Orion SA (OEC) 2017 Q2 法說會逐字稿

Greetings and welcome to the Orion Engineered Carbons Second Quarter 2017 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ms. Diana Downey, Vice President, Investor Relations for Orion Engineered Carbons. Thank you. You may begin.

Thank you, operator. Good morning, everyone, and welcome to Orion Engineered Carbon's conference call to discuss second quarter 2017 financial results. I'm Diana Downey, Vice President, Investor Relations. With us today are Jack Clem, Chief Executive Officer; and Charles Herlinger, Chief Financial Officer.

We issued our earnings press release after the market closed yesterday and have posted a slide presentation to the Investor Relations portion of our website. We'll be referencing this presentation during this call. Before we begin, I'll remind you that some of the comments made on today's call, including our financial guidance, are forward-looking statements. These statements are subject to the risks and uncertainties as described in the company's filings with the SEC. Actual results may differ materially from those described during the call. In addition, all forward-looking statements are made as of today, August 4, 2017, and the company does not undertake to update any forward-looking statements based on new circumstances or revised expectations. Also non-IFRS financial measures discussed during this call are reconciled to the most directly comparable IFRS measures in the table attached to our press release. I will now turn the call over to Jack Clem.

Thank you, Diana. Good morning, and thank you for joining us for our second quarter 2017 earnings conference call. Our agenda for today's call is shown on Slide 3. Today we'll cover the key metrics coming out of our second quarter, while commenting on the performance of our 2 Carbon Black business segments and their market. Charles Herlinger will then provide more detail on these financial results, and discuss our outlook for 2017. Following Charles, I will comment on major operational initiatives, progress on our strategy and some key performance metrics to date. We'll then open the lines to take your questions. Starting with our second quarter highlights on Slide 4, I'm pleased to report another solid quarter results for Orion, with good execution in both of our Carbon Black businesses, strong cash flow generation from operations, and near-record adjusted EBITDA, which rose to EUR 58.4 million, just topping a pretty difficult comparator in the prior-year second quarter. End market demand was relatively strong across all regions. Specialty volumes continued to grow this quarter, albeit at a modest pace compared to our recent performance. But for the full year, we have grown these volumes close to 8%, well above our view of market growth. Rubber volumes were down in spite of reasonably strong market demand, but this was planned as we closed 1 unprofitable plant at year-end 2016, and are in the process of converting some capacity in Korea from rubber to specialties. While overall volumes were down, we improved performance in most of our key financial metrics. Net income in the second quarter increased 2% to EUR 16.8 billion. EPS remained stable at EUR 0.28 per share, adjusted EBITDA rose 1.1% to EUR 58.4 million and adjusted EPS rose by EUR 0.02 to EUR 0.37 per share. Cash generation from operations remained solid at EUR 43.6 million, providing sufficient coverage for CapEx, dividend and interest needs. We reduced our leverage ratio once again, this time to a record low of 2.37. In addition, we have repriced our long-term debt facility and cut our annual interest expense. Charles will give more details on this a little later.

Slide 5 provides detail on volumes and adjusted EBITDA of each business, updated views of our regional production coverage and key profitability trend lines. As you can see, we increased the percentage of specialty and more technical grades of rubber black to just under 60% during this quarter, consistent with our mix shift to more profitable grades. Specialty volumes continue to lead our overall growth, but I'll also note that technical rubber grades reached an all-time high of 35.2% of our rubber portfolio. The Specialty Carbon Black business accounted for well more than half of total adjusted EBITDA, with 25% of total volume. Referring to the trend lines at the bottom of the page, feedstock cost pulled back a bit during the quarter. This offered some relief on the margin pressure we have seen on our non-indexed specialty business, but the larger impact on the sequential improvement in their gross profit per ton was a strong demand for our premium grade. Rubber gross profit per ton softened additional pressure in this quarter versus the first quarter of the year from differentials and lower energy contribution from our co-generation facilities. A relative to last year second quarter pricing efficiency gains worked in their favor.

