Innospec Inc (IOSP) 2003 Q2 法說會逐字稿

Good day, and welcome, everyone, to the Octel Corporation second quarter, 2003, financial results conference call. Today's call is being recorded. Certain statements made herein constitute forward-looking statements that involve risks and uncertainties including the risks associated with business plans, the affects of changing economic and competitive conditions and government regulations. Additional information may be obtained by reviewing the company's reports filed from time to time with the Securities and Exchange Commission.

With us today from the company are the President and Chief Executive Officer, Mr. Dennis Kerrison, and the Chief Financial Officer, Mr. Paul Jennings. At this time, I would like to turn the call over to Mr. Dennis Kerrison. Please go ahead, sir.

Thank you, Susan. Good morning to our shareholders and friends in the financial community. Welcome to Octel Corp.'s second quarter, 2003, shareholder and analyst call. Paul Jennings, our CFO, will pick up this morning's conference call with a review and analysis of the financials and highlight the key points of the quarter in the first half of the year. These are the results that were issued last evening.

Following Paul's comments, I will summarize some of the business dynamics underpinning the financials and how then this fits into our view going forward and the outlook for the company. Following this, we will be pleased to give you all an opportunity for any questions and comments you may have.

I'd now like to pass you over to Paul Jennings, our CFO.

Thank you, Dennis. Good morning, everyone. My name is Paul Jennings and I'm very pleased to be able to present the financial information for quarter two and for the first half year for Octel Corp. The quarter has confirmed the progress being made in our specialty chemicals business and TEL has performed well.

TEL income was only marginally below the same quarter last year, helped by the resumption of deliveries to Venezuela and the conclusion of the war in the Middle East. Specialty chemical income was almost double last year for the quarter and is now in line with last year at the half year.

In addition, a number of one-off charges were taken in restructuring and we incurred the costs of the closure and sale of two small, non-core businesses which I will go over in more detail later in the call.

Net income for the second quarter, 2003, was $9.6m or 77 cents per diluted share compared with a profit of $17.7m or $1.40 per diluted share in the comparable period last year. It is interesting to note that quarter two of 2003 included a pre-tax restructuring charge of $8.2m or 46 cents per share after tax. This charge had been highlighted and predicted two quarters ago.

For the six months, net income is $20.2m or $1.65 per diluted share compared with a profit of $36.1m or $2.88 per diluted share in the same period last year. Again, this is after a 46 cents per diluted share after-tax charge for restructuring.

With regards to the strategic business units or SBU performance, specialty chemicals had a good quarter with sales of $45.6m, a 24.6 percent increase over the same period last year. Gross profit for the quarter of $15m was 14.5 percent ahead of last year, reflecting the improved activity and the initial benefits from the restructuring activities. Year-to-date sales of $95m are 16 percent up on last year with gross profits 4.7 percent higher at $30.9m.

We have highlighted previously that the acquisition integration process has been significantly accelerated and we are seeing an improvement in operating performance as a result. The steps that have been taken will enable us to enjoy further performance improvements during the balance of this year, but they will be more fully apparent in 2004.

Moving on to TEL, sales were $68.2m for the second quarter, 18 percent above the same period last year with deliveries resuming to Venezuela during the quarter as predicted earlier this year. Selling prices continue to be well managed and have reduced the impact of the global market volume decline. This, together with the continued benefit of tighter cost control at our U.K. plant resulted in gross profit for the second quarter of $34.6m or 50.7 percent of sales. Year-to-date sales of $116m are 5.3 percent down year over year on volumes 21.4 percent down, reflecting the selling price management mentioned earlier.

Provisions for restructuring costs of $8.2m were made in the second quarter of 2003, principally relating to the specialty chemicals business. After tax, these amounted to 46 cents per diluted share. It is still expected that aggregate will total around $12m during the remainder of 2003 and 2004 across the businesses. These charges were accelerated into the second quarter to reflect the short payback time in improved performance that has already been experienced. These combined charges reflect our well-known objectives of rationalizing sites and assets to capture synergies in specialty chemicals and also being proactive in managing the continuing decline in demand for TEL.

As mentioned last quarter, we continue to monitor the value of TEL good will in line with FAS 142 and at the present time, we see that 2004 will be the first year we will have to take a non-cash charge in the TEL operation.

