Good day, ladies and gentlemen, and welcome to the NewMarket Corporation Conference Call and Webcast to Review Second Quarter 2019 Financial Results. All lines have been placed in a listen-only mode and there will be a question-and-answer session after the presentation.

[Operator Instructions] At this time, it's my pleasure to turn the floor over to Mr. Brian Paliotti. Sir, the floor is yours..

Items of note include CapEx of $12.9 million, funding of our dividend of $19.6 million and using more cash to fund the normal variations in our working capital. We continue to operate with very low leverage with net debt-to-EBITDA below 1.5 times. For 2019, we expect to see capital expenditures in the $60 million to $70 million range.

This is slightly revised downward for 2019 due to the timing of some of our larger capital projects. We have continued to manage our business to satisfy the customer needs, while generating solid operating profit, making decisions we believe will promote the greatest long-term value for our shareholders, customers and employees.

We continue to believe that the fundamentals in our industry as a whole remain unchanged, with the petroleum additives market growing at 1% to 2% annual rate for the foreseeable future. And we continue to believe that we will exceed the growth rate over the long term. Tom, that concludes the planned comments. We'd like to open it up to questions..

[Operator Instructions] We do have a question coming through from Dmitry Silversteyn with Buckingham Research..

Good afternoon, guys. Thanks for taking my call. Wondering a couple of things. First of all, on the -- you mentioned in your press release that foreign exchange had a positive impact on your margins.

Can you elaborate on that? And is it just a translation of where you manufacture versus where you sell, or what was it about the foreign exchange that hurt your top line but helped your margins?.

Yes. It's a translation impact..

Including Singapore at local currency and you sell in the U.S.

and you get higher dollars, or how does it work?.

Those type of impacts across the balance of the manufacturing units in the revenue stream..

Okay.

Can you give us an idea of where your -- of how different your manufacturing footprint versus your sales footprint is, so it's easier for us to monitor this effect going forward?.

Well, Dmitry….

in order words, you're producing 70% in the U.S., but selling 70% abroad or vice versa, that's the type of thing that I'm looking for?.

Yes. Dmitry, I had to have to give you that something more detailed off-line. I mean, we sell all over the world and all types of currencies and we manufacture and buy goods across the world in multitude of currencies. So it's not a simple answer as we manufacture X percent in one region and collect X percent globally in another region....

Okay. I'll really talk to you offline, Brian. Thanks. On the high single-digit volume loss that you're experiencing in petroleum additives, you mentioned that it was a combination of the market slowing down, but also you "firing" some customers at low margin.

If you've had to separate those two events, how would we pocket that high single digit decline in volume?.

Well, I think as we talked about last quarter, there was an impact in the first half of 2018 that we saw carry into the first half of 2019. So when we talked about we divested a small business and there's also places that we no longer sell.

So that was about 3% of the 8%, and then the rest of it was through the effective management of shedding some low margin business and the rest was just market. So that's -- that makes up the entirety of the 8%..

Okay. All right, great. And then just trying to understand the -- what I would consider to be a surprisingly lift in margins. So you lost $30 million or so in the top-line, yet your operating profit grew by $30 million, $10 million of that I think was pricing, if it completely fell through to the bottom line.

So where did the other 20 -- to channel another analyst, how did you guys do that?.

Well, we also have seen reductions in raw materials, but it's not just the procurement of raw materials. As you know, we made an acquisition a few years ago for self-production of some of our own raw materials and we're seeing the benefit of that.

Then we had talked about over the last few years, we will start to see that in that line, as well as we continued to be diligent from a cost perspective and saw benefits from that from more effective and efficient operations. So both of those combined were vast majority of that..

Okay. Got it, Brian. So would you consider this 17%, 18% EBIT level sustainable for the remainder of the year, given that raw materials are probably going to get even -- year-over-year comp at least is going to get better by the end of the year even if the pricing stays here, I'm assuming you're still getting pricing for your product.

So is this the new level that we've got after four quarter of somewhat lower results?.

As you know, Dmitry, we don't give guidance, but we think this business over the long-term operates in the mid- to high-teens..

Okay. Let me ask the question differently.

Was there anything in this quarter that would not be repeatable in terms of the drivers of margin in the second half of the year?.

The answer to that is no..

Okay, all right. Thank you..

[Operator Instructions] And we do have a question coming through from Haruki Toyama with Madison Investment..

Hi, guys. The explanation you gave on the decision not to renew certain low margin business. That's a new explanation, although the volume declines have been going off for a couple of quarters.

Is there something that really ticked up in the latest quarter? Or is it just something that you just call out in previous quarters?.

Hi, this is Teddy. We called it out this quarter just because we didn't want to indicate that it was all related to market changes, that's all..

Okay.

But then that is something that did impact your reported declines in previous quarters as well?.

There is always give and take in the marketplace, so yes..

Okay. And then on the pricing, you're starting to lapse some increases from a year ago.

Should we expect then that the pricing will continue to increase at similar paces or start to really wind down over the next few quarters?.

We expect this business to operate in the mid to high-teens from a margin perspective over the long-term, and we're going to manage it to that..

Thank you..

Thank you..

[Operator Instructions] And Mr. Paliotti, there are no further questions left in the queue at this time..

All right. Thanks, Tom, and thanks everyone for calling in. We'll talk to you next quarter..

Ladies and gentlemen, this does conclude today's teleconference. We appreciate your participation. You may disconnect at this time..