Albemarle Corporation (ALB) Q4 2007 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Q4 2007 Albemarle Corporate Earnings Conference Call. My name is Lisa and I'll be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. [Operator Instructions] I would now like to turn the presentation over to your host for today's call, Ms. Sandra Rodriguez, Director of Investor Relations. Please proceed.

Thank you, Lisa. Good morning everyone and thank you for joining us today for a review of Albemarle's fourth quarter results which were released after the close of the market yesterday. Our press release contains preliminary results for the quarter, and this information is subject to further review by the company and our auditors as part of our year-end audit process. Please note that we have posted supplemental sales information as well as reconciliations for net debt and EBITDA on our website under the Investor Information section at www.albemarle.com. I'd also like to caution that the remarks today contain forward-looking statements. Factors that could cause results to differ from expectations are listed in our annual report on Form 10-K. Participating with me on the call this morning are Mark Rohr, President and CEO; John Steitz, Executive Vice President and COO; and Rich Diemer, Senior Vice President and CFO. Now I'd like to turn the call over to Mark.

Thanks, Sandra, and good morning to everyone. We are pleased to have the opportunity to share our fourth quarter and year-end results today, and we look forward to answering your questions after our brief remarks. Before I go into the results, I'll mention a few highlights from the quarter. First, our new hydroprocessing catalyst plant in Bayport, Texas is up and running and producing catalysts for first quarter delivery. We're very proud of this new state-of-the-art facility which will add 10,000 metric tons of capacity, which is needed to satisfy demand this year and next. Since we last spoke, we also announced a major expansion of our Polyolefin Catalyst production facility in Baton Rouge, which is expected to be operational in the fourth quarter of this year. The expansion positions Albemarle with the capacity to meet strong catalyst growth demands from the world's leading high-performance polyolefin producers. We do expect sales from this unit to begin late in this year. Innovation, environmental stewardship and social responsibility are obligations that our company prides itself on. One great example of our commitment to these principles of sustainability is our new halogen-free flame retardant. You may have seen the recent press release that introduces our ANTIBLAZE product used in flexible foams and furniture and cars. The product has been produced in a unique way that makes it non-persistent and non-bioaccumulative by EPA criteria. We're very pleased to offer this extremely effective flame retardant as an ideal solution for foam makers. This product also ushers in a new era of development at Albemarle with products designed specifically to eliminate risk and legacy concern. We also have a few organizational announcements to share with you. George Newbill, Executive Vice President of Manufacturing Operations, has announced his intention to retire in the first quarter of this year. George has been a significant contributor to our success over the last 40 years. We will all miss George and his unwavering commitment to Albemarle and to all of us. Luke Kissam will succeed George Newbill and assume management responsibility for Albemarle's global manufacturing operations. Luke brings years of strategic business management experience in the manufacturing, chemical and agricultural industries to this new role. He joined Albemarle in September 2003. Prior to joining Albemarle, Luke served in strategic roles with Merisant, a manufacturer and marketer of sweeteners and consumer products, and before that with Monsanto Company, a leading provider of agricultural products and solutions. We're also announcing the promotion of John Kasbaum to Division Vice President, Alternative Fuels Technology. John was deeply involved in forming our partnership with UOP. The tremendous success we're having with this venture and John's extensive industry knowledge position him well to lead Albemarle's alternative fuels technology efforts into the future. Now moving to the company results. I'm pleased to announce sales of $599 million for the fourth quarter, up 2.5% year-over-year and 2.6% sequentially, yielding net income for the quarter of $58.6 million or $0.60 per share. For the year, net income increased 16% excluding special items, which translate into earnings of $2.40 per share for the year. Operating profits and segment income margins increased by more than 200 basis points year-over-year. Following a year of transformation, our restructured Fine Chemicals segment realized an incredible 40% year-over-year improvement in annual operating profit, providing segment income margins excluding special items of 16.2% compared to 10.2% in 2006. Both Fine Chemistry Services and Performance Chemicals delivered impressive year-over-year results. Fourth quarter results were slightly weaker than expected on product mix and softness in demand for clear brine fluids, yielding fourth quarter segment income margin of 13.5%, which is relatively flat compared to the fourth quarter of 2006. We expect organic growth in Performance Chemicals and new opportunities in Fine Chemistry Services to drive further year-over-year improvements in this business. Our Polymer Additives segment saw modest top line year-over-year and sequential gains in the quarter. Most noteworthy is the turnaround in our tetrabrom business that had not seen significant... they have seen significant weakness through the first three quarters of the year. December was our strongest revenue month of the year for tetrabrom. We are encouraged by the strengthening in recent months and expect to see continued growth as we head into 2008. Our Catalysts segment finished a record year in both sales and segment income. December was also a record revenue month, driving double-digit growth in the fourth quarter revenues to $235 million and segment income to $42 million. The new hydroprocessing plant is producing high quality product to meet expected demand growth this year and through 2009. We're already seeing strong demand for refinery catalysts that could not be filled were it not for this new unit. The business is showing good progress in FCC catalyst pricing strategy as well and we expect to see the benefits of our latest increase realized throughout 2008. Now let me briefly comment on input costs. Raw materials and energy costs increased a staggering $23.8 million over fourth quarter 2006. Global energy, raw materials and material... and metals pricing have reached new plateaus relative to historic levels. China is having significant and unpredictable impacts on moly and rare earths, alumina, and BPA pricing. As a point of reference, in the past 12 months, moly has increased from $26 a pound to $32; cobalt from $17 to $30; and both continue to rise as we speak. Tin is up 5.8 million and alumina up 2.3 million quarter-over-quarter. Our team faced over $77 million of raw material and energy inflation in 2007. That's the equivalent of $0.60 of earnings headwinds year-over-year, and still managed to increase our earnings 16%. Looking ahead, we expect similar levels of inflation in 2008 and will obviously continue with pricing and cost reduction efforts to help offset this margin pressure. You may have also noted we increased our R&D spending by approximately 35% in 2007 and have forecasted another double-digit increase for 2008. Our capable research teams continue to build intellectual property and bring to market the most technologically advanced products that our customers expect. Over $500 million or 25% of our 2007 sales are from new products developed within the past five years. As our customers and the world demand more environmentally safe products, our focus is to continue developing and manufacturing products that are environmentally sound and support a sustainable business model. Now let me close with a few comments on the outlook for the year. In 2007, we were challenged by raw material inflation and sluggish demand in some of the end markets we serve. Each of our businesses had to work harder than ever before to deliver solid year-over-year earnings growth. While doing so, they also improved our business foundation in a way that will help us repeat our success in 2008. In Polymer Additives, I'm optimistic we have turned the corner with brominated flame retardants, and I expect modest volume growth through 2008 and also expect pricing traction needed to offset the raw material inflation we're facing, except for alumina, where 20 plus million dollars of inflation will challenge our mineral FRs early in the year. Fine Chemicals is on track to drive volume and pricing in our bromine franchise and we have a number of exciting new opportunities in our Fine Chemistry Services business. The breadth of our refinery catalyst portfolio, our world-leading organometallic technology and our technical services capability positions our Catalysts segment to achieve another year of record setting growth. As our businesses hone their strategies for sustainable growth, we're focusing on the areas that drive our success: value delivery, manufacturing discipline, leading technology and customer service. We see tremendous growth opportunities in Asia and in the Middle East; and when I combine those opportunities with our new product introductions that are planned and base business growth that we expect, 2008 will end with Albemarle delivering solid revenue and earnings growth. Now with that, let me turn it over to John Steitz.