I mentioned earlier that we had incurred the costs of the closure and sale of two small, non-core businesses. We decided to close down our loss-making activity in Hong Kong at the end of the quarter which resulted in a charge of $3.1m pre-tax, principally due to the write off of good will related to that business. The cash impact of the closure was $1.2m relating to outstanding letters of credit in place to support that business.

In addition, we sold a small, non-core business in England, Octel Waste Management, for net proceeds of $3.7m and incurred a small net loss of $0.4m, again relating to good will written off partly offset by the gain on sale.

Cash flow from operating activities was $11.7m for the second quarter of 2003, bringing the year to date to $17.2m cash inflow. Investing activities consumed $12.8m of cash, covering the remaining payments under the provisions of previous acquisitions, the conclusion of the Veritel agreement and the closure and sale of two small, non-core businesses which have been discussed more fully earlier.

We have initiated a review of our debt structure using external advisers with a view to strengthening the long-term liquidity of the company. We expect this to be implemented during the remainder of this year.

Net debt plus equity continues to fall and is now just below 25 percent, and interest costs fell by over 50 percent year over year. Our reflective tax rate was 25 percent for the quarter, higher than the same quarter last year, but more in line with the final, full-year rate of 2002. Year to date, our reflective tax rate is 28 percent. The weaker dollar year over year continues to impact our predominantly non-U.S. cost base compared to last year, with profits down between $2m and $3m due to translation for the quarter.

In summary, the performance of specialty chemicals is much improved year over year with the benefits of restructuring now having a positive impact. TEL had a good quarter following the resumption of shipments to Venezuela, the business portfolio was improved and cash was generated.

Thank you for your support and attention. I will now hand you over to Dennis Kerrison for his reports on the business.

Thank you, Paul. Paul has outlined most of the main business drivers behind the results for the quarter and the first half of the year. So perhaps I can expand a little on what and how we have achieved this good second quarter performance.

At the time of the last conference call, first shipments had just recommenced to Venezuela and the outlook was certainly unclear. I spoke at that time about the poor activity of our TEL team. With all the changes [inaudible] new contacts and work on the new orders and supply processes. I'm pleased to say that we have now established business as usual there, and while we have lost effectively the first quarter, we expect to supply consistently going forward.

We continue to be somewhat more proactive in our key accounts in terms of the economics of switching out of TEL, including the possible economic impacts on companies and the countries in which they operate. This is tied to an account-by-account total supply and support program, and strategic pricing continues to be part of this.

We mentioned in the last call that we were looking at the next TEL downsizing, taking the opportunity to significantly right size the [inaudible] infrastructure [inaudible]. The process has started and accounts for some of the restructuring charges mentioned by Paul. We will complete the process in 2004 and we're expecting to maintain our current manufacturing cost base going forward thereafter.

Our somewhat bullish comments on specialty chemicals are not necessarily reflected in the aggregated numbers, so let me expand a little. The overall figure was impacted by the low profitability detergent contract in 2003 which we mentioned during the first quarter conference call. We're addressing this with sales of higher margin analogs, improved plant utilization, and process improvements. However, these will not impact significantly on the 2003 results.

The main cause of our enthusiasm is the accelerating benefits accruing from the integration and nationalization program in our fuel additives, that is petroleum specialties business, which started last year. We have felt there has been some concern and skepticism in recent months about our ability to deliver. While the full benefits will not be seen until 2004, we are ahead in the program and confident of delivering on time.

A word of explanation on Octel Waste Management. This was a small joint venture building on our core competence of handling dangerous and toxic materials. Unfortunately, our partners in the venture proved to be inappropriate, focusing on the commodity end of that market. We decided to sell out and concentrate on core businesses. We are, however, increasing our efforts with Octel Environmental Company.

With the decline and phase out of TEL, there's a growing opportunity of the new business in rectification and remediation. While profitable, this business is a small niche specialty but a key part of our product stewardship program. We have been able to advise shareholders over recent quarters about our safety record and national awards. This quarter I'm pleased to announce we were awarded the best U.K. company for employee training schemes at the recent Chemical Industry Association awards ceremony. With the rapid decline of TEL and the growth of specialty chemicals, ongoing training and continuous improvement of our employees are key to our company's future.

At the time of the quarter one announcement, I mentioned the strengthening of the management team at Octel, and I'm pleased to say the new team is already contributing significantly to our success.

I think I'll stop here and give you all a chance to ask some questions and make any comments you may have. Thank you.

