Good day, ladies and gentlemen, and welcome to the Quarter Two 2018 Albemarle Corporation Earnings Conference Call. My name is Kathy, and I will be your operator for today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of this conference. As a reminder, this call is being recorded for replay purposes. I would like to turn the call over to Mr. Dave Ryan, Vice President, Corporate Strategy and Investor Relations. Please proceed, sir.

Thank you, and welcome to the Albemarle's second quarter 2018 earnings conference call. Our earnings were released after the close of the market yesterday. And you'll find our press release, earnings presentation and non-GAAP reconciliations posted on our website under the Investors section at www.albemarle.com. Joining me on the call today are Luke Kissam, Chairman and Chief Executive Officer; Scott Tozier, Chief Financial Officer; Raphael Crawford, President, Catalysts; Netha Johnson, President, Bromine Specialties; and Eric Norris, President, Lithium. As a reminder, some of the statements made during this conference call about our outlook, expected company performance, as well as lithium and electric vehicle demand may constitute forward-looking statements within the meaning of federal securities laws. Please note the cautionary language about forward-looking statements contained in our press release that some language applies to this call. Please also note that our comments today regarding our financial results exclude non-operating, non-recurring and other unusual items. GAAP financial measures and reconciliations from those to the adjusted numbers discussed today may be found in our press release and in the appendix of our earnings presentation, both of which are posted on our website. Now, I will turn the call over to Luke.

Thanks, Dave. Good morning, everyone, and thanks for joining us on the call today. First, I want to welcome Netha Johnson to the team as President of Bromine Specialties, and congratulate Raphael Crawford, Eric Norris, and David Ryan for their new roles. I'm very excited about the leadership experience each of them bring to the team and I'm very confident in the team's ability to execute our strategy and deliver significant shareholder value today and well into the future. Now, turning to the quarter results. I'm very pleased with our strong second quarter performance. Excluding the divested businesses, second quarter revenue grew by 20%, adjusted EBITDA grew by 24% and adjusted diluted earnings per share grew by 28% compared to the second quarter of 2017. All three of our businesses delivered double-digit adjusted EBITDA growth. That performance further strengthens our confidence and potential of our portfolio for the short, medium and long-term. Lithium growth continues to be driven by accelerating demand for electric vehicles. The 2017 sales of plug-in and pure electric automobiles were up about 56% over the prior year, and sales through the first half of 2018 are up almost 90% versus the first half of 2017. Our customers are experiencing growth consistent with that data. Recently, major cathode and battery manufacturers have reported year-on-year sales growth, ranging from 21% to 75% for the first half of 2018. Our customers and our customers' customers continue to invest for future growth in a manner that is consistent with the Albemarle demand model. And the global environment for EV adoption continues to build momentum. Since the beginning of 2018, another six countries have either proposed bans on the sale of gas-powered vehicles or introduced new consumer incentives to encourage EV adoption. In the United States, four states have proposed or…

Thanks, Luke. For the second quarter, we reported net income of $302 million or $2.73 per diluted share, including the gain on the sale of polyolefin catalysts and components that closed on April 3. Excluding the year-on-year impact of that gain and other one-time items, we reported adjusted earnings per share of $1.36, an increase of about $0.30 per share compared to second quarter 2017 or 28% growth. Growth in our core segments resulted in an increase of about $0.34. Business results were boosted by our share repurchase program and offset by a net cost increase in other areas, primarily due to a higher effective tax rate compared to second quarter of 2017. We have almost completed the $250 million accelerated share repurchase program initiated in May. Based on the strong performance of the company and our long-term growth potential, we continue to believe that Albemarle stock is currently undervalued. Hence, subject to market conditions, we intend to initiate a second buyback of $250 million of stock via another accelerated share repurchase program. In total, that will result in a $0.5 billion of buybacks in 2018, equating to about 5 million shares. This will leave approximately 7.5 million shares remaining under our current authorization. We expect our average share count for all of 2018 to be about 109 million shares and our share count for the second half is expected to be about 108 million. For the first half of the year, net cash from operations was $224 million and we are on track to end the year between $660 million and $730 million. Adjusted free cash flow for the first half was $30 million. Capital expenditures during the first half were $281 million and will continue to ramp during 2018, reflecting growth capital deployment in our Lithium business. We…

