Element Solutions Inc (ESI) 2015 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Platform Specialty Products Corporation third-quarter 2015 results conference call. (Operator Instructions). As a reminder, this conference call may be recorded.

I would now like to turn the conference over to John Mills, Partner, ICR. You may begin.

Thank you. Good morning, everyone. Please note that in accordance with Regulation FD, or 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 we begin, please take note of Platform's cautionary statement regarding forward-looking statements at the end of the press release issued last night. Some of the statements made today during this conference call will be considered forward-looking. All forward-looking statements are based on current available information. Platform's reported results could differ materially from those predicted. However, Platform undertakes no obligation to update such statements as a result of new information, future events or otherwise.

Please refer to Platform's SEC filings including its quarterly report on Form 10-Q for the fiscal quarter ended June 30, 2015, for a more detailed description of the risk factors that may affect Platform's results.

Please note that Platform has posted supplemental slides to its website at PlatformSpecialtyProducts.com. In accordance with Regulation G, Platform is providing reconciliations of certain non-GAAP to comparable GAAP financial measures in its supplemental slides which can be downloaded in the investor relations section on Platform's website under events and presentations.

As a reminder for the purpose of this call, Platform will be comparing the periods in 2014 and 2015 on a pro forma as adjusted basis as the Company believes that these figures provide a better comparison and understanding of the underlying business results for its operations. Pro forma as adjusted figures represent the Company's financials as if the acquisition of each business in Platform's portfolio had occurred on January 1, 2014. This pro forma does not include any data on OM Group or Alent as they were not a part of Platform on September 30, 2015.

Platform will also present results on an actual dollar and constant currency basis and we encourage you to review the supplemental slides that have been posted on the Company's website for further clarification.

It is now my pleasure to introduce Martin Franklin, Platform's Chairman, for opening remarks.

Thank you very much. Good morning and thank you for joining our third-quarter 2015 earnings conference call. With me on the call today are Ben Gliklich, Chief Operating Officer; Sanjiv Khattri, Chief Financial Officer; Jonathan Evans, our Interim President of our Agricultural Solutions Business; and Scot Benson, President of the Performance Applications segment.

Given our capital markets activity and recent call many of you have heard quite a bit from us recently. Our results are in line with those we published a few weeks ago. Our other updates remain unchanged. We are reaffirming our guidance, the Alent transaction remains on track to close in the coming months, and our near-term priorities remain the same, execute on our integrations, grow the business organically and generate cash flow to delever.

The pace of activity at Platform since its founding has been remarkable. I am pleased with the continued progress we are making towards our long-term goal of becoming the best in class globally diversified specialty chemicals company.

There have been real challenges for the business this year but we believe we have faced them better than the market has given us credit for. Particularly our Ag business which is growing on a constant currency basis despite the weak macro environment. The team remains resolute in our belief that Platform will emerge in 2016 as a stronger, better managed Company that is poised for consistent profitable growth.

Our two business segments are comprised of high quality, high cash flow specialty chemicals businesses with attractive market positions and defensible barriers to entry. We believe our shift back to the basics in 2016 will demonstrate these strengths.

When we last spoke a few weeks ago I indicated that one of our most pressing near-term priorities was the financing of the Alent acquisition. I'm pleased to report that yesterday we completed the issuance of $500 million of senior notes. We are also in the process of finalizing our syndication of approximately $1.4 billion of term loans comprised of both a US dollar and euro tranche.

While the new debt is relatively expensive, it has removed any uncertainty around the financing of the Alent transaction. The additional cost is marginal relative to the value creation that this transaction is expected to provide.

In late October, we completed the first transaction related to the acquisition of OM Group's electronics and photomask businesses. As previously announced, we expect to acquire the remaining business, the remaining assets in early 2016 subject to standard closing conditions. Both transactions have already been funded as part of the OM Group acquisition. We believe that the Alent and OM Group assets are strategically significant and highly complementary businesses, will strengthen our performance application segment by broadening our product and service offerings to customers.

We expect the combined entity to have an unmatched depth of knowledge and experience in the markets where it will operate. It will also have the largest salesforce in the industry. I'm excited about seeing this combination succeed.