Thanks Mark. I will begin with our Fine Chemicals segment. Net sales for the quarter totaled $131 million with segment income of just under $18 million. While our Performance Chemicals business delivered strong sales this quarter, clear brines, as mentioned earlier, demand into the Gulf of Mexico was down in the quarter. This negatively impacted Fine Chemicals' profit and margins. Our clear brines performance is consistent with reports from oil service providers and the decline in overall rig count in the Gulf of Mexico. For the year, our completion fluids profit performance increased more than 20% year-over-year and now we are seeing improved volumes into 2008. Our Fine Chemistry Services and intermediates business continues to deliver solid results on very strong margins. Just as a reminder, the Tamiflu intermediates business came in the second half of 2006, and therefore results in negative revenue comparisons to the third and fourth quarters of this year. Absent the Tamiflu business in 2007, our fourth quarter segment income in Fine Chemistry Services showed a marginal increase from 2006 and over 20% improvement from the third quarter of 2007. On our total year comparison, the Fine Chemistry Services segment income improved 30% over 2006, clearly a reflection of the team's efforts to drive the business with higher margin pharmaceutical and agricultural intermediate products. Among the promising pharmaceuticals we're developing are ones that could help reduce harmful cholesterol levels and another that suppresses the onset of Alzheimer's disease. Moving on to the Polymer Additives segment, Polymer Additives' net sales for the fourth quarter totaled $234 million, up 2% from the fourth quarter of 2006 and up slightly year-over-year. Polymers' fourth quarter segment income is $30.3 million, up almost $1 million sequentially. This is the first sequential improvement we have seen in a year. Strong performance in our tetrabrom and stabilizers and curatives business was offset by increased raw material costs. Our brominated flame retardants demonstrated the start of a turnaround in the fourth quarter with sales up just over 8% sequentially, but still lagging by approximately the same percentage from the fourth quarter of 2006. Tetrabrom sales increased at an encouraging double-digit rate sequentially. However, in the fourth quarter, the market declined for a number of our highly specialized products, primarily into the construction and automotive industries. This affected mix and reduced segment profitability. We see this segment improving through the course of 2008. Our stabilizers and curatives business showed solid performance this quarter with pricing improvements contributing to increased segment income. Now moving on to Catalysts, Catalysts' net sales for the third quarter totaled $235 million, an increase of 22% over the fourth quarter of 2006 and 8% over last quarter. Segment income for the quarter was $42 million compared to $30 million in the fourth quarter of last year and $41 million last quarter. 2007 was a record breaking year in several areas. To name a few, Polyolefin Catalysts delivered double-digit profit growth from the fourth quarter of 2006, closing the year with record setting profits in this business. HPC refinery catalysts saw an all-time high sales month in December as well as total year sales and FCC refinery catalysts set a record in segment income profit for the second consecutive quarter. Pricing momentum, volume growth and execution were the key drivers to closing out a record sales and profit year for the Catalysts segment and our team will stay focused on stepping up innovation to sustain our technological lead and deliver superior products and service to our customers. So with that, let me turn it over to Rich Diemer for comments on the financial results.

Thanks, John, and good morning to all. The items I would like to cover on today's call include taxes for the quarter, the year, and the year ahead; corporate and other expenses; cash flow; and our year-end balance sheet and financial position. Let's start with taxes. Our effective tax rate for the quarter was 17.1%, resulting in a full year effective tax rate of 19.8%. Both the quarter and full year benefit from a favorable mix of earnings from tax-free or lower rate tax jurisdictions, principally JBC, our Jordanian-based bromine venture and the Belgian trading and finance company, which is now the hub for our European operations. In 2008, we will continue to focus on tax efficiency but feel that incremental income is more likely to be earned in locations that will push our tax rate higher. Our guidance for full year 2008 is a range of 23.5 to 24.5% for our effective tax rate. Unallocated corporate expenses were $12.3 million in the quarter, down $2.4 million from the prior year end and consistent with the level we discussed at the end of last quarter. Our outlook for next year is for corporate expenses of approximately $55 million for the year. Our EBITDA this quarter was $107 million. Full year EBITDA was $435 million, up 11% year-over-year and we anticipate 2008 EBITDA to press the $500 million level, up 15%. We ended the quarter with cash and equivalents of $131 million. CapEx for the quarter was $27 million and $99 million for the full year. We are planning for 2008 CapEx of $90 million. Depreciation and amortization was $27 million in the quarter and $107 million for the year. We are projecting next year depreciation and amortization of $105 million to $110 million. In Q4, we repurchased 1.1 million shares of our stock. For the year, we repurchased and retired approximately 2.4 million shares for $101 million, an average of $42.71 a share. We expect to continue to deploy a portion of our cash and cash flow to share repurchases and we have 4.3 million shares authorized under our current repurchase program. Between repurchase activity and our dividend, we returned over $140 million to our shareholders in 2007, more than a 120% increase over 2006. At year end, we have consolidated debt of $724 million, including $70 million of debt from JBC, our Jordanian venture and Jinhai, our Chinese antioxidant ventures. $396 million of our debt is fixed rate and $328 million is floating rate, a 55:45 split. Our floating debt interest rate is 5.35 at year end. The weighted average interest rate for Q4 was 5.3%. Net of 131 million cash on hand and excluding $43 million of non-guaranteed JBC and Jinhai debt, our net debt is $550 million. Our year-end ratios are all improved by about 500 basis points year-over-year. Debt to cap is 34.7% and net debt to cap is 30%. And with that, I'll hand it back over to Sandra.

