Element Solutions Inc (ESI) 2015 Q2 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to Platform Specialty Products Corporation's second-quarter 2015 results conference call. (Operator Instructions). As a reminder, this call is being recorded. I will now turn the call over to Ben Gliklich, Platform's Vice President of Corporate Development and Investor Relations. Please go ahead.

Thank you and good morning, everyone. With me today are Dan Leever, Platform's CEO, and Frank Monteiro, our CFO. Dan will provide an overview of this quarter's key achievements, some comments around recent acquisition and integration activity, and a summary of some key changes to our leadership team we are announcing today. Frank will follow up with more detail on our financial performance, then Dan will offer some closing remarks before opening the call for Q&A.

Please note that in accordance with Regulation FD of fair disclosure we are webcasting this conference call. Any redistribution, retransmission or rebroadcast of this call in any form without the express written consent of Platform is strictly prohibited.

Before begin please make note of Platform's cautionary statement regarding forward-looking statements at the end of the earnings release issued earlier today. Some of the statements made today during this conference call will be considered forward-looking. All forward-looking statements are based on currently available information.

Platform's actual results could differ materially from those predicted. However, Platform undertakes no obligation to update any such statements whether as a result of new information, future events or otherwise. Please refer to Platform's SEC filings, including its current report on Form 8-K relating to the earnings release, for a more detailed description of the risk factors that may affect Platform's results.

Please note that Platform has posted supplemental financial data slides to its website at www.platformspecialtyproducts.com. In accordance with Regulation G Platform is providing reconciliations of certain non-GAAP to comparable GAAP financial measures in its earnings release, its current report on Form 8-K relating to the earnings release and in the supplemental slides. The supplemental slides can be downloaded and the Investor Relations section on Platform's website under Events & Presentations.

For the purposes of this call we will be comparing the periods in 2014 and 2015 on a pro forma as adjusted basis as we believe that this will give our investors a proper comparison and understanding of the underlying business results for Platform's operations. Pro forma as adjusted figures reflect our financials had we owned each of the businesses in our portfolio since January 1, 2014.

Like any other global corporation, Platform is subject to currency fluctuations. So we will be presenting our results on both an actual dollar and constant currency basis for both years. I encourage you to review our supplemental slides that have been posted on our website for further clarification.

Following management's remarks there will be time allotted for Q&A. Now I would like to turn the call over to Platform's CEO, Dan Leever. Dan, please go ahead.

Thanks, Ben, and good morning, everyone. I am pleased to report a strong and productive second quarter this morning. The pace of activity that has characterized Platform thus far continued in the quarter.

In late May we announced the definitive agreement to acquire OM Group's Electronic Chemicals and Photomask businesses. These are assets we have long sought after and they will be a great addition to our existing portfolio.

We promptly followed that acquisition with a $483 million equity capital raise to fund working capital and future acquisitions including the OM acquisition. This helps bring our leverage ratio in line with our stated long-term goal.

Soon thereafter in July we announced the terms of a recommended offer to acquire all the issuing outstanding shares of Alent plc, which when completed will be a truly transformational acquisition for our performance application segment and will bring additional balance to Platform's overall portfolio. This is a highly complementary business with a strong heritage and we are excited about the transaction.

With these transactions progressing towards anticipated close in the second half of 2015 and early 2016, we feel very good about the state of this segment and its prospects for growth.

In addition to our recent M&A activity in performance applications end markets we remain diligently focused on the integration work in our Ag segment. We are pleased to report that we realized $8 million of synergies in the second quarter or $32 million of annualized synergies, up from $5 million of realized synergies in the first quarter.

This progress instills confidence in our ability to meet our $80 million Ag synergy target. And when you combine this with our $70 million plus of synergies from the Performance Application segment that we announced these past few months, we believe we have a very promising and material earnings growth opportunity in addition to the underlying growth of our businesses.

The $70 million figure is based on $50 million related to estimated synergies in connection with the Alent acquisition and $20 million relating to the OM assets. The Alent synergy estimate has been reported on by PricewaterhouseCoopers and Credit Suisse in accordance with UK takeover regulation. You can see the reports and letters from PricewaterhouseCoopers and Credit Suisse confirming the reports on our website.

