David Williams - General Counsel Patrick Williams - President & CEO Ian Cleminson - EVP & CFO.

Ivan Marcuse - KeyBanc Jon Tanwanteng - CJS Securities Christopher Butler - Sidoti Bill Dezellem - Tieton Capital Management Debra Fiakas - Crystal Equity Gregg Hillman - First Wilshire Securities Management Chris Shaw - Monness Crespi.

Good day ladies and gentlemen and welcome to the Second Quarter 2015 Innospec Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. David Williams, General Counsel. Please go ahead, sir..

Thank you, and good day, everyone. My name is David Williams. I am Vice President, General Counsel and Chief Compliance Officer at Innospec. Thank you for joining our second quarter 2015 financial results conference call. Today's call is being recorded. As you know, late yesterday, we reported our financial results for the quarter ended June 30, 2015.

The press release is posted on the company's website, www.innospecinc.com. An audio webcast of the call and the slide presentation on the results are also now available and will be archived on the website.

Before we start, I would like to remind everybody that certain comments made during this call might be characterized as forward-looking statements under the Private Securities Litigation Reform Act of 1995.

Generally speaking, any comments regarding Management's beliefs, expectations, targets or other predictions of the future are forward-looking statements. These statements involve a number of risks and uncertainties that could cause actual results to differ materially from the anticipated results implied by those forward-looking statements.

These risks and uncertainties are detailed in Innospec's most recent 10-K report as well as other filings we have with the SEC. We refer you to the SEC's website or our site for these and other documents. In our discussions today, we have also included some non-GAAP financial measures.

A reconciliation to the most directly comparable GAAP financial measures is contained in our earnings release and in the presentations that follows, a copy of which is available on the Innospec website.

With us today from Innospec are Patrick Williams, President and Chief Executive Officer and Ian Cleminson, Executive Vice President and Chief Financial Officer. And with that, I will turn it over to you, Patrick..

Thank you, David. And welcome everyone to Innospec's second quarter 2015 conference call. We're very pleased with the improved performance of our core businesses in the second quarter.

Our Fuel Specialties and Personal Care business have delivered very solid growth despite the sluggish economies in Europe and the substantial foreign exchange headwinds as the euro remains weak.

Low oil and gas prices have continued to depress demand for chemicals and yet our oilfields specialties business has held up particularly well most notably with the delivery of innovative products and services to the completion and production market. We've a great reputation and we're gaining traction with new customers every quarter.

This has translated to a very strong financial performance with operating income up 22% over the comparable period in 2014 and a broad margin improvement across all our key businesses with our overall gross margin up a full five percentage points over last year.

This was driven by a combination of raw material price improvements, richer sales mix and a higher margin new business. Our move in this richer sales mix is a reflection of the new products and technology our combined companies bring to the market.

Entering the second half of 2015, we remain optimistic that we can maintain our business momentum and deliver a solid full year performance. Within Fuel Specialties, sales revenue in the fuels business by depressed by foreign exchange headwinds, but profitability improved significantly.

Business was flat in the Americas, but our business in EMEA performed extremely well in both sales and profitability against a backdrop of a very slow economic growth and continued geopolitical issues. Meanwhile our Asia Pacific business despite some quarterly fluctuations is steadily improving and on the right track for sustainable growth.

As we anticipated, our AvTel product line returned to more normal order patterns in the second quarter. Our oilfields specialties business has performed well driven by a sound performance in frac stimulation and production chemicals.

We believe that we're outperforming the market in these businesses, although in common with other companies, our drilling business continues to suffer from depressed rig count. We're confident that our target to maintain our oilfield business revenues for the downturn is still valid, which would be a significant achievement.

Overall, we feel very well positioned to resume our rapid growth in both sales revenue and profitability when the upturn comes. Although our performance chemicals business reported 9% year-over-year decrease in sales, this was due to currency issues and anticipated weakness in the polymers and fragrances markets.

