Innophos Holdings Inc. (IPHS)
Q1 2010 Earnings Call
May 4, 2010 10:00 am ET
Mark Feuerbach - VP, Treasury, Financial Planning & Analysis
Randy Gress - CEO and Director
Neil Salmon - VP and CFO
Frank Mitsch - BB&T Capital Markets
Edward Yang - Oppenheimer
Christopher Butler - Sidoti & Company
Adam France - 1492 Capital
Olga Guteneva - JPMorgan
Richard O'Reilly - Standard & Poor's
Previous Statements by IPHS
» Innophos Holdings Inc. Q3 2009 Earnings Call Transcript
» Innophos Holdings, Inc. Q1 2009 Earnings Call Transcript
» Innophos Holdings Q4 2008 Earnings Call Transcript
Good day ladies and gentlemen and welcome to the First Quarter 2010 Innophos Results Conference Call. My name is Leticia, and I will be your operator for today. At this time, all participants are in a listen only mode. We will conduct a question-and-answer session later in the call. (Operator Instructions) As a remainder, this conference is being recorded for replay purposes.
I would now like to turn the call over to your host for today, Mr. Mark Feuerbach, Vice President, Treasury, Financial Planning and Analysis. Please proceed sir.
Thanks for joining us today for the Innophos Holdings Inc. conference call to discuss first quarter 2010 results. Conducting the call today are Randy Gress, Chief Executive Officer, Neil Salmon, Chief Financial Officer, Bill Farran, General Counsel and myself, Mark Feuerbach.
During the course of this call, management may reiterate forward-looking statements made in our May 3rd press release regarding financial performance and future events. We will attempt to identify these statements by use of words such as expect, believe, anticipate, intent and other words so to note future events. These forward looking statements are subject to material risks and uncertainties that could cause actual results to differ materially from those in the forward looking statements.
We caution you to consider the important risk and other factors as set forth in the forward looking statement section and in item 1A risk factors in our annual reports on form 10K as filed with the SEC that could cause actual results to differ from those in the forward looking statements made in this conference call.
We will make a replay of this conference call available for a limited time over the telephone at the number said forth in our press release and via a webcast available on the company website.
In addition please note that the date of this conference call is May 4
2010. Any forward-looking statements we may make today are based on assumptions that we believe to be reasonable as of this date and we undertake no obligation to update these statements as a result of future events.
Now, I would like to turn the call over to Randy Gress, CEO of Innophos.
Thanks Mark and good morning everyone. I am very glad to have this opportunity to update you on first quarter results. I will start with the highlights of the quarter. Then Neil will summarize our financial results and afterwards I’ll make a few concluding remarks then we will take your questions.
First, we are pleased to achieve in this quarter our first sequential operating income improvement since the third quarter 2008, driven by increased sales volume which more than offset the impact of a modest price decline.
This performance enabled us to deliver a sequential increase in operating income of $10 million or $3 million if we exclude the impact of OCP settlement cost booked in the fourth quarter 2009.
This quarter net sales were $169 million, a 15% increase sequentially continuing the encouraging volume trend we have noted since the second half of 2009. Our core business of specialty phosphates contributed strongly and was up 8% sequentially.
Also GTSP sales were up significantly against a low fourth quarter 2009. It was particularly encouraging to see strong volume growth of 12% sequentially in the US and Canada combined with Mexico continuing its progress and restoring its market position.
In comparison to first quarter 2009, specialty phosphates volumes were up 19% and total company volumes were up 12%. This is the first year-over-year volume improvement the company has achieved since 2007. Pricing declined less than expected at 4% sequentially and as we indicated on our last call, we expect Q1 to have been the last quarter and our recent trend of price decline. Compared to pricing prior to the 2008 run-up in raw materials, we see about a 40% improvement in average selling prices in the US and Canada.
Following significant increases in commodity phosphate prices, fertilizer prices during the first quarter of this year and the impact on related raw materials such as sulfur and ammonia, we have begun to increase selling prices effective the beginning of April to help offset those higher raw material cost.
Returning to sequential quarterly sales and earnings growth, represents another key milestone for the company and is a very clear sign of the progress we have made in transforming our business and overcoming many of the challenges we have faced.
The strength and success of our US and Canadian business is very evident. Food and beverage markets were again the primarily driver of our gross in the quarter and we are clearly seeing both stronger demand conditions and also increased commercial success with our focus on improving the value we bring to customers. This is evident in the improved margins we are able to earn in these sectors.
In Mexico, we are at an early stage of our transition. We have previously commented on the success the business had in dealing with the extremely challenging conditions experienced last year. And you are also aware at the decisions we took to continue investing through that period. With our OCP settlement announced during the quarter, including firm rock prices for the remainder of the contract plus the successful we’ve had in the last two quarters in restoring our market position, I am confident we are firmly back on the path to improve profitability in Mexico even if as new outline shortly, our Q1 results in Mexico was a little behind our expectation.