Jack Clem - CEO Charles Herlinger - CFO Diana Downey - VP, IR.

Kevin Hocevar - Northcoast Research Michael Leithead - Barclays John Roberts - UBS Connor Cloetingh - KeyBanc Capital Markets.

[Starts Abruptly].

Thank you, operator. Good morning everyone and welcome to Orion Engineered Carbons’ conference call to discuss first quarter 2018 financial results. I’m Diana Downey, Vice President, Investor Relations. With us today are Jack Clem, Chief Executive Officer; and Charles Herlinger, Chief Financial Officer.

We issued our earnings press release after the market closed yesterday and have posted the slide presentation to the Investor Relations portion of our Web site. We will be referencing this presentation during this call.

Before we begin, I remind you that some of the comments made on today’s call, including our financial guidance, are forward-looking statements. These statements are subject to the risks and uncertainties as described in the company’s filings with the SEC. Actual results may differ materially from those described during the call.

In addition, all forward-looking statements are made as of today, May 18, 2018, and the company does not undertake to update any forward-looking statements based on new circumstances or revised expectations.

Also non-IFRS financial measures discussed during this call are reconciled to the most directly comparable IFRS measures in the table attached to our press release. I will now turn the call over to Jack Clem..

Thank you, Diana. Good morning and thank you for joining us for our first quarter 2018 earnings conference call. Today’s agenda, shown on Slide 3, covers our first quarter performance, key metrics and some comments regarding our two Carbon Black segments.

Additionally, Charles Herlinger will provide detail on our financial results and discuss guidance for the full year of 2018. After that, I’ll offer our view of the current anticipated state of our markets and our actions to capitalize on these. We will then open the lines to take your questions.

I’ll start the call with my overall assessment of Orion's first quarter performance, Slide 4. It was a very good start to the year. We set some ambitious goals for the full year and the first quarter played out according to our plan and consistent with our strategy to continue improving mix from a strengthened production network.

We believe that global economic conditions and industry supply/demand dynamics would become more favorable and this clearly has been the case. We benefitted from the tailwinds of strong demand and tightening supply conditions allowing us to grow volumes in both segments while improving price.

Regarding feedstock, both price and volatility have increased. This was and is especially the case in China. But the team has so far managed to deal well with increasing competition for our feedstock from not only the Carbon Black industry but from other users of the material.

We needed to recover margins in our specialty business eroded by this rise in feedstock costs. The margin squeeze was quite apparent in the information we’ve provided you in our last quarterly call.

We initiated a series of price increases which along with mix improvement and some currency tailwinds gave us a strong sequential improvement in our first quarter. Many of the price increases kicked in as the quarter timed down and others became effective at the beginning of the second quarter.

And while these price increases were still chasing the rising cost of oil, the efforts effectively neutralized the impact of rising energy prices during the quarter. We are initiating additional efforts at this time to continue to frame the impact of the current rise in oil costs.

We were clear last quarter that we intended to rationalize certain grades in order to move capacity to higher value products, some of which have lower throughput but net higher margins. This figure shows the result of this.

We grew in line with the market but saw a very strong improvement in mix, growing specialties while improving margins is our goal and the team delivered. We were also pretty clear in our view of what we expected in rubber. Demand was growing and the competitive environment shifting more to favorable supply/demand dynamics.

We achieved price increases in our contract business for 2018 and in addition saw substantial improvements in mix both year-over-year and sequentially. And even though we had restricted capacity in the U.S. and also in Korea as we revamped that production network, we grew overall volumes by 4%.

There is heavy demand for our feedstock due to robust global Carbon Black production but also from competing industries. This represents the only material headwind we saw in the quarter for this segment.

It is certainly on our watchlist for the remainder of the year and one of the primary reasons we recently announced base price increases for the United States where contracts allow. Even so, we were pleased with the developments we’ve seen in this business segment.