However, our strategic personal care business grew 10% during the same period, continued its strong performance from both existing and new products. We saw good growth in this business in all regions and prospects in the second half look promising.

As we previously reported, we agreed to the sale of our Aroma Chemicals business to Emerald Kalama Chemicals during the second quarter and closed this transaction on July 6, 2015. We had indicated for some time that this business was not cure to our strategy.

This is a good move for Innospec and that it allows us to focus more of our resources on future technologies for personal care and more it provides us with greater opportunities for sustainable growth and higher margin growth.

In Octane Additive, we delivered the remainder of the first quarter order completing the first half sales as we had indicated. We now have an additional order for the one remaining customer which we expect to fulfill in the third quarter.

It is possible that there will be further sales in Q4 and even in the 2016, but we have no confirmed orders at this time. Now I'll turn the call over to Ian Cleminson, who will review our results in more detail. Then I'll return with some further comments on the quarter and our outlook. After that we will take your questions..

Thanks Patrick. Turning to Slide 6 in the presentation, the company's total revenues for the second quarter were $242.9 million, a 10% increase from $221.3 million a year ago.

The overall gross margin increased substantially from last year to 36% driven by improved margins in the fuels specialties business as well as an outlet from our recent acquisition. EBITDA for the quarter was $34.7 million, a 10% increase over last year. Net income for the quarter was $34.5 million.

Our GAAP reported earnings per share of $1.40 included $0.65 for the adjustment to the fair value of contingent consideration, $0.14 in foreign exchange losses and $0.13 of amortization of acquired intangible assets. Overall, the net effects of these special items increased our second quarter earnings by $0.38 per share.

A year ago, we reported GAAP earnings per share of $0.75, but that included a negative impact from special items of $0.13. Excluding special items in both years, our adjusted EPS was $1.02, a 16% increase from $0.88 a year ago.

Part of the Independence acquisition, we're required under GAAP to fair value of the contingent consideration we expect to pay in 2015 and 2016 on a quarterly basis. Any adjustments to the fair value is charged in the income statement is non-cash and adjusted out for EPS purposes.

In this quarter, as a results of our expected lower payouts in 2015 and 2016, the adjustment resulted in a $26.6 million credit to the income statement on a $0.65 adjustment suite. Moving on to Slide 7, revenues in Field Specialties for the second quarter were $182.3 million, 26% higher from $145.1 million reported a year ago.

The increase was boosted by a strong contribution from recent in Oilfield Specialties, which added 29% to revenues. By excluding the acquisition volumes increased by 4% offset by an adverse currency impact of 6% and 1% weaker pricing in the quarter.

By region excluding that Oilfield Specialties sales in Americas were broadly in line with last year versus EMEA grew by 6% year-over-year as volume growth more than offset the adverse currency impact. In Asia pacific, sales fell by 9% driven by a reduction in volumes and adverse currency impacts.

Oilfield Specialties grew revenues by 2% from the first quarter and as expected after all the patents recovered.

Gross margins in the segment rose sharply in the second quarter to 37.8% driven by a combination of raw material price improvements including the positive impact from foreign exchange, our richer sales mix and higher margin new business wins.

As a result, gross profit was $68.9 million up 57% from last year's $43.9 million and operating income was $27.8 million. Turning to Slide 8, revenues in performance chemicals for the second quarter fell 9% to $54.1 million as volume growth of 4% was offset by 5% lower pricing and an adverse currency impact of $0.08.

By region, sales in the Americas were broadly to last year fell by 17% in EMEA and 11% in Asia Pacific driven primarily by foreign exchange impact on weaker pricing and fragrances and polymers. Gross margins were 27.4% in the second quarter, up from 25.8% last year.

Performance Chemicals operating income for the quarter was $7.5 million compared to $7.8 million in last year’s second quarter. Moving up to Slide 9, net sales in octane additives for the quarter was $6.5 million and $18.7 million for the year-to-date in line with expectations.

