Matthew K. Juneau - Albemarle Corp. Luther C. Kissam - Albemarle Corp. Scott A. Tozier - Albemarle Corp. D. Michael Wilson - Albemarle Corp. Silvio Ghyoot - Albemarle Corp..

Robert Andrew Koort - Goldman Sachs & Co. Matt Andrejkovics - Morgan Stanley & Co. LLC Kevin W. McCarthy - Bank of America Merrill Lynch Jeffrey J. Zekauskas - JPMorgan Securities LLC David I. Begleiter - Deutsche Bank Securities, Inc. James Sheehan - Suntrust Robinson Humphrey, Inc. Michael J. Sison - KeyBanc Capital Markets, Inc. John J.

Hirt - Citigroup Global Markets, Inc. (Broker) Mike Ritzenthaler - Piper Jaffray & Co Aleksey Yefremov - Nomura Securities International, Inc..

Good day, ladies and gentlemen, and welcome to the First Quarter 2015 Albemarle Corporation Earnings Conference Call. My name is Matthew, and I will be your operator for today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session toward the end of this conference.

As a reminder, this call is being recorded for replay purposes. And now, I would like to turn the call over to Mr. Matthew Juneau, Senior Vice President -Corporate Strategy & Investor Relations. Please proceed, sir..

Thank you and welcome, everybody, to Albemarle's First Quarter 2015 Earnings Conference Call. Our earnings were released after the close of the market yesterday, and you'll find our press release, earnings presentation, and non-GAAP reconciliations posted on our website under the Investors section at www.albemarle.com.

Joining me on the call today are Luke Kissam, Chief Executive Officer; Scott Tozier, Chief Financial Officer; Silvio Ghyoot, President-Refining Solutions; Joris Merckx, President-Chemetall Surface Treatment, and Michael Wilson, President-Performance Chemicals.

As a reminder, some of the statements made during this conference call about the future performance of the company may constitute forward-looking statements within the meaning of federal securities laws. Please note the cautionary language about forward-looking statements contained in our press release. That same language applies to this call.

Please also note that our comments today regarding our financial results exclude all non-operating or special items, and reconciliations related to any non-GAAP financial measures discussed may be found in our press release or earnings presentation, which are posted on our website. With that, I'll turn the call over to Luke..

Performance Chemicals, Refining Solutions and Chemetall Surface Treatment. On a constant currency basis, with the first quarter of 2014, these businesses delivered revenue growth of over 4%, including the 12 days of unreported January sales for the former Rockwood businesses. On the same basis, adjusted EBITDA grew by over 6% in the quarter.

We are very pleased with our start to 2015, which demonstrates the resilience and margin power of our businesses and our ability to cope with challenges in some of our key markets, and currency headwinds caused by the strengthening U.S. dollar. Indeed, the combined adjusted EBITDA margins of our three GBUs was 28% in the first quarter of 2015.

Scott will talk business segment performance in more detail and will help reconcile to the reported numbers, but at a high level, Performance Chemicals had a strong quarter in all segments, with our Lithium and Performance Catalyst businesses both showing strong improvement versus the first quarter 2014 pro forma results, and our Bromine businesses delivering a solid quarter that exceeded our January expectations.

Chemetall Surface Treatment showed excellent growth on a constant currency basis, with both volume and price improvement compared to the first quarter 2014. Refining Solutions was weaker than expected, driven by weakness in Clean Fuels Technologies related to delay change-outs, weaker mix and fewer first-fill opportunities.

After closing the Rockwood transaction on January 12, we continued to make strong progress toward all of our key 2015 objectives. First, our integration team has already initiated projects that deliver $40 million of synergies in 2015, and we are confident that we will achieve our full year 2015 goal of $50 million through ongoing projects.

The $40 million in 2015 savings will become $48 million of full year savings in 2016, putting us well on our way to our $100 million target for 2016. Second, our businesses are already being run in a structure consistent with the global business unit realignment announced in January.

This new structure is helping to increase our market focus and push the organization to capture additional synergies. Third, our first quarter adjusted EBITDA, free cash flow and net debt only increase our confidence in our ability to rapidly delever in line with our target of 2.5 times net debt-to-EBITDA by the end of 2017.

Consistent with the confidence in our cash generation power, we increased our dividend by 5% to an annual rate of $1.16 per share in February, marking our 21st consecutive year of dividend increases.

As a result, in February, we were proud to be added to the S&P High Yield Dividend Aristocrats Index that recognizes companies with 20 years or more of increasing dividends, a streak, we expect to continue.

Finally, we have kicked off the planned divestitures of Minerals, Metal Sulfides and Fine Chemistry Services, which will allow us to focus completely on our key businesses and will accelerate debt reduction. All three processes are well underway and we are seeing strong interest in all three businesses. With that, I'll turn the call over to Scott..

Minerals, Metal Sulfides and Fine Chemistry Services. Second, the corporate line item includes foreign exchange gains and losses related to cash balances and various legal entity accounts. Historically, this has not been significant, but with the acquisition of Rockwood there was notable impact in the first quarter, as I will talk about.

