Cabot Corp (CBT) 2014 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the second-quarter 2014 Cabot Earnings Conference Call.

My name is Erica, and I will be your operator for today.

(Operator Instructions)

I would now like to turn the call over to Erica McLaughlin, Vice President, Investor Relations.

Please proceed.

Thank you, Erica.

Good afternoon.

I would like to welcome you to the Cabot Corporation earnings teleconference.

Last night we released results for our second quarter of 2014, copies of which are posted in the investor relations section of our website.

For those on our mailing list, you received the press release either by the e-mail or fax.

If you are not on our mailing list and are interested in receiving this information in the future, please contact investor relations.

The slide deck that accompanies this call is also available in the investor relations portion of our website and will be available in conjunction with a replay of the call.

I remind you that our conversation today will include forward-looking statements which are subject to risks and uncertainties, and Cabot's actual results may differ materially from those expressed in the forward-looking statements.

A list of factors that could affect Cabot's actual results can be found in the press release we issued last night and are discussed more fully in the reports we filed with the Securities and Exchange Commission, particularly in our last annual report on form 10-K.

These filings can be found in the investor relations portion of our website.

I will now turn the call over to Patrick Prevost who will discuss the key highlights of the Company's performance.

Eddie Cordeiro will review the business segment and corporate financial results.

Following this Patrick will provide closing comments and open the floor to questions.

Patrick?

Thank you, Erica, and good afternoon, ladies and gentlemen.

We achieved another strong quarter of business performance and delivered a record in our performance material segment this quarter.

Volumes increased as compared to the prior year in both the performance materials and the reinforcement materials segments, as we saw the demand in our key markets improve, and we also commercialized new products and new capacity.

Purification solutions EBIT improved sequentially as a result of revenue growth and lower fixed costs.

We've been very focused on improving the profitability of the business and are seeing the results of our work.

We have been growing revenues through price increases and improved product mix, and we've also been addressing operational issues that have impacted us over the recent quarters, and I'm pleased to say that the results have been achieved in this area.

At the corporate level, we experienced slightly higher unallocated costs associated with increased project activity and an increased tax rate.

One of the projects I would like to highlight is our commercial excellence initiative.

It is a corporate project, and it is about advancing our commercial processes and tools across the Company.

With this effort, we see that we can gain a deeper understanding of the overall market environment and of our customers' needs.

And the ultimate goal is to achieve even better quality service and reliability which would -- and will lead to the improved value proposition for our customers.

On the strategic front, we announced our plans to divest our security materials business for approximately $20 million to SICPA.

SICPA is the leading global provider of security inks, authentication and traceability solutions, and services for banknotes, security documents and consumer products.

We are pleased to have reached an agreement with SICPA, and we believe that we'll be able to expand -- and we believe that they will be able to expand and accelerate the growth of this business.

The sale is expected to close by end of FY14, pending regulatory approvals.

In addition, our new product introductions continue to accelerate.

And we launched a new line of carbon black products for tire products called PROPEL, and this was done during the quarter.

Tire technology continues to evolve rapidly, and we recognize that tire manufacturers need new reinforcing materials.

Cabot's new products provide tire manufacturers the materials they need to design higher-performance tires with lower rolling resistance and increased durability.

This is an example of how our deep understanding of our customers' needs, combined with our unique R&D and manufacturing capabilities, enables us to create and deliver differentiated solutions.

During the quarter, we also announced new contracts for activated carbon supply and equipment.

These contracts wins demonstrate that our preparations for the mass implementation are progressing well and we are ready to enable the industry to meet the new regulatory environment.

As the recent US court ruling that upheld the MATS regulation, which is in effect in April 2015, supports our expectations for growth in the North American activated carbon market.

I will now turn it over to Eddie to discuss the financial results in more detail.

Eddie?

Okay.

Thank you Patrick.

Total segment EBIT from continuing operations was $116 million, which was $29 million higher than last year's second quarter.