Thank you. The question-and-answer session will be conducted electronically. If you would like to ask a question, please do so by pressing the star key followed by the digit one on your touchtone telephone. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We will proceed in the order that you signal us and will take as many questions as time permits. Once again, please press star one to ask a question.

We'll take our first question from Don Nood [ph] with VN Capital Management.

Good morning, gentlemen. You mentioned you had a review of your debt structure conducted with some outside parties and that you'd be implementing their recommendations. Can you be a little more specific on tactics that they've recommended and what we can expect going forward? Thank you.

Thank you, Don. This is Paul Jennings. With regards to that particular point, we've initiated some work with the financial advisors and we expect that probably by - in the fourth quarter, that we will have a program where we can refinance the existing debt structure of the business to provide more long-term liquidity. Because, as everybody knows, our debt structure at the moment allows for balloon payments at the end of October 2004 and we just feel that we need to make sure that we've got longer term liquidity in the business. That's why we've started the work now.

OK, thank you.

Now we'll hear from Richard Howard with White Mountains Advisors.

Could you expand a little more on that, Paul? Other than get past the 2004 payments, do you anticipate having, you know, like five-year debt, or what are we talking about? And also, is our debt currently pound denominated or is it dollar denominated?

OK. Thanks, Richard. First of all, it's dollar denominated. And secondly, with regards to the structure, what we're looking at is that we expect to make sure that obviously we can provide for the short-term capital needs, to be able to make sure we [inaudible] the existing debt, but also to see what we can provide in terms of some future funds to help support the growth of the business along with the cash that's generated. So we are looking beyond the three-year period.

And if I could follow up, I notice that debt outstanding, particularly due within one year, was up significantly the first quarter to the second quarter. What was the driver on that? Was it the spending for the extraordinary items or, what happened there, Paul?

Well, I think the major thing, as you know, Richard, from quarter to quarter we look at the next 12-month period in terms of what we show as short-term debt versus what we show as long-term debt. So you really have to look at the two numbers combined to get the overall debt position. But there's been no major change other than that there were some debt payments scheduled for March of next year which obviously we've rescheduled and they've now gone into a later period. But there have been no massive changes on that, Richard.

But total long-term debt is up first quarter to second quarter by - I want to guess here, eyeballing the numbers, $6m.

Yeah, but that really - as I mentioned, is how we actually classify that over that 12-month period. So what we've done is we've -

No, I'm adding both short- and long-term together.

Yeah, and I'm looking at them as I see them right now and I've got short-term debt of - sorry, current portion of long-term debt is $41.8m and the long-term debt is $108.7m. That's $160.5m, and we had $159.2m at the end of December.

Oh, I guess I'm adding in the bank overdraft as well. OK, thanks.

OK.

Once again, if you would like to ask a question, please press star one on your touchtone telephone. Now we'll hear from Paul Smith [ph] with Capital Flows.

Yes, Paul, I want to also pursue this debt thing a little bit more. Maybe you could explain to us strategically what you're trying to do relative to the balloon payment that you're going to get in 2004. Are you anticipating putting some additional debt in place prior to that, or what's your strategy here?

Thank you, Paul. Our strategy here is that I don't want to keep looking over my shoulder every quarter in terms of what we have to do as far as bank repayments, et cetera, et cetera. And I think what we need to do is to put some longer term liquidity into the company that allows us to have some flexibility in terms of how the business is run and the things that we need to do for the shareholders.

So what I'm looking to try and do is to get us in a situation where we could have maybe a combination of some sort of term loan and then maybe a small overdraft. But really so that I can provide for the capital needs of the business for a longer term, three to five years, which together with the cash that we generate will mean that we've got much more flexibility about our strategic options in the future.

Thank you.

We'll take our next question from Jeff Dukakis with JP Morgan.

Oh, hi. This is Niva Deena [ph] sitting in for Jeff. Good morning, fellows.

Good morning.

A quick question, if I could. On - you guys gave out numbers for volumes. Could you guys break those down kind of for the quarter and pricing effects for the TEL and specialty business?

Sorry. Could you just repeat the first part of the question?

Sure. You guys provided volumes kind of for the TEL business on the year-to-date basis. Wanted to know what those looked like on a quarterly basis year over year.

I don't recall that we have given any quarterly numbers.

Yeah, the only thing we mentioned on that one is at the half year we said that volumes were 21.4 percent down year over year. [inaudible] sales were only down by 5 percent. I think that's the information that you're referring to, yes?