As a reminder, our year-over-year financial comparisons will be based on pro forma 2014 results as shown in that April 8-K to facilitate a cleaner comparison. Overall, for the first quarter, we reported all-in diluted earnings per share of $0.40 or $1.17 per share excluding special items.

There were a number of one-time special items during the quarter, the largest of these related to the Rockwood acquisition. The inventory step-up resulted in a pre-tax charge of $48 million or a $0.34 loss per share after taxes, and one-time acquisition and integration costs resulted in a pre-tax charge of $59 million or a $0.39 loss per share.

A full reconciliation is in the press release. Net sales totaled $884 million and adjusted EBITDA was $266 million for the quarter. While profitability as measured by adjusted EBITDA margin improved to 30%, even though sales were down 7% compared to the first quarter 2014.

The stronger dollar impacted our results by reducing sales by $41 million and adjusted EBITDA by $14 million, with most of the impact from the euro and the Japanese yen.

Another unique item in the quarter was a gain of $52 million in EBITDA or $0.36 per share driven by per share, driven by a non-cash foreign exchange gain related to cash held in foreign entities after the acquisition and before we paid down our bridge loans. Our European entities held a significant amount of cash in U.S.

dollars and the drop in the euro during the quarter created an accounting gain. This situation has always been in our numbers, but never to this magnitude, which was driven by the combination of the amount of cash on hand and the steep drop in the euro.

Additionally, the year-over-year, comparison was impacted by stub period sales for the former Rockwood businesses that are not reported in our Q1 results. The 12 days in January that represents a stub period would have increased total company revenue by $33 million and adjusted EBITDA by $3.4 million.

If I normalize our results for the impact of foreign exchange, the non-cash foreign exchange gain and the Rockwood stub period, sales would have been up slightly and adjusted EBITDA would have been up by 7%.

We now expect our effective tax rate, excluding special items, non-operating pension and OPEB items for 2015 to be about 26%, again, driven by the level and geographical mix of our profits, including those generated as a result of the recently completed Rockwood acquisition.

While this is a bit higher than what we expected in January, it is fully within the range of our acquisition modeling.

In January, we forecasted capital expenditures in 2015 to be close to the top of the 4% to 6% of revenues that we expect to spend on capital over the next few years, with completion and startup of the La Negra lithium carbonate expansion in Chile, one of the items pushing capital to the top end of the range.

As we work to complete this project, we now see a need to spend additional capital that could push us a little over that 6% of revenues in 2015.

Free cash flow, defined as cash flow from operations, adding back pension and post-retirement contributions and subtracting capital expenditures was about breakeven in the first quarter at a negative $5 million. 2015 will have a number of moving parts and one-time charges as we work through the integration and acquisition related projects.

In the first quarter, there were about $100 million of these one-time cash outflows, including various transaction fees. Despite the changes in tax rate and capital, we remain on track to be within our January guidance of $100 million to $200 million of free cash flow for the full year.

Excluding the one-time items, our full-year free cash flow will be between $450 million and $550 million, demonstrating the tremendous cash generation of our businesses. In addition, we are working to update our working capital targets.

We believe there is substantial upside in this area, with opportunities in both the legacy Albemarle and Rockwood businesses. We closed the quarter with working capital at just under 25% of revenue and our long-term aspirations are to reduce this to about 20%, which represents a substantial cash opportunity.

There are a number of complicating factors, but we will work to develop initial targets toward that 20% aspiration over the next several months. At the end of Q1, Albemarle's net debt-to-EBITDA ratio as measured by our bank covenants was 3.6 times.

As the full impact of the acquisition rolls into our leverage ratio, I expect net debt-to-EBITDA to creep up toward 3.7 times to 4 times by year-end, before any help from the divestitures. We are focused aggressively on deleveraging based on our strong cash generation, disciplined capital and cash management and by delivering on our synergy targets.

We are seeing a high level of interest in the three businesses targeted for divestiture. And our goal is to complete these by year-end and the proceeds will be used to drive additional debt reduction. Our initial guidance of $40 million to $50 million of adjusted EBITDA risk related to foreign exchange was based on a U.S.

dollar to euro range of $1.12 to $1.18 and a Japanese yen, U.S. dollar range of JPY117 to JPY121. While the yen remains in that range, the strength of the dollar against the euro has created additional foreign exchange risk. And based on that adjusted expected U.S.

dollar to euro range of $1.04 to $1.12, our adjusted EBITDA risk has increased to $50 million to $60 million on the full year. Now, let me turn to business unit performance in the first quarter.

Before I address our three GBUs, note that we had a weaker start to the year in some of the businesses planned for divestiture, which negatively impacted both revenue and adjusted EBITDA. Refining Solutions reported first quarter net sales of $179 million and adjusted EBITDA of $42 million, with adjusted EBITDA margins of 24%.

On a constant currency basis, sales and adjusted EBITDA were down 3% and 23% respectively. About 5% of that EBITDA decline related to higher freight costs, as a result of the West Coast port strike, as we spent more on freight to ensure our customers received their products.

