ALB
#We expect it to decline in the second half of the year.
It was stronger for us than what we had previously indicated.
That was really because of the regional mix; much stronger for us in the Middle East than in the Gulf of Mexico.
As you know, we have a strategic advantage with our site in Jordan on the Dead Sea and that enabled us to capture some additional volume in the Middle East.
All the indications we get from our customer base, as well as what we read into from forecasted E&P spending, is that it will be down in the second half of the year.
So the GreenCrest piece is a strategic product for us that we have announced recently that we have discontinued HBCD, and we are focusing on GreenCrest for those applications.
That is still a relatively small part of our portfolio, but growing at a fairly fast clip in 2016.
Yes, the other thing I'd add on that is we make less profit on this product than we did on HBCD just because of the volume and because of the cost position of that product, royalties that have to be paid to the owner and such things like that.
So it's not ---+ from what HBCD was, it is a negative as opposed to a positive.
On your first question, the cadence of the volume for this year is probably determined by the fact that there is, on the one hand, a strong gasoline market, which determines good utilization of the majority of units all over the world.
On the other hand, compared to last year, there were no additions this year or commissioning of any new units.
So in essence, there is a stable number of assets there that's all being run at a good pace, and this is driven by the fact that there is a good gasoline demand all over the world.
On the FCC pricing, you know we have announced an increase earlier in the year and have been clear on the specific reasons for doing so.
That has not changed.
We are working on implementation.
You know that it's going to take some time before we are going to see the result of it.
Probably too premature to express on where things are heading, but we have had some minor successes so far, and we are confident that over a period of two or three years that that price increase will come through.
Hold on one second, <UNK>, he asked about HPC too, so (inaudible) as well.
Okay, on the HPC, you know that the metals are playing a big part in the price setting for those products, so price to a certain extent is determined by the volatility of the metals prices, and for the rest, there is no downward pressure whatsoever on the pricing.
So if I could add to that, that metals is generally a pass-through, so it may impact your margins somewhat, but it won't impact your actual profit that you would make off that when you see these pass through.
On the FCC and HPC catalysts, again, as we've said, as long as we can deliver the technology that helps the refinery make more money, to have more throughput, to be more efficient in their operations, we can get a pass-through.
We can increase prices because we are helping them make more money and that's our goal.
That's the industry's goal.
We want to help refineries make more money, and then we want to get a piece of it.
And that's what we are working hard to do to push through these price increases, and we feel good about where we are with that.
So, <UNK>, sorry to interrupt, but the capital structure and deleverage.
Yes, so I'm happy with our capital structure and its readiness, if you will, for deleveraging.
We were able to borrow for the transaction of Rockwood, as well as refinance the debt that we took over from Rockwood at very favorable rates.
We have in place a term loan now, the remaining term loan that's about $900 million that's fully pre-payable.
It's due in 2019, so we fully expect that that will be the target that we use to go down.
And frankly, we just need to execute on converting these great EBITDA margins into cash and we will be well-placed.
So I think we are in great shape and you will continue to see us delever.
Yes, so if you look at it ---+ I appreciate the question.
First of all, you shouldn't read anything into it.
But if you look at the lithium business, the lithium business has significant growth opportunities before it.
It will be ---+ it will require capital in order for us to achieve the type of growth that the entire industry is going to have, and maintain our leadership position in that.
Bromine is a much more mature business and it requires it to be run differently.
So we are going to run bromine not for growth, but we are going to maximize the cash that we get out of that business to fund lithium.
And I think it takes two different focuses to run those businesses.
One is all about growth and delivering these great opportunities we have.
The other one is ensuring our cost structure is where it needs to be, maintaining what we have, ensuring that we are a solid supplier, achieve growth where possible, but run it for cash.
It requires two different focuses and to us it made the most sense to do that.
In addition, whenever we were speaking with investors after the transaction we were going around, there was a clarity from our major investors that they wanted to see transparency on how Bromine was doing, but mainly how Lithium was performing versus what we said and what we thought it was going to do.
So we thought that, given the two different focuses of the leadership team, as well as the request for the clear transparency from the investors, this made the most sense to operate in that regard, <UNK>.
Yes, as a general rule, <UNK>, that's exactly right.
Okay.
I'm going to let <UNK> take the first one.
So on your question on end-market demand for bromine, the largest market for us is brominated flame retardants, and the largest piece of that is going into electronics.
So far, we are seeing a relatively flattish outlook for BFRs into electronics.
There are some things going up and some things going down.
As you mentioned, server demand is up.
We are expecting, at least from what we've seen in published reports, that to be up 8% in total server demand year-over-year, but offsetting some of that is a low single digit decline in PCs and TVs year-over-year.
So on the balance, it's relatively flat.
When we do look at some of the other indicators, so for example, Bishop & Associates puts out a Global Connector Confidence Index.
That's at about 76 right now and anything north of 50 tends to be a positive sign for electronics.
So we are cautiously optimistic, but so far the indications we get from our customers looks relatively flat to slightly positive.
On your second question, a criteria for us to do another large acquisition.
You know, <UNK>, we need to follow through on this one first.
We've still got to finish the integration.
We've got to capture those synergies that we talked about.
We've got a lot of focus on getting more efficient as a company and we will do that.
We need to pay down our debt.
We made a commitment that we were going to deleverage and we need to do that.
That'll take us probably through the end of 2017, early 2018, that kind of range to pay off the deleverage.
And we need to follow through on the capital plans for Lithium and the growth.
So I don't see another large acquisition in our future, in our near future, in the next 12 to 18 months.
[I wouldn't assume it].
We've got our plate full executing on what we are doing.
And then if you fast-forward out then, we are going to look at the kind of acquisition, if we do one at that time, where we would build on the growth that we've got, build on the great technology positions that we would have.