Hey, thanks, Scott. Our strong first half has positioned 2018 as another outstanding year for Albemarle. In Lithium, we now expect full year adjusted EBITDA growth in the low- to mid-20% range year-over-year. The tie-ins at La Negra II are currently on schedule for the third quarter. Therefore, the second half of 2018 is anticipated to look a lot like the first half for Lithium, with 3Q earnings similar to first quarter and 4Q earnings similar to the second. Bromine continues to benefit from favorable market conditions. We now expect full year adjusted EBITDA growth in the high single-digits on a percentage basis. Finally, with reduced impact from the force majeure in curatives and the favorable impact of the insurance settlements related to Harvey, we now expect full year adjusted EBITDA growth for the Catalysts segment to reach high single-digits, excluding divested businesses. Similar to 2017, the fourth quarter is forecasted to be stronger than the third due to the timing of the CFT orders. As always with CFT, there is some risk related to orders slipping from one quarter or one year to the next. As a result of all that, we are increasing our guidance for 2018. We now expect 2018 net sales of between $3.3 billion to $3.5 billion, adjusted EBITDA of between $990 million and $1.02 billion and adjusted EPS of between $5.30 and $5.50 per share. As Scott mentioned earlier, we believe the stock is currently undervalued and expect to initiate a second stock buyback. As was the case with the buyback we initiated in May, the growth potential of our businesses, the strength of our balance sheet and our operating cash flow give us the confidence that we can take this action, execute our capital projects, maintain our long-term EBITDA ratios and still have plenty of firepower leftover for opportunities that are consistent with our strategy. We remain committed to and confident in our strategy, and in our ability to execute that strategy in a way that should drive significant shareholder value into the foreseeable future. With that, we'll open it up to questions.

Your first question comes from the line of Bob Koort, Goldman Sachs Please go ahead, sir. Dylan Campbell - Goldman Sachs & Co. LLC: Hi. Good morning. This is Dylan Campbell on for Bob. So, we're seeing some weakness in Chinese spot lithium prices recently, but the year-over-year pricing remains strong for Albemarle. So I guess, when you look forward to the second half of 2018 and 2019, how are your contractor pricing discussions going with customers? And then, also, could we expect some further incremental pricing growth from just the laddering structure of your contracts?

Yeah. If you look at – as we've always said, because of our long-term contract strategy, China spot pricing has no impact on our pricing and you shouldn't see a correlation. I think this quarter, really, you're beginning to see that as the China spot pricing is down and our pricing is up year-over-year. So, we think that that's a validation and we will continue to see that. As you look at pricing, I think we've said pricing would be in a similar range for the full year, year-over-year, and we don't see any change to that. It's a little too early to talk about 2019, but we're having good conversations about contracts from a volume standpoint, from a commitment standpoint, from an extension standpoint, and from a price standpoint going forward. So, more on that as we start talking about 2019, but everything looks good today. Dylan Campbell - Goldman Sachs & Co. LLC: Got it. Thank you. And for Lithium EBITDA, you said that 3Q is going to be similar to 1Q, calling out some one-time items with the tie-in, but I'm a little bit more curious on the flat EBITDA between 2Q and 4Q. Can you provide kind of what this implies for your volume and pricing trends through the end of the year in terms of sequential movements?

Yeah. You'll see – I mean, third quarter will be down sequentially for the reasons we talked about and then they'll be up from third to fourth quarter from a volumetric standpoint.

This is Eric. And just to add, a part of that, remember, is we do tie-ins in the third quarter, which then allows us to bring the rates of La Negra up to the full potential. And so, in the fourth quarter, we'll start having the benefit of those high production rates. Dylan Campbell - Goldman Sachs & Co. LLC: All right. Thanks.

Thank you. The next question comes from P.J. Juvekar, Citi.

Hi. This is Scott Goldstein on for P.J. Thanks for taking my question. So, I guess, in Lithium, when we're thinking about your longer term contracts, I think in the past, you've mentioned the durations can range between three to five years with some going as long as 10 years. I was just wondering, is there a particularly grade of lithium, like whether it'd be hydroxide or carbonate, where you're seeing more demand for longer-term terms than the other grades?

Go ahead, Eric.

Great. So, Scott, yes, it's Eric here. So, we are seeing – when we enter these contracts, they are specific to the product and they're split between carbonate and hydroxide roughly, which just certainly mirrors our production planning and our capital expansion planning. And beyond that, they're specific to a grade of carbonate and hydroxide. We have 20 different specs across the range of products we supply to these customers and some of them are unique to certain customers. So, they're very specific and allows us to plan accordingly. As we've said a couple of times, hydroxide is coming off a lower base. So, on a CAGR basis, yes, hydroxides are growing faster, but the demand is roughly split between the two.

Okay. Thank you. Another question on Catalysts. I think at your Investor Day in early 2017, you talked about expected growth at around 3% per year over the next five years. With the rollout of IMO 2020, maybe could you talk about how, I guess – does that change your expectation for the long-term growth in Catalysts going forward?