Thanks Rich. Okay, we would like to open it up for your questions now. Question And Answer

Thank you. [Operator Instructions] Our first question comes from Chris Shaw from EDS [ph]. Please proceed.

Yes, good morning. Good quarter. Thanks guys. I was... can you just talk briefly just about the strength in tetrabrom and what you are seeing, and what has changed since I guess you guys last talked? I think actually last time you talked, I think you were seeing some strength at the beginning of the quarter. But could you just talk about that a little bit?

Yes, I would be happy to, Chris. This is John Steitz. You know, through the course of 2006, we really saw very strong volumes, in particular in the fourth quarter of last year, and that defied what some of the indicators were, like the booked and billed report.

Right.

So we thought through the course of '06 there was really a buildup in the supply chain of inventory, which we have been really correcting for, particularly in the third quarter of '07. We had our biggest decline then, and we were hoping for sequential improvement in tetrabrom, and that's what we saw. And basically, I think a much more realistic supply chain inventory situation is out there. So we feel pretty good about continuing to improve volumes through the course of '08 as well.

What's the latest book-to-bill look like?

I haven't seen the one for December, but I know October and November were slightly above 1.0, which is a reasonable indicator.

Right. Curiously, is there... I forgot. Did Tamiflu... do the benefits of Tamiflu extend into 2007? Or was it just the second half of '06?

No, it was all the third and fourth quarter, particularly the fourth quarter of '06. And really what happened there was our customer wanted us to include their intermediates in the pricing of the product. So it wasn't so much a... it really diluted the margin at that time.

Okay. And then finally...

It accelerated sales artificially is what I am saying.

And then finally, in Catalysts, I was just looking at your pricing trends in Catalysts, and obviously there was a big spike up in the fourth quarter. Is that just sort of reflecting the mix shift into more HPCs and is that signaling the beginning of the changeouts?

Yes, let me comment. Our HPC volumes sequentially were pretty flat. So the inflation there more reflects the increase in moly prices. So that's kind of the HPC story. The pure pricing play was more in FCC, where we achieved in the quarter an average price over the course of the quarter of $2700 a ton. So we're pleased with that. As you know, we've been leading that effort, and we've announced this additional increase for 2008 that we're working on right now.

Great, thanks a lot.

You're welcome.

Thanks Chris.

Our next question comes from Laurence Alexander from Jefferies. Please proceed. Laurence Alexander - Jefferies & Co.: Good morning.

Good morning Laurence.

Hi Laurence. Laurence Alexander - Jefferies & Co.: I guess first question is in Fine Chemicals, can you walk us through how much the impact was from the clear brine fluids, both on the volumes and on the margin? Just a little bit more detail there.

Yes, I would be happy to Laurence. This is John again. So if you look at the fourth quarter, year-on-year, the profit, just in absolute dollar values, if you can bear with me on that, the profit declined year-over-year about $5 million. Raw materials and energy year-over-year impacted that business by about $5 million as well. The clear brines was about year-over-year and sequentially both about $3 million impact. So it's a combination of both. We also year-over-year had some weakness in our ag intermediates business, and that's more just a reflection of order pattern. It looks like it's picking up in the first quarter. Sequentially, the profit was down $3 million in Fine Chemicals; and raw materials and energy were almost that entire amount, it was about $3 million as well. You know, primarily natural gas increases sequentially. And we had a range of fairly dramatic increases in olefins; that is ethylene based. Caustic, we saw really ramp up in the quarter and we began to see some ATH inflation that infected both Fine Chemicals and polymers at that time. Also, the sequential, as I mentioned earlier, impact on clear brines was about $3 million, so that was both sequentially and year-over-year. Laurence Alexander - Jefferies & Co.: And when you look at the pipeline for the pharmaceutical intermediates, I mean they are typically fairly lumpy. Do you think there is... that's going to be a swing factor in your favor to offset... to help offset the raw material pressure in '08, or how should we think about likely margin pressure in '08?

Yes, we feel pretty good about the pipeline in our Fine Chemistry businesses. And we're hopeful, just like in our Fine Chemistry Services sector in the fourth quarter, we more than offset that loss of the Tamiflu business on a profit basis. It was just on the revenue that... because of that... the artificial inflation, because we included the intermediates from our customer in that sale. But we feel real good about the pipeline, yes. Laurence Alexander - Jefferies & Co.: And then in the Catalysts...

So the real question is where are margins going in Fine Chemicals? And we hope to exceed the '07 levels in '08 and be north of 16% for that business in '08 and we feel good about that. Laurence Alexander - Jefferies & Co.: And then in Catalysts, can you walk through what we're seeing in terms of the pricing trends in polyolefin catalysts, and how much you're expanding capacity and when that will be on stream?

Yes, there is two segments of our polyolefin catalysts business. There is our organometallic business and then there is pure new catalyst. And the new catalysts are really priced based on that given molecule, and so there is a big mix effect there in that business. But our organometallic product line, we've seen very solid year-over-year increases in terms of pricing, the order of magnitude like 40%. And... but that business is also, as we go into '08, with tin and alumina and ethylene all impact the cost structure there. So we're evaluating a pricing strategy right now in our organometallic business. Laurence Alexander - Jefferies & Co.: And then, I guess, just lastly on the HPC new capacity that you're bringing on stream, what's the mix in that? I mean should we see a favorable margin impact as that ramps up, or is that going to be a drag on margins?

Laurence, this is Mark. When we look at the mix of that, it's favorable. So we expect that that unit is going to boost our margins year-over-year. Laurence Alexander - Jefferies & Co.: Okay. Thank you.

Thank you, Laurence.

Our next question comes from Kevin McCarthy from Banc of America Securities. Please proceed.

Hi Kevin.

Yes, good morning.

Good morning.

Can you comment a little bit on what you're seeing on the M&A front in terms of potential for bolt-on acquisitions? And more broadly, how would you characterize propensity to redeploy your free cash flow, buy acquisitions as opposed to increased or accelerated repurchase activity given the volatility in the stock market recently?