The decline was driven primarily by Clean Fuels Technologies and to a lesser extent by an elevated number of commercial trials in Heavy Oil Upgrading, as we discussed in January. Heavy Oil Upgrading business performance was in line with expectations, and we do not expect ongoing impact from these customer trials.

Our expectations for the year in the Heavy Oil Upgrading remain unchanged with both volumes and profits expected to increase versus 2014. In January, we noted are concern that low oil prices created risk to our Clean Fuels Technologies forecast.

That concern was borne out in the first quarter as Clean Fuels Technologies saw a more negative EBITDA impact than initially expected from delayed change-outs, weaker mix when compared to 2014's unusually strong mix and fewer first-bill opportunities.

As a result, we are now more cautious on outlook for Clean Fuels Technologies in the remainder of the year, and we expect 2015 EBITDA to be down versus 2014.

Clean Fuels Technologies remains a lumpy business and while there may be some near-term impact, especially associated with the delayed change-outs in a low oil price environment, on a long-term basis, this business should continue to perform and grow.

Performance Chemicals reported first quarter net sales of $388 million and EBITDA of $131 million, with EBITDA margins of 34%. On a constant currency basis, sales were up 3% and EBITDA was up 17%. Normalizing for the equity income from the Talison JV, which closed in the second quarter of 2014, EBITDA was still up 10%.

The improved earnings and margins were driven by a combination of improved PCS sales and volumes, and improved sales in our Lithium business. Excluding the negative impact of foreign exchange and including the stub period in the results, Lithium revenue and EBITDA were up 17% and 34%, respectively, compared to the first quarter of 2014.

The primary performance drivers were pricing improvement and the impact of the Talison JV, which delivered stronger-than-expected equity income on strong volumes and margins for technical grade spodumene. We continue to be bullish on the outlook for battery grade products.

Note that the portable electronics market grew 10% to 12% in the quarter, and the growth in battery, electric vehicles continued with global sales up more than 25% compared to the first quarter of 2014. Year-on-year comps were also impacted by the larger butyllithium customer lost in the second quarter of 2014.

Overall, the Lithium business continues to perform well, meeting or exceeding the expectations we set at the beginning of the year. On a constant currency basis, bromine related sales and adjusted EBITDA were both down 4%, but we're above our January expectoration.

Completion fluid volumes were better than expected in the Gulf of Mexico, and we also benefited from deepwater fracking sales there as well. These two factors helped to counter weak completion fluid volumes in the rest of the world. Brominated Flame Retardant volumes continued to improve, as did volumes in a number of other brominated derivatives.

While pricing was down year-over-year in the quarter, it was sequentially stable and while still early, we are seeing encouraging price and volume trends in this business, even if our outlook for the year still remains down compared to 2014.

Finally, Performance Catalyst Solutions, which also includes Curatives for reporting purposes, had a very strong quarter as the polyolefins market continued to show steady global growth. And we benefited from some one-time sales as well as timing of customer demand for our key catalyst component.

Net of foreign exchange impact, sales were up 17% and adjusted EBITDA was up 65% year-over-year. In addition to the customer wins, low raw material costs, an improved tight (20:21) utilization benefited the quarter and helped to counter ongoing price pressure in the base organometallics segment.

Chemetall Surface Treatment net sales were $192 million, with adjusted EBITDA of $46 million, resulting in margins of 24%. Excluding the negative impact of foreign exchange and including the stub period, sales and adjusted EBITDA were up 8% and 11%, respectively, compared to the first quarter 2014.

Surface Treatment is continuing to benefit from broad-based volume growth and pricing gains in most end markets, particularly driven by higher sales in automotive OEM and automotive components, general industry, coil and aerospace applications.

Overall, market dynamics remain favorable, with continued opportunities for bolt-on acquisitions, similar to the recently concluded acquisition of our partner shares in our Shanghai JV. Now, I'll turn the call over to Luke to talk about our guidance..

Thanks, Scott. In January, we projected 2015 adjusted EBITDA of $875 million to $965 million, and adjusted EPS of $3.15 to $3.70, with an earnings cadence of 40% in the first half and 60% in the second half of the year.

As you heard from Scott, in the first quarter of 2015, our overall business performance exceeded expectations, generating adjusted EPS of $0.81 per share, exclusive of the non-cash FX gain that Scott explained. A great start to our year.

One month into the second quarter, we expect continued solid results from the three businesses, Bromine, Lithium and Performance Catalyst Solutions that make up Performance Chemicals. Similarly, Chemetall Surface Treatment continues to meet our expectations.

Refining Solutions is mixed; Heavy Oil Upgrading or FCC catalysts should deliver volume growth in line with our January forecast. However, volumes and profitability in Clean Fuels Technologies will be more negatively impacted by the late change-outs, fewer first-fill opportunities and negative mix than initially projected.

Combining all these factors, we are more confident in our 2015 outlook, and now see adjusted EBITDA in the range of $935 million to $1 billion, including the FX gain related to the U.S. dollar cash on hand at the completion of the Rockwood acquisition. On an earnings per share basis, this results in updated guidance of $3.65 to $4.05 per share.