We are lesser focused on delivering these cost savings for shareholders and pleased with our progress to date -- sorry, that is laser focused. Clearly we are upbeat about the potential of our expanding businesses and we are keenly aware that our future success will be driven by our best asset, our people.

To that effect with taken proactive steps to strengthen our management structure and to add resources both at the corporate and operating levels of the Company. Wayne Hewett, Platform's President and the President of our Ag segment, will be leaving Platform to pursue other opportunities. He has tendered his resignation effective August 28.

We thank him for his service and we wish him luck in future endeavors. We will not be replacing him in the role of President of Platform, but we are conducting a search to find a new President of Agricultural Solutions.

In the interim we are pleased to announce that Jonathan Evans will serve as Interim President of Agricultural Solutions. He has a strong track record in Specialty Chemicals and helped build a best-in-class supply chain for Arysta, a global and complicated operation. I will be working closely with Jonathan and our Ag CEO Flavio Prezzi in the months to come. We see lots of opportunities.

We are also very pleased to announce that Frank Monteiro will assume a new role as Chief Operating Officer of MacDermid and our Performance Application segment. With two pending applications in the segment he will provide more leadership depth to partner with Scott Benson, President of Performance Applications, to oversee the integration and ensure these businesses do not skip a beat.

Frank has tremendous depth of knowledge in this space which will be extremely valuable in this process and beyond. He will be in a position to focus on the critical value creation opportunities in the business he knows exceptionally well.

We are very thankful for his contributions as CFO of Platform and MacDermid before that. He has been a key ingredient in our success thus far and will continue to be even more so in his new role. Thank you, Frank.

With Frank transitioning to his new role we are pleased to announce that Sanjiv Khattri will be our Executive Vice President and Chief Financial Officer. Sanjiv will join us with over 25 years of experience in various financial roles across a range of industries. Most recently he was CFO of Covanta Holding and prior to that CFO of GMAC.

Sanjiv began his career in the Treasury Department of GM where he had a successful 14-year career in GM globally -- culminating with the role of Assistant Treasurer before moving over to GMAC as CFO. He has a strong track record and experience building and managing global finance functions with robust financial reporting capability.

Sanjiv is also well-known in the financial community and brings an established track record in capital markets, capital planning and teambuilding. We are excited to welcome him to the team; he will begin with us in mid-September. To ensure a seamless transition Frank will remain Platform's CFO until that time.

Another key hire from our -- results from our investigation of a broadly defined global business effectiveness program which includes shared services, zero-based budgeting and indirect purchasing amongst others. We have spent time with thought leaders understanding these initiatives and intend to implement a global business effectiveness program to optimize our cost base.

We still have work to do to fully develop our strategy and quantify the potential benefits in detail, nevertheless we have sufficient conviction that this is an initiative worth pursuing and that we have recruited a world-class expert to help us manage it.

We are pleased to announce that Larissa Siegel will join us as Vice President of Global Business Effectiveness. Larissa has the passion, drive and energy, along with a large depth of experience in this field, having overseen the establishment of Burger King's shared service and business effectiveness program and other key programs under the ownership of 3G Capital. She will report directly to me and will be given a broad mandate to drive this initiative. She will join us at the end of the month.

Results for the second quarter saw good constant currency underlying growth but were impacted by strong foreign currency headwinds. In the second quarter of 2015 on an actual basis -- actual dollar basis revenue was $675 million, an increase of $486 million or 257% over last year's $189 million. Adjusted EBITDA was $167 million, up $119 million or 248% from $48 million last year.

On a pro forma as adjusted basis revenue declined 14% primarily due to strong currency headwinds. Adjusting for FX, constant currency organic pro forma revenue increased 2.5% and constant currency pro forma adjusted EBITDA increased by 5.6%. Adjusted pro forma EPS for the second quarter of 2015 was $0.25 compared to 2014 of $0.31. Recurring free cash flow for the quarter -- in 2015 was $0.40 against $0.22 last year.

We are particularly pleased to report positive constant currency growth in our Ag business continued for the quarter growing 1.9% over the second quarter of 2014. This is despite many of our competitors demonstrating flat or declining sales and illustrates the success of our S squared strategy, specialty crops in specialty places.

Ag constant currency adjusted EBITDA increased 1.5% in the quarter which includes synergies. Constant currency adjusted EBITDA growth in Performance Applications segment was again double-digit at 15.2% growth.