The second gross margin was 58.5% and operating income for the quarter was $2.8 million. As Patrick noted earlier, we have secured a further order and expect to deliver $19 million of revenues in the third quarter. Turning to Slide 10, corporate cost for the quarter was $7.4 million unchanged from a year ago.

This includes a $2.4 million recovery in legal fees. Excluding this recovery, corporate costs are broadly within our expected range of $10 million to $11 million per quarter. The results of a slight punching credit of $0.1 million compared to a charge of $0.9 million a year ago.

The effective tax rate for the quarter was 33.4% as expected as a result of the adjustment to the fair value of contingent consideration, the anticipated full year adjusted effective tax rate to be around 26%. Moving on to Slide 11, we closed the quarter with net debt of $21.1 million, an improvement from $90.4 million in the first quarter of 2015.

The company retired just over 140,000 shares at $5.1 million as part of the Board authorizing share repurchase program compared to semiannual dividend of $0.30 per share at the cost of $7.3 million.

Net cash generated from operations was very strong at $36.9 million and at June 30, we had cash and cash equivalents of $70.9 million and total debt of $142 million. I will now turn it back over to Patrick to some final comments..

Thanks Ian. To conclude, we delivered above our expectations in the second quarter in both sales and profitability. This was particularly notable given the state of the markets in which we operate. We're very pleased with this performance. We've continued to launch a range of exciting new products to meet developing customer needs.

Many of these carry substantial international patent protection. Continued development of new technology remains a core competence of our organization. We're -- many of our customers are currently operating in very tough market conditions.

We will continue to support them through this period by providing high performing products and a cost effective price backed by excellent service. Our business continues to be healthy cash generator and even with substantial cash outflow for dividend payments and stock repurchases we closed the period with a very strong balance sheet.

We're very well positioned to seize new growth opportunities both via organic growth and further acquisitions to continue to return shareholder value. We're very proud about our near term prospects for Innospec and its core strengths of fuel specialties, personal care and oilfield specialties and look forward to the future with confidence.

We appreciate the continued support of our customers, shareholders and employees worldwide. Now I'll turn the call over to the operator Ian and I will take your questions..

[Operator Instructions] And we will take our opening question from Ivan Marcuse of KeyBanc Capital Markets. Please go ahead. Your line is open..

Hi, nice quarter. Thanks for taking my questions.

The first one is if you look at your gross margin expansion of 500 basis points, I guess more than that, if you look at your fuel specialties gross margin expansion of 38% versus I don't know, whatever was the year ago 30%, what would you, how much of that would you say is raw materials percentage of that gross margin improvement, the price cost spread versus new products versus timing or etcetera, account would you give out..

Hi Ivan, I am really pleased with the expansion in fuel specialty and the overall business actually. You have also the perfect storm in Q2 in fuel specialties. We've got a lot of new business wins higher margins and the sales mix we had has been particularly impressive as well.

On the raw materials as you know, in fuel specialties we have a price escalator to the price de-escalator. So there is normally a lag of three to six months with raw material prices going up and coming down. So you will see some of that come off in the third and fourth quarter.

In terms of the actual amounts, I think longer term as we go into the third and fourth quarter, we would expect our gross margins to be returning to probably around about 32%, 33% in that segment..

So if you look at the -- assuming your new business isn’t going anywhere, on a longer term basis, does your gross margin run rate sort of stay in that 32%, 33% versus the I don't know 30%, 31% that it was in..

Yes, I would probably, Ivan add these 32% to 33% and we indicated in the first quarter conference call as well that we felt like our margins were going to be going up. We saw the relief coming. We saw the richer sales mix and I think we're pretty confident moving forward that we ought to be able to do probably 32%, 33%..

Great, so times like your oilfield chemicals business, was that a contributor to earnings this year or this quarter?.