This improved outlook reflects the strong first quarter results, as well as our confidence in business forecasts for the remainder of the year and in our ability to overcome the additional headwinds we face from a strong U.S. dollar, low crude oil pricing, and weaker Clean Fuels Technologies performance.

Due to the strong first quarter and to better-than-anticipated volumes in our oilfield completion fluids business in the Gulf of Mexico, our projected earnings cadence is now less tilted toward the second half of the year than initially forecasted.

While we still expect higher operational earnings in the second half of 2015 compared to the first half, especially in Refining Solutions, the projected EPS split with the inclusion of the foreign exchange gain previously noted is now closer to 50%-50% than 40%-60%.

As we look to the rest of 2015, we see the same macro issues that have impacted us year-to-date, strength of the U.S. dollar, sluggish global economy, and crude oil pricing continuing to be major factors.

Just as in the first quarter, our focus will be on what we can control, and you can expect disciplined operation of our businesses and our assets, strong cash management and a continuing push to deliver on our integration and synergy targets.

In closing, while we are only one quarter into the year, I believe our first quarter results underscore the earnings power of the new Albemarle and demonstrate our ability to deliver results regardless of the business environment.

I am more excited than ever about the combination of Albemarle and Rockwood and our ability to deliver increasing shareholder value through our industry-leading businesses..

Operator, we're ready to open the lines for Q&A, but before you do so, I would remind everyone to please limit your questions to two per person at one time, so that everyone has a chance. Then feel free to get back in the queue for follow-up, if time allows. Please proceed..

Thank you. And your first question comes from the line of Bob Koort of Goldman Sachs. Please proceed..

Thanks, guys. Good morning..

Hey, Bob..

I was wondering, Luke, if you could talk a little bit on the Bromine side? You mentioned some improvements and encouraging trends, but not really changing your view yet.

Is that just a function of maybe once burned, twice shy? Or what's the reason for the greater conservatism mix here that some of the production issues in the industry get rectified, why not a little bit more bullish?.

Yeah. I think that we're seeing positive trends, and I'll let Michael comment on some specifics, but we're seeing positive trends across the pricing front. We're seeing positive trends on volume, but we also understand that the operational issues of some competitors is ultimately at some point going to come to an end.

And so, it's hard to gauge what will happen when that does. So we feel very good about where we're going in Bromine. This price increase is necessary for us to continue to operate the assets, and we're not going to chase volume. So we're going to lose some volume in accordance with this, with this pricing announcements, we expect that.

It's built into what we expect to do for the rest of the year, but we're in this for the long-term. And so, don't hear in our comments a hesitancy in what we're doing is right or a concern about the long-term value that these products are going to bring. We're committed to this price increase, and we're going to push it through..

Just so, Bob, this is Michael Wilson. Yeah, I got just a comment. We obviously got off to a very solid start in the first quarter. I think clear completion fluids were a positive surprise for us. We really benefited from ongoing activity in deepwater. So, I think that gave us a bit of tailwind that we were cautionary about at the beginning of the year.

So, I would say that's a real positive from a volume standpoint. We still have some caution about the second half of the year. Everybody knows that the number of drilling rigs is going down. If deepwater continues to hold up though, I think we'll be fine. I've really not changed the outlook on that since the beginning of the year.

If I think about the Brominated Flame Retardants side of the business, we are for now maybe two quarters in a row, seeing higher year-over-year volume growth. It's low-single digits, but it's positive. And then I think to Luke's comments on the pricing front, it's too early at this point to try to quantify any impact from that, but I am optimistic.

I do believe we are seeing traction in the marketplace, which is a positive and I can give you a sort of one anecdote, the one place where prices are published publicly is in China. And since the announcement that we put forward, prices in China are up about 20%. So, I see all of those as positive signs for our business going forward..

And can you talk on the lithium side, where you see the ramp of the carbonate plant down in Chile? And then it seems like we're getting some positive news flow out of the EB market (29:02). Can you give us a sense of when you'll have to make a decision on a new hydroxide plant? Where you might place that? What the expense would be? Thanks..

Yeah. To answer your first question regarding the capacity on Chile, nothing has really changed from my comments at our fourth quarter call. I indicated at the time that we expected the plant to start up in late second quarter, beginning third quarter. So, mid-year timeframe; we're still on track for that.

But I also cautioned that we would not expect any significant volume benefit from that plant probably until mid-2016, just because that plant is designed to produce battery grade lithium carbonate and it is a very rigorous qualification process that we will have to go through. So, we will start that plant up.

We'll do some campaigning of it, producing products that we'll send out for qualification, and we'll gradually bring that capacity on. But we're looking forward obviously to doing that as we continue to see strong demand for battery grade materials. We saw that in the first quarter of this year versus last year.

Battery grade product demand was probably up 20%, which is in line with the comments that were made about what we're seeing in consumer electronics and EBs overall. So, with respect to the need for lithium hydroxide, that's a decision – an activity that we have ongoing.

