SWM
#Sure, <UNK>.
So as we mentioned in the prepared remarks, we continue to see solid growth coming from our water filtration business and we have also seen a stabilization of our business with customers that are aligned with oil, gas, mining activities and we have been pleased with some good growth coming from our Asia operations across a variety of filtration applications.
The point that I want to emphasize is that we continue to prune our mix of industrial sales.
As I mentioned, our focus this year is really to reposition DelStar on higher value applications and expand the profit margins as we are posting year to date.
So on the industrial products question, I think the reason we are pointing to some decline is again our focus on profitability and the fact we benefit from growth on the higher margin filtration businesses around the world is kind of helping us to improve the mix and expand margins that way.
As it relates to the exposure to the power segment, industry, our focus is really today on wind ---+ tailwind, blade manufacturers, there is some I would say timing of order issues that this industry presents and it is fairly concentrated.
However for us, we are seeing steady activity there.
Obviously we believe strongly that there is solid growth on selling those customers midterm.
We had a very tough comparison as it relates to CTS.
The Chinese joint venture, last year second quarter was the strongest quarter of the year and so when we report the profits and decline in volume versus prior period in the second quarter, CTS was the largest driver of that volume decline even though the [French] operation were also down year on year.
And as it relates to CTS, there is typically is some timing of orders and continued lumpiness in one quarter to another and as a reflection of the weakness in 2016 in cigarettes being sold by our customers to the market and probably the result of some reduction in inventory of finished products within the wholesale and retail, [some in] the Chinese market, we expect growth from the quarter but certainly not at the level that we had built in the guidance which was double digit income benefit if you want from the joint ventures versus last year.
So it is a combination of several factors.
I would emphasize the strong performance of our Engineered Paper segments and the drivers being a combination of strong volumes, strong efficiencies within an execution of our plants, within our operations, we caution that we are excited to see the (inaudible) effect of our LIP offering and we believe that will continue in the second half of the year but I am very pleased with the execution of the segment, Engineered Papers overall.
As it relates to AMS, strong execution of Argotec to topline and bottom line and improved margins from DelStar are contributing to the gain in profit margins and that is expected to continue.
Yes, I think you summarized it well.
Obviously currency is out of our control.
I think right now we are seeing a very strong first half as it relates to the volumes.
On the Engineered Papers side as we have said with the unbuild on the LIP question, it is really ---+ we believe we continue to gain incremental share.
The question is how much of that incremental share gain equates at the end of the year which is what you said, the tailwind our business.
And in terms of the challenge right now compared to our plan is essentially the weakness on the Chinese joint venture side which obviously we will continue to report on every quarter.
So just to address the last point, this is not due to I would say increased competition on the recon side in China.
China was the only country of size where there was continued growth in smoking in China and that stopped last year with a small decline.
We believe this decline continues and that is driven by anti-smoking regulations and excise tax increases that the government has put on cigarettes.
However, this is smaller compared to the challenge that we are referencing with the volume decline and part of that is our cigarettes sales and part of that relates to excess inventory in the supply chain through retail of finished goods, finished cigarettes and for CTS particularly, we also are dealing with another line of excess lead supply which actually is probably more pronounced than what we see worldwide.
A lot of that has to do with the fact that the industry was growing strongly and then it started to have an inflection point downward and under maybe the current state regulated system, the adjustments in terms of production outputs for cigarettes and also [crops and now for leaf], have been slow to be made and I think that is the challenge we are seeing this year is a reflection of that.
I hope this addressed 0your question.
Thank you all for attending the call.
We certainly appreciate your interest in SWM.
<UNK>, <UNK> and I will be in our offices today and if you have any further questions, please give us a call.
We certainly look forward to updating you on our progress and results again in November.
Have a nice day.