Kevin, we always remain very active in the M&A market, as you know. There is a lot of activity out there. We've looked recently at a couple of businesses that couldn't quite meet our expectations internally in terms of the earnings requirement post an acquisition. We just didn't have, we felt, a strong enough story to justify even the bolt-on in that scenario. But I'm cautiously optimistic as I look out there that in the unsettling times that we see today, there are going to be continued properties that come available. And we have kind of a unique foundation, and we should see opportunities to do some bolt-ons as this year progresses and we get into next year. We've been pretty Solomon-like with our money over the last several years and spread it around a lot of different areas. But of course, we did step up a lot of our equity repurchase last year. I don't want to forecast what we'll do this year, but in our opinion the stock is way undervalued today. And so we're going to look at free cash flow and if we don't need it to do acquisitions, we'll be looking heavily at equity buyback.

Okay. We'll stay tuned there. A question on Fine Chemicals for John. If I look at the volume number of negative 24%, how much of that would you attribute to Tamiflu? And then a related question, I heard you say that you thought margins could improve in '08 versus '07. What about volumes? What's your outlook given the project pipeline that you have in Fine Chemistry Services et cetera?

You bet, Kevin. The... I mean, majority, I think 80% of the volume impact was the Tamiflu. So really that's a mix issue because the volume there was very, very small. I mean, it was probably less than 2% of the total Fine Chemicals volume was Tamiflu. So it was really a mix effect there. Then you have year-over-year, the other volume decline we saw was in that clear brines business. So that declined year-over-year about 7, 8%. So the other... the two... the real pure volume impact was on clear brines. We see... that was really just our clear brines business in the completion area. It's not linear, and we're seeing a good start to '08 in that business. We're also seeing some new applications with more horizontal drilling occurring. We are seeing more frac opportunities in that business. So overall for '08, the fundamentals are very strong. And we see volume growth in '08 for our Fine Chemicals business both in our performance chemicals sector and the fine chemistry services area. So we feel that the business from a sales perspective has absolutely bottomed out and revenue growth through the course of '08 will be strong at slightly higher segment margins.

Okay, great. And then finally, where is your bromine operating rate these days? And how would you expect that to trend the next couple quarters?

We're still probably in the 75% range on bromine operating rates, primarily year-over-year in '07, primarily... primary driver is brominated flame retardants. So we'll have to see how the economy goes, but we have got room, certainly room to increase operating rates there. But that's really not the way we're running the business with the margin improvement year-over-year. We will match our bromine operating rates to what is needed in the marketplace.

Understood. Thank you very much.

Thank you, Kevin.

Thanks Kevin.

Our next question comes from the line of David Delentutor [ph] from Deutsche Bank. Please proceed.

Hi David.

Hi, this is James Sheehan sitting in for David this morning.

Okay, great, James.

Hi. Yes, just on hydroprocessing catalysts, do you see the refill cycles for 2008 and 2009 looking stronger now than they did three months ago? And do you still expect about 10 to 12% volume growth in 2008?

Yes, James, we are... I think as we started last year, we were talking about the '08-'09 cycle and we projected... as we got into last year, we projected a 50% operating rate for the new unit that was... that we were bringing on stream. And we certainly are seeing that materialize probably, and then some. We should have, as we look at it, a strong early part of the year, weakness in the middle of the year and strong second half of the year. So I mean, the thing does kind of roll through it a little bit. But I think our volume year-over-year is going to be up north of 10% and then maybe press 20% if everything comes in the way we think it should. As we look at '09, again, some of the indications are early, but we've won a number of the new opportunities that are out there, and so our confidence level to repeat that performance in 2009 is starting to grow. And so we feel pretty good about our ability to keep driving Catalysts performance and record setting trends that are there.

Okay. So on the Bayport expansion, you are looking at that being 50% utilization, you said?

For the year, yes.

For the year?

They will be higher than first quarter, lower in the second and third, and higher in the fourth. And we haven't worked out exactly the calculus on that. It depends on when the refineries call us and delivery schedule. But that's kind of the cycle we see, but it should average 50%, yes.

Okay. Then on Fine Chemicals, can you update us on your outlook for volumes and margins there in 2008? And a related question, do you have... are you able to scale back on costs in Fine Chemicals with the volumes dipping?

Yes. James, this is John Steitz. So, roughly the volume is not such an issue in Fine Chemicals because it is such a mixed play. As a matter of fact, we have the lowest volume product lines generate the highest margin for us like in our specialty pharma sector. I mean our volumes are less than 1% of our total Fine Chemicals volume, but comprise much heavier weighting of the profit there. But we do see volume growth in '08, and we see top line growth in '08, and we hope at this point that it will exceed 10% total sales revenue growth for Fine Chemicals. And we are hoping for a slight improvement on margins through the course of '08 as well compared for the year, '07 to '08. As I said, better we hope than 16%.

Thank you. And lastly, in brominated flame retardants, what is your latest thinking on capacity expansions in view of what you are seeing on volumes there?

Well, right now, we are doing some debottlenecking on some of the specialties that we have, and we've got a number of cost reduction capital projects kicking in through the course of '08 as well. But we do not see at this point any significant or material capacity expansions in flame retardants right now.

Okay. Thank you very much.

Thank you.

Thanks James.

Our next question comes from P.J. Juvekar from Citi. Please proceed.

Yes, good morning.

Good morning.

Good morning P.J.

How much of your brominated flame retardant molecule goes into construction versus electronics? Can you give us some ballpark number?

Yes, I would say the order of magnitude of 10%. And then automotive would be probably 20% with electronics being the balance.

Okay. Electronic business picked up for many of your competitors in the fourth quarter. Not competitors in the brominated flame retardant, but generally people who supply to that industry. And with that, then why are your volumes lagging in electronics?

Well, P.J., we saw sequential volume improvement in tetrabrom, and most of the specialties that I mentioned in my prepared comments related to construction and automotive. So that's where we saw some volume corrections. With that said, we are seeing a pretty good start to '08 right out of the gate here and we see some fairly resilient volumes in that sector. But tetrabrom being our primary window into electronics, we did see some double-digit increases in volumes there. So that's consistent with what your observations are.

And your non-brominated flame retardant volumes were up and bromine was down. Do you see that trend going on with some environmental pressure on bromine?

Well, I think really there our mineral flame retardant volumes were up slightly sequentially, and we're talking a couple of percentage points. And I think the big part of that is really not the electronics sector. The applications there are just not... don't fit the need. We see most of that related to industrial construction and automotive in our mineral flame retardant business. Again, it was up slightly sequentially. It was down about 5% year-over-year. So we have had some economic-related pressure on that business as well.