We've got an active project to evaluate opportunities for investment, and we just got to work through our internal processes on the approval of that and in the process of development design, decide where we're going to invest and win.

But as I look at that market, there is definitely a need for additional capacity in lithium hydroxide, and we intend to serve that..

Thanks..

Thank you for your question. Your next question comes from the line of Vincent Andrews of Morgan Stanley. Please go ahead..

Hi. Yes. Good morning. Actually, this is Matt Andrejkovics calling for Vincent. Thanks for taking the call. Just wanted to clarify, in the CFT catalyst business, you mentioned the risk for delays.

How long can the refineries typically delay these change-outs? And is that something you might expect to get maybe back within this year? Or might it get pushed out? And then, a follow-up on that, the fewer first-fill opportunities that you mentioned, is that lost business maybe that you expected to get? Just maybe a little color on that would be appreciated.

Thanks..

If you look at the – I'll let Silvio talk about it, but it really varies. I can't tell you whether it's going to move out of the year or whether it's going to move to later in the quarter. Some of them that we look out would definitely move out of the year.

Some of them that we had built into the forecast for 2014 – I mean, for 2015, have definitely moved out to 2016. Some of those first-fill opportunities would be lost business, if our partner – in some instances, if our partner, we were expecting to get a fill at a period of time and it's delayed for the quarter or for the year, it would move out.

But if our partner loses that design, we would obviously lose that business. But we purely (32:15) have further line of sight into those.

So, for what we're talking about today, you're seeing – the two questions would be, one, for the first-fills, it really has a mix issue because we don't get those higher value first-fills that we thought we were going to get in the year. And we're completing out with some lower value products.

And then, from a – when they're pushed out, it just really depends on each refinery.

Silvio, you want to add some color to that?.

Yes, thank you, Luke. On those change-outs, which are being pushed, we have fairly good visibility on how far they'll be pushed out, whether it is further in the year or whether it is into next year. Some of them are pushed out. Some of them have a short-term replacement of catalysts, which like Luke said, a lower mix volume..

Okay..

Okay. Great. Thanks very much..

Thank you for your question. Your next question comes from the line of Kevin McCarthy, of Bank of America. Please proceed..

Yes. Good morning.

With regard to your free cash flow guidance, just wonder if you could walk us through some of the one-time items, including cash repatriation taxes? And on the subject of working capital, it sounds like you're taking a fresh look at that, maybe you can update us on what you have embedded in the current range for working capital, and what opportunities you might foresee there?.

Yeah. Hi, Kevin. Yeah, as you look at that range, obviously, the big movers are around the acquisition costs and the transaction costs and filing the tax repatriation costs. So, those numbers haven't changed. So we're still in that kind of almost $200 million in terms of the acquisition and integration costs.

Tax repatriation is going to be in the – just under $150 million. Those are on track. Tax repatriation doesn't really affect Q1 yet, but it'll layer in over the next three quarters. Working capital, as you mentioned, is an opportunity for us. We're not anticipating significant improvement in working capital this year.

However, as I mentioned in the script, certainly, it's something that we're looking for the long-term to drive. So, you can expect some minor improvement for this year in generation of cash flow..

Great. As a follow-up, you've elected to leave the one-time non-cash foreign exchange gain of $0.36 in the numbers.

You've been, I think, very overt and clear about what you're doing there, but maybe you could just address why you've elected to leave that in, when there's a whole variety of other adjustments in the quarter?.

Yeah. No, that's a good question. Foreign exchange gains and losses have always been in our numbers at the end of the day. So, if you go back in time in terms of Albemarle's reporting, we've always had some level of foreign exchange gains and losses. It's the magnitude of this situation that is driving obviously the fact that we have to call it out.

And in this case, we had a significant amount of cash in our foreign entities related to the transaction and it was denominated in U.S. dollars. And with a significant drop in the euro, that created that gain in those foreign entities. So, it's really no change in how we've been reporting, but it is a large item.

We'd expect as we go forward, that we'd be back into the normal range of a million dollars or $2 million per quarter, plus or minus, and we'd be right back to where we've been in the past, so..

Okay. Thank you for the color..

Thank you. Your next question comes from the line of Jeff Zekauskas of JPMorgan. Please proceed..

Can you hear me?.

Yeah, we can hear you now, Jeff..

Okay, good. Thank you. Your sales adjusted for FX were down 3% in the quarter. Can you describe what your volume change was and your average price change for the company as a whole? And that is – I'm interested in the organic volume and price change.

And I know that there's some joint ventures that sort of move around, I was hoping you would exclude that?.

Yeah. With the addition of Chemetall, Jeff, volume is less impactful because it's not a volume-based business, much more of a service and the technical delivery-based service. So, it's a little bit more difficult to break that down. We can break down as we go forward into the other businesses.

But as you look at the overall company from a pricing perspective, we saw good price traction within Chemetall. We've seen good price traction within our Performance Chemicals businesses, as we talked about; relatively flat I would say in the Catalysts businesses..

So....