The Performance Applications segment, which currently consists of the MacDermid business, had record adjusted EBITDA and its associated margin of over 29% was the best margin quarter ever. Demonstrates -- this demonstrates the continued operating leverage we are achieving in this business.

I am particularly pleased to report that we generated $98 million of adjusted recurring free cash flow in the quarter. As you know, we are cash flow focused above all else and this number is encouraging.

We have previously said that the Ag working capital cycle peaks in the middle of the second quarter and releases over the balance of the year. We are seeing that happen now and look forward to continuing to report strong cash flow generation from the business in the back half of the year.

Our team has weathered difficult market conditions in some markets very well. We are delivering on synergies, building on our capabilities and, importantly, continuing to grow and execute on our strategy.

With that I will turn it over to Frank to walk you through the financial results in more detail. Frank.

Thank you, Dan, and good morning, everyone. As Ben noted, in addition to our actual results we will be presenting numbers on a pro forma as adjusted basis, meaning comparisons and analytics for the current and prior years will reflect the combined businesses as if we owned all acquired business units for the full year.

We believe that our reported results only partially reflect the ongoing operations of Platform as they include deal-related costs, purchase accounting adjustments and other non-cash items associated with our acquisition strategy, whereas our pro forma as adjusted results provide a clearer picture of our underlying businesses and their growth rates. Supplemental slides are posted on our website to assist you in understanding these adjustments.

We are pleased to report a record quarter for Platform. For the quarter ended June 30, 2015 on an actual results basis Platform's reported revenue was $675 million versus $189 million in the prior year, an increase of $486 million. In segment terms Performance Applications revenue was $182 million versus $189 million in 2014, a decline of $8 million or 4%. The Agricultural Solutions segment finished quarter two of 2015 with revenue of $494 million.

On a pro forma as adjusted basis in actual dollars Platform had quarter two 2015 revenue of $675 million versus $785 million for the same period in 2014, a decrease of 14% or $110 million.

The Performance Applications segment declined $8 million or 4% from $189 million in 2014 to $182 million in 2015, as previously mentioned, while the Agricultural Solutions segment declined $102 million or 17.2% from the $596 million in 2014 to $494 million in 2015.

As Dan discussed, the strengthening of the US dollar, particularly against the Brazilian real, continued to represent a significant headwind to our operations in the second quarter of 2015.

On a pro forma as adjusted basis in constant currency Platform grew revenues by 2.5% or $17 million from $672 million in 2014 to $690 million in 2015. The Performance Applications segment increased revenues 4.5%, or $8 million on a constant currency basis, growing from $174 million in 2014 to $182 million in 2015. The Agricultural Solutions segment increased revenues 1.9%, or $9 million on a constant currency basis, from $498 million in 2014 to $507 million in 2015.

The constant currency growth in the Ag Solution segment is consistent with what we mentioned in Q1 regarding the full-year growth rate expectation.

Platform pro forma as adjusted EBITDA in reported US dollars for 2015 was $168 million versus $185 million in 2014. On a segment reporting basis Performance Applications pro forma as adjusted EBITDA was $54 million, up $3 million or 6.5% over the prior period, while the Agricultural Solutions segment reported pro forma as adjusted EBITDA of $114 million which was down $21 million or 15.5% over the prior period.

Adjusting for currency effects Platform's pro forma as adjusted EBITDA for 2015 was $166 million versus $157 million in 2014, which is up 5.6% or $9 million.

On a segment reporting basis in constant dollars Performance Applications pro forma as adjusted EBITDA was $54 million which is up $7 million or 15.2% over the prior period, while the Agricultural Solutions segment reported pro forma as adjusted EBITDA of $112 million is up $2 million or 1.5% over the prior period.

During second quarter of 2015 we raised $483 million of equity, primarily to fund working capital and future acquisitions, including the pending OM Group transaction. We also implemented a series of interest rate swaps on our current term loans helping to more appropriately balance our fixed versus floating interest rate exposures while leaving us with flexibility as we look to fund our future deals.

As of June 30, 2015 quarter two net debt was $2.75 billion, which includes $365 million of cash that will be used for the OM transaction. We fixed a portion of our floating-rate debt in early August and so now approximately 80% is fixed while 20% is variable.

Based on our current cash flow projections, expected future funding obligations and contemplated capital markets activity we expect to return to our 4.5 target leverage during 2016. To further that point, we believe there may be a misconception about any equity funding that is needed for the Alent transaction.