Scott, this is Raphael. No, I think the IMO standard, that'll be a contributor to the growth. Overall, as part of a larger trend, which is really about contaminant sulfur removal from transportation fuel, that contributes to growth. The overall crude slate becoming more heavy and sour, that's favorable for our Catalysts business, both for FCC and HPC, as well as the trends toward chemicals output from refineries. And we have specific technology, Max Propylene, other technologies, which support that trend. So, when you combine all of that together, we believe that offsets whatever downside there might be from increased fuel efficiency or EV trends. So, overall, net positive.

Yeah. And the other thing I'd say is, in our 2017, IMO 2020 was already on the rise. And so I wouldn't treat that as something that's a new revelation that we didn't have in that model. And so, it will help us along the edge, but it won't make a step change.

Okay. Got it. Thank you very much.

The next question comes from John Roberts of UBS.

Can you tell us what the sequential price change was in Lithium? And I believe you include mix in your average selling price changes. So, how do we think about mix in that business currently and as we go forward?

Yeah. This is Scott. So, sequentially, we're up around 2%. There is a bit of customer mix in there. That's hard to strip that out of the analytics, but generally, product mix and other types of mix are not included in that number. So, it's about as pure as a price number as you're going to be able to get from our results. But, overall, good traction from pricing on a year-over-year basis as well as sequentially reflecting that trend towards the longer term contracts and the support that's behind us.

Okay. And back on Catalysts, do you envision any investment to be able to either on the IMO 2020 because that might go beyond maybe next year? And then secondly, on the crude-to-chemicals kind of investment refiners have made, do you see any investment going into Catalysts? And would you even put more capital or investment into that business or would you just maybe not grow as fast as the market?

Yeah. So, let's break it down. So from a IMO, that would impact the HPC catalysts. And we would have investments, but they would be more debottlenecks, more than anything else or changing our technology around a little bit to best fit that. That'll be, as I look at it, encompassed within our continuity capital that we would spend on a regular basis that we've always talked about in the range of 4% to 6% per year. If you look at the crude-to-chemicals, you're really talking about FCC catalysts. And the fact of the matter is today – at the prices we see today, I don't see reinvestment economics in the price we're seeing to FCC catalysts today. So, unless we see those type – an improvement in price to get to those reinvestment economics, we would find another way to meet demand, but it wouldn't be a significant capital. It would be debottlenecking. It would be ways to increase our yield. It would be ways for us to be able to do that as part of our continuity capital, but a significant investment in other plant. We need to see higher FCC pricing and the team's working on that. So we're seeing good traction on FCC pricing. So we may get there, but we got to ways to go to justify reinvestment economics there.

Thank you.

The next question comes from the line of Jeff Zekauskas of JPMorgan. Jeff, your line is now live.

Sorry about that. When you look at the lithium market today, do you think the supply demand balance is becoming looser or tighter or staying the same, say, over the next 12 months?

Hey, Jeff. Eric here. So, our view is it's pretty balanced and about the same. It hasn't changed much. It continues to be challenging to produce where the growth is, which is in the battery grade area. You have the majors, ourselves included, expanding to meet that. But the time to bring that on, as it corresponds to demand, we see that being about the same, pretty balanced.

And if you look at it over the next 12 months, Jeff, I don't see a whole lot change. If you look at our forecasted growth, what our customers are saying, and you look at what we're bringing online, we're going to be about where we are today from a sold out position and still relying on some tolling. So, it's about where it is now. In buckets, you can look at carbonate versus hydroxide and see a little bit different story there where one being tighter and one being a little alone. But from a pricing standpoint, from a demand standpoint, we're not seeing – I don't anticipate anything in the next 12 months that would have a material impact.

Okay. And so, as a base case, when you model the financial returns of your Lithium business, do you assume that the benefit to Albemarle over a longer period of time are really going to come from volume growth, and that as a base case, prices neutral from where we...

Absolutely. When we model it, the way we model it, to look at the investments, our returns, what we ought to do, we had – it is now for the next few years a volume story for us. Where we are able to achieve price in these long-term contracts, we will do so. But we've taken the philosophy on those long-term contracts, we want to have a minimum price guarantee and a minimum volume. But it will be a volume growth story more so than a massive price, which Jeff is consistent with what we've been saying for a couple years. But, yeah, you got it right on that.

Okay. Good. Thank you so much.

Thank you. The next question comes from David Begleiter of Deutsche Bank.

Thank you. Good morning. Luke and Scott, just on Lithium pricing in 2018, is your guidance still up high single-digits for the full year, year-on-year?

Yeah. That's correct, David. We're right on track of with where we actually entered the year and are tracking right on what we thought. So if you remember, we came into the year expecting high single-digit pricing in Lithium, it would be higher on a year-over-year basis in the first half and declining as we go into the second half as those comps get more difficult.

Very good. And just also on Lithium volumes, are you still on track for 10,000 ton increase year-over-year in Lithium?

Yes.

Thank you very much.