Slide 6 covers our specialty business. It had a very good quarter, in fact, its second best quarter ever. It faced, however, a difficult comparator, as it was up against the spectacular prior-year results, our best quarter ever, which enjoyed strong mix, volume and falling feedstock prices. Volumes continue to climb, up 2.9% to 65-kilo tons with our strongest growth occurring in Europe. Specialty revenue increased 13.3% to $111 million euros versus EUR 98 million in the prior year's quarter. Gross profit and gross profit per ton rose sequentially due to a strong mix, but was down EUR 3.8 million to EUR 45 million versus prior-year quarter, as a result of higher feedstock cost not fully offset by higher volume and the stronger mix. As a result, gross profit per ton fell 10.5% to EUR 688.08 and adjusted EBITDA was down EUR 3.9 million to EUR 34.8 million.

Turning to Slide 7, we're pleased to report a continued improvement in our Rubber Carbon Black business versus prior-year quarter. The rubber end markets were reasonably stable across our regions, but particularly strong in Europe. Our volumes were down due to the closing of our French plant at the end of 2016, reallocation of some of our rubber capacity to specialty in Asia and a lengthy maintenance-related downtime in one of our U.S. facilities. Overall our volumes declined 12.1% to 201 kilotons in the second quarter. Offsetting this volume impact were positive moves in price and fixed and variable cost improvements. Second quarter revenue was up 25.6% to EUR 188.3 million from EUR 149.9 million in last year's second quarter, largely due to the pass-through effects in our index business. Gross profit increased 3.2% versus last year's quarter, or EUR 1.2 million to EUR 39.3 million, reflecting improvements in costs, while the gross profit per metric ton followed, rising 17.4% to EUR 195.04. Adjusted EBITDA increased 23.6% to EUR 23.6 million. Followers of this industry know that there is substantial tire building capacity coming online in the U.S. There have even been recent additional announcements related to non-U. S. companies seeking to increase their production capacity here. Miles driven in the vehicle part continue to grow. So we're guardedly optimistic that U.S. Rubber Black demand will resume its long-term growth pattern. This has been somewhat overdue and as a result during this year, we took an extended downtime on 1 unit, which is now back up, but we'll idle another unit before the end of this year. In addition, we have announced price increases on all Rubber Carbon Black sold in the U.S. in order to ensure a sustainable supply of our products to our customers. On a somewhat related note regarding supply, Chinese Carbon Black producers are seeing higher feedstock cost. This has resulted in the reduced exports to practically all regions, except the immediate Southeast Asian countries. In addition, the Chinese government has announced more stringent environmental standards for the control of emissions, which will weigh heavily on some of the marginal producers in that country. This is a significant shift in the global supply profile for carbon black, as the vast majority of capacity additions needed to meet the growth in global tire demand have been met with new capacity coming out of China. That adding of capacity appears to have stopped, if not possibly reversed for standard tire grades. Tightening of the global supply-demand picture is expected to follow. I'll now turn the call over to Charles for more detail on our performance.

Thanks, Jack. Good morning, everyone. Turning to Slide 8 and our consolidated second quarter results, our volumes decreased by 8.8% or 258,000 metric tons from the prior year to 266,600 tons, with much of this decline attributable to the closure of our Ambès, France facility, a prolonged maintenance turnaround in the U.S. and conversion of rubber capacity in Korea to specialty production. Despite the change in volumes, due primarily to the pass-through of higher feedstock costs, revenue increased 20.8% to EUR 299.3 million in the quarter compared to EUR 247.9 million last year. Our overall contribution margin declined modestly in the second quarter, falling 2.9% to EUR 117.9 million versus EUR 121.4 million in the prior year's period, as both of our Carbon Black businesses contributed to this decrease. As the top waterfall chart on the right-hand side of the slide shows, the drop in contribution margin was largely the result of lower volumes, mix and price, with favorable foreign exchange effects providing a partial offset. Referring to the second waterfall chart on the right-hand side, the EUR 3.5 million contribution margin headwind in the quarter was more than offset by production cost and below gross margin cost savings in part associated with the closure of our French facility. As a result, adjusted EBITDA increased by 1.1% to EUR 58.4 million. Our adjusted EBITDA margin of 19.5% declined 380 basis points versus last year's second quarter, primarily due to the pass-through effect of higher feedstock costs to our customers, increasing reported revenues. The last waterfall chart on the right-hand side of this slide analyzes net income development, which increased by EUR 0.3 million, essentially in line with the adjusted EBITDA development quarter-over-quarter.