In addition to these operational achievements, we are on track to meet commitments to shareholders regarding our reporting conventions. You can see that we are now reporting in U.S. dollars. Further, we remain on track to convert to U.S. GAAP by year-end. For your convenience, we filed a 6-K denominated in U.S.

dollar with financials for full year 2015 through 2017 and the first quarter of 2017. Turning to Slide 5. Overall volume increased 4% in line with our expectations for specialties but somewhat stronger for rubber.

We had a record quarter reaching an adjusted EBITDA of $76 million, up 21.4% reflecting gains in volume, price and mix as well as a strong tailwind from currency effects. These more than offset the headwind we saw from feedstock.

Looking sequentially, the stronger operational performance is clear since currency movements from the fourth quarter of 2017 to the first quarter of 2018 were not as sharp as seen year-over-year.

Here we see that higher volumes improved pricing and a much stronger mix make up the majority of the 15.3% or $10 million improvement from the last quarter of 2017.

Relative to the first quarter of 2017, net income plus earnings per share grew by 44%, reflecting a 21.4% gain in EBITDA and a reduction in interest expense as a result of successfully re-pricing our debt. And with the increase in net income, the Board approved an increase in our dividend of 10% to $0.20 per share.

Slide 6 shows updated views of our regional production coverage and volume mix. In keeping with our plans this year to swing more capacity to higher margin products, the volume mix of these two segments for the quarter remained about equal to last year. Technical rubber grade volume grew in line with rubber black volume.

The breakdown of volume by producing location, as shown on the right side of the slide, was also fairly comparable between the two periods, although the mix within rubber saw strong improvements. Gross profit per ton rebounded from the last quarter of 2017 as seen in the graph at the bottom of the page.

The move is especially pronounced in specialties but the favorable move in rubber is also reflective of the positive momentum in that segment. Slide 7 gives more detail on specialty. We grew with the market, as discussed previously, the good improvement seen in mix. Volume gains were seen in Europe and the U.S.

while Asia Pacific saw some of the rationalization we discussed earlier. Demand remains solid across markets with particular strength in coatings, polymer for the pipe industry and numerous special applications that have good margins. Our capacity realignment project in Korea is proceeding ahead of schedule.

We have qualified the large majority of grades needed to close the smaller Korean plant. Many of the products are already being produced at the larger facility. Capital expenditures on this project are coming in on budget with only one remaining conversion to complete.

After the end of the first quarter, we closed the sale of the land at the expected price. The major production realignment both strengthens and simplifies our Asia Pacific production network while growing specialty production capacity.

In addition to the capacity gained in Korea, work has begun on the new specialty production line to be installed in Italy. We see this coming online in late 2019.

Specialty revenue grew 22% to $141.7 million due to the combination of pricing, higher feedstock price, pass-throughs, mix and volume gains along with the boost from favorable foreign exchange translation. These factors flowed through to increases in gross profit, gross profit per ton, adjusted EBITDA and adjusted EBITDA per ton.

As a reminder, adjusted EBITDA margin reflects the pass-through of higher feedstock prices as well as some continuing delay in our recovering feedstock costs. For rubber, Slide 8, we see the effects of robust [indiscernible] demand and tighter capacity utilization in our production network.

European volumes were up as demand pulled down inventories and we supplemented Europe with product from outside the region. Utilization rates are higher, especially in Europe and increased in the U.S. Outside of China, we believe global operating rates are in the mid-to-high 80% range.

Gross profit per ton increased 13.6% to $269.2 due to increases in base price, further improvements in mix and favorable currency effects which more than offset negative feedstock impacts. Adjusted EBITDA and adjusted EBITDA per metric ton also grew as shown on the slide. I will now turn the call over to Charles for more detail on our performance..

Thanks, Jack. Good morning, everyone. Turning to Slide 9 on our consolidated first quarter results. Overall volumes increased by 4% or 11,000 metric tons from the prior year’s quarter to 286,100 tons reflecting stronger volumes in both segments particularly within Europe, South Korea and China regions.

Revenues increased by 25.5% to $406.7 million in the quarter compared to $324.1 million last year, primarily due to positive foreign exchange rate translation impacts, the pass through of higher feedstock costs, increased volumes, mix impacts and increases in the base selling prices.