Yes, it was, we saw some slight improvement in revenues over Q1. We saw an expansion of gross margins as well and despite the lower oil prices and lower demand for chemicals in that segment, we're very pleased with the performance of our business and it contributed nicely..

Okay. Great. Thanks for taking my questions..

Thanks Ivan..

Our next question comes from Jon Tanwanteng of CJS Securities. Please go ahead. Your line is open..

Good morning, guys. Very nice quarter..

Thanks Jon..

Thanks Jon..

What does the chemicals business look like without fragrances in terms of run rate growth in margins?.

So that's an interesting question Jon. When you remove it and we'll be looking at I think you're probably going to remove an annualized basis of about $54 million of sales and you're going to remove about $0.22, $0.23 of EPS.

So backing all that out, you're going to see our business that's going to have a more positive topline growth because as we said earlier on the call, our personal care business is growing round about 10% and you will see our gross margins more around that 27% to 28% as well.

So the dynamics of that business are going to look slightly different in the back half of this year. Certainly more positive and it was a good acquisition -- a good disposal for us..

Okay.

Great and then what's driving the outperformance in fact in stem? Is it new products, or demand increasing for existing wells or some combination of both or something else?.

Yes it's a combination of both. I think we have a really great strategy to enter that market and the guys running the business have done a very good job in sales, service applications. New technologies, great service, very strong customer base and quite frankly we were in the best regions at the lowest split cost. So it's a little bit of both.

Again in this business where expectations were considerably off in a lot of our competition we did very, very well in regards to this marketplace..

Okay.

And how is that business and the chemicals businesses will track into July and August? Have you seen follow through or potential like down in terms of energy prices and now that impacts everything?.

Shockingly we’re still seeing a pretty strong quarter starting half. We just don’t see the slowdown quite yet. Now if crude prices stay below $50, that’s a different ball game, but right now we feel pretty confident going into the quarter that we’re against a fairly strong..

Okay, thanks again..

Thanks Jon..

Our next question comes from Christopher Butler of Sidoti and Company. Please go ahead. Your line is open..

Hi, good morning guys..

Good morning, Chris..

Could you give us an indication of how much business you sell into China and what you’re seeing in Asia overall?.

Yeah, Chris at the movement combined fuels and Performance Chemicals business, we don’t actually disclose the amounts of business we do in China, but it's certainly a market that has got a lot of potential for as in both personal care and fuel spatiality. It's a region that we're starting to expand our presence in.

So you’re going to see us starting to open more offices there because there is a lot of potential in that region, but we don’t actually disclose the amounts of business we do in the part of the world, but its potentially very significant market for us..

And could you speak to the demand environment over there in general then and outlook for the third quarter second half?.

Yeah, I think demand Chris is off little bit in China.

There is a not a lot of regulatory driving that market when you talk of specific businesses, but if you look at overall, China market it’s a in a little flex right now and just look at the stock market what’s going on in China and their GDP, we’re seeing similar in our side of the business at what the actual market trends are going on in actual China.

Just to add to what Patrick said there Chris and if your question is are we going to see a large impact from China slowdown in our numbers it's not a big enough part of our overall business to support our numbers on a go-forward basis..

And shifting over to the octane additives, looks like while you right now only have one order, you sounded little bit more optimistic that there may be more coming for the fourth quarter and early 2016, which is great.

As I think about that business and AvTel am I right in saying that having octane additives makes your AvTel business more profitable just because you are able to produce more in general?.

Yes its volume driven and the more you put through the plant, the higher margins you get. And I think as we said in the call as well Chris is that we had a third quarter order already on the books. We wouldn't be surprised to get an order in Q4 and/or going into the first part of 2016..

And could you remind me what happens when this business comes to an end in terms of costs restructuring what's going to be the impact when it finally does come to an end?.

Yes there are two parts to this answer Chris. The first part will be when the octane additives for the motor application finishes and as Patrick said that could be international or even beyond, at that point we will have volume step down and the remaining business will be for AvTel.