We have a debt commitment from our banks for the full cash portion of the non-stock purchase price. Our stated long-term goal is to keep our leverage ratio at or below 4.5 times. But given the strong cash flow characteristics of the businesses, we are very comfortable in carrying higher debt levels for a short period time as necessary to help fund our acquisition.

These debt levels will come down naturally from the cash flows of the business or, should the market conditions be appropriate, we will issue equity to bring us into line with our debt leverage goals more quickly.

Recurring free cash flow generation in the second quarter was a strong $98 million or $0.40 per share. As expected, working capital peaked mid-quarter and has begun to release. From an investment standpoint year-to-date CapEx has been $44 million including $29 million in physical plant and $15 million in registrations.

As we integrate the businesses we continue to focus intensely on improving the working capital and transactional FX exposures and we feel good about the progress that we are making. On our last call we talked about FX representing a 10% headwind based on end of February rates.

Rates continued to move against us in the second quarter and beyond particularly in Brazil where the quarter two average for the real was off 8% against end of February rates. By the end of July the rate had moved 18.5% off of February and its decline has continued.

We have implemented pricing actions, barter transactions, factoring and other mechanisms to mitigate the effect of currency, especially on cash flow, and we have seen many of these work as planned in the quarter. But nonetheless translational FX is negatively impacting our numbers.

As noted in our press release, we have revised our 2015 adjusted EBITDA guidance for the full year 2015 to reflect FX rates at the end of July. Platform's initial guidance was linked to end of February foreign-exchange rates and the dramatic strengthening of the dollar has led to a significant headwind. Two-thirds of Platform's Brazilian earnings come in the second half of the year.

Based on end of July foreign-exchange rates, and excluding any impact from the announced acquisitions that have not closed yet or any softening in the end markets for Agricultural Solutions products that would be below last year's level in the back half of the year, we expect adjusted EBITDA to be in the range of $620 million to $650 million compared to the initial expectations of $660 million to $680 million.

Any further negative impact from exchange rates including the real since July is not captured in this revised guidance. Importantly, this guidance range assumes growing conditions, particularly in Latin America, for the rest of the year are similar to those of last year.

Our team in Latin America is confident, however, we are being cautious. We intend to update 2015 guidance on our Q3 earnings call to refine our full-year outlook further based on macro market conditions at that point in time.

Given uncertainty over the closing dates for the announced acquisitions, recent equity financing associated with the OM Group acquisition, and additional potential financings for the Alent transaction, Platform's EPS guidance is no longer applicable and the Company intends to issue a revised forecast following the close of the OM Group transaction if required.

I will now turn you back over to Dan to give you further updates and concluding remarks. Dan.

Thank you, Frank. Both of our segments demonstrated constant currency growth in the second quarter. The challenging macro operating environment, to which no one in our industry is immune, actually showcases the strength of our underlying businesses. We are excited by these challenges as they create opportunities for us.

On the Ag side of the business we have demonstrated our ability to continue to generate underlying growth despite industry-wide headwinds. We remain committed to our specialty squared strategy, specialty crops in special geographies, and expect to continue to outperform the overall Ag market which is more dominant by row crops in major markets on that basis.

The Performance Applications business is continuing to be a steady generator of EBITDA and free cash flow and we are energized by the business prospects of soon to be enlarged segments.

As we said on the call when we announced the Alent transaction, we believe the transaction particularly adds valuable management strength, capabilities, customers and technologies to Platform and will allow us to offer an even greater value to our customers and shareholders.

We believe synergy realization is on track and the Ag integration is going well. Every day we are seeing new opportunities to create more efficient businesses which we are fully pursuing any and all angles.

I am excited to collaborate with Jonathan Evans, Interim President, and Flavio Prezzi, COO of the Ag Solutions business. We are 100% aligned behind the strength of the business model and share a passion to make it even better.

With regard to the two pending acquisitions of the OM Group businesses and Alent, we feel confident with the prior closing guidance we had provided. We are excited to own these businesses in the near future. And have been actively engaged in internal integration planning as well as keeping contact with the companies as appropriate under the regulations. Employees for all the companies are excited about the prospects of a combined business.