Our overall contribution margin increased strongly by 15.6% in the first quarter to $150.2 million versus $129.9 million in the prior year’s period.

As the waterfall chart on the right-hand side of the slide shows, the increase in contribution margin includes positive effects from foreign exchange rate translation pricing actions as well as volumes and mix offset by some feedstock in energy-related impacts.

Referring to the second waterfall chart on the right-hand side, this contribution margin increase in the quarter was mainly offset by negative foreign currency exchange impacts on our fixed cost. As a result, adjusted EBITDA increased by 21.4% to $76 million.

Our adjusted EBITDA margin of 18.7% declined 60 basis points versus last year’s first quarter, reflecting the pass-through of higher feedstock costs in the revenue base as well as some continuing delay in recovering feedstock costs.

The waterfall chart on the bottom right-hand side of this slide analysis net income development which showed an increase to $24.2 million versus $16.8 million in the prior year’s quarter, as a result mainly of the increase in adjusted EBITDA offset by an increase in depreciation and tax expense. That’s supported by improvement in our financing costs.

Now turning to Slide 10, which shows our cash flow dynamics for this quarter and our key balance sheet metrics as of March 31, 2018. For the first quarter, we generated $27.2 million in cash from operations; thus supporting a strong CapEx investment program.

This quarter’s strong underlying cash generation was nonetheless held back by a $36.2 million increase in the carrying value of our working capital due to the rising feedstock prices. Other uses of cash over the same period include interest payments, required debt repayments and dividends.

As a result, our cash position decreased to $59.7 million at the end of the first quarter of 2018.

The company’s non-current indebtedness as of first quarter end was $699.9 million with net debt at $651.8 million, taking current Term Loan B and local debt into account, which represents a leverage ratio of 2.41x LTM adjusted EBITDA compared to a leverage ratio of 2.43x at December 31, 2017 also on a U.S. dollar basis.

Effective in May 2018, we once again re-priced our euro and dollar Term Loan B debt achieving a further 50 basis point reduction on the dollar tranche margin and 25 basis point reduction on the euro tranche margin, thus once again making our Term Loan B debt among the very most competitively priced of any for our rating category.

Having accomplished this, we then proceeded to swap our dollar denominated debt to euros to better align our group cash flows with our new U.S. dollar reporting currency.

This redenomination of our debt from dollars to euros also has the significant added benefit of achieving an additional interest cost reduction over and above the re-pricing of our debt of $4.7 million per year for the six plus years to maturity of this Term Loan B debt.

Both the re-pricing and this redenomination of our debt are expected to boost earnings per share by some $0.08 annually. Slide 11 presents our revised 2018 guidance and further cash flow detail regarding 2018 base business requirements and capital allocation.

We currently expect adjusted EBITDA for 2018 to be in the range of $280 million and $300 million.

This upward revision of our guidance is mainly attributable to the key assumption that exchange rates will be for the remainder of the 2018 at the level experienced in the first quarter of 2018 and that volume growth will be in line with current GDP expectations.

This guidance range also assumes that we will continue to be able to pass on recent feedstock costs rises efficiently to our customers.

With the performance in the first quarter of 2018 as a backdrop and with the positive expectations we have for the future development of the business, our thoughts with regard to capital allocation, that is to say relating to dividends, our target leverage ratio and our opportunistic buyback program remain essentially unchanged.

In this regard, I would point out that our dividend in the first quarter of 2018 represented a 10% increase over the quarterly dividend a year ago. In terms of other areas of guidance, we expect base capital expenditures to be approximately $100 million, excluding completion of the South Korean capacity transfer and before EPA-related CapEx.

Furthermore, we can confirm that the cash proceeds received in May 2018 amounting to approximately $50 million before considering an associated capital gain tax payment of some $10 million which were derived from the sale of our plant site in Seoul, Korea fully offset the capital expenditures and other costs associated with this consolidation project.