Okay. And then on the Catalysts side, we understand the new refineries and new plants that you are building. What do you expect the replacement demand? So existing refineries that replaced their catalysts back in '06 to get ready for '07 regulations. What percentage of that do you expect them to come back to the market for '08 just because of the regular wear and tear?

P.J., let me throw that question back at you and see if we heard it correctly. You are saying of the refinery catalyst business, HPC business, hydroprocessing kind of catalyst business we have today, you're interested in how much of that is new business this year versus recharges to older units?

Right. You had a big recharge in '06.

John, do you have that kind of perspective?

I would think the new, purely new applications are probably a third of our growth where two-thirds is probably repeat. I think the '09 impact will be more significant there, P.J., with a lot of new refinery opportunities coming up in the Middle East and India.

And how long does a typical refinery catalyst last?

About two years, and we are seeing some refineries that are operating in very adverse conditions, we are seeing that shorten. And it could be as much as four to six months with very difficult operating conditions on the crude slate.

Okay. Okay. Thank you.

Thank you.

Thanks P.J.

Our next question comes from Steve Schwartz from First Analysis. Please proceed.

Good morning, everyone.

Good morning, Steve.

Hi Steve.

John, if we could go back to your answer to something earlier on flame retardant polymer additives, it looks like you guys saw about 6% volume growth in '06 and so you've had now four quarters where you are down double digit in volume. You mentioned that you think there is an inventory correction going on. But you also mentioned that there is this impact from housing and auto. Can you talk a little bit about how that might be split?

Yes, the brominated flame retardant business is where you would have to consider the economy in your review of that business because it affects a lot... the impact is from a lot of consumer spending issues. The housing and construction is more in some of our specialty sectors and then the mineral flame retardant used in wire and cable. So it's two kind of different issues, and a little bit of ambiguity there. But going forward, we think the inventory corrections in brominated flame retardants have really run their course and we see volume improvement running through the course of '08. Mineral flame retardants is a little different issue. We've got the automotive-related potential slowdowns there and then we have a lot of raw material inflation as well. So we're a bit more cautious on the mineral flame retardant side.

Okay. So if we are just looking at the aggregated number, you're not really concerned that there is a secular issue here with the volume decline, in other words?

Well, is it secular or not? It all depends a lot on where the economy goes, I think. We're going to keep our eyes closely on the market indicators there. We are trying to keep in close contact with our customer base. There are both some negative issues and some positive ones. With the Olympics in China, there is the outlook that television sales will be fairly robust in 2008. So we are still moderately optimistic about growth prospects for the year.

If I can just add on what John has said, if I look back at the post-Y2K period, 2001, which was a very tough year on consumer electronics and in particular office equipment kind of related areas, PCs and copiers and things like that. What we saw is that we ended up sort of... I don't know if there was really a recession... but that slowdown in that area. It actually took for that to fully flush itself out over two years, probably almost three to fully flush itself out and get back up to... get fully out of that trough. I think what John is relating to is we've seen a pretty early bottoming of this trough. And so that gives us some optimism that we'll come out of it faster than we did in the 2001 kind of timeframe. But time will tell. Right now the early indicators, as John noted, look pretty encouraging. But we are cautious about it until we really see that happening.

Okay, great. And then on my second question relating to Fine Chemicals, on your slide, you have the footnote that calls out that ex the Tamiflu campaign, volume would have been down 7%. And John, I think you answered this earlier, but how much of that is from clear brines? So if you take out clear brines, would the volume have been positive in Fine Chems?

There was actually another issue there where we sold some raw material product in the fourth quarter of '06. So if I exclude clear brines and that issue, which was another 6% of the total volume in the products that really make money for us, we would have seen volume grow. That's correct.

Okay, so three components to the bridge gets you back to positive volume.

Yes. I really didn't want to go into too much on that, this one sale. But it was just some excessive raw material we had, and we ended up selling it last year.

Great. Okay. Thank you, gentlemen.

There was really no profit impact on the business.

Okay, great.

Thank you.

Our next question comes from Jeff Zekauskas from J.P. Morgan. Please proceed.

Hi, good morning.

Hi Jeff.

What was the cash flow from operations for the year?

Our preliminary rollup of cash flow from ops was $240 million, Jeff.

240. So does that mean you used the $100 million in working capital?

That's about right, yes. And part of that is inflation, raw material inflation, part of that is getting inventory ready to push through our new plants and part of that is we've got to do better in working capital.

So is your business now more working capital intensive than it was before? That is, when we look at 2008, will we see a similar number or a different number, in your estimation?

Yes, Jeff, this is John. The biggest absorber or sponge of working capital in our business is the HPC business. And as we've tried to describe to all of you, it's fairly lumpy. We had, as we pointed out in the prepared remarks, a big, big December in our HPC business. So that inventory there, which is really already inflated because of high moly, molybdenum, cobalt and nickel costs, then turns into a receivable. And that has been a big, big sump, if you will, for working capital. Now with that said, with the new plant coming on, we feel that will give us some surge capacity and we can manage that working capital better through the course of '08. So we're going to work hard. We've got some aggressive goals that incent our people and we are going to work to get working capital down. We know it was an issue for us in '07 for sure. But as Rich pointed out, the raw material inflation rolls through standard costs and then the FX is a big issue for us too, because we have a fair amount of European-based inventory and manufacturing there.

So it sounds like it will be up, but you are hoping not at the same magnitude?

We expect to get a nice improvement in days working capital next year, Jeff, is the way I would put it.

Yes.

Secondly, can you talk about sequential pricing in Polymer Additives? Is sequential pricing up or down on average?

Yes, it's about flat. Year-on-year, it's up nicely, 10%. But it's flat sequentially. And I think that's a reflection of the slower volumes through the course of '07, Jeff. It's difficult to get pricing traction when you have flat or declining volumes.

And Mark talked about, I think, alumina raw material inflation being about $20 million or so in 2008. And the idea is that maybe you will recoup half of that, or all of it, or a third of it by price increases?

Well, we are working on that right now. We had finalized the agreements on raw materials in the December timeframe. And you're right, it rolls up north of $20 million. It impacts both the flame retardant business and our Fine Chemicals, our ATH and the Fine Chemicals sector.

Right.

Roughly, to cover that order of magnitude inflation, we need about 15% on the pricing side. So we are working on that now. If at the end of the year we get two-thirds of that, I would be pretty pleased with that result. So we are working on that right now.