And if I look – just if I could clarify, if I look at our overall revenue and try to normalize it, there's two big factors. One is foreign exchange. As you mentioned, that's roughly $40 million impact on the quarter.

There's also the stub period, which are the 12 days that we did not own Rockwood at the beginning of the year and that represents around $33 million. So, if you adjust for both of those, we're actually up 0.5%. So, just about basically, breakeven flat..

So basically, your prices are up, I don't know, 3%? 3% and your volumes are down 3%, is that the way to look at the company?.

For the quarter....

For the quarter, that's probably right, I would say maybe 2% on price, on average across the company..

Yeah. For the quarter, that's right. And remember that one of our bigger volume products is FCC catalyst. And on FCC catalyst, our volume is down in the quarter because of the larger turnaround – not turnaround, the larger customer trials that we talked about in the first quarter.

So, I would expect over the course of the year that that would even out, because we expect to see nice volume, particularly in the second half of the year for FCC catalyst..

So, how much was FCC – what was the volume and price change in FCC and then HPC for the quarter?.

Jeff, hold on one second..

Thank you..

Let me just grab it. If I look at High Oil Upgrading, down roughly for the quarter, down about 10% for the quarter. And then for the full-year, we'll be up. Okay, and if look at Clean Fuels for the quarter, Clean Fuels roughly up a hair, and I would expect it to be down for the full year..

Okay. Great. Thanks so much, Luke..

Yeah, man..

Thank you for your question. Your next question comes from David Begleiter of Deutsche Bank. Please go ahead..

Thank you. Luke, you mentioned that in Bromine that you might lose or you would expect to lose some volume pushing this price increase.

To whom and where would you be losing that volume do you think?.

Well, I mean, it goes across the board. I mean, there are only so many participants out there in the marketplace, so. But the bulk of the time, as in the past, anytime we've raised prices, what generally happened is we'd lose some volume to some Chinese producers. And so, I wouldn't expect this to be a whole lot different..

Fair enough.

And maybe just on lithium, Luke, talk about lithium carbonate pricing trends and potential for higher prices going forward in lithium carbonate?.

Yeah.

I'm going to let Michael talk about that, if that's okay?.

Yeah. David, this is Michael. So for 2014, we're going to see higher prices. We're going to have higher realized prices across the lithium salts, particularly for lithium carbonate and lithium hydroxide. So, that's going to be sort of mid-to-high-single digit price increases on average for the full year.

The time – we closed the acquisition in January, a lot of the lithium volume was already contracted on an annual basis. So, there's not significant opportunities, I would say during the course of 2015. But as we see the market developing going into 2016, I would certainly say I'm optimistic about the outlook for being able to raise prices further..

And sorry, Luke – thank you.

And Luke, just comment on FCC pricing trends and where we stand on the overall price increase here?.

Yes.

Silvio, you want to talk about pricing?.

Yes. Thank you, Luke. On FCC, I do not see any downwards trend for pricing. I think everything will be holding as we have scheduled earlier in the year..

Thank you..

Thank you for your question. Your next question comes from the line of Dmitry Silversteyn of Longbow Research. Please proceed. Changed his mind and the next question comes from James Sheehan from Suntrust Robinson Humphrey. Please go ahead..

Good morning. Thank you. On your commentary on lithium you mentioned spodumene doing better than expected. I think that was in the more technical grades.

Can you talk about what's driving the demand for spodumene and whether you think it will continue to be in the more technical grade of lithium?.

Actually, it's in both technical grade and chemical grade lithium, which is used for conversion into downstream derivatives. So the way to think about is technical grade lithium carbonate is really used in glass and ceramics. So, that's a GD plus, or GDP type of growth businesses, I think, is the way to look at that long-term.

So, the real volume growth is for the chemical grade, which is being used to make either lithium carbonate or lithium hydroxide, which is sold either into technical applications or into battery grade applications. In some cases, it's used to make derivatives that are even further downstream.

But, that's really what's going to be the long-term driver of demand. So, I think you have to look at overall lithium growth, which is probably averaging 8% to 10% per year, and we should expect that to continue for spodumene..

Thank you. And just on PCS, you mentioned some order timing issues there.

Did we shift orders forward into the first quarter from the second quarter? If you could just discuss what you think the cadence of order timing is for the rest of the year?.

Well, I think, if I look at PCS overall for the full year, our outlook is largely unchanged from the beginning of the year. I would just say that we had a much stronger Q1 than we anticipated. We're interpreting that that some volumes that might have come to us in the second quarter were pulled forward, but I don't know that with certainty.

I mean, the upside may be that volumes continue to be ahead of our expectations. But at this point, we're sort of holding to the forecast that we gave at the beginning of the year, so..

Thank you..

Thank you for your question. Your next question comes from the line of Mike Sison of KeyBanc Capital Markets. Please proceed..

Hey, guys. Nice start to the year. In terms of your outlook for 2015, I'm trying to gauge kind of the cadence for upside. You're getting a strong start to the year, it doesn't seem that you've raised the outlook for 2Q to 4Q, yet, you might have some building (44:52) price increases.