As for the remainder of our guidance metrics, we expect depreciation and amortization to be approximately $100 million with our tax rate expectation for 2018 on pre-tax income between 32% and 33%. As for our stated intent to convert our financial statements from IFRS to U.S. GAAP, we expect currently this to take place by the end of.

While both the switch to U.S. dollar reporting and to U.S. GAAP accounting are important milestones for us to be eligible for inclusion in the relevant U.S. equity indices, there are a number of other criteria to be met including being able to identify a path to efficiently re-domicile our top co [ph] to the U.S., which remains a key unresolved task.

I will now turn the call back to Jack who will wrap up our prepared remarks before we head to Q&A..

Thank you, Charles. Our focus has been to restore margins in specialties eroded by rising costs and to maximize our production network in rubber to take advantage of strong global demand. We implemented this plan in specialties to recapture margin lost to rising feedstock costs.

Our quarterly results show the progress from price moves to limit the impact of further oil increases and substantial improvements in mix. But feedstock prices continue to rise, so we have to double up on this effort to keep ahead of these cost pressures.

I see growth at above market rates going forward but with continued emphasis on devoting capital to higher margin products. In spite of some capacity restrictions in rubber black, in the U.S. and Korea we were able to grow volumes in this favorable demand environment.

Our capital has tightened with some operating improvements and some remaining open spots in the network should allow us to grow with the market for the full year. We have managed all price movements reasonably well, but we can see that with the benefit of strong Carbon Black demand come a challenge of strong demand for quality feedstock.

Today’s global feedstock supply has changed due to crude slates in the U.S., largely shale oil driven and demand for coal-based feedstock from users outside of the Carbon Black industry. Both price and the yield capacity of feedstock have moved in an unfavorable direction and are likely to continue this trajectory.

To counter this, we are continuing our efforts to improve our operational yields and sourcing flexibility while discussing these industry trends with our customers who share our concerns about rising input costs and the impact these moves have on supply.

With global economic conditions steadily strengthening, favorable industry supply/demand dynamics which support pricing and expanded specialty production coming on line, I believe we are on track to meet this year’s guidance and build upon the successful 2018 for the following years. Operator, with that, please open the lines for questions..

Thank you. At this time, we’ll be conducting a question-and-answer session. [Operator Instructions]. Our first question is from Kevin Hocevar with Northcoast Research. Please proceed..

Hi. Good morning, everybody, and nice start to the year..

Hi, Kevin..

Hi, Kevin..

You saw a really nice improvement sequentially in specialty gross profit per ton but oil prices moved high up here since the end of the quarter and I know normally there’s a lag between raws and pricing.

So could you give us any sense for – do you expect to maintain that level of gross profit per ton as we move through the year or do you think that as feedstock cost move higher, could there be little hiccups that you play catch up with price?.

Kevin, of course, feedstock prices have moved higher since that period of time. They’ve marched up pretty much through the full quarter. We’re talking about Brent right now that’s at 80, operating currently in the high 70s, WTI in the low 70s and those are going to drag up our raw materials.

So I do believe that we will see these increased feedstock costs come through. Having said that, I think as I said in our call earlier, we’ve got a lot of initiatives underway right now to recapture that.

A lot of what we saw in the first quarter were attempts to neutralize – essentially neutralize and get in front of these feedstock costs in the first quarter and a lot of those price initiatives that we took on in the first quarter didn’t come all the way in January 1st.

Some of them came in January 1, some came in during the quarter, some came in through the end of the quarter, others came in at the 1st of April, but we’re not through with that.

So I guess the long answer to your question is we’ve managed to neutralize that rise and enjoy a substantial increase in gross profit per ton from not only these price increases but also mix and some currency effects and I would expect the same kind of situation to occur in the second quarter..

Got you, okay, that’s helpful. And you’ve mentioned rising feedstock costs due to just demand in Carbon Black and outside of Carbon Black and it sounds like you’re taking action in North America to raise price June 1st. So wondering what – I know a lot of – on the rubber side, a lot is contract based.