As I said on our last call, beating our synergy targets is what dictates our priorities and this remains true today. We have management capacity in Performance Applications business and found compelling value in the two deals we recently announced for the segment.

And the rest of the year we will be focused on getting the two transactions over the goal line and making sure that our integrations continue to go right. We are confident in our ability to execute.

To summarize, we are pleased with the quarter but cautious about the short-term outlook. Our business units remain focused on execution and we are building the right team to manage the far larger business we have become.

There are factors working against us, particularly currency, and we are focusing on managing those risks while optimizing the businesses with regard to factors under our control, [developing] great products and technology, providing best service to our customers, and ensuring our earnings convert into cash flow consistently at a high rate.

We have significant additional levers to pull to further improve our earnings and cash flow. We are in the early days of the Ag integration. I am confident this business will perform according to our expectations, especially in the medium- to long-term. And our business effectiveness initiative only provides upside.

I look forward to updating all of you on future calls and, with that, happy to take your questions.

(Operator Instructions). Jon Tanwanteng, CJS Securities.

Welcome to Sanjiv and Larissa if you are there. Thank you for taking my questions. I am just wondering where Wayne is going and if his departure was a result of anything within Platform or if it was actually an external decision on his part?

It was his decision, I don't know where he is going. Just to give you a little bit of background, Platform is very much a collaborative interdependent management structure.

And when you look at Martin and Martin's team and myself and Ben and Frank, we really all work in an area that is a little bit like a private partnership where we sit around the table and we see who has the expertise and the capacity to work on a certain thing from time to time.

And it doesn't always follow the same path from a standpoint of hard organizational lines. And it is not for everybody. And at the end of the day Wayne wants own show. So he left to go find his own show and we wish him a lot of luck.

Okay, thanks. And, Frank, can you quantify the percent of the reduction in the 2015 guidance as a result of foreign-exchange as opposed to other end market factors such as demand or mix or pricing or anything like that?

It is driven at this point by the FX. There is a customer in the US, in North America specifically, I believe it is about $10 million of revenue that is going to affect 2015 that we did lose. But we will have opportunity to gain that customer back in 2016 and we are focused on that at this point.

Okay, so you would say virtually all?

Most.

I would say most.

Okay, got it. And can you further update us on what kind of sensitivities your earnings or EBITDA might have to the top two or three currencies in your portfolio? I know you have a lot in there but reals or euros or yens, what percent reduction in each of those currencies result in a change to your EBITDA?

So I would say the biggest change in our guidance is driven by the real. I mean, if you just look at how currencies have performed since February, there has been not too much movement in most of the major currencies with the exception of the real and that is what is driving this.

Okay, thanks. And finally, if you can, could you update us on the expected dollar amount of the equity component of the Alent transaction as you envision it?

Sure. And so, this is driven by several variables including timing of close and the market condition. But the way that we think about this is we will be financing off of end of 2015 EBITDA with the benefit of synergies that we expect to realize in 2016. So that should be the EBITDA component of -- which you multiply by the 4.5 times or so.

And we expect to generate significant free cash flow from this business -- from the Platform businesses and Alent, which stays in that business assuming the deal closes prior to June. So that reduces the net debt balance on our balance sheet.

And so solving for that EBITDA component and our net debt you can triangulate significant debt headroom and then sell for equity. We can't give much more guidance around numbers because of UK regulations. But I would say that it is far inside of the $1 billion which was mentioned on our Alent call a few months back. It is a much more manageable quantum.

And I think as Frank suggested, we have a full debt commitment, so if the marketing conditions aren't right we can work with it.

Great, that is very helpful. Thank you.

John McNulty, Credit Suisse.

I guess a couple on the respective businesses. The performance business, I think we had this question last quarter when the numbers or the margins looked surprisingly even higher than we expected this time. They took another step up.

And I guess I am wondering what is driving the margin improvement in the performance segment. Is it some mix-related things, are you seeing better price? Like what is driving that profitability and I guess how should we be think about that level of profits going forward?

It's all driven by new products that have been successful. So all of the margin growth comes from new products at higher margins. And we think it is sustainable.

Okay. And then maybe you can give us an update just in that segment in terms of -- I know it does have some energy exposure and energy certainly tripped up others throughout the quarter I guess.

Maybe you can give us an update as to what you are seeing tied to your energy markets, if you have really kind of felt any of the pressures around oil yet, if that is something to come or it is something that you can kind of weather and we shouldn't necessarily be worrying about it?