Yeah, I was wondering if you guys had that on a quarterly basis? For the quarter?

Well, there are two things here. The first one - and I have to say this every time and I'm somewhat apologetic, but with the decline of lead we are very loathe to give too much information about the individual customers and individual tonnages for people that don't have the interests of Octel or its stakeholders at heart. But with TEL, as you'll recall, and particularly when you've got a sudden situation like Venezuela and the national strike or war in the Middle East, to really look at quarterly swing in volumes I don't think is particularly valuable.

What we have done is we're now three quarters, I guess - three quarters of the way back to full sales into Venezuela in the second quarter. We're continuing our price increases. But again, quarter to quarter doesn't mean anything because our price increases come through at least annually, so I think that information - one, we don't really want to put it out, and secondly, it's misleading as to how the business is run.

That's fair enough. Thank you.

Once again, we'll hear from Richard Howard with White Mountains Advisors.

I don't want to hog things. I'll wait my turn. But anyway, two more questions. Were there sales into Iraq in the second quarter?

Yes.

Great. And does the waste business sale for $3.7m - did that money show up in the June 30th, balance sheet?

Yes.

OK, great. Thanks.

Now we'll move to Joel Luceman [ph] with Corvant Partners [ph].

Hi, it's actually Josh Kaufman [ph]. You guys have said before that you have some holes in the specialty chemicals line that you were planning on filling through acquisition. Can you address that as far as what it might be in the near future?

Yeah. I mean our business - we've always said this, is with the rapid decline in TEL, we want to make sure that we have an ongoing viable specialty chemicals business thereafter. Pretty much with the acquisitions that we made over the last two years in the fuel additives business, the main pressure on that team is to squeeze out the synergies and get the integration and restructuring of that unit. So although obviously we know the industry very well and we keep an eye on what is going on, we are not actively pursuing any fuel additive acquisitions currently. That would be folly, given the fact that we're still in the middle of an integration program.

But the other leg of our specialty business is relatively weak. It doesn't have critical mass and the reason that we haven't made some of those small to medium sized acquisitions, as we did in petroleum specialties was that for some reason or another - we discussed this several times last year - for one reason or another either somebody else beat us to the punch or the seller wanted us to overpay or pay for our own synergies or there were environmental problems or whatever.

For lots of reasons, four or five active targets just didn't materialize. We felt it's wiser to walk away than overpay. So that is sort of a weakness in our business. And we continue to look for opportunities.

As you know, M&A is very much opportunistic. But at the present time, where larger companies are spinning off businesses which they consider non-core where the economic climate is right, we just continue to look at what opportunities which are good for the long-term shareholder value could be there. So I think that just balances the two. The [inaudible] specs - we're going through an integration period before we come out of that next year and in the performance chemicals we continue to look at opportunities which will enhance the long-term value.

OK, thanks.

We have a follow-up question from Paul Smith [ph] with Capital Flows.

Yes. Dennis, could you give us some color on the improvement in the specialty chemicals business this quarter? It was a big concern because of its performance last quarter and things seem to have improved. And maybe you could elaborate a little bit?

Yes. [Inaudible] and Paul has as well about some of the write-downs we've taken. We made quite a few acquisitions [inaudible] around the same time of companies that were in the same area, and that allowed us to take everybody by surprise and not have to have other people bidding up against us. Those acquisitions were small to medium size and they were in different continental European countries and that means that you can't just integrate as you would in, say, the U.K. or the U.S. With social contracts, with union strength, employee strength, we have to very carefully look at how we put these things together. And each of them had a manufacturing site and they had to be rationalized.

We put a program together the second half of last year which will run until probably the first quarter of 2004, and this means taking costs out, it means reducing the asset base and it means getting people out as well. We have to be very careful what we say in this, but it's one of the reasons we strengthened our management team last year is to bring people in with the experience to drive this type of program through and I think as Paul indicated, and he may want to expand on that, we're moving ahead of our own schedule and it's going very well. That's why we were able to take some of these write-downs.

Yeah, if I could just expand on that, Paul. We took some charges at the end of last year and also in this first half year. As I mentioned, we've actually accelerated those because we can see the benefits from doing those are actually coming in much quicker than we originally thought. So we've got a different structure to that business. It's going to market in a slightly different way. We're starting to see some improvements in volume and some improvements in margin as a result.