The increase compared to the prior year was driven by higher volumes and improved margins across many of our segments.

Sequentially total segment EBIT increased $2 million driven by improved EBIT in performance materials and in purification solutions.

As Patrick mentioned, we have reached an agreement to sell our security materials business.

As such, we have recast current and prior period results to report the financial impact of this business as discontinued operations.

I will now discuss the details at the segment level beginning with reinforcement materials.

During the second quarter of 2014, EBIT for reinforcement materials increased by $19 million or 45%, as compared to the second quarter of 2013.

The increase was due to 15% higher volumes as compared to the prior year.

Volumes improved due to the commercialization of our new China capacity, the addition of our Mexican carbon black plant and recovery in global demand.

Raw material purchasing savings and benefits from energy efficiency investments also contributed to the improvement in earnings.

Sequentially EBIT decreased by $3 million due to 2% lower volumes driven by the impact of the Chinese new year holiday during the quarter and the challenging South American economic and political environment.

We also experienced $3 million of one-time benefits for insurance proceeds and tax refunds during the quarter.

This amount is comparable to similar benefits recorded in the first quarter.

We would not expect these to repeat again in the third quarter.

As we look ahead, we believe that volume comparisons to last year will continue to improve.

Our second half of the year typically has higher maintenance spending due to our turnaround schedule, and we would expect this trend to continue this year, starting in our third quarter.

Longer term, we continue to be optimistic about the industry trends and our global leadership position in the carbon black industry.

In performance materials, EBIT increased by $10 million, as compared to the second quarter of 2013, due to an improved product mix and higher volumes.

Volumes in specialty carbons and compounds increased 3%, and volumes in fumed metal oxides increase 4%, as demand improved in our key end markets.

Sequentially, performance materials EBIT increased by $13 million, primarily due to higher volumes.

Volumes increased 15% sequentially in specialty carbons and compounds and increased 5% sequentially in fumed metal oxides, due to seasonally improvements in demand.

Going forward, we expect to see continued recovery in the automotive sector in 2014, and we expect construction and infrastructure related spending to increase as well.

Similar to reinforcement materials, our second half of the year typically has higher maintenance spending in relation to our turnaround schedule, and we would expect this trend to continue this year.

We are well-positioned with our recent capacity expansions and new product introductions to capture growth.

Advanced technologies EBIT increased by $4 million from the second quarter of FY13.

The EBIT increase was driven primarily by higher royalties in that elastomer composites business.

Sequentially advanced technologies EBIT decreased $13 million, as compared to the first quarter of FY14, due to a technology milestone payment received in the first quarter in elastomer composites that did not reoccur in the second quarter, and lower volumes across the segment.

Thus specialty fluids activity levels were lower than the first quarter, as expected, which resulted in business EBIT of $9 million.

In addition, we experienced lower seasonal volumes in inkjet and lower aerogel volumes.

CEC volumes also decreased as we transitioned away from supplying material and into our royalty based agreement.

As we look ahead, we expect to see a lower level of activity next quarter in specialty fluids based on the timing of projects.

Adjusted EBITDA in purification solutions for the second quarter of 2014 was $9 million, which compares to $13 million for the same period last year.

The decrease of $4 million year over year was driven by lower volumes and $2 million of higher costs associated with a higher allocation of functional and indirect costs.

Overall volumes declined in the air and gas sector which more than offset a 5% increase in other sectors.

These impacts were partially offset by higher prices.

Sequentially purification solutions EBITDA increased by $4 million driven by higher prices and lower fixed costs.

Overall volumes remained relatively flat sequentially, as higher air and gas volumes were offset by seasonally lower volumes in other end markets, particularly in the North American water sector.

As we look ahead, we expect our quarterly performance to improve.

The improvement should come from higher volumes and improved operational performance that will allow us to rebuild safety stock inventory.

I will now turn to corporate items.