Thank you for your question. The next question comes from Colin Rusch of Oppenheimer. Colin Rusch - Oppenheimer & Co., Inc.: Thanks so much. Given the rapid pace of battery chemistry evolution, particularly for vehicles, how quickly are you seeing the need to tweak formulations on the concentrates to really meet customer specs?

Colin, this is Eric. I would say it's an ongoing evolution, right? If Glen Merfeld, our Chief Technology Officer, were here, he would tell you that what's happening is a continual effort by battery producers or cathode manufacturers that serve them to get more lithium out of the – or get more energy density out of the cell. There's a certain amount of lithium that's not used in the cell and there's opportunity to get 5%, 10%, 20% greater density per cell. And so, there are incremental innovations looking at changes to potentially the anode that are – slight doping of the anode that are going on. Some of this often will happen on the cellphone side before it happens on the EV side, but those are ongoing. In terms of what it means from a cathode standpoint, in some cases, some of the innovations may use the same cathode chemistry. In other cases, you'll see evolution towards higher energy density cathodes. NMC 622 is definitely the trend that we see in the market today for high nickel cathodes. NMC 811 is often talked about, but still has a lot of engineering to go around safety and therefore, cost effectiveness and its application. So, it is an ongoing effort that requires us to be responsive, both in terms of ideas we have, but also in terms of formulation with cathode chemistry. Colin Rusch - Oppenheimer & Co., Inc.: Okay. That's very helpful. And then, just given the lifespan of most vehicle programs being five to seven years, how much fluidity are you expecting within those vehicle programs? And I understand that this is really trying to get some insight into your customers' customers, but as vehicle OEMs try to extend life and lower weight requirements – or extend vehicle range and lower weight requirements, how much fluidity are you seeing in terms of that evolution in terms of the chemistry as you were just talking about?

Well, it's kind of hard for me to separate your first question from your second because they're interrelated. Maybe that was your intent. So, I would say that, I think in a lot of cases, it's with – as you said, five year vehicle – the five year plan is locked down and there are certain targets in terms of energy that are expected out of the cell for a certain model. There is some – based on a number of vendors that OEM manufacturer go to, there is some flexibility for the battery producer to manipulate materials, manipulate chemistries to hit that target. And so, I guess there's some fluidity there in how they get there, but the targets in terms of the range per vehicle tend to be much more locked down over a long period of time. Colin Rusch - Oppenheimer & Co., Inc.: Okay. Thanks so much, guys.

Thank you. The next question comes from Ian Bennett, Bank of America Merrill Lynch.

Thank you. And perhaps I'm reading too much into it, but I noticed on the key messages in the beginning of the slide deck this quarter, Wave 1 expansions on track is no longer there. So, maybe I'm reading too much into it, given you are still on track for La Negra. And then, perhaps related to that question, I was wondering if you could comment, in two of the regions where you're expanding capacity. First, in Australia, the dispute with Global Advanced Metals and that trial date, if that's having any impact at all on your ability to increase production in that region and what potential financial damage they're claiming? And then, in Chile, news articles about being slow to respond to CORFO, if that's having any effect at all? And I know that they're changing the way – the oversight of the mineral in that country. Comments on that would be helpful. Thank you.

Yeah. Hey, this is Luke. You're reading way too much into the – what the key message. We're right on track. And that's what we said in the script. We're on track to deliver everything that we've said to the Street and everything that we said we'll deliver to our customers. So, you ought not assume any change to that. We're rolling right along. As it relates to Australia, the dispute with GAM is against Talison. That has been a dispute that we've talked about in the past and we don't see it having any impact. And our partner, Tianqi, in that would – I think their public comments would be similar. We don't see it having an impact. It's a dispute that if it needs to get resolved, it will. If not, we're very confident in our legal position. From Chile, what I would say about Chile is we are in compliance with every term of every agreement that we signed related to Lithium. And I don't see any issue with our ability to get the brine to run our facilities in La Negra today, tomorrow and throughout the term of that agreement.

Thanks. And as a follow-up, you've accelerated another share repurchase. You made comments about Albemarle stock being undervalued. It looks like also, during the last couple of months, many of the junior companies have experienced greater declines in their equity value. I was wondering if you could update on how you think about consolidation in this industry and the relative importance between relationships with customers and low cost assets. Thanks.

Yeah. I think that the low-cost assets, first of all, drive your cost position. And then, your relationships with your customers drive what your price is going to be and how you're going to move that supply once you have it. So, I think you got to have both. And if you have one and not the other, you may have a decent business, but you're subject to whim. So, what we have is low-cost resources that are geographic diverse with long-term agreements, with the major cathode producers around the globe. So, we feel like we're in the best – in the catbird seat really as we look to that. As I look other juniors and what the valuations may be, there's still a difference – what we have to look at is what do we have in front of us that we can execute on, what's the cost of that and what's the return on that for the capital that we're going to invest, and what's the time that it takes us to do that. Any acquisition needs to be one that accelerates, de-risk and provides a better return of our capital than what we see in front of us. If we see that in front of us, we have the capability with our balance sheet and our ability to execute to be able to seize upon those opportunities, but we're going to be disciplined in doing so.