Now turning to Slide 9, which shows our year-to-date cash flow dynamics and our key balance sheet metrics as of June 30, 2017. Over the first half of 2017, we generated EUR 61.2 million from operations, net of an increase in net working capital of EUR 18.2 million, associated primarily revising oil prices. Our uses of cash over the same period, which include capital expenditures, interest payments, required debt repayments and dividends totaled EUR 67.1 million. As a result, our cash position, prior to voluntary debt repayments, decreased during the first half of 2017 by EUR 5.9 million.

Turning to our balance sheet, as of June 30, 2017, the company had cash and cash equivalents of EUR 48.5 million compared to EUR 73.9 million on December 31, 2016. The company's noncurrent indebtedness as of second quarter was EUR 571.8 million, with net debt at EUR 542.0 million, taking current term loan B and local debt into account, which represents a leverage ratio of 2.37x LTM-adjusted EBITDA. As a result of this positive development, driven by strong operating performance, S&P recently uplifted Orion's credit rating to BB from BB minus. Our goal remains to move towards a low 2x EBITDA net leverage multiple over the next couple of years through a combination of adjusted EBITDA growth and deleveraging. As a reminder, the total debt chart on the bottom right-hand corner of this slide illustrates that some of our debt is denominated in U.S. dollars, but reported in euros, and thus gets revalued every quarter as these currencies fluctuate.

Slide 10 presents our full year guidance and further cash flow detail regarding base business requirements and capital allocation. We're maintaining our full-year guidance for financial year 2017 of adjusted EBITDA between EUR 220 million and EUR 240 million. Looking into the second half of this calendar year, we expect for a variety of operational reasons that quarter 4 of 2017 will show stronger adjusted EBITDA growth over prior year as compared to quarter 3 of 2017. Our guidance is based on the assumptions that volume growth will be in line with current GDP expectations, and that oil prices and exchange rates will be at the level seen during the second quarter of 2017. For our base capital expenditures our guidance remains at approximately EUR 60 million, with the total rising to over EUR 80 million, due to self-financing capital expenditures associated with the consolidation of our plants in Korea. As previously stated, we expect that the cash proceeds derived from the sale of our plant in Seoul, Korea will more than offset all capital expenditures and other costs associated with this consolidation project, but with some timing differences spanning a year or so. The remainder of our guidance metrics are unchanged as well. We expect depreciation cost of EUR 60 million and amortization EUR 20 million. Our tax rate expectations on pretax income is around a rate of 35%.

Moving to the right side of Slide 10, and our analysis of our annual cash requirements, you will see that our estimates reflect a reduction in interest payments as a result of the May 2017 previously announced repricing of our term loans. On the basis of having confidence in our ability to meet our capital allocation priorities and supporting dividend payments, investing in optimization CapEx and continuing in due course to deleverage the balance sheet, we're now starting to take steps centered around changing reporting currency and associated topics in order to enhance the attraction, at least in some investors' eyes, of owning Orion stock. We'll, of course, take the necessary time to make these changes in how we report to shareholders in order to ensure that this is carried out in a controlled and transparent manner. I will now turn the call back to Jack, who will comment on our operational priorities and other matters before we head to Q&A.

Thank you, Charles. We believe our strategies are working and remain committed to the priorities you see on Slide 11. In summary, we'll drive the growth of specialties and technical rubber grades by converting or expanding capacity to meet the demand created by our broadening sales force and new product offerings. We will continue to evaluate our production footprint to align our product mix, cost structure and capacity with demand. And we'll continue to drive improvements in productivity.