We ended the quarter with a cash balance of $89 million, and our liquidity position remains strong at $487 million.

During the second quarter, we generated $150 million of adjusted EBITDA.

We used $47 million of cash to reduce debt, $28 million for capital expenditures, and networking capital increased by $27 million, driven by increases in accounts receivable and inventory.

During the first week of April, the Company received cash proceeds of $215 million for the final payment related to the sale of the super metals business.

We expect to use the cash from the sale to reduce debt levels, which would reduced our debt to EBITDA from 2.6 times to 2.1.

We reported a net tax provision of $7 million for the second quarter, which included $17 million of benefits for tax related certain items.

Excluding the benefit from certain items, our operating tax rate on continuing operations for the second quarter was 28%, which was slightly higher than expected.

This was due to the expiration of the research and development tax credit in the US and the geographic mix of earnings.

We now anticipate our operating tax rate for FY14 will be approximately 28%.

We expect capital expenditures to be at the lower end of our previously forecasted range of $200 million to $250 million for FY14.

I will now turn the call back over to Patrick.

Thank you, Eddie.

We continue to be optimistic about FY14 after seeing the positive demand trends this quarter, both in our reinforcement materials and performance materials segments.

Tire and automotive industry demand is expected to improve 3% to 4% in 2014 along with construction and infrastructure related spending.

Overall, most geographies are showing signs of economic improvement, perhaps with the exception of South America.

We, however, believe that, beyond Venezuela, the economic issues in South America should be of a short-term nature.

Also we are maintaining our focus on innovation.

We are actively developing new products for many markets, and we continue to invest in process and energy efficiency technologies that are key for our long-term global competitiveness.

And then finally our strategy remains to deliver earnings growth for our shareholders, and we continue to be on track with that.

So with that, I'd like to thank you for joining us today, and I will now turn the call back over for our Q&A session.

(Operator Instructions)

Jeff Zakauskas, JPMorgan.

Hi.

Good afternoon.

Good afternoon, Jeff.

Hi.

I think in the commentary, Ed said that you planned to take the proceeds from super metals and repay debt.

Is that correct?

That is correct.

Yes.

So I was puzzled as to why that was a better use of capital than repurchasing your shares and that you have a very high sustainable free cash flow yield.

Why would the returns be better in repurchasing your debt?

Well, so we have a strategy with regard to our capital allocation, and we are looking at first and foremost, at investing into our current business.

So we've got some high return projects, and that's certainly within that area that will attract capital first.

And of course, we have the interest of our shareholders at heart, and dividends are important as well.

But as you know, we have seen our debt to EBITDA metrics weaken in the last year or year and a half, and we're concentrated on getting that metric back into this space that we have had in the past.

Now, on the share repurchasing side, we have and continue to think about it as more of an opportunistic effort on our part.

We believe that offsetting dilution is our main objective, and we'll also be looking at chances to do that.

But right now in terms of the priority the debt to EBITDA metric has been prioritized with the cash coming from super metals.

It seems a puzzling decision.

Did your carbon black prices, on average, increase sequentially or did they decrease?

Or stay the same?

I think, I would say in general, and of course it's considering the many countries and we do business in, I can only stay at the general level and I would say that the rubber black prices for the tire industry have been fairly stable.

Fairly stable.

And then lastly your performance materials margins were really lovely.

They were -- your profits grew at a much faster rate than your sales did.

What exactly was behind that?

Was there some pricing?

Or was there a significant drop in raw materials?

What accounted for the very, very sharp profit increase?

Year-over-year.

I would say this is a business that has been doing a lot of things in multiple areas to improve its profitability, and we're able to leverage the -- a lot of work that has been done over the last few years.

We are also pleased with the fact that we've been pushing our product mix towards the higher-margin segments of the industry and applications.

And this is the result of a few years of work.

We're launching new products that are helping us in terms of achieving higher margins and then lastly, we are focused on pricing.