And yes, there might be some smaller charges we have to take further on this year, but I don't anticipate them being particularly significant. Really, it's just been the benefits from those restructurings, and we've brought them forward a little bit because we can see the cash benefits coming through much faster.

Thank you.

And now we'll hear from David Wilson [ph] with Smith Barney.

Good morning.

Good morning.

It looks like a nice quarter.

Thank you.

Thank you.

After you get your debt restructuring done, do you think you'll start back on the old program share buy back?

I think share buy backs - as you know, David, this - I'd have to hold off on that a little bit given the - wanting to really get the debt structure sorted out and to make sure that we satisfied those particular demands. But I see that having a balanced portfolio of share buy backs and dividends and et cetera is the right thing to do for the business. And we've been tightly managing that cash flow over the first half of the year with some success, but we think we'll be a position to continue with that program in the not-too-distant future.

OK. And could you talk a little bit about your inventory build? You had a little bit in the future, not much in the second, and going forward, where you think the TEL inventory build will go to as you shut down [inaudible]?

I think what we've seen in the second quarter is a mix of inventory shift where we have more finished product because we had actually quite a lot of shipments in the first couple of weeks of July. And obviously as we start to plan the rationalization of the [inaudible] site we will be looking very hard at making sure we've the right sort of inventory profile for that. But we're probably not going to be looking at significant inventory build during 2003.

OK. And when you said the Iraq delivery had taken place, was that in the second quarter, or was that out in July?

It was in the second quarter, right at the end of June.

OK. And after this next $12m of restructuring costs happens, do you foresee, given where you are now, and I know it's hard to look at the future like this, but do you foresee next year having any significant write offs?

I think it's - I mean some of that $12m will actually take place next year based on the new accounting standard. So that's why we've said it's going to be 2003 or maybe 2004. I think that that will get us to a position, certainly within the TEL business and also specialty chemicals where we'll have gotten the acquisitions integrated and we will have [inaudible] chunk of capacity [inaudible] that site. It's hard to say whether there will or won't be any, but I think what we will have done will actually get us in a pretty strong position at that time.

OK. And could you give us a little bit of a clue about a run rate at the end of the year, the specialty chemicals business where you think that's going?

In terms of turnover or...

In revenue. I guess revenue is fine.

In terms of growth or in terms of annual sales?

Either one.

That business is probably going to be - it will show some growth over what we had in 2002. It's around about $200m in sales.

I'm not sure, David, what you mean by run rate.

I see. I mean what will the fourth quarter - what - so you think it will be $200m this year.

Yes.

And going forward, what kind of growth rate do you see on it?

Well, I think in terms of the top line it's very slightly [inaudible]. Let me just try to give you a flavor for this. In terms of the top line, the standard fuel additives business will grow with market. We have a range of products that are coming in now, that are to do with regulations that come in in Europe and the U.S. in '05 right through to '10 where the regulations for higher quality fuels, less emissions and also things like biofuels - and these will all give us new opportunities for growth outside the market growth. So we can see we've got some quite healthy growth still on the top line.

On the bottom line, you'll see the benefits of work we've been doing over the last year and you should see the - for the fuel additives business, the return on non sales will be double digit [inaudible]. The one thing that's dragging us back a bit is this detergent contract, which is fine because it's high technology. It keeps the plant occupied. As legislation comes in, the use of these environmentally friendly products will grow. At the moment, it's pulling the results back a little bit.

But as I said earlier, we're looking at better plant utilization. We're looking at putting more sophisticated products through that plant for other customers and other markets. So I think there's some potential there. So if you look at the two parts of it, we've got above average for specialty chemicals top-line growth and certainly bottom line as well, David.

All in all, you sound pretty optimistic about 2004. Am I reading you right, there?

I think it's too early to talk about that. What I'm very pleased about is the efforts that our guys have made in 2003. I mean we had people actually parachuting into Venezuela when guns were going off and also going back into the Middle East has been difficult. I want to see that bed down completely, but at the moment the TEL is back on track and we're doing very well.

On the specialties, every indicator is positive, as I said, without the detergent. It's not negative on that. It's exactly as we saw it and exactly as we read it. But everything is looking pretty good, though I'd like to get through the third quarter towards the end of the year and start looking at next year's budgets before we get too bullish on that. But at the moment, all the indicators look good and certainly 2004 should take us forward in specialty chemicals, David.

Thank you very much.

Let's turn to Pete Tassig [ph] with Capital Flows for our next question.

Good morning.

Good morning.