Once the Alent transaction closes, we will have nearly $4 billion in revenue and adjusted EBITDA margins in the low 20% range -- in the low 20s% range rather. Our portfolio will be balanced between our Agricultural Solutions and Performance Application segments and will be geographically balanced between emerging markets and developed economies.

With the completion of the Alent acquisition only weeks away, Platform is fully focused on execution. This means integration of all our acquisitions and realization of synergies, generation of free cash flow to improve our balance sheet and hiring of a new CEO to provide leadership to the great team that we have.

As I have discussed previously, integration and synergy realization are our top near-term priorities. And 2016 will be a year of looking inward so that we can optimize our performance.

Finally, we continue to build our high-quality leadership team and I remain impressed at the depth of talent across our businesses. We have continued to involve Scot Benson and John Evans in our market interaction these past few weeks to a great reception. They are highly exemplary of the rest of the team.

I am personally leading the search for a new CEO and have received significant interest from a number of extremely well-qualified candidates. Our new CEO will foster an environment that takes the best of all of the cultures we have acquired and creates one cohesive platform that values the unique attributes of its diverse businesses. This search is my top priority and I am hoping to have the role of Chief Executive filled before the year-end. We will provide an update on the search at the appropriate time.

We have formerly hired our future President of the Agricultural Solutions Division and look forward to introducing him to investors once he has completed his transition from his current employer.

With that, I will turn the call over to Ben to review the business segments. Ben?

Thank you, Martin. Good morning, everybody. As we mentioned on our business update call a couple of weeks ago, our third-quarter results were heavily impacted by currency fluctuations in the macro Ag environment. Despite these headwinds we believe our long-term fundamentals remain solid as we continue to deliver constant currency revenue growth for the combined business. We have also continued to outpace our targets for synergy realization in the Ag business with $13 million in the P&L this quarter. More on that later.

In our Performance Application segment, third-quarter sales were essentially flat on a constant currency basis as we continued to experience headwinds primarily in our Electronics business in China. This was partially offset by positive results in our automotive and offshore fluids businesses.

Constant currency EBITDA was up over 8% in the quarter with continued margin improvement despite the topline challenge largely due to our enhanced product mix and continued cost control efforts. We continue to make progress with our global automotive OEM program and results in our graphic business were encouraging with continued growth in our sheet products.

As we look forward, we continue to believe that we can drive our topline despite temporary headwinds in Asia.

Our Performance Applications business is a relatively steady generator of EBITDA and free cash flow and we are excited about the growth prospects of the soon to be enlarged segment. Employees in all of the businesses are actively engaged in the integration and pre-integration planning process. We have established global cross-functional teams to oversee this process and we are already off to a good start in collaborating with the teams at Alent.

With an additional $50 million of expected synergies from Alent and $20 million of expected synergies from the OM acquisition, we believe we have a very compelling earnings growth opportunity in addition to the underlying organic growth of the businesses.

Turning to the Agricultural Solutions business, the market continued to look much the same in the third quarter as it did in the second quarter. Commodity prices continue to sit at the low-end of their historic ranges and the strengthening of the US dollar has added an additional challenge to all competitors in the space.

On a reported dollar basis, our business has certainly not been immune to this. However, we are seeing strength in certain regions and products. Strong constant currency performance in Europe, Africa and Latin America partially offset the weakness in Asia and North America and proprietary herbicides and fungicides have been offsetting the weakness in insecticides, particularly in Latin America. This type of performance demonstrates our specialty squared strategy. Ultimately we still feel confident the fundamentals for the Agricultural Solutions industry are sound. Farm level consumption of products is healthy and planted acres continue to grow.

Looking region by region, the AIME, or Africa, India and Middle East region, continues to see strong demand and we are seeing a good start to the season in South Africa partially offset by weakness in India. Latin America continued its strong performance growing double digits on a constant currency basis in the third quarter driven primarily from the delayed but positive start to the season in the Cerrado's region of Brazil.

In addition to our strong performance in Brazil, we also experienced positive year-over-year comparisons in all other material Latin American countries.

In North America, we saw an approximately $8 million headwind from our change to distribution strategy with the balance expected in the fourth quarter.