Now, I do want to remind you that the second quarter, so our second fiscal quarter, tends to be a seasonally stronger quarter than usual.

But I do agree that we are seeing better and improved performance in that segment, and we're very pleased with that.

Okay.

Thank you very much.

Thank you.

James Sheehan, SunTrust.

Good afternoon.

I was wondering, Patrick, if you could comment on what your reinforcement materials volume growth was excluding the new China plant.

Okay.

Hi James.

I'm not sure we provide that data.

I think we're slightly sensitive in terms of the competitive situation in China.

So what I can tell you is that we are pleased with the sales coming out of that plant in China.

We're on track with the commercialization plan.

I think beyond that, we have indicated that our sales have grown approximately 6% ex our NHUMO Mexican acquisition.

Very good.

Okay.

And then on your carbon black utilization rates, they had kicked a little bit higher last quarter.

I was just wondering if you could comment on where utilization rates are now, and what is your outlook for the rest of 2014?

Yes.

So, I think we are pleased with the performance of the business.

However, I think it's important to note that we're still in terms of the rubber blacks or reinforcement materials business, running the business in the lower 80% utilization rates.

So we, in a way, have not achieved or haven't yet gone back to what I would call a more mid-cycle type business conditions.

We are coming out of a couple of years of pretty weak to flat business activity in rubber blacks, and we're happy about the development.

But we're still not where we think the business should be, considering the long-term trends in terms of demand for tires and demand for carbon black.

So still at a fairly low level, we believe that the rest of the year should show promise, in terms of continuing to see us actually seeing the industry recovering to better demand levels overall; and this is a global picture.

Okay.

And lastly in purification solutions, how much of the improvement in this current quarter was due to price increases?

I would say it's about half price increases if you look at the improvement picture.

All right.

Thank you very much.

Thank you, James.

Kevin Hocevar, Northcoast Research.

Good afternoon, everybody.

I was wondering if you could run through the regions for reinforcement materials.

It seemed like North America and Europe were, kind of as expected, pretty strong and then big accelerations in Southeast Asia and Japan, but softer in South America.

I guess probably softer in China than I would have expected given the new plant.

So with that ramping up -- so I was wondering if you could give a little color by region.

Yes.

I'd be happy to do so.

I think you've described some of the high-level picture here.

Europe is, and we are very pleased with that, recovering.

I would say it's still a low pace of recovery, but it is showing signs of a certain robustness which is really good.

And you can also see that when you look at the reports from the tire producers.

North America, I would say, we've seen replacement tire demand picking up as well as miles driven.

And, in addition to that, the auto production levels are solid.

So that is positive; on the perhaps, concerning side, is the pressure from import competition.

We are seeing more tires coming in from China and from Southeast Asia, so that will perhaps dampen the uptick year.

If I go to Asia, I would say, in a way, the impact or the demand recovery we're seeing in Europe and North America is actually providing beyond the local demand growth, a boost for the local producers.

So Southeast Asia and Indonesia, in particular, is doing very well.

And even though we had a bit of a weak recovery coming out of the Chinese New Year; the last few weeks I would say, month or month and half, have been actually quite strong in China.

And to a certain degree, supported by somewhere around 8%, 9% order production growth, that people forecast for China and also, as I mentioned earlier, the growth in export.

So I would say, the only area that has been weak, and it's reflected in our numbers, is South America.

And, as you know, we are in Venezuela, Argentina, Brazil, and Columbia.

Venezuela and Argentina have been the areas where we see in the most pressure and have experienced also devaluation effects.

And I would say on finalizing perhaps on the Japan side, I would say not much to report, a fairly flat to stable environment there.

Okay.

Thanks for that color.

And I guess, when you look at the pickup, it sounds like you had a sequential pickup in the air and gas applications in Norit.

Was any of that of benefit from the higher natural gas prices and utilities switching to coal from natural gas?