But it's really premature to talk about that now because the focus is all about finishing this integration, executing against the strategy we have, both with our businesses and the Corporation and deleveraging and cleaning up our balance sheet.
So it's really premature to talk about any potential acquisition.
Yes, <UNK>, that's the end.
When you talk about the $82 million, I'm assuming you are talking about the appraisal shares to ---+ in the [Varitant] settlement.
That was a leftover of the acquisition and the transfer of shares.
Is that correct.
That's the settlement amount, and that normally does not get captured in a free cash flow calculation, so that's actually in the financing section of the cash section.
So that's the settlement.
So that does affect our cash overall, so it does not affect free cash flow, but it does it affect our cash overall.
And obviously included in our ability ---+ slowdown our ability to pay down debt in Q1 gives us some momentum going into Q2 and the rest of the year.
It does not, no.
No, free cash flow and actual free cash flow is really cash from operations.
We do add back pensions and OPEB contributions and subtract CapEx.
So those are the components.
Other financing activities, pluses and minuses that come through that, would not be included.
So first off, we are not going to disclose the details of the agreement until it's actually signed, but we anticipate that the EBITDA margins for the lithium business will still be in the range of that 40% over the life of that agreement.
Again, if the MOU is signed and the way it is, we would start paying royalties in 2017, as we've said.
So we hadn't said what amount that is because the agreement is not finalized, but we would see that, so you would be a little bit of a dip in the margins because you are paying some for royalties, but we still expect to have growth.
And you've got pricing that will continue and we would expect to be able to maintain healthy margins in that 40% range.
In essence, I would just hold onto what we communicated earlier.
The market is still somewhat nervous in terms of the oil price and how they spend their budgets for change-outs or delaying catalyst change-out.
So nothing has changed fundamentally there.
However, we see some higher number of change-outs year-over-year within the context of the lower oil price, and we have been doing good in securing those volumes, and at the same time, the catalysts that we will be using had a better mix versus what we had last year.
Yes, I'm not sure I understand the question.
So today, we have margins in Lithium, if you just look at Lithium alone, that are in plus 40%.
And that's a global average that we have for all of our businesses ---+ battery, non-battery grade ---+ everything is north of 40%.
What will happen ---+ you said 2020, but if the MOU ---+ once the MOU gets signed, then we will pay royalties in 2017.
That will impact the royalties from the carbonate and hydroxide produced out of Chile, not the rest of the world.
It won't have any impact on spodumene.
So we will see some downward pressure on margins because of royalty that should be able to be offset because of the additional volume we'll be running through, as well as price increases.
So to model something now into 2020 and try to extrapolate what the margins are out of Chile versus the margins out of spodumene versus the model out of specialties, you are quite frankly just slicing it too thin.
We will maintain margins in the general area in lithium where we are for the foreseeable future.
Yes, and I am assuming you've just asked about catalyst and lithium, so that's a question.
I think if you look at the most aggressive assumptions in the marketplace, it would be 3% type of penetration of electric vehicles in the annual sales fleet.
There's still going to be the need for hydrocarbons for the gasoline and for the diesel, so we don't see the success of one hurting the other.
We haven't seen that with low oil prices or high oil prices.
It's been a consistent growth for lithium, and last year, FCC had a record year.
So you'd have to see a titanic shift to electric vehicles to 50% plus kind of range to really see a huge negative impact on our catalyst business.
Now particularly as we see the slate around the world, the crude slate, getting heavier and getting more sour, so that will require more catalysts even to process the same amount of crude if it's heavier, if it's more sour.
So we love both of the businesses.
We think for the foreseeable future that both of them can flourish in the environment and one not hurt the other.
As mentioned, bromine prices have stayed higher longer than I think we would have expected coming out of last year and into this year.
On the supply side, there's a few things that have affected pricing on elemental bromine.
Most recently, in February, there were storm tides in the northern coastal regions that damaged pipelines and other infrastructure, and that slowed startup of several units, several operations in China.
So that's led to somewhat of a supply shortage.
What we saw last year and into the beginning of this year was really lower imports.
Imports have resumed back up to 2014 levels, and now we think it's local production.
And in Q1, our estimate has been that roughly 30% of the capacity within China was utilized for elemental bromine, but we see a run rate of increased production, which would perhaps double that later in Q2.
So we think that, on the supply side, it will certainly loosen up.
On the demand side, there were lower inventories of tetrabrom that led to increased demand for bromine.
So on the balance, it looked favorable.
For us personally, the bromine business in China, the elemental bromine business, is not a significant piece of our business, but where we can, we are taking advantage of the increased pricing in China to capture additional margin for Albemarle.
I think if you listen to any of the ---+ <UNK> and I went to a couple of conferences in the first quarter and one of the things that we said there was we have seen a slower pickup than anticipated out of production out of China.
What I'm anxious to do is get through the summer, get through the second quarter, see where we are in June and July and what has happened with the production out of China bromine field, I think we will know by then, and it will give us a much better feel of whether we've got some opportunities going forward in bromine, or whether it's still this steady state that we are looking at today.
So optimistic.
Feel good about what we've done.
But I think as it relates to China specifically, we need a few more months just to make sure that what we are seeing is not a blip as opposed to a trend.
Yes, right now, we are holding the pricing that we had from last year, and as <UNK> said, we will continue to evaluate as we get a few months down the road to see does the pricing hold out in China and are there opportunities for us to capture more, or at a minimum hold what we have.
We see supply/demand imbalance through the midterm, say through the next five years or so, and so given that the market is imbalanced, we think that we should not see a lot of volatility in pricing.
Thank you for your time and your interest in Albemarle.
Again, we feel very good about what we accomplished in the first quarter and look forward to continuing the momentum on through the rest of the year.