So wondering what actions you can take if feedstock costs – because I know normally it’s a pass-through mechanism but it sounds like maybe you can clarify if feedstock costs are going more than is being passed through in that raw material escalator baked into the contract? And with these actions like they’re taking in North America, can those take effect midyear as opposed to waiting until contracts reset in the first of the year?.

Yes, you’re correct. Most of the volume that we have in the U.S. and Europe are under contract. There are some spot businesses and there are some businesses that shift around which allow spot pricing opportunities. And when those occur, that’s the kind of pricing that we will put on that.

In fact, we’ve already done that in some circumstances when we were able to do it. Moving quicker than the contracts allow are probably not in the cards right now. But where we don’t have these volumes under contract totally or under these volumes under contract totally, these are kind of pricings that we will deploy.

A lot of the business in the Asia Pacific remains in spot, particularly in China. And so there where we have chased up and down, in fact some of these coal-based materials will put these price increases in place when we need to..

Got you. And then last question, how should we think of the contribution from – with oil; Brent you said up at $80 a barrel roughly. What type of contribution incrementally versus last year can you get from cogeneration? Because I know you typically make more money the higher energy prices are.

So what type of incremental contributions can we get from that?.

Hi, Kevin. It’s Charles. We don’t publish separately as you know cogeneration data, but it’s a substantial effect, meaning it's low-single digit million. But it’s worth commenting that that’s a benefit of higher feedstock prices.

Not all our cogeneration is linked directly to the price of energy but some of it is and it is certainly worth taking into account in this type of environment..

Okay. Thank you very much..

Our next question is from Mike Leithead with Barclays. Please proceed..

Good morning, guys..

Good morning..

I just was wondering, can you just talk through the sequential changes in margins for both businesses? Obviously we have 4Q numbers in euros but I’m just not sure if FX kind of distorts that comparison now to U.S.

dollars?.

Actually the best page to refer to for that we think, Mike, is Page 6 of the presentation where we summarize both the specialty and rubber. The adjusted EBITDA margins and also the gross profit per ton which is for reasons we have discussed many times we think is also very meaningful.

And basically, but just to go directly to your question, the development in specialty margins and in rubber is a function of obviously the profitability but also the pass-through of higher feedstock costs. So what that means is, is that in the case of rubber, you would have seen – and take these as rough numbers.

You would have seen another percentage point at least of margin if the revenue denominator hadn’t been impacted by higher – the pass through of higher feedstock costs. On the specialty side, the amount is smaller and the specialty development shows that we are making progress on the pass on of higher feedstock costs.

But as Jack referred to earlier in the Q&A, some of what we’ve already got in the bag will manifest itself in Q2 and beyond and we’ll keep chasing it. And we expect that to be reflected then in the development of the specialty EBITDA margin which is also impacted by the denominator increasing i.e.

revenue because of the pass through of higher feedstock costs. Long story short, that’s why we tend internally to look at gross profit per ton because the adjusted EBITDA margin or the EBITDA margin has these effects in it, but clearly it’s a metric people look to..

All right, that’s helpful. And then if I look at your Slide 15, you talk about rising demand and Carbon Black investments not keeping pace with that.

Can you just broadly talk about maybe where we are you think for Carbon Black relative to reinvestment economics and maybe how far we are away from that becoming attractive? I guess I’m trying to get in terms of what the potential pricing cycle could be over the next couple of years here?.

I think it – of course, it depends on the grade, it depends on the segment, it depends on the region. As we’ve pointed out, we believe we’re already there with our specialty business which is why we’re investing in this new line in Italy for specialty production. We feel very confident about that.

But I suspect that your question goes more to the notion of rubber black. And there where you’re seeing high utilization rates, there have been some announcements of capacity increases and primarily have been in Asia Pacific if not exclusively in Asia Pacific. Some we question whether or not they’ll actually go forward, some probably will go forward.

We know right now India is very, very tight. There is high demand in India and prices have moved up pretty sharply in India.