Or do you see this more -- are there any early adopters of MATS kind of ramping up maybe earlier than expected as providing that pickup?

I was wondering if you could give a little color on that, on the pickup on the air and gas side.

Yes.

I would say there's nothing unusual here in terms of people having applied or trying to be early in terms of meeting the MATS regulation.

So what you're seeing is perhaps some seasonality effects.

So cold weather has had an impact.

It's had an impact on us, as well in terms of the business environment, both in terms of having had an impact on our sales somewhat.

It's been minor but it has been.

And we've also had and it has been more of an issue it has also had an impact on operations and manufacturing where we've had to turn down our plants.

But I would say back to the sales in air and gas, I would say more of it seasonal effect and again, the MATS regulation is in our view coming strong.

But it will be felt most strongly in the beginning of 2015.

Okay.

Great.

And the final question.

You mentioned entering contracts for shipment of Mercury activated carbon in 2015.

I was wondering if you could describe the pricing environment on those contracts.

Given the expectation that supply is going to tighten as we approach MATS, are you getting benefits in pricing compared to what current levels of pricing are on shipments you're making today on these contracts?

And knowing you can't get into very much in terms of specifics, can you give us an idea of that pricing environment is better than it is today.

Well, as you can understand, because of the competitive nature of this information, I cannot give you any specifics here, but what I can say is that we are engaging with the industry.

We're getting more and more active as we see most of, if not all of, the utilities engaging on this topic.

And we're pleased with the progress we're making in terms of finding contractual arrangements that are attractive and interesting for our customers but also providing us the right type of return.

So we're certainly seeing the market improving over the coming years, and we will reflect that in the pricing as the year goes on.

Okay.

Thank you very much.

Thank you.

Ivan Marcuse, KeyBanc.

Hi.

Thanks for taking my questions.

Real quick on the maintenance you expressed that maintenance was going to be higher in the second half versus this first half.

How much would you say on a sequential basis, I guess, looking into the second quarter or third quarter, would your maintenance expense rise?

Right.

So, yes.

We mentioned that, because we do have this seasonal effect every year, and it is the third and fourth quarter that are being affected.

And these are not large numbers but I would say, somewhere in the vicinity of $5 million to $10 million for the third and fourth quarter for both performance materials and reinforcement materials.

Great.

And then do feel like you're volumes for the materials business and would you expect that to sort of rise; even though we're going to a little bit of a slower seasonally weak quarter in the third quarter for Europe, do expect to see a seasonal increase or was your comments more on a year-over-year basis looking at the third and fourth quarter?

I'm sorry.

I then, I'm not sure I understood the question.

Do you mind repeating?

For your volumes, are you looking for a sequential low single digit increase, or you talked about the outlook continuing to improve in demand getting better, so is that on a sequential basis or just more or less on a year-over-year?

I'm sorry, Ivan.

Can you just clarify what business you're asking for?

Your performance materials, rubber black.

So in the performance materials business.

Okay.

So as I mentioned, the second quarter is high seasonally, so we would say that's the higher point.

But if you look on a year-over-year basis, we expect some improvement.

Okay.

Great.

And then, real quick on the costs, you mentioned in the projects.

Are those costs going to -- is this a one-and-done type of expense?

Or would you expect your unallocated corporate costs to remain sort of at this level looking out into 2014?

Yes.

So as we look at the next few quarters, I would say this quarter was slightly higher than usual, and I would say we may see slightly that same level for a couple more quarters ahead.

Okay.

Great.

Thanks for taking my questions.

Thank you.

Laurence Alexander, Jefferies.

Good afternoon.

Good afternoon.

I guess first question, just on advanced technologies, can you give a bit of more than detail on what drove the lower margins and how we should think about that business going forward?

Is this sort of a more sustainable level or do think that the prior margin levels are really something that you can return to?

So Lawrence, I am sorry -- which?

Sorry.