In brominated flame retardants, what percentage of your polymer additives doesn't go into high impact polystyrene and ABS resins? You can ballpark this.

Honestly, I would be taking a guess, Jeff, because I haven't looked at it in that perspective. But tetrabrom and our decabrom, our 8010, are primarily HIPS and ABS related. And those are the biggest volume products for us. Some of the next largest volume products go into high-performance, high-temperature nylon. And that's probably order of magnitude of 10%. So you probably have between 50 and 60% into HIPS and ABS and another 10 to 15% in nylon. And that's in the brominated flame retardant piece. And of course, mineral flame retardants are in crosslinked polyethylene, PVC, wire and cable, those kind of applications.

Okay. Thank you very much.

Thanks Jeff.

Thanks Jeff.

Our next question comes from Mike Sison from KeyBanc. Please proceed. Michael J. Sison - KeyBanc Capital Markets / McDonald: Hey everyone. Good morning.

Hi Mike. Michael J. Sison - KeyBanc Capital Markets / McDonald: In terms of pricing, Catalysts has had good pricing for the last two years, in total up 8% for the last two years in a row. Is that a range to expect considering FCC and polyolefin trends heading into 2008?

Yes, well there is three aspects to it. The organometallic piece, Mike, and as I mentioned, we're kind of formulating our strategy right now on that business in light of the fact that we have got a lot of raw material inflation hitting it. We have got HPC, which is, I think we've developed a tremendous amount of discipline for passing through this unbelievable inflation in these precious metals. And then FCC just takes a tremendous amount of work. And as you know, we have been leading that effort and you get pretty road weary on it because it's a tremendous amount of hard work. We're constantly working to demonstrate our value in that product line. We have had a lot of success in doing it. But with that said, the FCC business and from an ATH perspective, from a rare earth perspective and a natural gas perspective has a lot of raw material inflation and energy associated with it. So to stay ahead of that curve is becoming an increasingly difficult challenge for us, but we are continuing to work on it. Michael J. Sison - KeyBanc Capital Markets / McDonald: But isn't moly a pass through?

The moly is. Yes, the moly, cobalt and nickel are, for sure. But it just works into your arithmetic as you work it out. For example, in the fourth quarter of '07, our HPC business volumes were up a little bit, but it was mostly a pass through of that raw material inflation. Michael J. Sison - KeyBanc Capital Markets / McDonald: How much pricing in 2008 will be incremental, assuming sort of just to expand profitability versus just getting raw materials?

If we were to get 50 basis points out of that, I would be delighted. Michael J. Sison - KeyBanc Capital Markets / McDonald: 50 basis points in pricing?

In pricing, right. So the bigger, I think, impact profitability wise is HPC and the volume play there. Michael J. Sison - KeyBanc Capital Markets / McDonald: You know, in 2007, Mark, your pricing was up $155 million, $154 million. Your raw materials are up $80 million. So you have generated incremental profitability on pricing. Has anything changed heading into '08? I'm sort of surprised that there is a little bit of caution here considering the last two years it... well, I mean it hasn't really been a problem.

Well, Mike, I think what I would say, we did express a little bit of caution, but it's really around the rate of change or the rate of inflation. We started 2007, you may recall, Mike, and I think we even forecast moderate inflation for the year of 10 or $11 million. And in some areas, we felt we actually could be favorable by $10 million or $11 million. That's where we started in the first quarter of '07, and we were poked in the eye for 77, and a third of that almost occurred in the last quarter. So we've seen this... I'm going to go... I'm going to use the term hyperinflation. When it's jammed in that quick, with all the pundits talking about the world coming to an end out there, then we just have a little bit of concern about our ability to go in and drive things through quickly. So we are a little cautious about it. I can assure you that John's team is working that equation very hard to make sure that we... when we get... when we see prices going up that we're extracting that out of our customers and finding ways to drive margin in the process. We're still devoted to do that. But I'd like to see the first quarter end and kind of see what's happening globally and with our volumes before I get firm about what we'll do for the year. Michael J. Sison - KeyBanc Capital Markets / McDonald: And quickly on the... you're bringing on a lot of new capacity in catalysts. Any help on the incremental margins there for the expansion?

Yes. I mean I think in each case, you're going to be healthier because we've got good volume absorption in that and distribution of costs.

Yes, you saw our margin in the fourth quarter. We hope to improve on that, Mike, in 2008. Michael J. Sison - KeyBanc Capital Markets / McDonald: Okay. Then, Rich, did you suggest that EBITDA would be $500 million in '08 or was there some qualitative north of $500 million, or what was that...

I think the artistic term I used was we would be pushing $500 million, Mike. Michael J. Sison - KeyBanc Capital Markets / McDonald: In 2008 versus 2007?

Pushing or approaching. '08 would be up about 15% compared to '07. Michael J. Sison - KeyBanc Capital Markets / McDonald: Got you. And Mark, historically, at the beginning of the year you sort of give us a little bit of a color what your thoughts of how smart we are in terms of our First Call estimates. Any sort of view if there is a decent range out there?

Well, when we look at it, there is a consensus out there, I mean, prior to the day of roughly 2.80. And where we sit today, we feel okay about the consensus. I would say that that's a pretty broad range out there as we started the day. And the high end of that's hard to see, but I would say that we feel today okay about the consensus. Michael J. Sison - KeyBanc Capital Markets / McDonald: Great. Thanks guys.

Thanks.

Thank you, Mike.

Our next question comes from Dmitry Silversteyn from Longbow Research. Please proceed.

Good morning. A lot of mine have been answered.

Hi Dmitry.

Good morning, Dmitry.

How are you? Let me go back a little bit, and talk about margin guidance for 2008. You talked about Fine Chemicals being roughly about 16%, which is obviously above your guidance of 15% that you're trying to get your businesses to. You've kind of finished the year with about 15% in both Polymer Additives and Catalysts business despite some challenges. As the HPC volume growth resumes, as you continue to push price increases in FCC, given that you have raw material headwinds, and also looking at the demand improving hopefully in the brominated flame retardant business, if we look beyond 2008, if we look at 2009, 2010, somewhat of a longer term goal of yours, are you still looking at 15% as the sustainable margin for your three businesses? Or have you had a chance to reevaluate them, given the progress you made, and are you ready to share with us maybe perhaps a little bit more aggressive outlook for your margins?

Dmitry, we're kind of fighting over who should answer that question because...

They both want to answer it.