Right now we see that running out at least through 2018 probably more likely 2020 and at that point, we will close that part of the facility down. So again you will see some restructuring cost in that. There will be small amount of stranded cost, but not significant amount and we have got the plan and the structure in place for whatever happens.

So it's a part of the business that we've stepped down many times over the years and we're very well prepared when that moment comes..

And Chris that moment will be super fun sight because we have other products on that site..

I appreciate your time..

Thanks Chris..

We will take our next question from Bill Dezellem of Tieton Capital Management. Please go ahead. Your line is open..

Thank you.

I have a group of questions if you will allow me, the first one is would you discuss the meaningful new customers that you have gained in the last six to 12 months please?.

Yes Bill we don’t disclose customers and/or volume to specific customers openly. So we really can’t give you a lot of detail around it with the exception to say that the customers that we have brought on have been a good margin gains..

And I should have asked my question slightly different can you discuss them in a general sense as opposed to by name?.

Yes, if you look at it, it's really across the Board we picked up new customers in personal care. We picked up the new customer base in Oilfield and have really just have grown organically with our Oilfield customers. On Field Specialties we had some customer gain over in Europe which helped us to offset the currency impact..

And are you feeling that this is a process that will continue or you starting to in some of these areas personal care and field specialties in particular not the oilfield, but the other two that really, they’re becoming a bit fully penetrated..

No, I think in the other businesses, if you talk Personal Care in specific, we’re fairly -- well I would say we’re very small in regards to the overall market. And with the market that we play and the new technologies that we have, we feel we can still penetrate and grow at that 8% to 10% as we stated before.

So we’re very confident we have good growth and good growth mechanisms in our personal care market. When you talk about fuels there is probably six major players and it’s a very stable market. And as we've said before it's somewhat recession free, but it's not a sexy market where you're going to get double-digit growth.

It’s that 3% to 4% or something above GDP and that’s really what we’re seeing today and that will continued to be that way..

Thank you.

And then in your presentation you noticed some of the -- in Personal Care that you had new products that were driving sales, would you discuss those please?.

Yeah, again we don’t talk about new products and I don't that kind of information but it's really right in line with our strategy that we've set forth out years ago.

The guys have done a great job in R&D and that actual field sales reps have done a great job with introductions of our new products, but it's really across the Board, its shampoos, its body gels, its body soaps, it's really across the Board that we’ve seen that growth..

Thank you. And then circling back to Oilfield, you noted that that grew sequentially and I believe that most in the Oilfield had a sequential decline, to outperform is great, but to actually go the other direction is rather remarkable.

Would you discuss in a bit more detail how you accomplish that?.

We have unique strategy and we obviously don’t want to talk about our strategy over in an open session with the public, but I think we have a very unique strategy in how we approach the market and having a great strategy with a great product line gave us the ability to grow. We have very good customers in that market.

We still have a balanced drilling program during the lowest cost lit basins. So we've expanded organically with those customers and we've added a few ones. And so it's really been a strong, strong strategy driven by very good people and we feel confident moving forward that we can maintain that.

Now look if crude drops in the high 30s and low 40s, you'll see a balance potentially go the other way, but I think you're right. We're very proud of our group for what they've done in this market and we will continue to push forward..

And yet you did take some of the contingent consideration off the table from an accounting perspective.

So even though the growth is really quite remarkable when they sold the organization they were looking for whole bunch more?.

That's a fair comment Bill and I think when we brought this business back in October, November, I think the world was a very different place.

So this has been a major realignment in oil prices and wages reflecting the future value we see in this business, but longer term, we are convinced that this is the right acquisition and an acquisition that will return shareholder value to us..

So you know what's interesting about this business. It's a perfect storm good and bad. We always believe and as I tell my people, good companies become great companies in down markets and we have a great strategy. We're very well positioned in our drilling frac stimulation production markets.

