, it is in both technical grade and chemical grade lithium, which is used for conversion into downstream derivatives. So the way to think about it is technical grade lithium carbonate is really used in glass and ceramics. So that is GD-plus, our GDP type of growth business, is I think is the way to look at that long term. So the real volume growth is for the chemical grade, which is being used to make either lithium carbonate or lithium hydroxide, which is sold either into technical applications or into battery grade applications. In some cases, it is used to make derivatives that are even further downstream.

But that is really what is going to be the long-term driver of demand. So I think you have to look at overall lithium growth, which is probably averaging 8% to 10% per year. And we should expect that to continue for Spodumene.

Thank you. And just on PCS, you mentioned some order timing issues there. Did we shift orders forward into the first quarter from the second quarter? If you could just discuss what you think the cadence of order timing is for the rest of the year.

Well, if I look at PCS overall for the full year, our outlook is largely unchanged from the beginning of the year. I would just say that we had a much stronger Q1 than we anticipated. We are interpreting that that some volumes that might have come to us in the second quarter were pulled forward. But I don't know that with certainty.

The upside may be that volumes continue to be ahead of our expectations. But, at this point, we are holding to the forecast that we gave at the beginning of the year. So.

Thank you.

Mike Sison, KeyBanc Capital Markets.

Nice start to the year. In terms of your outlook for 2015, I am trying to gauge the cadence for upside. Given the soft start to the year, it doesn't seem that you raised the outlook for Q2 to Q4. Yet, you might have some bromine price increases. You talked pretty positively of lithium and surface treatment. So can you maybe talk through what is offsetting all the positives and is there potential for a better year, given the good start?

Sure. It is really a couple of buckets that I will put them in. First of all, we have got an additional $10 million of currency headwinds., $10 million to $12 million of currency headwinds than we did when we talked about the outlook in January. So we have got additional currency. The second thing is, clean fuels technology, the volume and profitability of that business will be weaker than we anticipated in January and it will be down year over year. So we are going to see some reductions in clean fuels.

From a bromine standpoint, the first half of the year is stronger, particularly in clear brines, than we anticipated. But, as the crude prices continue to stay at the kind of levels they are, we are getting more and more information from our suppliers in the drilling fluid, about the second half of the year being up in the air.

So we have built some of that into the original model, but you don't see the improvement that we saw in the first quarter carrying through for the rest of the year in our forecast.

So those are the big buckets that we have got that we believe we are overcoming in our other businesses to lift the bottom end of our range and hold on to what we did in the first quarter and still maintain that guidance for the year.

Got it. And then, in terms of bromine, do you need a certain level of demand or volume growth to achieve the price increases or do you feel pretty good that, given there's -- as you mentioned, there is not a lot of you guys that if you press through you will get them irregardless of some of the volume backdrop.

I guess just to reiterate what I said before, I am optimistic about our ability to get traction on the pricing increases. I recognize everybody is aware sort of that we talked about historically about capacity utilization. And there is no question that if you looked at nameplate capacity utilization for bromine, you probably have global operating rigs that are in the upper 60s to 70% now, but I think we have been communicating to customers and they recognize is that we are matching our production planning. We are matching our investments in this business to meet contracted demand for products that we are getting fair value on. And, as Luke said earlier, we are not going to chase low margin business. We are not particularly interested in the spot business.

We want to contract with customers who recognize the value that we provide in terms of our products and services. We feel it is only fair to ask for that value. That is the argument that we are making and we are resolved to push this through.

Thank you.

P.J. Juvekar, Citigroup.

This is John Hirt on for P.J. today. Given the (technical difficulty) tightness that you have seen in the bromine market that you have talked about, can you talk about the pace with which you anticipate getting pricing through and, more importantly, in terms of the impact how should we think about the timing of the impact? Do you anticipate that starting to impact you in Q2, but perhaps more of the impact in the second half?

I think the way to look at it is there is going to be a gradual thing that will occur over time. First of all, you have to realize that we have contracted volumes. So we are raising prices as contracts permit. Some of those contracts will go through the end of this year. So the opportunity to even have the discussion with customers won't happen until then.

But, that being said, I mean, some of it is happening now. I would think early on we probably see some volume that will offset some of the pricing benefits. But then, over time, I think the pricing benefit begins to overpower the volume loss. And then, we see the impact of that coming to the bottom line.

So the answer to your question is, we certainly didn't see that in the first quarter because it was late in the quarter when we announced the increase. I would expect marginal, if any, benefits in the second quarter. I think by the time we get to the end of the second quarter, we will have better insight as to whether we are really getting a significant impact in the second half. And then I think, really, where we would hope to see the benefit is as we go into 2016.

Okay. That's helpful. And then just a follow-up on Talison which you said performed ahead of your expectations. I know capacity there was doubled, I think, a few years ago. So I am curious where your operating rates are for the Talison assets and given that lithium demand has -- it sounds like it has stayed pretty resilient despite lower oil prices. I would imagine you could ramp up production of that rock base resource a little bit faster than you can on the brine-based resource.

So can you kind of just talk about that dynamic and where you are operating today? Thank you.

If I look at the technical grade product, which again is sold directly into glass and ceramic applications. And that we take through an [offtake] agreement for distribution. That is running at relatively high capacity utilization rates.

The chemical grade product, which is used for conversion to downstream derivatives, is running at about 70% of capacity. So clearly, there is headroom as market demand grows to increase that and to grow volumes.