Constant currency pro forma adjusted EBITDA in Ag was down 6.9% year-over-year showing a similar trend as our revenue performance with positive results in the quarter from our Africa Latin America and Europe businesses. Excluding the corporate allocation to this segment, constant currency EBITDA growth would have been positive.

Putting aside the translational impact of the strengthening dollar, Latin America benefited from both increases in net selling prices and volumes across a wide range of products and regions. Europe was also up double digit at both the gross profit and pro forma adjusted EBITDA lines.

While performance on a reported and constant dollar basis in Ag was well below our expectations coming into the year, we believe the softness is temporary and we are pleased to have posted constant currency growth despite the macro challenges.

As mentioned previously, the pace of synergy realization in our Ag business has been well ahead of schedule. On a run rate basis, we have achieved over 50% of our three-year target of an estimated $80 million of synergies in the first eight months alone. This is a great accomplishment. I'm very proud of the hard work our integration team members who have allowed us to now approach the market as one consolidated portfolio.

To date, the realized synergies have predominantly been G&A focused but we expect to start to see meaningful additional synergies from cost of goods sold and other sources in 2016. We will strive to achieve our longer-term value creation objectives when making the businesses we acquire better and I believe that we are well on our way to doing that with Ag. I expect to see similar success with the integration of Performance Applications once it is underway.

Overall, we remain confident in our ability to drive value for shareholders through strong execution, successful integration and synergy realization and a continued primary focus on free cash flow generation. As Martin mentioned, 2016 will be about execution of our key priorities and I look forward to continuing to update you on this in the coming quarters.

With that, I will turn the call over to Sanjiv to walk you through the results in more detail. Sanjiv?

Thank you, Ben, and good morning, everyone. I have had the chance to speak to many of you already because of the big call in late October and the financing we have underway. But it is great to be talking earnings with you. I plan to spend some time going over the numbers themselves but also updating you on various initiatives we are implementing.

As a reminder in addition to our reported GAAP and adjusted GAAP results, we are presenting numbers on a pro forma as adjusted basis as if the acquisitions of Agriphar the Agro Solutions business of Chemtura Arysta had occurred on January 1, 2014. Due to the significant acquisitions we have made over this time frame, we think these numbers are more useful than on and as reported comparison. For the avoidance of doubt, none of the pro formas include any information on OM Group or Alent. That is for the Q4 results and2016.

The second thing we did was compare the results on a constant exchange rate basis in order to illustrate the impact currency headwinds have had on our financial performance and also to highlight the resilience of the business despite the broader macro challenges that Ben covered. For the constant exchange rate calculations for Q3 results, we assume Q3 2015 average exchange rates for both 2014 and 2015. For year-to-date results, we assume year-to-date through September 2015 average exchange rates for both 2014 and 2015.

Please refer to our supplemental slides posted on our website to assist you in understanding these adjustments. Like always, we will be available for any questions.

Before I delve into the results, I want to spend a little more time on FX given the size of the impact it has had on our results this year. As I mentioned on our business update call a few weeks ago, the Brazilian real, the euro and the Japanese yen are off 31%, 18% and 15% respectively for the year-to-date September period versus the same period for 2014.

These currencies have begun to stabilize in various points of 2015 and our hope is that much of the devaluation is behind us. This is something we don't control but have to manage over the medium and long-term. We have continued to expand the implementation of various transactional hedging programs particularly in Ag aimed at mitigating the impact of foreign currency on our economic cash flow. At the same time, it is important to note that the majority of our FX exposure is translational in nature and costs are matched or hedged in local currencies. Of course, translational FX negatively impacted our numbers and will likely to continue to do so in Q4 and into the first half of next year.

The financial results came in exactly in line with what we shared with you in late October. For the quarter ended September 30, 2015 on an as reported basis, Platform's revenue was $597 million versus $197 million in the prior year, an increase of about $400 million. In segment terms, Performance Applications revenue was $180 million, a decrease of 8.7% versus the prior year. The Agricultural Solutions segment finished Q3 2015 with a revenue of $418 million.