Advanced technologies.

Yes.

So we have had a bit of a weak quarter, as you can see.

There are various pieces to that.

The season before made so our specialty fluids business, as we had mentioned, was weaker due to the number of projects we could foresee working on this quarter.

We had the second item was the non-recurrence of the Cabot elastomer compounds, a one time payment.

And then we had the weaker volumes in both aerogel and inkjet this quarter.

I would say, these are not issues that I would say are of concern to me.

These are seasonal effects, and we are confident that those businesses will get back to the previous levels.

And then in reinforcement materials, can you give an updates on how far along you are in your various productivity and energy efficiency initiatives?

You've had very strong margins for a couple of quarters, and is this a sustainable level or can you even take them higher?

Well, we're at a point where a lot of projects have been implemented.

However, somewhat more recent in nature, so for example, our Jinxi investment in China; we have started off the plant without an energy recovery center, and this center has been started up last month.

So we had a bit of a lag, so this will continue to improve our opportunities in terms of value creation from these energy center activities.

In the area of yield improvement, we have research work and pilot work going on that is fairly advanced, and over the coming years, we're going to be implementing some of this throughout the Cabot system.

So there's still value creation up ahead of us in the space.

And then just lastly, with respect to the decision to pay down debt, is there something that's the credit agencies are factoring in in terms of potential unquantified environmental risk or something like that, that is part of the consideration to keep trying to take the debt level down, or --?

No.

I wouldn't say that, Lawrence.

We were operating at a debt level below 2.0 prior to taking on debt about two years ago, and it's always been our target to return back to the roughly 2.0 or just below levels.

So we have the ability to repay debt on the short-term very quickly, and so that's really been the decision we've taken.

Okay.

Thank you.

Christopher Butler, Sidoti & Company.

Hi.

Good afternoon, everyone.

Hi, Chris.

Looking at the specialty fluids business, you had talked about continuing softness here into the third quarter.

Could you give us a sense on how long you expect this softness to last and any repercussions from the difficulties with Russia, or the trade thoughts, as we respond to their actions?

No.

I would say the political risks around the Ukraine and Russia have no impact on the business.

As usual, I think what we're seeing is the project nature of our specialty fluids business.

So we have visibility on a lot of the projects, and we get some forecasting from our customers, in terms of when the product needs to go into the well, for both completion or drilling.

The issue is that these forecasts change on a regular basis, but in this case we have visibility through the next quarter that the number of projects will be at the level of this past quarter.

Beyond that, we see potentially some improvement towards the end of the calendar year.

And circling back to the cash questions, as we apply your decision to reduce debt to possible acquisition pipeline, can we take that to mean that there isn't anything immediate that you're looking at?

And could you talk to a longer-term pipeline?

Chris, you know that I wouldn't be able to comment on that.

I think what I could say is that we continue to look at opportunities in this area.

We would be looking at opportunities that are close to our existing businesses and preferably of the size of the recent NHUMO acquisition.

But that's all I can say at this stage.

Thank you for your time.

Thank you.

Jay Harris, Goldsmith & Harris.

My questions have been answered.

Thank you.

Thank you, Jay.

Ivan Marcuse, KeyBanc.

Hi.

Thanks for taking my questions.

I misspoke on my last question.

In reinforcement materials how do you see on a sequential basis, obviously near-term overall demand, even with a typically a seasonally lower European quarter?

Yes.

So we continue to see a positive, and we're optimistic about the rest of the year.

I would say, we should see year-over-year growth, but it'll be at lower level.

Right now, I think there's still a mixed economic environment that we're dealing with.

But it feels certainly much better than it did just a year ago.

Okay.

Great.

And then you may have commented on this, and I may have missed it, but in your purification segment, I think last quarter you mentioned your expectations sort of get back to the breakeven type of level for the year on this business.

So do you anticipate to get to that level you'd have to show the next couple of quarters of profitability?