You've talked pretty positively of Lithium and Surface Treatment, so can you maybe talk through what is offsetting maybe all the positives? And is there potential for a better year, as given the good start?.

Sure. It's really a couple of buckets that I'll put them in. First of all, we've got an additional $10 million of currency headwinds, $10 million to $12 million of currency headwinds than we did when we talked about the outlook in January. So, we've got additional currency.

The second thing is Clean Fuels Technology the volume and profitability of that business will be weaker than we anticipated it in January, and it'll be down year-over-year. So, we're going to see some reductions in Clean Fuels.

From a Bromine standpoint, the first half of the year is stronger, particularly in clear bronze than anticipated, but as the crude prices continue to stay at the kind of levels they are, we are getting more and more information from our suppliers in the drilling fluid about the second half of the year being up in the air.

So, we had built some of that into the original model, but you don't see the improvement that we saw in the first quarter carrying through for the rest of year in our forecast.

So, those are the big buckets that we've got that we believe we're overcoming in our other businesses to lift the bottom end of our range and hold on to what we did in the first quarter and still maintain that guidance for the year..

Got it.

And then in terms of Bromine, do you need a certain level of demand or volume growth to achieve the price increases? Or do you feel pretty good that given there's, as you mentioned, there's not a lot of you guys that if you push through that you'll get in irregardless of sort of the volume backdrop?.

Mike, this is Michael Wilson again. And I guess just to reiterate what I said before, I'm optimistic about our ability to get traction on the price increases. I recognize everybody is aware sort of that we've talked about historically about capacity utilization.

And there is no question that if you looked at nameplate capacity utilization for Bromine, you probably have global operating rates that are in the upper-60s% to 70% now.

But I think what we've been communicating to customers and they recognize is that we're matching our production planning, we're matching our investments in this business to meet contracted demand for products that we're getting fair value on. And as Luke said earlier, we're not going to chase low-margin business.

We're not particularly interested in the spot business. We want to contract with the customers who recognize the value that we provide in terms of our products and services. We feel it's only fair to ask for that value. That's the argument that we're making, and we're resolved to push this through..

Great, thank you..

Thank you. Your next question comes from the line of P. J. Juvekar of Citigroup. Please go ahead..

Hi, good morning, this is John Hirt on for P. J. today.

Given the (48:17) tightness that you've seen in the bromine market that you've talked about, can you talk about kind of the pace with which you anticipate getting pricing through? And then perhaps more importantly in terms of the impact, I mean, how should we think about the timing of the impact? Do you anticipate that starting to impact you in 2Q, but perhaps more of the impact in the second half?.

Again, this is Michael Wilson. I think the way to look at it is it's going to be a gradual thing that will occur over time. And first of all, you have to realize that we have contracted volume. So, we're raising prices as contracts permit. Some of those contracts will go through the end of this year.

So, the opportunity to even have the discussion with customers won't happen until then. But that being said, I mean, some of it's happening now.

I would think early on we probably see some volume that will offset some of the pricing benefits, but then over time, I think, the pricing benefit begins to overpower the volume loss and then we see the impact of that coming to the bottom line.

So, the answer to your question is we certainly didn't see that in the first quarter because it was late in the quarter when we announced the increase. I would expect marginal, if any benefits, in the second quarter.

I think by the time we get to the end of the second quarter, we'll have better insight as to whether we're really getting a significant impact for the second half. And then I think really where we would hope to see the benefit is as we go into 2016..

Okay. That's helpful. And then just a follow-up on Talison, which you said performed ahead of your expectations, I know capacity there was doubled I think a few years ago. So I'm curious where your operating rates are for the Talison assets? And given that lithium demand has – it sounds like it's stayed pretty resilient despite lower oil prices.

I mean, I would imagine you could ramp up production of that rock base resource a little bit faster than you can on the brine base resource. So, can you kind of just talk about that dynamic and kind of where you're operating today? Thank you..

Yeah. So, if I look at the technical grade product, which again is sold directly into glass and ceramic applications and that we take through an off-take agreement for distribution, that's running at relatively high capacity utilization rates.

The chemical grade product, which is used for conversion of the downstream derivatives, is running at about 70% of capacity. So clearly, there is headroom as market demand grows to increase that and to grow volumes. However, much like the approach I indicated with Bromine, we intend to manage that capacity in a way that we match the supply to demand.

And we do that so that we're matching supply to demand where we're able to get prices that we think are fair value. So again, we're not just going to increase capacity to try to get volume growth at the expense of value..

Understood. Thanks very much..

Thank you for your question. Your next question comes from the line of Mike Ritzenthaler of Piper Jaffray. Please go ahead..

Yeah. Good morning.

In Refining Solutions, how does the adoption of relatively new products like AlkyClean factor into your outlook? Or are they just too small to move the needle?.

Good morning, Mike. This is Silvio. The AlkyClean, as you remember, we had the first sale last year. That unit has been built at a tremendous speed. And I'm looking at a calendar, it's supposed to be started up in the next couple of weeks.