Platform had Q3 2015 reported dollar revenue of $597.3 million versus the $707 million of pro forma as adjusted revenue for the same period in 2014, a decrease of about 16%. The Performance Applications segment declined 8.7% versus the prior year as I just mentioned while the Ag segment declined 18% versus the prior year to $418 million.

The strengthening the US dollar particularly against the Brazilian real continued to represent a significant headwind to our operations results in the third quarter of 2015. On a pro forma as adjusted basis in constant currency, Platform in fact grew revenues by 2.2% from $590 million to $602 million in 2015.

The Performance Applications segment was essentially flat with revenue declining 0.2% versus the prior year on a constant currency basis. The Agricultural Solutions segment increased revenues 3.2% versus the prior year on a constant currency value basis to $422 million.

Platform adjusted EBITDA in reported US dollars for Q3 2015 was $115 million versus $141 million of pro forma as adjusted EBITDA in 2014. On a segment reporting basis, Performance Applications adjusted EBITDA was $54.5 million, down 2.3% versus the prior year and the Ag Solutions segment adjusted EBITDA was $60.6 million, down 29% versus the reported year. Again adjusting for currency affect, Platform adjusted EBITDA for Q3 2015 was $116.8 million, basically flat versus the adjusted EBITDA in 2014.

On a segment reporting basis in constant dollars, Performance Applications adjusted EBITDA was 54.5%, up 8% over the prior period while the Ag Solutions segment reported adjusted EBITDA down about 7% over the prior pro forma as adjusted number. The driver of the decline in EBITDA for Ag despite a stronger topline is actually increased corporate overhead tied to the infrastructure initiative of that platform. I know this is a lot of numbers. They are all nicely laid out in the supplemental deck we posted in connection with this earnings release.

As of September 30, 2015, Platform net debt was $2.76 billion, which includes $367 million of cash which was subsequently used to fund the OM acquisition, the first transaction of which closed on October 28. As Martin mentioned earlier, we recently closed our $500 million unsecured notes offering at a coupon of 10.375% and are finalizing our syndication of the $1.1 billion US term loan and EUR300 million term loan all to fund the Alent transaction.

In addition as previously announced, we will issue 18 million of shares of common stock to fund the remaining acquisition consideration. Pro forma for this debt raise, our total debt outstanding is approximately $5.3 billion. Adjusted net debt is $5 billion including the use of cash to fund the OM acquisition. The capitalization, debt table in the supplemental deck lays it that out nicely on a pro forma basis for you.

With respect to cash flow, third-quarter recurring free cash flow was $67 million. As expected, working capital release was a source of cash this quarter and we should continue to be in Q4 also. Recurring free cash flow represents our cash pro forma operations adjusted for cash flows that are not considered a part of ongoing operations. Some examples of these is transaction costs, the impact of foreign exchange rates on intercompany debt, legal settlements and restructuring costs.

From an investment standpoint, year-to-date CapEx was about $58 million including $32 million in physical plant and another $26 million and registrations. This low CapEx number and high cash flow conversion is what we expect from our asset light high touch businesses and is an important part of our value creation story.

Furthermore as we integrate the businesses, we continue to focus intensely on working capital and transactional FX exposure and we feel good about the progress we are making. Delevering our balance sheet is a primary focus for 2016 and cash flow generation as well as EBITDA growth and synergy capture will be how we hope to accomplish that.

As noted during our business update on October 27 and now in our third-quarter press release issued earlier today, we have reformed our 2015 adjusted EBITDA guidance for the full-year 2015 in the expected range of $550 million to $570 million. This is prior to the impact of any EBITDA from the OM assets and Alent which is expected to be modest in the 2015 reported period.

Consistent with our assumptions provided in the second quarter, our base EBITDA guidance of $550 million to $570 million assumes no incremental currency headwinds and was projected at September 30 FX rates. While this is down from what we envisioned at the start of the year in light of the macro conditions and the state of the Ag factor, this represents a solid year for us and as with all the that initiatives that Martin and Ben alluded to, we are focused on doing much better in 2016.