Thank you. The next question comes from Joel Jackson, BMO Capital Markets.

Hi. Good morning. One of your larger bromine competitors spoke about bromine for them over earned in Q2. They're expecting lower earnings the second half of the year. You seem to be modeling more to flat to up Bromine earnings in the second half of the year. Can you give a little more color on that? Anything happening in Q2 a little bit stronger. It doesn't seem like for your business.

Yeah. If you look at it – I don't know what happened with one of our competitors, but what we're looking at now is relatively flat second half versus first half in Bromine from a bottom-line standpoint. I don't see anything. If we had – it all comes down, honestly, to the amount of product we're able to get out because we're sold out and it's how our assets run. And if our assets run better, that may move us a little bit to the upside of our range. If they don't operate as well, that may move us to the lower side of the range. But to us, it's all in the second half, if the market conditions remain similar, which what it appears to do, it's all about our ability to execute and run those sites.

And I apologize if this question was asked earlier, but, Luke, Eric, we all see the daily, the weekly, the monthly spot Chinese carbonate prices falling. There's a question about how good the information content is in that data. Can you maybe comment on that? Is there any connection between those data points and what you would see in your contract pricing in the next – you've answered some of this, but is there any informational content really in that data?

I don't look at it. I mean the only time I bring it up is whenever you guys ask me about it and I have to go ask somebody what the Chinese spot price has done because it's really irrelevant. What's relevant to us is what's the cost that makes our customers – gives them the value that they're willing to pay for and gives us the return that we need to invest the capital. So, I'm the wrong guy to talk about spot pricing in China and, well, it's relative or anything else because I just – I never look at it.

Thanks.

The next question from Kevin McCarthy, Vertical Research Partners.

Yes. Good morning. I was wondering if you could provide an update with the progress on your contract negotiations with cathode manufacturers. I think in the past, you had expressed the goal of converting about 80% of the contracts by the first quarter of 2019. Is that still the case? And perhaps you could elaborate on the various contract features that you're seeking and how that's been received by your customer base?

Yeah. Kevin, this is Eric. I think just to repeat to what I recall us saying. We indicated that this was an important year because we had some contract naturally maturing, and others where we – either ourselves or the customers, proactively approaching us for contracts that weren't maturing, that wanted to be, for one party or other, extended longer term. And for us, that's beneficial obviously so we can plan production. So, how that's going? We have a few more contracts that we've closed. Those terms are moving out to the middle of the next decade, by and large. It depends by the contract, but that's – we're moving beyond five years, whereas in the past, I think, we've indicated three to five years. Yet, we still have more to go, right. I think we indicated that this will be an important year and we're making great progress thus far. And we, clearly from what we're seeing, (00:38:22) continue to expect to see similar progress going forward. The terms of these aren't different than what we described before, right. There's a components of a floor price, minimum volume and right of first refusal on additional volumes based upon the customers' growth, openers that are bidding, not the customers, and a return that gives a price that results in a return, that's 2x our cost of capital on an after-tax basis. So, all those elements are still in play. What's really changing is the length of that term and obviously, the volumes are getting larger for those customers as well. And we'll, by the end of the year, likely, therefore, in our fourth quarter call in the beginning of 2019 going to give a more thorough update on all of those matters.

And then as a follow-up, how would you compare and contrast demand for hydroxide versus carbonate? One of your peers seems to be seeing a mix shift toward hydroxide. Is that something that you observe as well? And if so, what might be driving that and how sustainable might it be in your judgment?

Well, given our size and our position in carbonate, we have, I'll say, the opportunity to serve both markets, right. So that's maybe where we differ by some of our peers. We have a significant carbonate and we're building a – and have and are building an even more significant hydroxide capacity. As you know, Kevin, the plan for building capacity has us building more hydroxide capacity going forward than carbonate and that's because we're starting from a smaller base. And that is also true of the market. The market for hydroxide overall outside of Albemarle is smaller and the demand growth therefore is growing off a smaller base. In terms of what's happening at the customer, as I indicated in an earlier question, we're seeing demand for both. Now, what we are certainly – and this is – we even had a question about Chinese EV policy, but in China, we're seeing a clear move to nickel chemistry. And we – it's very likely that we'll see an uptick in hydroxide needs for what's going on in China where they're putting their EV infrastructure and vehicles in place. But all that being said, the contract commitments we have that go out into the next decade are pretty balanced between carbonate and hydroxide. And it really does depend on the cathode or battery manufacturers' infrastructure, the know-how they have in place to process and therefore the preference they have for one or the other.