Our job is to make sure that we have good products and services to our customers and when this market turns and goes the other way, we're going to be in a great position. So to sit here and do what we did in this quarter and accomplish what we accomplished, we're very excited about the future of this business.

You could crude can't stay down as long as it is, but it will come back up at some point in time and we're in a great spot..

That's helpful and I would like to ask one accounting question if I may. SG&A actually was up in the quarter and it didn’t quite fit everything else. It was up as a percentage of sales versus the year ago.

It was up sequentially versus Q1 even thought the revenues were lower than the first quarter revenues, can you talk that through for us please?.

Yeah sure. These are two things really. Year-over-year our main SAR increases in field specialties. The bulk of that comes from the acquisition of Independence. Outside of that, new business win that we've had in the Americas have attracted higher SAR to service that business.

So really what you're seeing is higher sales and higher GP offset by some increased SAR, so it's just a function of our business growing..

Always for the agreement in SAR?.

Administration and Research..

Okay, So basically it just requires more -- those customers are requiring more handholding..

Correct..

Right, thank you both..

Thank you..

Thanks Bill..

Our next question comes from Debra Fiakas of Crystal Equity Research. Please go ahead. Your line is open..

This is Debra, can you hear me okay. .

We can Debra..

We can Debra. Debra..

Can you hear me now?.

Yeah, we can hear me. Just fine..

Oh! Wonderful, thank you. I have a just a few questions to follow-ups on some of your previous responses to other questions.

About the new customers it's excellent to hear that you’re winning new customers, would you say that when you finally ink the orders, was it a matter of the pricing of your products or the performance of your products that was helping you win these new customers/.

Debra, it's typically a combination of both..

Okay.

And is this the case also and the particular success that you had in the oilfield services?.

Yeah a lot of its technology and service in that market. I think knowing where crude prices are, our customers have expectations of us to deliver the best products at the lowest cost and obviously not like go up service and we’ve done a very solid job of providing that in the marketplace.

And I think we have to be very watchful and very thoughtful of prices in that market, but those gains have been again a combination of pricing and technology..

Okay, excellent and then I would also just like to get a view you placed in previous conversations and in previous earnings calls you placed a lot of emphasis on the Personal Care segment, how dependent are you on being able to introduce new products in order to fuel growth? Or is the opportunity that you see in Personal Care simply a matter of further penetration of the market with your existing product base?.

It's a little bit of both, good question. You have to expand your market base through your current organic products and through new product technology and we had a lot of new technologies we launched in the last two years and we're just expanding that into a larger customer base..

Okay.

So we could -- we're not necessarily dependent upon seeing you bring on new products and if you do bring on new products, do you plan on making announcements of those or we just kind of hear about after the fact?.

Yes we typically don’t make a large announcement unless it's a really big market that we're playing into and we have a very strong patent products.

A lot of the products there we introduced some new products are fairly small market share and really depending upon the price mechanisms that we're dealing with in the actual retail markets -- so consumer market.

So we've been very cautious to go out there and introduce some new products and expectation out to Wall Street that we're going to go out and do an additional $50 million sales, but it might be a $5 million market. So that's pretty much why we had not announced a lot of new product technology launches..

Okay.

And then just one little laundry list item, could you repeat the -- I think you provided a number for the Octane additive sales in the third quarter, could you just repeat that please?.

Yes it's $19 million Debra..

19?.

19 that's correct, 19..

All right and that's actually a little bit of a surprising number for me and any rates still getting acquainted with your company, if you anticipate additional sales, we wouldn’t certainly not expect it to be at that level or would we expect it to see a number closer to the number you reported in this quarter?.

You know Debra, we just don’t know. There is not a lot of clarity when you're dealing with one country. We don’t -- it is a spur of the moment conversation.

We get an order, we get an LC, we move forward, we don’t know how much could be -- we're always very open about AvTel business and we will always come out in the third quarter for instance if we another order for X amount, we'll let you guys know. It’s a very difficult world to predict..