Despite financing and other activity, it is business as usual. We have also been quite busy from a budget perspective. Our budgeting process is well advanced and we look forward to providing formal guidance for 2016 in the coming months. We will have a foreign exchange headwind in the first half of the year but anticipate organic growth and synergy realization to offset this. Our expectations are for a strong performance in 2016.

Before handing the call over to our Chairman, a few other updates on what else I have been up to. In addition to Platform's back to the basics priorities which are my priorities as well, I am focused on some very specific initiatives around the areas of infrastructure, building the infrastructure of people, processes and systems to support our $4 billion business and more. We have already made some key hires and have more on the way. We are focused on a couple of key system and process initiatives that will make our ability to support the business easier.

Finally in terms of style, some of you know me from my previous life. We plan to continue to be available, open and transparent to all our stakeholders. Martin sets a wonderful tone here and I plan to follow in his footsteps.

With that, it is my honor to hand it back to Martin Franklin, our Chairman. Martin?

Thank you, Sanjiv. In summary, we are extremely focused on executing our strategy. We have closed the first part of our OM Group acquisition and expect to close the Alent acquisition in December and we will begin the integration of both businesses immediately. While we anticipate some lingering currency and macro headwinds for our Ag and Performance Applications segments during the remainder of fiscal 2015 and into 2016, we are taking steps to mitigate the impact of both on both our sales and margins.

We are confident that we have a compelling long-term growth opportunity and our top priorities in 2016 will be to integrate the acquisitions and leverage our increased scale, geographic reach, products and technology to improve earnings and cash flow generation.

We look forward to delivering to our customers, shareholders and employees the greater value and benefits of a larger, stronger Company. And with that we will be happy to take questions. Operator?

(Operator Instructions). Duffy Fischer, Barclays.

Good morning, fellows. First question is mostly centered around kind of the McDermott businesses and Alent. Just in general how do you see the macros or kind of what are you basing your business on as far as the macros go over the next two to three quarters?

Sure, I will pass that one to Scot, Scot Benson, do you want to take it?

Sure. I think everybody is well aware of the general electronic slowdown in China. However, we view it on a global basis seeing mitigation of that in other areas particularly as it relates to our expansion into the automotive segment and automotive electronics in particular. So we have a fairly bullish outlook on the markets in general in spite of a bit of a slowdown regionally in Asia.

Okay. And then on the Ag side of it with the planting season and growing season coming up, what should we think about as far as the working capital goes? It seems like people are adopting different strategies as far as what you will do accounts receivable and stuff like that with farmers. How is that going to work for you, does that mean we actually generate a little bit more cash from a dollar of sales this year because you are pulling that collection forward or how is that going to flow through the cash flow statement?

As you know, working capital is quite seasonal so we expect no material changes in our underlying philosophy towards it. Obviously collection remains a key strength and focus of our business. But I expect working capital to be positive in Q4 like it was in Q3 and then we expect working capital to be a use of cash in the first half of the year. So I expect a typical cycle for the Ag business. Payment terms in our Performance business are much more stable and less seasonal. They are more a percentage of sales rather than these seasonal factors that you see in the Ag business. Anything to add?

What I would just add is that our teams down in Latin America are extremely credit focused and as good as it gets with regard to collections. John Evans can speak to some of the specifics with regard to how we are handling this season versus historical seasons. John, I don't know if you have anything you would add.

Yes, I think our practices are well-established. (inaudible) the credit practices in Brazil in particular I think are well known for folks that follow this industry and as Ben said, we have a big field collections team, we work closely monitoring our customers and make appropriate adjustments if we deem credit risk too much. But we are having good luck on collections this year so I would see no reason to change our strategy because it has been successful so far and continues to be.

And then the last one is just you changed your inventory strategy in North America. How is that being received by the market? And then when you look at that and juxtapose that with Latin America, is there going to need to be an inventory strategy adjustment in Latin America as well?

So I will start and then I will turn it to Jon Evans. We changed our inventory strategy globally where we said we are not going to fill more than our customers need going into the growing season and the bulk of where we had that phenomenon was in North America. So when you look at the $40 million we reduced guidance by, that was driven 90% by North America but there were bits and bobs in other geographies.

Jon, you can speak to some of the market reaction and otherwise.