So given the cost of construction there and the demand that exists in India, I would suspect that they are probably at reinvestment rates now or should be in the next contract cycle depending on how their contract circumstances were.

Prices in China are fairly high right now and China still is kind of an odd market frankly with a lot of the smaller weaker players running at low capacity, the stronger more Western players with strong environmental controls and such are running at higher capacities.

And while the process there are very high, the feedstock remain very volatile [indiscernible] numbers run up and down quite sharply. So I would guess that if we saw some stabilization first quarter, maybe even third, fourth quarter of last year, you could be on the verge of increasing – reinvestment rate there.

But again I think it would have to be targeted at certain areas of the market, not general commodity rubber. I don’t think that we’re there yet. And moving back into maybe the more pertinent areas for our business, you’re talking about the United States, for instance, South America, we don’t see reinvestment rates currently.

Will we get there? It’s a potential. We are certainly expecting to move prices higher as we move into 2019 given the supply/demand dynamics right now. But clearly – United States will continue to be constrained because of this requirement associated with meeting the compliance requirements of EPA.

There’s substantial investments that will have to occur, something pushing $0.5 billion worth of investments on the Carbon Black industry has to occur. That’s a large – a really tall hill for the industry to climb while considering reinvestment rates in the business right now. So that remains kind of an open question in my mind.

I don’t see it in South America currently right now. And I could see it potentially in Europe. But again, I would target that on very special products and grades, not the general commodity ASTM grades..

That was really helpful. Thanks..

Our next question is from John Roberts with UBS. Please proceed..

Thank you.

Charles, on the re-domicile into the U.S., I assume your domicile in Luxembourg for tax reasons or at least partly for tax reasons?.

No. Actually not. I know it sounds perverse that we’re not, John. I understand the question, but not. Our tax rate 32%, 33% fully reflects the fact that we pay taxes really in three locations; Germany, the U.S. and Korea mainly. Obviously elsewhere in the world but those are the three main drains.

And our tax as you would probably be the first to point out is not particularly low. So Luxembourg is an accident of history. It has nothing to do with tax optimization. And so the shift of the top co to the U.S., for example, would have no per se no impact on our tax rate.

My comment on that was directed much more to just finding an efficient tax route to do that re-domiciling bearing in mind some of the Regs around tax reform in the U.S. haven’t yet been fully finalized..

And no one-time tax item that would be significant? I don’t know how to – might not be zero but --.

Yes..

Okay. And then you announced you’re going forward with some of the pollution control measures right now.

Could you update us on the reimbursement scheme from Evonik and does it only affect the cash flow statement or will anything go through the income statement as that comes back to you?.

Yes, I’ll comment on the entire EPA situation first and then Charles can comment on how this whole thing works its way through our financials. The consent decrees were agreed upon at the end of last year for all the Carbon Black companies as we understand it, those consent decrees were ready to be signed, in fact probably signed by the suppliers.

We signed ours and awaited the signatures of a variety of different authorities, including some states and so forth to be finally confirmed.

When the tax law changed at the beginning of this year, there was a requirement to redo some of the language in those documents in order to reflect some of the new taxing situations associated with compliance equipment. It’s taken the Department of Justice, EPA quite a long time actually to work their way through that language.

They have done that now as we understand it. And we’re now waiting on the signatures of the government to finalize this. Once those signatures are in hand and we understand it’s currently just a matter of process, not some sort of negotiating ploy or anything like that, then they have to be taken to a court. They go on a court docket.

And depending on the judge’s docket and I guess ambition to work on these sort of things will ultimately be confirmed. So having said that, we don’t really have confirmed consent decrees at this point in time but we believe that they will be in the form that we’ve announced earlier. It’s just a matter of this process.

So we’re a little bit reluctant to go great guns and spending a lot of money until we have that finalized, but we expect that to occur shortly. The situation with respect to compensation, there’s no change in our attitude towards that.

We have had very extensive disclosures with respect to what we have in terms of indemnity and we have every reason to believe at this point in time that there will be the recovery that we’ve talked about in the past. And how that recovery flows its way into the books I think I would differ to Charles on that..

