Rockwood Holdings, Inc. (ROC) Q2 2012 Earnings Call August 01, 2012 11:00 a.m. ET Executives Seifi Ghasemi – Chairman, Chief Executive Officer Robert Zatta – Chief Financial Officer Timothy McKenna – Investor Relations Analysts Silke Kueck – JPMorgan David Begleiter – Deutsche Bank Securities Inc. John McNulty – Credit Suisse Securities Mike Harrison - First Analysis Chris Shaw – Monness Crispi Richard O'Reilly – Revere Associates Presentation Operator
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Forward-looking statements consist of all non-historical information, including statements referring to the prospects and future performance of Rockwood. Actual results could differ materially from those projected in our statement due to numerous known and unknown risks and uncertainties, including among other things the risk factors described in our Form 10-K on file with the Securities And Exchange Commission.We do not undertake any obligation to publicly update any forward-looking statements to reflect events or circumstances after the date on which any such statement is made or to reflect the occurrence of unanticipated events. With that, I’ll turn it over to Seifi. Seifi Ghasemi Thank you, Tim, and good day to all of you. Thanks for taking the time from your busiest schedules to participate in our conference call. We do appreciate your interest in Rockwood. During the call today, we will refer to the presentation material posted on our website. So please turn to page seven of that presentation. I am pleased to report that Rockwood had a good second quarter. Our adjusted earnings per share was $1.24, which is 6% higher than last year. So for the first half of 2012, our earnings per share is 20% higher than the first half of 2011. We achieved these results despite significant headwinds as a result of translation of our earnings from Euros to dollars. As you know, Rockwood does not have much exposure to currency fluctuations from a transaction point of view. The rest of the numbers on page seven are self-explanatory. And on page eight and nine, we have delineated the details of the performance of each one of our business units. I will skip these pages and then start on page 10 by commenting on the specifics of each one of our businesses. I am on page 10 now. Our Lithium business continues to perform very well. The improved margins since both volumes and prices are higher than last year. We have started up our new state of the art lithium hydroxide facility in the United States and are moving ahead with the expansion program we have previously announced in Nevada and Chile that would see us double our production capacity to 50,000 tons per year by 2014. We expect our lithium business to continue to have a strong performance for the balance of the year.
Page 11, our Surface Treatment business again continues to do very well under the guidance of our excellent management team there. Margins improved to 21.2% as a result of higher prices and higher volumes in the United States and Asia. We fully expect this business to continue as a strong performance for the balance of the year. Our new state-of-the-art plant for this business being built in Michigan will come on stream by the end of this year and it will strengthen our position in the important U.S. markets.Page 12, our Performance Additives sector where we have significant exposure to the construction market, volumes are slightly down, but prices are up. We have said previously in our calls for the last two years that we do not expect material improvement in this sector until 2014. Considering the outlook for the business, we have also moved the start off of our new Color Pigment business from 2014 to early 2015. This is the plant that we are building in Georgia. Now please go to page 13. Our TiO2 business, we maintained our EBITDA margin at around 25% for the quarter, since higher prices offset the negative impact of lower volumes and some higher raw material costs. To give you more details, prices for the quarter, they’re 27% higher than the comparable quarter last year, while volumes are 28% lower. On a sequential basis, prices were about the same as the first quarter of 2012. We also completed the acquisition of the new TiO2 plants in early July. This plant in Erlangen in Germany has a capacity of 107,000 metric tons per year and we consider this to be a significant strategic addition to our business, and will enhance our position for the long-term. The specific benefits of this business are, number one, as you recall last year when demand for TiO2 was strong, we were totally sold out at our two existing facilities. They did not have the opportunity for further growth. The addition of this new plant, which was not operating at full capacity, will give us excellent opportunity for growth when demand for TiO2 gets back to 2011 levels or even higher. Read the rest of this transcript for free on seekingalpha.com