I think in North America, most of it was based on feedback from distributors in some cases and of course the other was based on data that we collected from our own on the ground reports that we get back. And finally making a decision to adjust our inventory position to align it better with what happened this year and taking a prudent approach for next year as well in the sense that it is primarily in North America.

You alluded to Latin America, that is not an issue for us, that is something we have managed, very, very close and adjusted our product mix and go-to-market strategy down there so we do not have a channel inventory issue at all in Latin America.

Great, thank you.

Jon Tanwanteng, CJS Securities.

Good morning, gentlemen. Thank you for taking my questions. If I'm hearing you correctly, Ag EBITDA was down year-over-year from a constant currency perspective but you also had an $8 million impact from the change in that inventory strategy so ex that, it would have been up, is that right?

Yes, if we just did that in isolation correct. Obviously there is a lot going on. We have increased our infrastructure spending at corporate so that also allocation of also impacted results. But you are right, on the margin just the inventory adjustment in North America would have resulted in equal numbers.

So there are two drivers that sort of speak to the discrepancy in the top line and the EBITDA where we had a growing topline in the quarter on a constant currency basis and a slight decline in EBITDA and variables in our inventory change and increased investment at corporate associated with the acquisitions we have made. Net of those you would have a better EBITDA result in the quarter, more in line with the top line.

It would be up.

Great, thanks for that clarification. Can you give us some color on the trends heading into Q4 in both these segments? Are you seeing any incremental pressures or tailwinds in any of your end markets and in particular conditions on the ground in Brazil, what are you seeing there?

Let's pass that one to Jon and Scot. Scot, do want to talk about performance applications first and then Jon with regard to Q4 trends?

Sure. We haven't really seen any additional pressure from Q3 so we are expecting Q4 to be fairly in line with what we had forecast fairly consistent with Q3 without any dramatic additional headwinds.

In Latin America, we are off to a strong start and third quarter I think is we spoke to earlier in the call. In fact, we are in a constant currency basis in Latin America. We are up both in topline and bottom line. We see strong indications for us in the quarter in Latin America in particularly in the segments that we play in, the fruits and vegetables, the pasture sector actually which is driven around beef and cattle applications in Brazil and also even soybeans. So expect actually a strong quarter for us in the fourth quarter on a constant currency exchange basis.

Okay, great. Going forward, how much of the year-over-year impact from currency can you expect to offset with pricing and how much pricing power do you actually have?

It really depends on where you are. Certain aspects of our Brazilian business are actually hedged economically in the sense that the transactions actually default into a dollar exchange rate. However, you are correct on a translation basis. We will have some year-over-year differences because if you remember last year the local currencies were a lot stronger against the dollar so you will see some of that played in. I think it is important to note that the guidance we reaffirmed today already reflects the exchange rates at September 30. And while there has been some movement back and forth at least as of now, midway through the quarter exchange is more or less flat, some ups and downs but basically flat versus where we were September 30.

Maybe Jon can add a little bit of color with regard to specific products or specific things in region.

Yes, we've got good pricing power with our proprietary portfolio, that is what we lead with in the marketplace especially in selective herbicides and in fungicides and even in insecticides where we have a bit of a smaller presence in the market. The brands are very, very strong. So as Sanjiv had indicated, we adjust pricing as the currency changes in particular Brazil has been the biggest challenge this year and the issue always of course is translational on the top side when it has gone back to corporate. That is really difficult to manage without some sort of large hedging tools so in the markets we serve, we do a really good job of managing on a transactional basis.

Okay, thanks. And finally, regarding the recent debt offering first of all, congrats on getting that over the hump. I would assume the goal is to pay that portion down as soon as possible given the interest. Are there any terms or expense clauses that would prevent that?

We have the ability in the next 12 months to reset a portion of the term loan and we have a no call provision of two years on our -- on the bonds.

So we have 2.5 years non call on the bonds and we have existing term loans outstanding that don't have any soft call. The term loans that we allocated this week have a 12 month soft call. And we've got attractive pricing relative to where it could have come out from the market. Obviously we are not celebrating it but it is good to have the financing behind us, back to the basics business as usual execution orientation here forward.