It's helpful. Thank you.

The next question comes from Aleksey Yefremov of Nomura Instinet.

Good morning. Thank you. Sorry to come back to the China question. I recognize that they don't have exposure to China spot lithium market, but can you offer us your view of what is going on in that whole lithium-to-EV value chain? Is there anything that you see that has implications for EV sales in China and therefore global demand for Lithium?

Yeah. Really, the only thing that I could hypothesize is that there are some lower grade carbonate that's in China that when you look at the Chinese regulations moving to a longer storage and a longer battery is having a tough time finding a place in the marketplace for EV because it won't meet that standard for that longer drive time under the new regulations in China. So it's of less value and somebody's trying to find a spot for. That's the best I can offer you. I don't think it's going to have any impact at all in our business.

Got It. Thank you, Luke. And then, staying in China on Xinyu II, what could be the benefit in terms of volume next year? Should we think of the ramp of Xinyu II as just offsetting some of the tolling volume that you have next year or will this be incremental to the tolling level that you have this year?

It's going to be incremental. And so, at full rates, it would be 20,000 metric tons on an annual basis. I don't think we can expect it to start up and sell out 20,000 met tons and run that way. So, is it going to be – we'll have a better handle around the second – the next call, but my expectations would be to get something around 15,000 or something like that out of that plant next year, that would be good operations assuming that they get commissioned and started on the back end of that during the fourth quarter, I would hope. That may be a stretch, but I would hope we'd be able to do that.

Understood. Thank you.

Okay. The next question comes from Sebastian Bray of Berenberg. Sebastian Bray - Joh. Berenberg, Gossler & Co. KG (United Kingdom): Good morning and thank you for taking my questions. I would have three, please. The first is on the extent of coverage of your volumes with longer-term contracts. Could you please give an idea of what percentage of your volumes are booked out for the next two to three years with longer-term contracts? I think the target, from memory, was about 50% by the end of this year. The second one is more on the development of Lithium demand this year. Do you have enough visibility now to say you would expect the market to grow by, let's say, 20% or potentially even more percent in absolute terms? Would this be about 260 kilotons to 270 kilotons? And lastly, a question on Catalysts. This business is, I think, has been mentioned in the previous question. People were typically thinking of low single-digit growth for. Suddenly, it has grown by over 10% volumes. Is this a catch-up effect? Is it some pre-stocking ahead of IMO legislation? Could you elaborate a bit please on why this business has grown as pleasingly as it has in Q2?

Okay. Let me let me take the first one. On the coverage on our long-term agreements over the next two to three years, that's probably going to be 95%-plus from what we can produce. Next year, as we said, we're going to have to rely on tolling as well. So we're selling more than we can produce internally because we're still relying on tolling. Our goal long-term is to be right around 80%, but we won't get there until sometime early the next decade, if you look, I would assume. On the demand, Eric, do you want to solve (00:45:09) a little bit about that, please?

Yes. So, I mean, I think – I'm trying to remember what we said in the past, so what industry prognosticators often say, but it's a growth that's sort of in that neighborhood of 20% year-on-year is sort of the expectation maybe going forward. Now, I can tell you that this year the demand growth, from what we see, looks stronger than that on a percentage basis. And it's coming – Luke in his script referenced a near doubling of EV demand. There's demand that's coming from other places like e-buses. There's demand coming from even industrial applications with a strong global economy. So, we're seeing demand that could approach close to 50,000 metric tons year-over-year on a market that, last year, we indicated, by our estimates, was 220,000 metric tons. So that's a stronger growth than we would have thought at the beginning of the year.

And then, if you look at Catalysts, I would view it – when you're looking at this year-over-year growth, you got to get it back to 2017. And if you go back 2017 and look at Catalysts from a full year basis, we would have been down year-over-year. So, 2017 was weaker than 2016. So, 2018, if we're high single-digits, we catch back up, or we maybe a little bit ahead or a little bit down. So, overall, as we've talked about, this is a lumpy business. FCC is more consistent. The CFT market in hydroprocessing catalysts, based on customer mix and product mix, and whenever they turn around, you have different costs based on where you are in that turnaround cycle. So, it happens to be this year that we're up after a down year last year. Overall, when you look at it over the course of five to 10 years, I would still expect that kind of 3% growth is where we'd end up on a CAGR basis. Sebastian Bray - Joh. Berenberg, Gossler & Co. KG (United Kingdom): All right. Thank you very much.

The next question comes from Arun Viswanathan, RBC Capital Markets.

Great. Thanks. Good morning. I just wanted to ask about the costs you're experiencing in Lithium. How would you characterize the cost curve over the last year and what's your outlook over the next year? I mean, have you seen any material changes to cash cost for yourself and do you see those rising over the next year?