It really hasn't impacted us that much because in the past we were able to surcharge energy components when they came through, for example from our raw material vendors and stuff like that. But specifically as it relates to our business, our Offshore Solutions product offering is having a banner year, much better than we would have expected.

There is some effect on our Industrial business that supports onshore oil and gas plating, but that is being offset by growth in the industrial end markets that relate to automotive.

Okay, fair enough. And then on the Ag front, can you give us a little bit of color in terms of -- you saw growth ex the FX moves. I guess can you walk us through maybe either geographically or by kind of larger crop segments how we should think about the volume growth that you were enjoying at those businesses?

Absolutely. So Europe's very strong, had a good year in Europe and essentially the year is done in Europe, so that is in the books and was strong.

Latin America strong, doing well in Latin America, really the specialty crop focus, and really the combination of the sales forces from these respective companies are showing additional business there so that was good.

Africa drought, not good. And North America, lots of headwinds in North America, not good at all. I mean really not good. And Asia okay.

Okay. And then just maybe one last question on the cash flows since the numbers came in I think better than what we were looking for. It doesn't seem like there is any bad debt issues or payment issues, and I know there has been concerns about that given your Brazilian exposure.

But can you give us kind of an update as to if there -- what you are seeing on that front? And then also, what is driving the incremental cash flow coming in better than it is? Certainly relative the EBITDA it definitely came in better than what we were expecting. So maybe a little bit of color around that would be helpful.

I am going to let Frank comment on the bad debt part, but I can tell you that we are going to generate free cash flow at a higher rate than anybody expects in this business because that is what we do, end of story. But, Frank, talk about the --.

Every one of the customers where we did have concerns we have been able to work through. So it has not impacted us per se. We did have some stuff that we did inherit as it related to when the acquisitions were done, which we fully reserved for. But even those -- I mean we have managed through very well where we are getting payment on.

Great, thanks very much for the call.

John Roberts, UBS.

The $98 million adjusted recurring free cash flow or the $0.40 a share, is there any way to think about the foreign-exchange effect on that since that's also got at least some hedging based on working capital and capital spending that is there?

And then as a follow-up to that, is there any way to annualize that number to get a sense of a full-year run rate? Or do we just have to wait to see what the back half looks like?

The FX piece, I mean we have to work through, so I mean we can get you that information (multiple speakers).

Will it be less than it is on the earnings? I would assume so.

We started putting some stuff in place. So we would have to take that into account. So once we flow that through we will be able to give you that answer.

But, yes, you are right to say it would be less for sure, because there is lots of mitigating strategies that we have done. So, yes, for sure.

With regard to seasonality, as we've communicated in the past, we build working capital through the first five or so months of the year and then it releases. It is difficult though to annualize any of these specific numbers just on the basis of the seasonality. And so, I am not sure I would do that.

Okay, thank you.

Duffy Fischer, Barclays.

Just if we looked at the midpoint of the old EBITDA guidance and the midpoint of the new EBITDA guidance we are basically down 5% or so. Would that be about what the free cash flow would be down? I mean obviously you didn't give us that, but in your models is that down roughly the same or would that be down more or less?

We are all thinking here.

I would say it is a reasonable assumption that it would be down about the same.

It should be about the same.

Okay. And then, can you walk us through how you guys are thinking about the fall season in Latin America in particular? Obviously a lot of moving pieces and parts, oftentimes you get pricing when the real devalues because farmers sell into a dollar market.

So when you look at that generally how do you look at the conditions this fall there? And then how are you going to protect I guess your cash flow in that if you make a sale you charge it saying Q3 or Q4 you may not collect that until Q1 if the real continues to devalue? Are you looking to hedge more than historically, are you going to take that risk? Or how is that part of the working capital going to be guarded, I guess?

I would start by saying that the guys in Latin America are really confident about making budget. I mean we are a little more cautious than they are. To be honest we have gone back to them and given them a free pass to be able to change their numbers over and over again and they say no, no, no, they think they are going to make it.

There is some phenomenon, particularly in the north of Brazil where the season started late, so that volume got shifted into the second half. So that is going to make the second half somewhat better than it would have been otherwise. And we are laser focused on the foreign-exchange transactional risk on this business, and we have got all kinds of strategy reporting in place.