However, much like the approach I indicated with bromine, we intend to manage that capacity in a way that we match the supply to demand. And we do that so that we are matching supply to demand where we are able to get prices that we think are fair value. So again, we are not just going to increase capacity to try to get volume growth at the expense of value.

Understood. Thanks very much.

Mike Ritzenthaler, Piper Jaffray.

In refining solutions, how does the adoption of relatively new products like AlkyClean factor into your outlook or are they just too small to move the needle?

The AlkyClean, as you remember, we had its first sale last year. That unit has been built at a tremendous speed and -- I am looking at a calendar. It is supposed to be started up in the next couple of weeks. So that will give us indication on how that new technology runs and we are confident that everything will happen as scheduled. But, as you know, new technology, new plant, there is always a little surprise.

Sure. Okay. And then, one question about the three businesses that are for sale. Should we be expecting some degree of softer performance year over year from those three businesses? And are the soft results that we saw in Q1 a function of their sale and perhaps losing customers? Or is it a list of things like -- that are end market-related. And is that impacting the valuation on those entities?

Yes. I think it values across the three businesses. I think minerals business is about right on where we thought it was going to be. Metal sulfide is down just a hair, but not too much. And the big downside is coming from custom services and what that comes from is from timing of some of the products is, they have got a tough comparison on Q1, and then as we look at the electronics business over the course of the year, some of that is moved out into 2016.

So that is what it is. It is a mixed bag. It is not anything related to the business and I don't expect it to impact the valuations because you look -- they are looking at a history of the business and the profitability of those businesses as well as the opportunity, and in custom services there is a great pipeline of products in there that really excited about. And then there are some opportunities for them to make some moves on pricing and some generics that they are working through right now.

So I think that will work itself out in the course of the year and early next year, and I expect us to be able to get the right value for our shareholders for the investment of those businesses. And if we don't, we will keep them.

[Alexei Yefimov], Nomura.

Could you comment on the difference in the outlook for HPC and FCC catalysts? It seems like lower CapEx at refineries is impacting these two products in a different way. Is there something in the nature of these products that signals that maybe the weakness in HPC is transitory or is there anything else going on?

At a very high level, when you think about FCC catalysts, and you look around where we are at the world, remember, we have got some big customers coming online this year. So we continue to have good growth particularly in areas where they are looking to maximize the propylene yield and that heavy residual. And so we feel good about that. And you will see nice growth year over year.

At the end of the day, it is all about transportation fuels. In FCC, you can think of it as a gasoline maker. People -- when you have lower energy costs; when you have lower gasoline costs, people may be driving more. So I think we will see nice continued growth in demand for the FCC catalyst and I am very confident about our technology and very confident about our ability to meet our customer needs for this year. And I think we will see that continue to grow.

On HPC catalysts, where we are stronger is in the ultra low sulfur diesel and in the distillate, and what we are seeing is, one, in the US, there is some lighter sweeter crude that is being brought to play that you don't have to use as much catalyst. And they don't have to run as hard to process.

We are also seeing, in HPC, remember it is a fixed bed so they have to shut the unit down, unload that, and shut down the whole unit and bring it back in, whereas FCC, you have a constant feed into the unit so you don't have to have that. So when they are pushing out those turnarounds, the couple of things are going on.

One, the catalyst is lasting longer. Two, the demand for those outputs that they have out there is not growing as fast as the capacity. And, three, the catalyst is just working better. So we are seeing longer turnouts and longer delays and the units are running while they can with what they have.

So it is two different drivers on hydrotreating catalysts and FCC catalysts. At the end of the day, we have got to be able to provide technology and the services and the products that help these refineries make more money. And that is what we are looking to do.

HPC is a lumpy business and we are in a lumpy spot this year For where we are the incumbent versus others. We don't have as many incumbencies coming open for turnarounds this year as we did last year or as we expect to have next year. So it is -- I am not too worried about it from a long-term standpoint, but this year is going to be challenging for HPC.

Thank you, Luke, for this explanation. In polyolefins catalyst, how do you view the sustainability of this improvement? Is this based on restocking in some of the polyolefins chains or is there something more lasting in this market?

In the polyolefins catalyst, you have a fundamental growth rate that is probably in that 4% to 6% per year. So my longer term expectations are with that.

Now, we have our downstream proprietary catalyst -- the single side catalyst that are probably growing at double-digit range. So that is inherently what is going to drive the business. I think, in the near term, we are seeing stronger demand for products so the pricing environment for some of the aluminum [alchels] still remains very competitive, particularly in certain regions of the world.

But, again, I think with the moves we made last year to rationalize the capacity with increasing demand, we are seeing that pricing begin to plateau in most regions. So hopefully, we also get to a point soon where we have some pricing leverage in that segment.

So I think as I look at across all the performance chemicals and the questions around what is happening from a pricing outlook standpoint, whether it is bromine; whether it is lithium; whether it is our PCS products, the approach we're really taking is one of operating discipline. We are going to be disciplined and how we manage capacity to be sure that we are getting good value for our products.

Thank you.

I would like to turn the call over to Matt Juneau, for the closing remarks.

Thanks, everyone, for listening and for all of your questions. Please feel free to follow up with further questions with either Zachary or me. Thanks.

Thanks for joining today's conference, ladies and gentlemen. This concludes the presentation. You may now disconnect. Good day.