Turning to Slide 12, I'm pleased to report that we have had another quarter of LTM EBITDA growth, a record of stability of which we are quite proud. Our stock continues to offer a competitive dividend yield to our shareholders and we steadily reduce leverage. Our stock prices moved up from the average of last year, as we believe the markets are recognizing the value of Orion and our response to the investing community's request for consistent earnings, lower leverage and more liquidity. Accordingly, there was recent sale of additional shares into the public market with a view to boosting trading liquidity even further. Our shares with public ownership have now increased to just under 60%. Furthermore, as Charles outlined earlier, we remain committed to those actions that improve the visibility and trading ability of investors in Orion's share. With that, I'll close this and thank our investors for their confidence in Orion, our customers for the business and our employees for their hard work. With that, operator, open the lines up for questions.

(Operator Instructions) Our first question comes from the line of Mike Sison with KeyBanc Capital Markets.

In terms of Specialty Carbon Black, when you think about the gross profit per ton decline, what needs to happen -- gross profit per ton decline, what needs to happen to sort of close that gap?

We saw margin compression in that month. And we had several price increase initiatives underway. Several of those price increases, as you can see sequentially, have taken effect from Q1 of '17 to Q2 of '17. So we're confident we're going to continue to see additional initiatives there to continue to close that gap. Because you have to recognize that comparator that you got from the second quarter of 2016 was a particularly difficult comparator. So overall, we're comfortable with where we are right now. We think we can probably climb back against some of that margin pressure, as we have shown from Q1 to Q2. But, again, you got a pretty hard comparator when you look at that Q2 of 2016.

When you think about the gap that you will see in '17 versus '16, and if your price increases, and your volume growth has continued to be pretty good, if those -- if you get those price increases, what would be improvement in gross profit per ton be as we head into '18?

We're not really give -- in a position to give that type of guidance at that level of detail. I can tell you that, as we said before, there is a lot of moving parts here. From the one part we do have this margin compression; we think we're overcoming that, as we've seen from that first quarter to second quarter. And the second part you have to recognize is that we are expanding our volumes pretty substantially in some of these emerging regions. And that, as we said before, has the impact of bringing in a margin in this regional production, particularly in China, where we're bringing specialty production into that facility in Qingdao, at lower or average margins versus the premium materials that we make, for instance, in our facility in Germany. So it's not a particular answer that I can give you a specific reply on because of our number of moving parts. We're comfortable with some relaxation in that gross profit coming from expansion of materials, expansion of products sold at margins that don't exceed or don't meet the margins that we have for our most premium products, simply because that -- our goal there, our strategy has always been to expand these sales into these underpenetrated markets, and recognizing that some of that is going to come at margins that come below gross profit margins, that come below some of the more premium materials that we've had in the past. I mean, ultimately, Michael, the goal here, as we said all along, is to maintain the premium profile of that business which we have with kind of EBITDA margin that you see in this facility, while continually expanding the overall EBITDA. So as we add these materials, they will be accretive to EBITDA and we'll tolerate this issue with gross profit dilution, so to speak.

Right. So given the volume growth continues to be healthy and new products continue again in different areas, when do you think we'll see sort of and inflection point and EBITDA will grow, which reflects the better volume growth -- especially Carbon Black?

You mean quarter-over-quarter or year-over-year?

Yes. Year-over-year.

We show continual growth in EBITDA year-over-year.

For Specialty Carbon Black?

Yes we have actually, Mike, and we have for a number of years shown growth. We had a spectacular performance -- Hi, it's Charles -- we had spectacular performance in 2016.

I understand that, I think your growth has been great. I just -- going forward, when do we get back to EBITDA growth for Specialty Carbon Blacks?

We look forward to doing that next year, if not this year.

In '18?

If you look at quarter 1 versus the quarter we are reporting on now, you've seen a pick up in adjusted EBITDA, so there's your growth. And to just get back to the point that Jack said, gross profit per metric ton -- and we said this repeatedly many times on these calls, is an important diagnostic for us in running the business. It's not an end goal. The end goal, to your second question is, is adjusted EBITDA and cash flow.