We are doing dollar sales, we are doing hedging, we are doing barter; we are really working it. And we, up to now, have been able to avoid all of the exposure from a transactional standpoint. Can we do that for this growing season 100%? I can't say that we can guarantee that. But we are going to largely mitigate the transactional cash flow risk, I can tell you that.

Okay, great. And then just the last one for me. In general, how would you characterize the inventory levels of your product kind of in the distribution channel today?

High.

Okay.

High-ish at least. Yes, it is higher than we would like.

But in line with industry, or do you think you are even higher than industry?

No, I think maybe even lower than industry, but higher than we would like.

Okay, terrific. Thanks, fellas.

Aleksey Yefremov, Nomura Securities.

Hi, good morning. This is [Jay Genpachart] sitting in for Aleksey. My first question is on within Performance Applications. Could you comment on the broader outlook for semiconductor demand and how that affects electronic solutions?

There is really no connection with semiconductor demand in Electronic Solutions. The numbers you need to look at are for wiring board production, not semiconductor, which are far, far less volatile than the semiconductor build. And that information is out there and available.

And it is a little soft right now, but I mean that is -- the reality of it is. But nothing to get overly concerned about. Decent -- we are going to have a great year in Performance Applications this year.

And do you expect that exposure to change with Alent or to be about the same?

Yes, it will change some with Alent for sure. Alent has damascene copper which goes directly into the semiconductor space, but it is fairly small, it is not huge number. And then they also are much heavier involved in electronic assembly than we are.

So there are definitely areas that are a little bit different than our electronics business for sure. And there will be I would say more exposure, but not hugely more exposure to the semiconductor cycle.

Great, thanks. And then on Ad, you mentioned the pricing initiatives. So do you expect your sensitivity to FX changes to lessen in second quarter? And can you kind of help us think about quantifying that?

Yes. No, I think there is two ways to think about it, one is transactional and one is translational. So from a transactional standpoint we have been able to up to now 100% mitigate the exposure from that. Like I said a minute ago, I am not sure we can guarantee 100% going forward, but it is going to be largely mitigated.

And then the translational -- I mean, it is what it is. We are going to be impacted by the translational effect and there is really not much we can do about that.

Great, thank you.

Roger Spitz, Bank of America Merrill Lynch.

Good morning. I wonder if you can talk a little more about what is driving the constant currency increased performance of Performance Applications on a year over year. Was it the new products you spoke about? Was it underlying market growth? Are you taking share?

No, I think the market is soft. I wouldn't say it is soft to the extent that it is like way down or anything, but it is not growing much. We are in a bit of a down cycle in China particularly right now in electronics. But we are having real success in new products.

So, all of the -- it is probably not fair to say it is all that, but a large part of it is the new products in electronics, but we're also having a really good year in the offshore fluids part, which is driven by the long CapEx cycle in the production business for oil and gas.

So, these deep offshore production assets take years and billions of dollars to build, you can't just shut them off one day to the next. So they are still coming online as we see it now. And so, that is driving some growth this year in a market that you would otherwise look at and say, boy, it ought to be down, it is just not.

Okay. And a similar question on Ag Solutions. What is driving that year-over-year growth? Is it the synergies of putting these pieces together? Again, taking share or underlying market growth?

So, certainly there is a synergy component. As we noted, we realized $8 million of synergies in quarter, we are at about $13 million on the year, so that helps. And then we have some really strong products and some, as Dan talked about, a strong season in Europe, things in LatAm are good thus far, balanced by some weakness in North America and Africa.

Thank you very much.

Chris Shaw, Monness, Crespi.

I might have missed it, but specifically in Ag, did you guys actually break out the price volume in the quarter? I'm just trying to isolate maybe the sort of pricing impact from the real devaluation.

That is not something we have provided in this quarter or in prior quarters.

Got you. And then can you guys talk about both the timeline and I mean just sort of your view on the antitrust process for the Alent deal? Are there -- both in the United States and in Europe maybe?

Yes, absolutely. There are a handful of jurisdictions in which we have regulatory filings indicated on the basis of that transaction. Some of those jurisdictions are more opaque than others with regard to the timing.

So what we have communicated with regard to closing of that transaction is end of this year or early next year. At this stage we have done some of those filings, not all of them, and don't have an update to provide with regard to refining that outlook.