John won, Dmitry.

That's a high class [ph] problem.

Yes. Well, it is really. And in Catalysts, I think out two years, a view of margins of 19% including our JVs would be a challenging but achievable goal. And so out 18 months, we have that view. In Polymer and Fine Chemicals, I believe in Fine Chemicals, including the minority interest and related adjustments of 17 to 17.5% goal out two years is something that we can achieve, particularly with the commercialization of some of our new products in Fine Chemistry. The polymers, with the setback in terms of volumes in '07, I think if we can get that business back to that 17% level out two years from now, I think that would be a good target, a good achievement.

Okay. Okay, that's very helpful. Thank you. Sticking with margins, your Polymer Additives margins in the third quarter really took a tumble to just over 13% because of the inventory correction you've running through your tetrabrom business.

Yes.

It sounded like volumes didn't improve sequentially, but I am assuming you were actually selling them out of production rather than out of inventory. And yet your margins really didn't improve all that much, up to about 13.5%.

Yes.

Can you kind of take us into kind of what if the impact had still... or prevented the margins from recovering back to the mid to high teens and whether or not we can look for those margins to recover in 2009... 2008, I'm sorry?

Yes. You bet, Dmitry. That's a key issue. So if you look at the sequential comparisons, we did grow the business on a profit basis, which we were pleased about. We did experience probably $2 million of raw material and energy inflation sequentially in that business. And then we had the specialties mix impact that I referred to earlier. And that was probably in the range of $4 million impact on the business sequentially, and we see that now improving. You're right, we did produce for sales in the fourth quarter, particularly in tetrabrom, which is a good thing. And we're hoping we've turned the corner based on where the economy leads us in the course of the next 12 months.

Okay, all right, thanks. That's helpful.

Okay.

And then, I just want to make sure that I'm thinking about this correctly. The new plant that you've started off in HPC, even though it's going to be operating at around 50% in 2008, and you mentioned about running maybe a little bit higher than that in the first half or the first part of the year and the second half of the year. That's not going to detrimentally impact your margins through fixed cost absorption issues, is it? I mean you're still going to get positive margin from that business compared to 2007?

That's correct.

Okay, all right. Just want to make sure. Thank you very much.

You bet. Thank you.

Our next question comes from Edward Yang from Oppenheimer. Please proceed.

Hi, good morning.

Good morning, Ed.

Hi Ed.

Hi Ed.

I want to go back to this polymer additives issue. It sounds like tetrabrom is turning around, but you mentioned construction and auto weakness, and that sounds like new news to me. And I was wondering what might have caused the weakness and was it regionally focused?

Ed, I'm convinced it's when the stock market declines almost 3000 points, it has an impact on people buying things. But that's just a guess. But it did impact us in the fourth quarter. And we have the broadest portfolio of products on the market in our flame retardant product line. And we had... we did in some of these specialties, which have been important profit drivers for us, we did see decline of volumes in the fourth quarter. Now we're seeing going forward into '08, an improvement, and that's based on what our customers are telling us, not just on our hopes and wishes, but.

John, the blip you saw from the customers, was it your North American customers, overseas customers?

Well, it's almost global, Ed. Really, it's not... I can't discriminate by region if it's just the U.S. or if it's Europe or Asia. Because it's companies that operate on a global basis; they may have plants in Asia, and both of these... several of these companies do operate globally. So it's really not a regional issue.

Okay, understood. And digging into the margins, how would you compare the margins for tetrabrom and the electronics-related flame retardants versus some of these more specialized polymer additives for the construction and auto industry?

Well, the specialties have higher margins. And then tetrabrom has also, through the course of the year, had some big BPA inflation, and that's a concern in '08 as well. When oil in the fourth quarter approached that $100 a barrel mark, that just de facto runs through phenol and into BPA. We also use some benzene derivatives in some of the flame retardant specialty lines, and we're concerned about that inflation. And then again, that's petroleum derived

John, could you size up the margin difference approximately? It's not something like 2X, or is it up a difference between a few hundred basis points, between the two types of flame retardants?

Yes, I would say that the impact on the specialties had about... we are talking probably a 150 basis point impact in the fourth quarter, comparing [ph] all in the order of magnitude.

Okay, thank you very much. Thank you.

Thanks Ed.

Thanks Ed.

Our next question comes from Bob Koort from Goldman Sachs. Please proceed.

Good morning, this is Amy Jhao [ph] sitting for Bob.

Hi Amy.

Hi Amy.

How are you?

All right, thank you.

My question is I heard you were talking about Albemarle target to achieve that $500 million in EBITDA in 2008. I was wondering what kind of economic assumptions, underlying economic assumptions do you use when you put out that target.

Very modest growth in the U.S. When we did our plan, it wasn't probably when people were... a lot of people were all calling for a recession. But we had modest full year growth and slower growth in the rest of the world than we experienced this year, but obviously incremental to what we have in the U.S. assumptions.

Gotcha. And then my follow-up question would be, you noted the very relatively strong year-to-date transfer of business. But if we're heading to the recession, which is the widespread market fear now, what would be the worst case scenario for Albemarle in terms of your growth profile and also margin progression?

Amy, this is Mark. That's a man, I wish I was smart enough to actually answer that question. It's tough to imagine a global recession for me, given what I see when I'm out all the time. And as we noted in our press release, based on the facts that we have in front of us, which relates to our customer interactions and the volumes we see, we don't see evidence of a global recession. We do see a lot of caution in the marketplace. And people are, as John noted, they are being responsible, they are not overbuying product, they are waiting, they are looking at the consumer to see how they react to these pundits. So from our perspective out there, we think the global nature of our business, especially India, the Middle East, Asia, is such that it will help offset what appears to be a slowdown in the U.S. economy. As Rich said, I think we were 2% or so growth in the U.S. economy, we assumed, Amy, and that... who knows if that's going to be right or not? But this company really depends on our growth offshore, and even today we still feel kind of good about that. So we don't really have a downside scenario in our own mind that we could forecast with you at this point.

Gotcha. And then... but do you have any contingency plan in case there might be?

Well, yes, that's a different question. We have taken steps should the ice get thin. The answer is absolutely. We have a lot of work underway to look at all of our assets again and make sure that we feel that in both an upside scenario and a downside scenario that they are well postured to add value to our shareholders. I think that effort is going to identify some opportunities for us. And as it does, we'll be announcing those to you guys. Those would be consolidation kind of opportunities, if we could, because we think volume growth is going to be low. Let's say, in one area, we may look to consolidate sites or do something like that. But yes, we're working that equation hard, Amy.