If you look at cash cost at plants, I mean, there are always year-on-year inflationary impacts, but if you look at that and productivity and then look more broadly at the competitive set, the combination of cost curves – our cost position in the cost curve and our position relative to competitors doesn't change. We're still on the left-hand side of the cost curve for carbonate, with brine and similarly with rock for hydroxide. Now, you have to also consider, what you're going to see in our results is the royalties – royalty structure, which also affects our cost structure. So, now we're – at current volume prices, we're at the high end – at the very high end of that royalty curve or tier. So, you will see times – on a comparison basis, where our costs are high because of that component, but all other components are largely as expected or similar to previous.

Okay. That's helpful. And just two more quick ones. So, first on pricing, when you see the high single-digit price increase for this year kind of go through, does that bring your average pricing kind of more in line where it should be or do you still have more rollovers that would drive further price gains next year?

Yeah. We've still got a few rollovers, but I mean – the only thing I would characterize is – I wouldn't characterize this is not in line. It's fine in line with where we are, but when you see these contracts renew, there is some opportunity for some adjustments in price, but it'll be – as we've talked about with – I think it was Zekauskas' question, what we'll see next year is more of a volume story than a price story. And that's what you see as we bring this new capital line, still some opportunity in price, but really, really it's more a volume story.

Great. Thanks. And last one is just Tianqi recently announced that they're investing a little bit more to increase some spodumene production in Australia. I think it's like 1.8 million tons or so by 2021. Would you get any offtake from that, or is that something that we could look for you to grow further in, or is that not a market for you guys?

No. So, it was actually Talison, not Tianqi. Tianqi is our partner. Talison made the announcement. And this is part of what's enabling the growth plan that we have that we've described. It's not in the current earnings deck, but it's certainly in our website. The expanding Lithium conversion capacity chart we have in Wave 1 and Wave 2. And under the bylaws and the relationship we have, any increase in offtake, we get half of and Tianqi get the other half. So, it doesn't go to market. It goes to us and enables that Wave 1 and there'll be a continued plan towards Wave 2 capacity expansions as well.

Okay. Thanks.

The next question we have is from Mike Sison of KeyBanc.

Hey, guys. Nice quarter. Luke, you kind of opened up and talked a little bit more positively again on EVs. Can you maybe just update us on your outlook for Lithium? Has it increased since the beginning of the year and to what degree? And you had a lot of nice highlights on what you think demand should be at the beginning of the call.

Yeah. No, if you look, our demand model remains fairly consistent with what we talked about earlier. And if you remember at one of our – at our previous calls and in some of our decks that we've got online and we've used that, some of the seminars that we've been to, in 2025, we're saying a total demand of around 800,000 metric tons. Transportation would amount to 550,000 metric tons of that, consumer electronics, 110,000 metric tons, and all other industrial uses about 140,000 metric tons. So, we haven't changed in that, although what I was trying to point out is the data that we've seen, the demand from our customers, the steps taken by our customers' customers committing to capital is all consistent with that demand model that we laid out early this year. So, during the course of this year, we've gotten even more confident in our demand model and even more confident in the growth that we anticipate between now and 2025.

Great. Then, as a quick follow-up, there still seems to be some concern that Lithium pricing could significantly fall over time. Do you see a scenario where your contract pricing can fall significantly over the next couple of years?

No.

Great. Thank you.

Thank you. The next question comes from Vincent Andrews of Morgan Stanley. Vincent Stephen Andrews - Morgan Stanley & Co. LLC: Thank you, and good morning, everyone. Just a couple of quick ones. Scott, the cash flow from operations guidance stayed flat, even though, EBITDA, you took the bottom end and the high end up. I did see some comments in the release and such about raw materials. Is this just a working capital build or what's the story there?

Yes. Vincent, this is primarily driven by – given our earnings up, our revenues up as well, so we have a bit more working capital. Obviously, that's going to be a bit of a drag on our cash flow. So, that's really all it reflects. Vincent Stephen Andrews - Morgan Stanley & Co. LLC: Okay. And then just – I've been reading some things about workers' strikes in Chile, maybe more for BHP and others, but is that something that you're concerned about at all?

We're not concerned at all. In fact, we recently just negotiated all of our union contracts for another three years. So, we feel like we're in great shape. Have a wonderful working relationship with our employees, both in the Salar, in Santiago and La Negra. There's a lot of activity down there right now. So, working with them together to get those contracts renewed, took a lot of great leadership from both the employees' side on the unions and ours. So, kudos to all those guys. Vincent Stephen Andrews - Morgan Stanley & Co. LLC: Okay. Good to hear. Thanks very much, guys.

The next question comes from Mike Harrison of Seaport Global Securities.