Okay. Thank you very much, I appreciate your answers..

Thank you..

We’ll take our next question from Gregg Hillman of First Wilshire Securities Management. Please go ahead. Your line is open..

Hi good morning, gentlemen. Hey, I've a couple of questions around oilfield.

Number one Ian, what’s the rules for segment reporting when you’d have to break that out or what’s your thoughts on that?.

We’ve been fairly open break from the new year our intention is to stop breaking out the oilfield segment into its own reportable unit. We’re just trying to help people by giving a little bit more visibility as we go through the year.

But you’ll see us start 2016 in a slightly different shape and we’ll be providing everybody investors like with all those new numbers you started playing on a go-forward basis as well..

Okay. And then Patrick in terms of international sales for oilfield what is -- are there zero international sales right now for oilfield or are there are any..

We definitely have international sales for oilfield and we continue to grow the business internationally. Your lion's share of your production chemicals or I would say fracstem chemicals in the U.S.

If you look at production chemicals etcetera, you can go outside the U.S., but your biggest share of production of chemicals, sorry, fracstem chemicals sit in the United States but we're definitely growing our market share outside the U.S..

Have you actually added offices internationally for that oilfield?.

We used the offices and infrastructure we currently have in place in fuels and obviously that’s there to make sure we control our cost and where we see where we need to put a brand new facility or other facilities, we'll look at our own facilities first and see if we could provide market share at that facility, otherwise we'll look outside, but right now, we’re using our internal infrastructure..

Okay.

And Patrick further on oilfield, could you expand into adjacent areas such as province or maybe providing services or bundled service offering along with the chemicals?.

We’re currently doing that right now Gregg, but we want to stick to what we're good at. We're very good at chemicals and into delivery of chemicals and we don’t want to really get outside our core strategy and that’s where a lot of companies fail trying to do too many things for too many people.

But I think we've done a very good job of showing up really drilling frac stimulation, completion and production and that’s really the markets that we're playing right now which we require a heavy dose of chemicals and good technology..

Okay.

And then in terms of your planning, what would be your projections of the oil price? The price of oil per barrel in terms of your planning assumptions going forward the next two to three years?.

I wish I had a crystal ball, I wouldn't be on this phone if I knew, but we follow oil prices quite significantly, not only from a raw materials standpoint for other businesses, but as well as to really watch -- have a watchful eye on our expansion in the oilfield market. I think we’re going to be depressed for a while.

There are a lot of reasons why that we obviously don't discuss for a hour, but I think this could be depressed for quite a while until we get into sometime in 2016 when that supply demand comes back in line.

So we’re probably looking at -- our view right now is the $40 to $55 range throughout the remainder of this year and in the start edging up into the 60s, low 60s into late 2016..

Okay.

And then so that would -- and then could you say anything about the acquisition front in oilfield?.

Yes it’s a situation right now where a lot of the businesses that are for sell quite frank are not worth to look. I think it’s an industry it's in a deep array right now. The assets that are out there are really not what we’re looking for. Really we’re looking right now organic growth. I think it’s a business that needs to be stable for a while.

We want to make sure we continue organic growth. If we find the great asset that we’re looking for that has really good technology back behind it, we’ll go after it. But right now we really want to see where this market heads over the next six months and I think you’re going to see a lot of players built around.

You're going to see a lot of consolidation and we're starting to see that right now..

And then finally on oilfield, has your R&D Department in the U.K. been working long enough on oilfield development that's come up with any new innovative products that you think that will take them longer since they really only been added for two years..

Yeah, I would say we're coming up with some new products already.

As you said it's fairly early in the process, but I think in conjunction with the Independence acquisition, the Bachman acquisition, in the technical and really the research fellows, as we feel very confident that we'll continue to put our new product and I think next year you'll see even more new products coming out of that research group..

