Albemarle's CEO Discusses F2Q12 Earnings Results - Earnings Call Transcript

Albermarle Corporation (ALB)

F2Q12 Earnings Call

July 18, 2012 9:00 am ET

Executives

Lorin Crenshaw – Director of Investor Relations & Communications

Luther C. Kissam, IV – Chief Executive Officer & Director

John M. Steitz – President & Chief Operating Officer

Scott A. Tozier – Chief Financial Officer, Senior Vice President & Chief Risk Officer

Analyst

David Begleiter – Deutsche Bank Securities

PJ Juvekar – Citi

Laurence Alexander – Jefferies & Co.

Analyst for Robert Koort – Goldman Sachs

Kevin McCarthy – Bank of America Merrill Lynch

Mike Ritzenthaler – Piper Jaffray

Jeffery Zekauskas – JP Morgan

Michael Sison – Keybanc Capital Markets

Steven Schwartz – First Analysis Corp.

Dmitry Silversteyn – Longbow Research

Edward Yang – Oppenheimer & Co.

Christopher Shaw – Monness, Crespi, Hardt & Co.

Presentation

Operator

Welcome to the Albermarle Corporation earnings conference call. At this time all participants are in listen only mode. We will be facilitating a question and answer session towards the end of today’s conference. (Operator Instructions) I would now like to turn the presentation over to your host Mr. Lorin Crenshaw, Director of Investor Relations and Communications.

Luther C. Kissam, IV

Welcome everyone to Albermarle’s second quarter 2012 earnings conference call. Our earnings were released after the close of the market yesterday and you’ll find out press release, earnings presentation, and non-GAAP reconciliations posted on our website under the investor’s section at www.Albermarle.com. Joining me on the call today are [Lu] Kissam, Chief Executive Officer; John Steitz, President and Chief Operating Officer; and Scott Tozier, Chief Financial Officer.

As a reminder, some of the matters discussed during this conference call and webcast may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Please note the cautionary language about our forward-looking statements contained in our press release. That same language applies to this call. Also, to the extent we discuss any non-GAAP financial measures, you will find reconciliations in our press release which is posted on our website at www.Albermarle.com.

With that I’ll turn the call over to [Lu].

Luther C. Kissam, IV

We appreciate the opportunity to share our second quarter financial results with you today. I’ll begin by commenting on the company’s quarterly results and share the updates related to some of our capital expansions as well as touch on our views for the rest of the year. John Steitz will then walk you through the business segment performance before Scott Tozier reviews select financial highlights. As usual, at the end of our prepared remarks we’ll open it up for your questions.

I’m pleased to report second quarter results that reflect the continuation of our solid start to 2012 across each of our segments. For the quarter, our net income before special items was $111 million or $1.24 per share up 1% year-over-year. Net sales were $685 million down 8% year-over-year. Year-to-date our earnings have exceeded levels achieved in 2011 despite what I would categorize as a more challenging economic environment this year. EBTIDA for the quarter before special items was $181 million up 2% year-over-year and for the first six months EBITDA was $357 million before special items, also up 2% year-over-year.

In the first half of 2012 volume gains in FCC catalysts and performance catalyst solutions coupled with strategic pricing moves and great cost management and execution on the manufacturing side offset lower volumes in polymer solutions and HPC catalysts allowing us to deliver a better financial performance than in the first half of 2011.

As John will discuss in more detail later, during the second quarter record fine chemistry results reflected continued strength in bromine & derivatives and continued growth in our contract manufacturing franchise. Polymer delivered its second straight quarter of meaningful sequential earnings and margin improvements. Catalysts delivered year-over-year earnings growth but slipped sequentially and versus our expectations at the beginning of the year as HPC catalysts saw more pronounced seasonal decline in volume of fresh catalyst than usual.

As we’ve said frequently over the years the relatively long sales cycle ranging from between 18 months and three years, depending on the customer, and the large nature of HPC orders makes forecasting inherently complex quarter-to-quarter. It’s important to note that we maintained our HPC market share during the second quarter where we were the incumbent supplier we supplied the vast majority of resales in the quarter.

We even picked up a couple hundred net tons in situations where we were not the incumbent. This was simply a quarter when not many of the units we supply were up for resale. Fundamentally our catalyst franchise overall is maintaining market share, remains healthy, and continues to enjoy excellent competitive positioning and growth prospects.

At this time I’d like to elaborate a little on the special item we reported this quarter related to approximately $95 million, $74 million after tax or $0.82 per share of charges related to our previously announced plans to exit the phosphorous flame retardant business. The cash outlay related to this exit is expected to be in the $5 to $15 million range with a payback in approximately one year.

Earning wise, full year 2013 should benefit by somewhere between $0.10 and $0.13 per share from this action. We have a history of managing assets that are not meeting our performance targets and our sites in Avonmouth and Nanjing were disadvantage from a location, scale and product mix standpoint. The charges taken should be sufficient to cover all exit costs and this decision will not impact our ability to achieve 2015.

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