I would just reemphasize what Martin said in his remarks that as a percentage of the value of the transaction, while the rates are higher than what we wanted to pay they are modest compared to the benefits of the acquisition.

Great. Thank you very much, guys. Good luck.

John Roberts, UBS.

Martin, you mentioned you hired a new Head of Ag. Did the new Head of Ag sign on thinking he would be working for Dan or did he sign on not knowing who his boss would be?

No, he signed knowing who his boss is going to be.

He signed on not knowing?

No, he signed on knowing. He was aware of the entire picture before he signed on and we signed him actually I can't remember the day but it was during the process of our doing the bond deal so after we had already announced all the changes. He was well aware.

All right, thank you. Will we see any more standalone financials from Alent before the deal closes or the next time we will see something from them it will be part of Platform?

We will try to create some visibility for you for the stop period. As you know, our target is to close this quarter and I don't want to give you a specific date but it could be very early in December. So we will have a stop period that we will give you some visibility and frankly one of the key benchmarks we hope you will factor against us next year is as Ben and Scot and the team report to you the synergy realization and how the integration is coming along. So all of that should hopefully give you visibility on Alent's results.

In the UK domain, they will be publicly filing their results as of the end of the closing so you will have full visibility to their UK results until we have acquired them.

Thank you very much.

Jim Sheehan, SunTrust Robinson.

This is Matthew Stevenson on for Jim. I wanted to ask about the impact of the infrastructure spending that you referred to earlier and how that was allocated to the segments?

So the allocation is nothing profound, we have a growing business that is rapidly growing. Martin and the Board decided that we needed to continue to build that infrastructure so that the Company was set up not only to manage a $4 billion revenue base but much more and so we are spending in that regard and the allocation basically is like any typical company where certain of the costs are allocated down to the business units. So there is nothing special I would mention currently.

Got it. And in terms of the long run leverage target of 4.5 times net debt to EBITDA given where the shares have come to, do you have any further thoughts on re-approaching that target over time?

Sorry, could you repeat the question?

I can repeat the question, sure. I asked regarding the long-term 4.5 times net debt to EBITDA target, on the 2Q call you mentioned potentially issuing equity to reach that target. Given where the shares are today I assume that is less of a tenable strategy. So I was wondering if you could give us any further guidance on how you see that target being reached going forward?

What I said just to be clear is that our focus is exactly what was that it would be which is to generate free cash flow to delever. There are three different ways I can think of, there are actually multiple ways that one can delever to 4.5 times. One is to generate cash flow to delever, one is increasing EBITDA. Another is buying the business with shares, the other is issuing shares.

So the reality is our stated target of driving the business back to 4.5 times leverage is our goal and we are going to probably take advantage of every alternative that is out there. We won't be issuing equity at these prices.

So it is that simple. If the market starts valuing this business for what it's worth and I think it will over time and I think this is the show me period where we need to just focus on deliverables and build investor confidence, I think it will reflect in the equity. If at that point we have an opportunity to accelerate delevering in a constructive way we will do so. But the same as I've done in every business I have been involved in for years, we will be opportunistic and proactive but we're going to make no promises about any particular path.

Thank you very much.

John McNulty, Credit Suisse.

So with regard to the Ag business, I know you have a lot of specialized products where there may not be necessarily great competition out there. But when you look at your customer base in general, what percent of that would you say looked there is inventory still in the channel and it still has to be worked through versus where business is free and clear -- where the other side of it is where business is free and clear to go and you won't see any kind of hurdles around inventory issues or anything like that?

I think our inventory or channel adjustment efforts where we are squarely focused around North America as I mentioned earlier, we haven't had an issue in Latin America and that is due to the portfolio that we offer there which is more niche applications plus the fact that we are very broad in Latin America even outside of Brazil. So hard to give you exact percentages, John, but the areas where we have run into trouble -- I say trouble because infestation has been down not necessarily due to full channel inventories. It has been mainly in insecticides and I would say that is in the Latin America market.