I didn't get connected to the call until a little bit into it, so I think I missed some of Paul's comments. And what I wanted to get at a little bit was in terms of the gross margins. And I don't know how much you addressed of that at the front end. And I have a little bit of confusion in that the gross margins in the second quarter on paper look like they're around - I don't know - 43.5 percent or 44 percent, versus, I guess, 49 last year. And I'm trying to understand how much of that is the restructuring costs and what we should look for going out in the future in terms of gross margins overall. And I think as I calculated in my head, that the specialty chemicals gross margins look like they increased a little bit from, say, 32 percent to 33 percent from the first and second quarter. So if you can better help me understand all that, that would be great.

Sure, Pete. This Paul. By gross margin, you're looking at gross profit, yeah?

Yes.

There are a couple of things. There's nothing within the gross profit line, per se, with regards to restructuring charge or anything like that. There are some small benefits from that in the specialty side coming through which are based on the charges that we had taken earlier. But the biggest difference, if you look at year over year, particularly for the quarter, is first of all, we've got a higher mix of specialty chemical products in the second quarter of 2003 versus 2002 and as you rightly point out, the gross margins on specialty chemicals are not at the levels that we had within the lead business.

And the second point is that in 2002 there were some one-off sales in that lead business that really helped that particular gross margin. But fundamentally, the lead business, the gross margin there of 50-plus percent is the target that we set for that particular operation and we think it's achievable, even with some capacity reductions. And specialty chemicals is going to be less than that at this stage, but we are seeing some improvements there as some of the restructuring charges start to take effect.

Can you then perhaps give us some sense of your best guess as to progress of gross margins and especially chemicals as time goes on? I mean do we look for incremental 1 percent per quarter? What kind of metrics can we kind of put on that?

I think it's not as easy as that because we're talking about a business which has got a lot of new products coming out of research. It's got a lot of product line rationalization in there. We're going through this restructuring at the present time where we're shaving those unprofitable items. We had a bit of a slippage.

Our target is 35 percent specialties and I think if you take an ongoing specialty chemicals company with lots of new products coming in and lots of new products going out, large product lines, then if you can hit 35 the type of business we're in, you should be in 10-15 operating profit margin. I think that's a sort of sensible figure to aim for.

OK. So the gross margin that we see on paper in the second quarter really isn't all that far from what it should look like in the future for a while then. Is that correct?

I think - again, remember that it's a mixture of the good, bad and the ugly in there and it's very difficult to pull things out. But we've got products which sell at 65 percent gross margin. We've got products that are about 25. [Inaudible] vital product line. And around 35 and above - 35 to 40 would be very healthy for us and that's what our target would be. But I think if you look at round figures ongoing as sort of 35, you're going to get around 12 operating profit return on sales.

OK. I think the final question I have is - is there anything extraordinary we should be looking for in either direction in the various operating expense lines in terms of SG&A or anything else going out from here?

No. I mean we show separately the restructuring charge, Pete, and there's nothing really of any great significance in there from a future perspective. I mean obviously we look hard at those particular lines since we are having to invest a little bit more as we develop our global structure to support the specialty chemicals business. But there's no major issues or major areas in there for the future.

And one other question occurred to me. Is there anything in the cash line where any of the cash is restricted because of geographic region or anything like that?

Not really. As I think I mentioned on the last call, we're developing a sort of global tax strategy for the business right now to make sure that we don't have those issues. But we don't see any particular issues in that area right now.

OK, thank you.

You're welcome.

That concludes the question-and-answer session today. At this time, Mr. Kerrison, I would like to turn the call back over to you for any additional or closing remarks.

Thank you, Susan. I'm pleased to say that after the problems of the first quarter, we seem to be back on track with TEL and are much more confident. Obviously from some of your comments, that's come over. We expect to meet our expectations for the year, despite the Venezuelan shortfall. We're achieving this through aggressive pricing, the cost controls that we've spoken about, and some pick up elsewhere around the world. Our TEL team is expected to deliver by our shareholders and I think it will again this year. In fact, I'm confident it will.

Therefore, and perhaps more importantly, we're seeing strong signs the benefits are starting to be generated in our petroleum specialty business and especially chemicals overall. Our new senior team has bedded in well and is meeting and exceeding internal targets. We believe by the end of this year, our shareholders will see tangible evidence of our ability to grow and to lever our specialty chemical businesses. Thank you very much.

That concludes today's conference. Thank you for your participation.