(Operator Instructions) Our next question comes from line of Kevin Hocevar with North Coast Research.

This is actually Kevin Cleary on for Kevin Hocevar. I was wondering if you guys could detail what utilization rates you guys are operating at regionally right now?

Europe is very, very tight as we look around the system. And I'll speak -- in generally speaking, the entire capacity, both rubber and specialty. Although specialty tends to be more globally focused as you know as opposed to regionally focused but the capacity utilizations tend to run about the same right now. So overall, Europe, extremely tight. I mean, we were running in the -- in sort of the low to mid-90s, and it's even tightened a bit more as we move through this year. So we see good utilization there. U.S. demand seems to be sort of clocking around that middle 80s, is our view right now. We're a little lower than that because we mentioned we took a line out of production this year for a significant amount of maintenance overhaul. That line is, as we mentioned, is back up and running right now, but we'll plan to bring another line down by the end of this year. So we're running, we think, a bit below capacity utilization in the U.S. right now, which is probably in the mid-80s or so. Korea, where we operate middle-to-high 80s kind of where it's been all along. Operating rates in Brazil are a little tensed -- a little opaque to us right now, but our facilities are running quite tight down there, as they are in China, and we service this -- the South African market currently. So overall, if you look at our whole total system right now, we're running in the high 80s.

The line you are idling in the U.S., could you ballpark what percent of U.S. industry capacity you think it is?

We have a 75,000 ton unit at Orange. I think we've probably commented on that in the past, 75,000 tons, where we're idling one of the three lines down there. So that would be some percentage of the U.S. capacity, which is roughly EUR 1.7 million ton, 1.8 million ton -- so you could do the math, it is 1% or 2% change.

(Operator Instructions) Our next question comes from the line of John Roberts with UBS.

It sounds like the technical rubber blacks are becoming more important. Do the technical rubber grades overlap with both specialty and tire grade carbon black, that is, are some technical rubber grades higher-margin than the low end of specialty blacks and are there some tire black grades that are higher-margin than the low end of technical rubber black? I'm just trying to understand the mix effects and the range that this technical rubber growth is going to fit into.

There is obviously a continuum there, John, I mean where you have, at the low-end, ASTM blacks that is sold to the tire industries, which is sold at roughly, whatever you want to call the base margin. And then you have some of these technical rubber grades, which include not only mechanical rubber goods but also some of the bespoke products that we sell to the tire industry, which can sell at substantial margin improvements over, what I would consider the base margin of tire black. Maybe it's another 50%, maybe it's as much as 2x or 3x depending on the particular application and the customer. If you switch over to the Specialty Black, as you can see, our Specialty Black margins are tapered -- are usually -- average at least are much higher than all of the rubber blacks that we sell. However, there are some low end specialty blacks, which reach down to that technical rubber black margin -- and in some instances maybe all the way down to tire, but that's not an interesting area for us. Our target is more the high end of that. So its kind of a long answer to your question, John, but there is indeed overlap from technical rubber grade up into specialty margins and technical rubber grade down into tire, and from specialty margins down into the technical rubber grade band of margins.

And then secondly, you will drop below 2x net debt-to-EBITDA in the next several quarters. Buyback isn't optimal given the float in future secondaries by private equity, your dividend yields are already high. The other options are ramping CapEx or acquisition, but that doesn't sound likely. How are you thinking about free cash flow as you go forward here?

I think your analysis is pretty much on target, John. We will look for -- I mean we do have some interesting organic CapEx projects which we'll talk about in the future with very nice returns that we are looking at. But other than that, obviously, this is shareholder money and that's where we'll end up.

(Operator Instructions) Our next question comes from the line of Arthur Roulac with Three Court.

I had a couple of questions. The first one was, can you just illuminate a little bit more, I guess you were saying that 3Q is going to be softer versus 4Q, so I guess, you should expect midpoint of guidance sort of 230 for the year, which I guess would equate to sort of EUR 57 million roughly per third and fourth quarter. Should be expect the third quarter to be softer and the fourth quarter to be stronger then?