Hi. Good morning. You mentioned in Catalysts that the FCC prices had moved a little bit higher. Can you just give us a little bit more detail on what you're seeing in the FCC pricing environment and your utilization rates in FCC right now?

Sure, Mike. This is Raphael. FCC utilization rates are fairly high right now. They're actually for – for the major players, it's very high. In China, utilization is lowered by Chinese FCC producers. But overall, it's a good market for FCC, given where utilization is. That's been favorable for pricing. We've seen pricing trending upward in most of our established markets. And I think that's a good sign. Pricing is a function not just of utilization rates, but it's also in the value you can deliver to your customers. And we're fortunate to have good technical products and technical people to help sell those solutions to our customers.

I was also hoping, Raphael, that you could break out the 16% volume growth that you saw year-on-year in Catalysts. What were the separate volume growth rates for FCC versus HPC? Thank you.

It's Scott. Yeah. So, Mike, we don't normally split those out, but we saw volume growth in both businesses.

Thank you.

The next question comes from Jim Sheehan of SunTrust.

Good morning. Thanks for taking my question. Could you talk about Lithium margins over the next – say, in 2019? You have shifting and moving parts throughout the year. How should we think about the seasonality or cadence of margins quarter-by-quarter?

Yeah. This is Luke. We look at it normally on an annual basis because if we got a – you got a plant that's running 40,000 metric tons and you shut it down for a week or two – or two weeks for something, you can see a change. So, what I would say is what we've always said. We expect these margins to be north of 40% and we believe we'll be able to hold that well into the future. If we look last year, I think our overall Lithium margins on an EBITDA basis were roughly 43% to 44% on a round. And if I look at it this year, first quarter, it was kind of 44%, second quarter was 45%. So, we're kind of right on where we've said we're going to be. I think, overall, for the full year, you'll see similar margins that we saw in the first quarter. And I'll expect, as we get out in 2019, we would see similar type margins.

Great. And on the IMO fuel standards for marine fuels, are you seeing any impact in your business this early, any impact on demand or pricing, or is that something that is going to ramp slowly over time as the regulation is implemented?

Jim, we haven't seen – this is Raphael, we haven't seen any impact of that yet. And to your point, I think it'll ramp slowly over time. It's an overall trend in the industry towards lower sulfur transportation fuel, not just in marine, but around the world, but it's a slow ramp.

Thank you.

The next question comes from Chris Kapsch of Loop Capital Markets.

Yeah. Good morning. My questions are follow-ups around the increased activity with tollers. I guess, tolling has always been part of the mix and I think, indeed, it was a tolling relationship with Jiangxi Jiangli, which ultimately led to the acquisition at the time what was probably one of the best converters in China. So the questions are, a couple of things, one, are these tollers that you're working with now, are they totally focused on battery-grade lithium products and you're comfortable with them hitting those specs? And then, given that these tolling pounds are part of the mix, is it having any sort of dampening effect on margins currently? And if that's the case, as you expand your in-house conversion capacity and shift more of that volume back in house, will that have an influence on the margin outlook?

Hey, Chris. This is Eric. So with regard to tolling, as you know, we qualify and spend a lot of time working in getting the right tollers. We make sure we're working with folks we know and believe they have the right quality. All that being said, it is not used in battery-grade products, right? We use this largely for technical-grade product lines or our customer relationships that we have. As we've said often on over the past couple of quarters and years, we'll continue to use that as swing capacity as we bring on plants and bring off to support ourselves because it is a lower-margin business, right. It does have a margin-dampening effect. And you're seeing a little – and we expect a little bit of that in the coming quarter, right? We will have tolling volumes that's offsetting some of the lack of volume we otherwise would have had coming out of La Negra because we're having a tie-in at La Negra. So, yeah, our expectation is you'll probably see more of a margin impact from the – from what goes on than a sales impact with La Negra because of that tolling phenomenon, being that swing capacity we bring on to buffer the situation.

That's helpful. And then just as a follow-up. I mean, given that most of these relationships are not focused on the battery grades, is it fair to assume then that the strategy will be to build out organic in-house conversion capacity as opposed to considering maybe another converter acquisition?

We will look at that as it comes. And it depends upon what the timing is, it depends upon what the capabilities of that toller is, and it depends upon what the return on invested capital would be, and what we would have to invest in there. So, we look at that, obviously, but the return's got to be right for us to do an acquisition, given where we are from an organic. And as we look at it as well, we've talked about the importance of having assets within China and outside of China because within China any export of lithium hydroxide has a 17% non-recoverable VAT. And we just want to be sure we can service our customers efficiently and effectively outside of China and inside of China.

That's helpful. Thank you.

Thank you, ladies and gentlemen. That concludes the presentation. You may now disconnect. Thank you for joining, and have a good day.