Understood. And then lastly, on this economically-related question, how much of your total sales exposure you would characterize as economically sensitive to the U.S., say, industrial production growth or something like that?

Well, 40% of our sales or so are in the U.S. So I mean in a broad sense, it's that portion of our portfolio is exposed primarily to this economy, although some of it goes into making products that are then exported. But 40% in the U.S.; 20% in Asia; plus minus a little bit; and 15%... I mean 40% in Europe. So I guess, I would look at that 40% and say if we had a decrease, it would impact that. It would lower that... those sales by some amount. You still there, Amy?

Lisa?

Amy's line disconnected. Hello? We apologize. Our next question comes from Steve Schuman from New Vernon Associates. Please proceed.

Good morning, guys.

Hey, good morning, Steve. Sorry for the line problems we had there.

Oh, not a problem. I figured you cut it off. A question on flame retardants going forward. There has been a lot of pushback on halogen-based flame retardants, and you yourselves have recently announced a number of new non-halogen based products. Margin wise, how are the new products looking and how is that going to affect your profit mix going forward?

Hello? [Technical Difficulty] If they are proprietary products that have intellectual property with them and boost performance such as the ANTIBLAZE product I mentioned, and the margins there are not comparable, if not better. If they are not proprietary, if they are ME2 [ph] products, then those products are pretty ugly, frankly, from a margin point of view. So it depends a lot on how customers move and how we respond to it. We are of a mindset that when you look at the non-halogen products for the most part, they are technically inferior to highly engineered products that companies like Albemarle make. So we believe that we'll be able to introduce new products over time that satisfy the needs of the market, address concerns, if they have them about the halogen content and be able to maintain margins.

Then on... can you update us on some of your specialty catalysts work? You have an alternative fuels program, you have this alkali cleaning product. Are we going to see any results from this in 2008 or are these well beyond that?

Yes, Steve. This is John Steitz. As a matter of fact, Mark and I are heading up to Finland later in this quarter, and we're getting really encouraged with a lot of the biofuels activity and our solutions to that. And we believe we will see results in '08, actually, that will be positive for the business and some significant step up in '09. So we're getting very encouraged by our activity in the alternative fuels technology area.

Is that you think U.S., Europe? And then is there any regulations that are pushing that or is this pure economically driven?

At this point, yes, it's pure economically driven and environmentally driven, of course. Yes.

And I missed... I was in and off on the conference call. On the polyolefin catalysts increase, it was over 40% last year.

Yes.

You say you have more coming, but is that just going to offset raw material inflation, do you think? Or do you think you have room to extract value out of those, considering the...

Well, the organometallic product line of ours delivers tremendous value. And so I think there is room to hopefully expand margins into '08 and '09. And this would be a contributing factor to help us achieve 19% in '09.

Great, thank you.

Thank you.

Thanks Steve.

Lisa?

Our next question comes from Adidia Naruman [ph] from SAC Capital.

My questions have been answered, thanks.

Thanks Adidia.

Thanks Adidia.

Our next question comes from Robert Felice from Gabelli & Company. Please proceed.

Hi Robert. Robert Felice - Gabelli & Company: Hi, most of my questions have been answered. Just one or two more on the bromine side. Given the way inventory patterns have waned and wanned, as we look back over the last couple of years, most of us have looked to '08 with expectations of a pretty nice rebound. And I know the last time we saw volumes rebound off of a low, they probably picked up in the double-digit range. And I think last quarter, John, you had mentioned that you didn't expect it to be that strong this time around, maybe in the high single-digit range, if I remember correctly. And given how things have evolved through December and into January, has that changed at all?

Well, no, I would still stand by that, Robert. I think what our customers are saying is hoping for volume growth in '08 in the 5 to 6% range. So I think that's at least a current view, depending again on where the economy goes, looks pretty solid. Robert Felice - Gabelli & Company: Okay. And you mentioned that sequentially on the bromine side, pricing has been pretty flat. It's up year-over-year. Given end market... the rebound in the end market as we look to 2008, should we expect pricing to add on top of that 5 to 6% volume growth? Maybe you can just shed some color on the magnitude of pricing that you think you can get?

Well, again, pricing going forward, a lot of it we will have to determine based on how we see the... if the volume continues to grow through the course of '08. That could help give... give us some traction in terms of pricing. But with that said, we have got a lot of raw material inflation hitting that. So if we could achieve pricing to help us offset the raw material inputs, that would be, I think, a great goal to have looked back on with success. As Mark and I had mentioned, we have this big issue with ATH and... for '08, and that affects our mineral flame retardant business. And that's almost $20 million in flame retardants. So that's going to take a lot of work and some help on the volume side to get us where we need to go to cover that. Robert Felice - Gabelli & Company: But it sounded like from earlier comments given the pickup in operating rates that you should see in the incremental volume, that despite the raw material costs, you should be able to see some leverage on margins?

You bet. So overall, we're hopeful in Polymer Additives to perhaps in the first half get north of 15% and through the course of '08 achieve something in order of range of 16% for our Polymers business. Hopefully that kind of answers the nature of your question. Robert Felice - Gabelli & Company: Yes, it's very helpful. Thank you.

Okay. You're welcome.

And we have a follow-up question from Bob Koort from Goldman Sachs. Please proceed.

I'm sorry. I think I just got cut off.

Yes, sorry, Amy. I don't know what happened.

I didn't finish my question. I thought there was some technical difficulties on my end. I have one more follow up. I probably missed your comment on that ATH contract. I thought that that was expired at the end of last year, right?

That's correct.

And then have you renegotiated that? Or how could you secure the source of that raw material?

Yes, we have renegotiated that, and it's resulting in higher costs both in terms of the raw material itself and the freight associated with transport of those products.

Okay, so that's key raw materials for flame retardants?

Yes, it goes into both the mineral flame retardant business, Amy and a portion of our mineral-based Performance Chemicals product line.

Okay, thank you very much.

The biggest impact is on flame retardants, but it does impact both businesses.

Thank you very much.

You're welcome.

There are no further questions at this time.

Okay, I would like to thank everyone for participating on the call today. If there are any further questions, you can contact me at the number indicated on the press release. Have a great day, everyone.

Thank you for participating in today's conference. This concludes the presentation. You may now disconnect. Have a great day. Thank you.