A little bit. I mean, we just think we're going to have a good fourth quarter. And we think that just because of timing of various projects, and so on, so forth that the fourth quarter will be a bit stronger, unusually, than the third quarter. But your summary is good. One is going to be clearly above that midpoint of EUR 57 million and one may be a bit below. I wouldn't describe Q3 in any way soft, just trying to give some feel for the second half of this year.

All right. That is very helpful. And I think the question the KeyBanc guy, I don't know what his name is, was trying to get was specialty has grown incredibly -- I mean, I think it was EUR 100 million back in '14 to EUR 137 million this year. The first half of this year, because of rising oil, you had this margin pressure and I think he was just trying to get at, when will that sort of margin pressure start abating and then when will you start seeing sort of the specialty side comp up as your -- as price increases catch up to the rise in the raws.

It's starting to abate already in Q2. You've seen the pick up in adjusted EBITDA, you have seen the pickup in gross profit per metric ton versus the first quarter. We -- again, that's a diagnostic, not an end in and of itself. But we see that moving in that direction quarter for quarter. We will have a few ups and downs, but as Jack described, this is a very good business, very good profile, we've got great products. So yes, that's what we expect.

Okay. And then on the Korea side, can you just remind us, again, the total investment in converting those facilities? I think there was maybe EUR 20 million to EUR 25 million of CapEx associated with it as well as some other costs? Maybe you can give us an update as to where things stand with Korea, when it should be done, et cetera?

Let me comment on just the activity there and then Charles can comment on the scope of it. As you recall, what we announced there was the notion of closing the northern plant, which is in the suburb of Seoul, Korea, and consolidating that facility down to the southern tip of South Korea into the facility we call Yeosu. It's a very complicated move because there are a number of lines, number of grades that have to be moved from one location to the next location. And so it's a bit of an orchestration process, which has actually gone off very well for us. We've been able to qualify the majority of grades now in the other locations. We've done conversion of a couple of units down there, which have largely been rubber in the past into specialty and qualified those to be able to produce all that we need to produce in those areas. And recognize what we're doing here is, when we make this move, we will have an overall reduction of rubber capacity but a bit of an increase in our specialty capacity, particularly in the high-end areas. We've also engaged real estate consultants with regard to the land in Seoul, in this plant that we call Bupyeong, in order to assess the value of the property and begin the process of actually working with the local government there for rezoning in order to be able to sell the property ultimately, which as we said in the past will more than self-finance all of these activities, these investments that I have just talked about as well as severance cost, remediation cost of the closure of that facility. So in essence, the target was to have this sort of wrapped up sometime in terms of the move and the production and all that probably sometime in the middle of next year, third quarter of next year, and the sale of the property, which is going to take a bit longer because it just takes a while in that country, sometime at close of 2018 -- it may work its way into early '19, but we're targeting right now the end of '18. And that's the plan if it sits right now, Arthur.

I think just in terms of numbers, we said this year, base CapEx spend about 60, but add on another 20-or-so for this Korea project this year. There'll be a bit more next year, consistent with Jack's description. That gives the order of magnitude, at 20 plus. And the land sale will more than cover that -- all ancillary cost and there'll still be some leftover, a truly sort of self-financing project through an asset that wasn't -- obviously because of the way things were accounted for -- valued fully at its current value in our balance sheet. So a very good project for us and it's shifting the footprint towards specialty.

Great and thank you. My next one is, I guess is the plan to maybe convert your reporting currency into dollars so people -- I think, there's a large swathe of people out there that are confused by the euro financials and the U.S. dollar stock. Is that sort of the plan, and is there -- is that something that maybe you do -- try to do at the end of the year for 2018, or is it a longer process?