And just can you talk to like what is your confidence in getting the approvals and sort of what the shares will sort of be like or just how you view the process?

So probably not going to talk about market shares, but we wouldn't have signed up this transaction if we didn't think regulatory was manageable. And so, we remain optimistic in that regard.

Great, that is all I have. Thanks.

Bill Hoffmann, RBC Capital Markets.

Just a little bit more on the Ag business. You guys talked about having a sort of heavier inventory load heading into the seasonally weaker second half of the year. I just wonder if you can talk a little bit about how you expect that to impact the business margins and/or also the working capital release we typically see in second half.

We are going to -- we expect to see good margins. We have been seeing good margins all year. We have a mix deal going on where the higher profitability products are being emphasized and we are seeing more sales of them at the expense of some of the lower margin products. So we expect that to continue.

So, we have got a pretty heavy second half of the year weight in Brazil where the margins are good. We don't expect to see that change as a result of the dollar at all really. So I mean we are cautious about the volume in the second half of the year, but caution is the right word.

We are not sitting here waving a red flag at this point. What I said at the end of the first quarter I think is worth repeating. I said, wow, it was a really great quarter and in the agriculture business you are dealing with weather issues, you are dealing with pests some years that show up, some years that don't you up. And there are so many variables that it is really difficult.

If you ask me about performance materials in the second half of the year I could tell you with a lot of clarity what the volumes are. In Ag you can't do that. So we are sitting here saying what we think the second half of the year is without any idea what the weather is going to be. And it can have a huge impact on the second half of the year.

So we are confident based on everything we know as long as there is not some really diverse weather event. And if there is, that is going to hurt. But all in all we expect it to be a little softer than we felt the last time we talked, put it that way. A (multiple speakers) little more cautious than we were last time.

Great. Are you seeing any pricing pressure on the Ag chemical side of it?

There is always pricing pressure that ebbs and flows. And we wouldn't -- we are not seeing anything out of the ordinary for sure.

Okay, thank you. And then last question, from a capital spending standpoint, any thoughts for full-year 2015 and maybe looking forward into 2016 on the core business you have today?

Well, we have given guidance at the Investor Day on CapEx, I don't think that has changed at all. And we see upside opportunity in 2016 for sure.

Okay, thank you.

John Roberts, UBS.

I believe oilfield services chemicals was a potential platform area of interest for you. With oil prices weakening again here would you entertain a good deal in that space if something came along or do you have too much on your plate right now?

We are pretty busy, John. We have got, as you know, many, many tens of millions of synergy opportunities in front of us. I mean that is what we're focused on now.

We should never say never particularly when you are dealing with our Chairman, Martin Franklin. But I can tell you that we are really focused on --.

We think we have huge opportunities here relative to synergies and making these businesses better. I am super jazzed about getting more involved in the Ag business and working closely with the management team there. And I see big upside opportunities, that is what we are focused on right now.

Maybe I will just ask a follow-up then. You said you are looking for a new head of the Ag division, but you are not replacing the President role. Wouldn't having a President allow you to focus more on the portfolio issues and free you up from becoming bogged down in operations?

Well, things ebb and flow. I mean right now operations is where the money is. And we are focusing on operations in the short-term because there is so much upside opportunity. But ultimately our business model is that we are going to have presidents who run the businesses who don't require a lot of involvement from corporate.

And that is part of the reason we are moving Frank over to partner up with Scott Benson. I mean those two guys don't need any help from me, I can tell you. And when we get a President in the Ag Solutions business he is not going to need help from me either. But for right now, yes, right now I spend a lot of time on that.

Okay, thank you.

Thank you. And that does conclude today's Q&A portion of the call. I would like to turn the call back over to Dan Leever, Platform's CEO, for any closing remarks.

First of all, I'd like to thank everybody and I hope you get the sense from this call that we are pretty excited about where we go next. One clarification point I wanted to make that Frank pointed out to me a few minutes ago is the Performance Applications growth, there is an automotive component in that that is going well this year. So I should have pointed that out when I did.

So in general we are pretty jazzed about how things are going. We have some short-term issues that we are going to fight through and we have got levers to pull and then some. This business effectiveness thing is a big deal, maybe not in the immediate future but pretty soon it is. And we look forward to telling you more about that over time. So with that I would like to thank you all for joining us today. Bye now.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone have a great day.