Okay. Thanks for your comments..

Thanks Gregg..

We will now take our next question from Chris Shaw of Monness Crespi. Please go ahead. Your line is open..

Hi, good morning gentlemen.

How are you doing?.

Good morning, Chris..

Good morning, Chris..

In Fuel Specialties I think in the release that ex the oilfield business, the Americas volumes were or North America volumes were flat or sales were flat.

I through that it would be a little stronger just given where refinery rates and stuff are -- I mean give a little color around performance?.

Yeah, if you look at consumption rates, were up, utilization rates were up. We were flat in this business and some of its order pattern. I think you will see it pick back up in Q3. I would say probably the majority of its order pattern.

And we'll wait for the third quarter before we really got a good handle, but our belief internally is that its more order pattern than anything else. And if you look at it -- if you look at the gross margin, it went up quite significantly. So although we were flat, our gross margin went up quite significantly in this market sector..

Alright specifically, that kind of business Fuel Specialty is traditional Fuel Specialty, should some of it being driven by I don't know how much refineries are running, how much product they're putting out right?.

Yeah, we were expecting a 2% to 3% growth in that. We really didn’t get it, but I think you will get through order patterns from into Q3..

And then I think somewhere you said that May was strong, now I assume most of that was Middle East relatively to Europe, is that right?.

What we saw in EMEA was a number of business wins and significant volume increases. So yes, it wasn’t just the Middle East. It was through the whole region. So we’re very pleased with region..

Yes and we picked up a large customer last year that started filing order in this year. I think that the new customers that we have brought on have been a benefit in EMEA..

Okay.

And then just around the sales of the Fragrance business, did you guys either give an indication of where you sold it for, was it multiple or net proceeds?.

Yes net proceed after tax proceeds was $41 million..

So that leads to my next question is that I know that occurred technically in the third quarter, so your net debt is going to be pretty low at this point maybe $30 million somewhat million or high 20s? Would you plan to do the balance sheet and then speed up any share buybacks or hopefully M&A? Would you priorities there?.

Good question. If you look at, we still have $4 million on our current facility and we will be using that remaining $4 million. As you know we always discussed with the Board and the increase of dividend had another large buyback and that's definitely on the table and have discussions as we speak.

And obviously we want to put our money to work and looking at the balance of acquisitions, buybacks and dividends are really what we are doing right now and that is where we want to keep our focus..

Great, just one quick last one, the corporate expense would go around $7 million.

Is that the run rate or is it going to fluctuate third quarter, fourth quarter?.

Our corporate rate is about $10 million to $11 million per quarter, Chris..

Okay. Thank you..

We will take a follow on question from Ivan Marcuse of KeyBanc Capital Markets. Please go ahead. Your line is open..

Quick follow-up on SG&A, asking a little bit different if you look at your operating expenses in Fuel Specialties they came in that $41 million range with the new business.

Do you expect that to stick or stay at that level or now that you got the business, would you expect it to tail off and then also what are you expecting for your operating cost now ex aromas in the performance chemicals side?.

Yes on the field side, I haven't -- that's going to stick that cost. So I think we need to think about that in the same way in Q3 and Q4. When you look at -- you look at the performance chemicals business ex witness and you're going to be looking an FAR cost of about $30 million for the full year, that's excluding the witness business..

Okay. So there is an auditor associated with it, I guess right..

Correct..

Okay. All right. Great. Thanks..

Welcome, thanks Ivan..

We apologize to any participants still queued, but due to time constraints we're unable to address any further questions. I'll now hand back to Mr. Patrick Williams for any additional or closing remarks..

Thank you all for joining us today and thanks to our shareholders, customers and Innospec employees for your interest and support. If you have any further questions about Innospec or matters discussed in this call, please give us a call. We look forward to meeting up with you up again later this year..

Thank you. That will conclude today's conference call. Thank you for your participation ladies and gentlemen. You may now disconnect..