First of all absolutely right, that's what we're going to do and that is the reason why we're going to do it. We haven't deliberately set a timetable yet because we want to map it out, and from subsequent quarterly updates, we'll provide that. It's certainly not something we will be doing this year, but it is something that could well manifest itself or show itself in 2018. We've also got the -- we get our brain round -- we report on an IFRS basis -- that we believe there are not material differences between IFRS and U.S. GAAP, but it would be interesting to consider sweeping that up as well. And that's what I alluded to over with the comment -- associated topic. So that's giving a bit of sort of flex at the moment on timing. I don't overload, we don't overload the organization and the finance function, and above all, we want to do 2 things: Obviously, do it in a controlled manner and make sure investors understand the changes such as they will be, fully, as we implement them. This is a no-surprises, full-visibility process. But the direction of travel and the reason the direction of travel is as you summarized, Art.

Got it. And then, I guess, finally, I think someone else had asked this, just on the allocation of capital, I suppose quite soon your leverage is going to be probably close to 2x at the end of year, maybe a little bit above that. I think that was generally the target for next year was sort of be in a position where you have surplus cash flow coming in. I would, again, encourage you and the board to maybe at least consider giving the extra float of starting to repurchase shares when you are starting to look at the company valued on 2018 numbers close to 6x. Reading reports, other people think some of your competitors should be priced at 9x forward, so there's a sort of a massive 3-turn arbitrage there by buying back stock in the open market, and it would seem -- you've been public now, it would 3 years; at the end of this year, it will be 3.5 years, the company has delivered, and it's grown EBITDA a lot and really is only $2.50 higher than where it IPO-ed. So please consider it; I know you guys are and thank you for all of your hard work.

Thank you Art. We will do, we're -- we remain, as a management team, very significantly invested in the company. In fact, the incentive program we have, the long-term incentive program we have is all in company stock. And basically, it's meant that the proportion of the number of shares on balance each manager holds is roughly the same as it was when the IPO-ed. So what I'm trying to say is that, we're as a management team very much incentivized to do what is in the interest of all shareholders, clearly. And our board understands that obviously as well. So sentiments, and again, the direction of travel, if I may overuse that phrase of your statement, is well registered.

(Operator Instructions) Mr. Clem, it seems there are no further questions. I will turn the floor back to you for any final remarks.

Again, thanks for joining our conference today. I think everybody has to agree that, at this point in 2017, we have positioned ourselves nicely in this market for success and in the eyes of the investing community. I think we've made a point today and in past discussions that we believe this is a solid and robust company, sustainable company capable of doing quite a bit, but undervalued by the market as one of the -- as Arthur Roulac mentioned a little bit earlier. We made a move to increase liquidity. We think that opens up some opportunities for us to appreciate -- for the markets to appreciate our stock a little bit better and we -- as Charles has mentioned, we are taking some additional steps to remove some of the impediments that we think exist out there, which will ultimately remove any of these hesitations that companies or investors have with respect to our multiple versus other multiples out there in the marketplace. But looking inside the business itself, I think you have to see that this rubber business has responded very nicely to some of the initiatives that we've had out there. We saw some pricing moves going into this year. We see an overall tightening of the business as we move into 2018. Supply and demand dynamics are, I think, favorable at this point and we've taken some moves both in Europe and the move that we've taken in United States in order to accelerate some of that supply-demand dynamic, which we think would be helpful for the industry. So in addition to a nice improvement that we are seeing in the Rubber Black Business, we see it continuing to strengthen as we go in to 2018. With respect to the Specialty business, it's a great business. We did see some headwinds this year. It's been spoken to on this particular phone call. But we have little to no concern about its ability to continue to outpace the market. Its growth rate has been spectacular, 8%-or-so year-to-date this year. No doubt it will end up much higher than the market growth rate also this year as we continue to expand our premium grade and overcome some of these headwinds that we saw with price of feedstocks. So I'm very confident in that business, and I think the listeners on this call are ought to also be very confident in our ability to continue the spectacular growth that we've seen in that Specialty business, while enjoying the recovery that we've got going on in the rubber business. And with that, I'll close. We appreciate your interest in Orion. Certainly, look forward to speaking to you, again, in the next earnings call, which will be in November. Thank you very much.

Thank you,.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.