But as you can also see from our results in Latin America, we are up both for the quarter and actually year to date not only on a gross margin basis but on an EBITDA basis. So we've been able to manage around that by mixing up if you will and moving to different products in our portfolios. We have got a broad spectrum of registrations and we have a team down there that is constantly opening up new doors with business so we have been able to mitigate any of the issues.

In terms of channel inventory for the Ag industry, I would actually turn the question around, it is better to ask probably asset to some of the other folks you cover in the sector because I think they have bigger trouble than we do.

Absolutely. And then just one other question on the Ag front. Any major product launches that we should be thinking about as they kind of roll through? I know in general the business tends to be a lot of singles and doubles but anything that we should be thinking about as we start looking into 2016?

We continue to do label expansions -- label expansions is basically new crops for some of the same base active ingredients that we have. And we've got a big list of those that will be launching next year in Europe and Latin America in particular. We are actually opening up some new markets in Africa as well. A lot of activity has been around our selective herbicide portfolio which has been really successful this year.

The other area where you will see a lot more activity next year is in our bio solutions area which we are one of the leading suppliers globally of those types of products. And you will see a lot of effort in Europe and then a real big effort which is already underway actually got underway in Latin America last year for those products.

Great. Thanks very much for the color.

Aleksey Yefremov, Nomura Securities.

Good morning. Thank you. I wanted to go back to pricing for crop protection in Brazil with real having stabilized in the last few weeks, are you actually implementing local currency price increases in the fourth quarter to catch up with some of the FX headwinds that you experienced in the third quarter?

Yes, I mean pricing is constantly adjusted as the orders are taken from our customers based on the current currency situation now in Brazil in the last week or two actually, it marks back a little bit the other way from a valuation standpoint. But I wouldn't necessarily say we are going to catch up but it is constantly changing depending upon what the real to dollar rate is and we adjust our pricing accordingly to ensure that we maintain our margins based on the fact that the COGS is dollar-based and it is for the majority of all the guys that are in the market in Latin America.

So if we think about the level of your prices in Brazil at the end of the third quarter, early in the fourth quarter, do you expect the same level going forward for 2016 growing season for example? And also as it relates to that, are any of your competitors trying to raise local prices?

Everybody is trying to raise prices to try to get ahead of things but it is always normal to have a small lag. But in the case of our business this year again it is buried in our financials but as we have basically verbalized, we have been able to actually grow our gross margin this year and grow our EBITDA on a constant currency basis. So we have been successful in dealing with the local currency situation in Brazil. It is different from a translational standpoint.

But yes, everybody is pushing prices, they have had to given the steep slide in the real from the beginning of the year. And I assume that will continue but it is hard to prognosticate what is what you happen with the real. There is a couple of different scenarios that could happen. We are going to be prudent but this is something we have had to deal with since we have been in Brazil now for a long time, decades in the market so the team there is quite used to going through these cycles.

And final question if I may, did you say that your volumes in crop protection in Latin America actually grew in the third quarter? And if that is the case, could you also update us on your overall volumes in crop protection and in other regions as well?

Actually our volumes in the third quarter were slightly down but our margins were up and our EBITDA was up and that was attributed to a different mix that we went to market with. So it was only slightly down. If you look at it from a sales perspective, it was more flattish but if you look at it from a volume perspective, it was slightly down.

Globally it depends where you are in the world. As we mentioned in North America and in Asia, we have had more difficult environment. Asia has been flattish, North America has been down and we have adjusted our inventory levels to reflect that situation. So volume in North America definitely down.

Latin America for the year will be up. Europe is flattish from a volume standpoint but again, margins and EBITDA up quite a bit and that is really due to two things. One is the integrated portfolio with the three companies coming together. So you see the strength of that. Two is again mixing up, so utilizing the broad registration and database that we have and the broad portfolio we have and going after different niches in response to what is happening in the marketplace.

We try to stay away from the row crop phenomenon that is going on right now which has rally impacted a lot of our competitors who play in that space a lot more than it impacted us.

Thank you very much.

That is all the time we have for questions today. I would like to hand the call back over to Martin Franklin for any closing remarks.

Thank you very much for your time this morning. We look forward to reporting to you on our progress particularly following the completion of the Alent transaction. So thanks to everybody. Have a good day. Bye-bye.

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