Albemarle Earnings Call INSIGHTS: Biggest Deltas, Top Line Decline

On Wednesday, Albemarle Corp (NYSE:ALB) reported its second quarter earnings and discussed the following topics in its earnings conference call. Take a look.

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Biggest Deltas

David Begleiter – Deutsche Bank: Luke, with respect to your lowered guidance, can you go through by segment where the biggest deltas are versus what you gave us back in April?

Luther C. Kissam, IV – President and Chief Executive Officer: Yes, I think if you look if you really look at Catalysts, we’ve got really tough comp and when you talked about 80, 80, 80, if you remember that those are the kind of numbers and I think as we build that toward the fourth quarter we’ll get there, I think it will be little bit lower than that in the third. Hopefully, we can warrant to get out there, but we’ll be lower in the third and probably at that or above in the fourth as we built on that HPC volume back. I think that we’ll also see – I’m confident in Fine Chemicals, will be able to be around that 40 range and then it remains to be seen what’s going to happen with polymers. We’re seeing a different – if you listen to my comments, we’re seeing different end market industry movements and the trends are different than they were in the first quarter, so it remains to be same what kind of that recovery is. We think it’s going to be flat rather than continue the sequential improvement. So, I think the polymer would probably be closer to where it is for the first half and we wouldn’t see that continued sequential growth.

David Begleiter – Deutsche Bank: John, with respect to Bromine FR pricing, the deck says overall pricing is holding. Spot pricing for bromine has been a little bit weaker, any signs of weakness in your Bromine FR pricing even in pockets?

John M. Steitz – EVP and COO: David, let me give you a little commentary on that because overall it’s a very positive story for us. If you look at the entire Brominated flame retardant portfolio prices are up both year-over-year and sequentially here over 10%. If you strip out tetrabrom, our prices are up year-over-year just under 20%. So I think we’re really positioning the business very well when volume resumes at more normalized levels. Tetrabrom is down a little bit sequentially, but we’re talking in the 2% to 3% range. So, it’s really held up very, very well.

David Begleiter – Deutsche Bank: Just lastly FCC even though had a weak quarter a year ago, but are you gaining any share in FCCs?

John M. Steitz – EVP and COO: David I think to answer your question, no. I think our particular situation, if you compare it to last year, we had a number of large customers who had significant downtime and that really affected our volumes last year. So we’re seeing now positive trends year-over-year for certain and normal seasonal sequential improvements as well. I think the overall market is being aided by a bit by this ethanol situation related to corn too. I think there’s a higher amount of gasoline and diesel from petroleum basis rather than a lot of the ethanol that had been used previously.

Top Line Decline

P.J. Juvekar – Citi: In Catalysts, your top line was down 14% but margins were up. Can you just discuss how much of the top line decline was from lower HPC volumes and lower prices?

John M. Steitz – EVP and COO: Really if you look at the decline, both sequentially and year-over-year, it’s really all HPC. With HPC, we had a unique set of circumstances. We had metal prices declining, that was a part of it. We had an exceptionally profitable order go out in the second quarter of last year, so mix was a bit of an issue for us. And then we had volume declines year-over-year. We also had a pretty good size order slip because of some bureaucratic issues in the Middle East slipped into July. But it was really all HPC. Now FCC, we did have rare earth indexing on pricing impact. That’s between $10 million and $15 million of year-over-year declines. So hopefully that kind of frames it up for you. But overall, we’re very pleased with the margin holding up at 29% plus. So that was very positive, I think positions us well for the future.

P.J. Juvekar – Citi: And John, would you say that your margins in HPC and FCC are comparable at this point?

John M. Steitz – EVP and COO: Yeah, I’d say that all three businesses in our Catalysts portfolio have comparable margins at this point, PJ.

P.J. Juvekar – Citi: Just on bromine and electronics, I know you don’t sell much in bromine but can you tell us what’s happening to merchant bromine prices in China and then what’s happening to clear brine’s prices?

John M. Steitz – EVP and COO: Pricing in China is down a bit compared to where it was last year. Our bromine, our elemental bromine pricing is heading very straight steady around $4,000 a ton. So, again, I think we’re positioned when we see some volume improvement across the portfolio. In clear brines we’ve had some really nice traction in terms of pricing. Year-over-year pricing is up by 14% and sequentially about 10%, so once again positioned very well for continued improvement.

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