Debt, cash, credit income, we’ll break it out separately..

Okay. So there will be income statement items but you’ll break them out..

Absolutely, indeed we will..

And then maybe one last one.

Your Board of Directors obviously is relatively small, so how do you see that playing out over the – and if I guess between now and I guess it will be to next year’s shareholder meeting that you might add additional people?.

Yes, our Chairman and literally the nominating committee and other members of the board right now are currently working on reorganizing and reconstituting the board. So there’s some recruitment efforts going on right there on the board. It will be built up. It’s just taking a little bit of time to get there..

Okay. Thank you..

Our next question is from Laurence Alexander with Jefferies. Please proceed. Laurence, please check and see if your line is muted? Laurence, we’re unable to hear you. Okay. [Operator Instructions]. Our next question will be from Connor Cloetingh with KeyBanc Capital Markets. Please proceed..

Hi. Good morning, everyone..

Hi, Connor..

Good morning..

So I was just wondering one of your competitors was talking about given the tight market dynamics and rubber blacks that customers are already reaching out for 2019 to secure supply, and is that something you’re seeing and would that be something that will make you consider taking that line back online that you took off in Orange, Texas last year or what are you thinking about just the market dynamics right now?.

Yes, it’s always difficult, a little bit tricky to talk about these contract negotiations but I think I can say with confidence that we have been approached earlier – way earlier than normal regarding supply.

I think there is a concern about securing supply in the United States really but also Europe to some extent because Europe is actually tighter than the U.S. right now. But I think the anticipation is you’re going to see the tightness existing in Europe that’s soon existing in the United States.

But we have been approached by that and we would consider the capacity provided we get sufficient income from that capacity..

Okay, great. Thank you. And then I know you had mentioned that you’re importing supply into Europe.

Is that something you normally do and if not, where did that come from?.

We don’t really like to do it. It’s difficult to move this material around. We are fortunate in a way that we’ve got the kind of supply network that we can do that in a pitch. But I would call it more one-off, a situation where you have customer relationships. They know your product.

Your qualified, approved certain places so they know it very well and there’s the confidence and the ability to move it around. And we can do that. But it’s certainly not the preferred way to supply..

Okay, great. And then just one last one on your volume growth expectations this year. I think you mentioned you wanted to scroll [ph] volumes around GDP. I was wondering with the new specialty capacity in Korea and that business has seemed to grow kind of above GDP rate this year.

Are you still thinking it can do that, or --?.

Yes, I think we can..

Okay. Thank you..

I think we’ve got the people and the plans in place to do exactly that.

And as we said before, our focus right now is growing that volume at the rates that we believe are appropriate for the world markets, a little bit greater than GDP we believe but we want to devote more and more of this capacity that we brought on line because the capacity that we’re bringing on line in Italy, the capacity that we brought on line in Korea is all high end and those are high-end products, which frankly don’t have the level of throughput as some of the other products that we have but they have higher margins and essentially you can think about margin per hour being maximized with high margin but lower capacity materials and that’s the focus of our team currently..

All right, great. Thank you very much..

[Operator Instructions]. There are no more questions at this time. I would like to turn the conference back over to management for closing remarks..

Thanks. Again, we always appreciate your attention. At this point in time, we like to talk about the business – we particularly like to talk about the business when we got the upswing in the first quarter like we got right now. As I said in my prepared remarks and so forth, I think we’re off to a very good start.

We had a nice 2017 and built a good foundation. 2018’s moving ahead. We understand where we have the challenges that we need to deal with out there and I think first quarter performance has shown we’ve been able to get on top of those. I’m proud to say that we’re able to raise our dividend, also our guidance midpoint up a bit, all good news for us.

So we appreciate the attention and certainly look forward to talking to you at the next quarterly conference call. Thank you very much for your attention..

Thank you..

Thank you. This concludes today’s conference. You may disconnect your lines at this time and thank you for your participation..