Do you see sort of a slower ramp up, or would you expect going into third quarter that purifications becomes profitable?

Or gets back into the black?

We are certainly working actively at getting the purification solutions back to the levels we know we can operate at, so that's the objective for the rest of this year.

And then longer-term, as you know with the MATS implementation that is getting more certain and certain as the days go by, we're looking at a business that could achieve somewhere in the vicinity of $150 million plus of EBITDA in 2017.

Great.

So do you expect purification to be breakeven by the end of the year for the full year?

I would say -- I'm not -- I think we've indicated that we are looking at this year being in line with 2012 levels; 2013 levels, sorry.

In terms of EBITDA.

EBITDA.

Yes, correct.

Okay.

Great.

Thanks.

Kevin Hocevar, Northcoast Research

I just wanted to clarify on an earlier question when you talked about pricing sequentially in the reinforcement materials business.

You mentioned that it was flat.

Was that in reference to just the base price or the contract pricing, or does that include the raw material fluctuations as well?

No, this is base pricing that we are talking about.

Okay.

And then just another quick one.

NHUMO looks like it's adding 9% to your volumes in reinforcement materials.

My understanding was this adds about 7% or so to your global capacity; so is this operating at a much higher utilization than say the average for the segment?

I would say it's in the average of the business.

I don't think there's anything special in terms of utilization rates in Mexico.

We're pleased with the business.

We're running it well.

But I would say nothing unusual there.

Okay.

Great.

Thank you.

Thank you.

Jeff Zekauskas, JPMorgan.

Thanks very much.

In your key highlights, you highlight PROPEL as a key new carbon black product.

Can you talk about why it's important?

Does it increase your sales growth rate or your margin, or is it a higher-margin product?

What's the analytical significance of PROPEL?

Right.

So, I think what is very interesting, is that over the last I would say 5 to 10 years, we've seen the tire industry renewing its interest in tire technology and have realized that materials sciences is a big component of achieving differentiation in the industry sector they are in.

And we are seeing and discussing with multiple tire manufacturers about their needs and how they can achieve better performance with their tires.

And, as a result of that, we have been putting quite a bit of work and this launch is actually the result of several years of development that have led to these new products.

Now, the effect of these new products on our sales are still, I would say, perhaps, half a year to a year out.

They are products that have significantly higher margins.

They are sophisticated materials that allow our customers to improve the rolling resistance of their tires and also durability.

And in a way, these products are there to do something -- to perhaps improve our competitiveness against some of the silica materials that have been coming into the market in the rolling resistance area.

But in addition, what we can do with carbon black is not only do that, but we've also been able to improve durability at the same time.

So it's quite an interesting combination of features that these new PROPEL materials can provide to our customers.

Is it a global rollout?

Or is a domestic?

Or European?

And five years from now, how many pounds or tons or revenues might PROPEL account for you?

I would love to be able to answer that.

We believe that it has real potential.

I think, it is a global rollout.

So we see that as meeting needs around the world that we're seeing from our tire customers, and we are quite hopeful to see very nice growth from this new product line.

Okay.

Thank you very much.

Thank you.

James Sheehan, SunTrust.

Yes.

On your comment earlier about purification solutions being able to do $150 million in EBITDA in 2017.

Has the court ruling on the MATS standard changed your view on how quickly or the ramp to $150 million in 2015 and 2016?

No.

I would say that the court ruling is just reinforced the fact that it will happen on April 15, 2015.

Our current modeling is that we see approximately half of the utilities needing activated carbon, needing it in 2015, and the other half basically starting to buy and utilize product in 2016.

Thank you very much.

Thank you.

We have no further questions.

I will now turn the call back over to Patrick Prevost for any closing remarks.

Well, thank you very much for joining us today.

I'm looking forward to speaking with you again next quarter.

Thank you for your participation in today's conference.

This concludes the presentation.

Everyone may now disconnect and have a great day.