So, that will give us an indication on how that new technology runs, and we are confident that everything will happen as scheduled. But as you know, new technology, new plant that there's always a little surprise..

Sure. Okay.

And then, one question about the three businesses that are for sale, should we be expecting some degree of, I guess, softer performance year-over-year from those three businesses? And are the soft results that we saw in 1Q a function of their sale and perhaps losing customers? Or is it a list of things like that are end-market related and is that impacting the valuation on those entities?.

Yeah. I think it values across the three businesses. I think Minerals business is about right on where we thought it was going to be. Metal Sulfides, down just a hair, but not too much and the big downsize is coming from custom services. And what that comes from is from timing of some of the products, as they've got a tough comparison on Q1.

And then as we look at the electronics business over the course of the year, some of that is moved out into 2016. So, that's what it is, it's a mixed bag.

It's not anything related to the business, and I don't expect it to impact the valuations because they're looking at a history of the business and the profitability of those businesses as well as the opportunity. And in custom services there's a great pipeline of products in there that they're real excited about.

And there's some opportunities for them to make some moves on pricing and some generics that they're working through right now. So, I think that will work itself out in the course of the year and early next year.

And I expect us to be able to get the right value for our shareholders for the investment of those businesses, and if we don't, we'll keep them..

Fair enough. Thank you, Luke..

Thank you. Your next question comes from the line of Aleksey Yefremov of Nomura. Please go ahead..

Good morning. Thank you. Could you comment on the difference in the outlook for HPC and FCC catalysts? It seems like lower CapEx at refineries is impacting these two products in a different way.

Is there something in the nature of these products that signals that maybe the weakness in HPC is transitory? Or is there anything else going on?.

Yeah. At a very high level, when you think about FCC catalysts, and you look around where we are at the world, remember, we've got some big customers coming on line this year. So we continue to have good growth, particularly in areas where they're looking to maximize the propylene yield in that heavy residual, and so we feel good about that.

And you'll see nice growth year-over-year. At the end of the day, it's all about transportation fuels. In FCC, you can think of it as a gasoline maker. When you have lower energy costs, when you have lower gasoline costs, people may be driving more. So I think we'll see nice continued growth in demand for the FCC catalysts.

And I'm very confident about our technology and very confident about our ability to meet our customer needs for this year, and I think we'll see that continue to grow. On the HPC catalysts, where we are stronger is in the ultra-low sulfur diesel and into distillates. And what we're seeing is, one, in the U.S.

there's some lighter sweeter crude that's been brought to play that you don't have to use as much catalyst and they don't have to run as hard to process. We're also seeing in HPC, remember, it's a fixed bed. So they have to shut the unit down, unload that, and shut down the whole unit and bring it back in.

Whereas the FCC, you have a constant feed into the unit, so you don't have to have that. So when they are pushing out those turnarounds, couple of things are going on. One, the catalyst is lasting longer. Two, the demand for those outputs that they have out there is not growing as fast as the capacity. And three, the catalyst is just working better.

So we're seeing longer turn-outs and longer delays and the units are running while they can with what they have. So, its two different drivers on hydrotreating catalysts and FCC catalysts. At the end of the day, we've got to be able to provide the technology and the services and the products that help these refineries make more money.

And that's what we're looking to do. HPC is a lumpy business, and we're in a lumpy spot this year for where we are the incumbent versus others. We don't have as many incumbencies come and open for turnarounds this year as we did last year or as we expect to have in next year.

So, I'm not too worried about it from a long-term standpoint, but this year is going to be challenging for HPC..

Great. Thank you, Luke, for this explanation.

In polyolefins catalysts, how do you view the sustainability of this improvement? Is this based on restocking in some of the polyolefins chains or is there something more lasting in this market?.

I think – this is Michael Wilson. In the polyolefins catalysts, you have a fundamental growth rate that's probably in that 4% to 6% per year. So, my longer-term expectations are with that. Now, we have our downstream proprietary catalysts, the single site catalysts that are probably growing at double-digit rates.

So, that's inherently what's going to drive the business. I think in the near-term, we are seeing stronger demand for products. So, the pricing environment for some of the aluminum alkyls still remains very competitive, particularly in certain regions of the world.

But again, I think with the moves that we made last year to rationalize some capacity, with increasing demand we're seeing that pricing begin to plateau in most regions, so hopefully we also get to a point soon where we have some pricing leverage in that segment, so.

I think as I look across all the performance chemicals and the questions around what's happening from a pricing outlook standpoint, whether its bromine, whether its lithium, whether it's our PCS products, the approach we're really talking is one of operating discipline, right.

We're going to be disciplined in how we manage capacity to be sure that we're getting good value for our products..

Great. Thank you..

Thank you very much indeed for your questions. I would now like to turn the call over to Matt Juneau for the closing remarks..

Thanks, everyone, for listening and for all of your questions. Please feel free to follow-up with further questions with either Zachary [Mestayer] or me. Thanks..

Thank you for joining today's conference, ladies and gentlemen. This concludes the presentation. You may now disconnect. Good day..