Welcome to the Innospec Q2 results conference call. For your information, today’s conference is being recorded. At this time I will turn the conference over to Mr. David Williams, Vice President, General Counsel and Chief Compliance Officer. Please go ahead.

My name is David Williams and I am Vice President, General Counsel, and Chief Compliance Officer of Innospec. Thanks for joining our second quarter 2012 financial results conference call. Today’s call is being recorded. As you know, late yesterday we reported our financial results for the quarter ended June 30, 2012. The press release is posted on the company’s website www.innospecinc.com. An audio webcast of the call and the slide presentation on the results are also now available and will be archived on the website. Before we start I would like to remind everybody that certain comments made during this call might be characterized as forward-looking statements under the Private Securities Litigation Reform Act of 1995. Generally speaking, any comments regarding management's beliefs, expectations, targets, or other predictions of the future are forward-looking statements. These statements involve a number of risks and uncertainties that could cause actual results to differ materially from the anticipated results implied by those forward-looking statements. These risks and uncertainties are detailed in Innospec’s most recent 10K report as well as other filings we have with the SEC. We refer you to the SEC’s website or our site for these and other documents. In our discussions today we have also included some non-GAAP financial measures. A reconciliation to the most directly comparable GAAP financial measures is contained in our earnings release and in the presentation that follows, a copy of which is available on the Innospec website. With us today from Innospec are Patrick Williams, President and Chief Executive Officer and Ian Cleminson, Executive Vice President and Chief Financial Officer. With that I will turn it over to you Patrick.

Welcome everyone to Innospec’s Second Quarter 2012 Conference Call. Our first quarter momentum carried us well into the second quarter in the face of some very strong and unpredictable headwinds worldwide. Thanks to the diligence of our operating teams throughout the company and our strong financial management we performed solidly in Q2. We have paid and will continue to pay close attention to cash management and cost containment in the face of economic uncertainties which has enabled us to maintain a very strong and liquid balance sheet. Continued positive cash flows from our businesses has enhanced our liquidity as well. We are watching the world economies closely and adjusting our business strategies accordingly. Having said that, our adjusted non-GAAP diluted earnings per share of $0.79 for the second quarter is in line with the financial analyst consensus expectations. Our overall gross margin was steady at 31.8% at the end of the period and our sales performance across the board was solid by all measures. Year-over-year our operating income increased by 7% and I’d make particular mention to the fact that both net income and EBITDA reported comparisons were down almost exclusively to the pre-tax $12.2 million swing in foreign exchange currency losses. Our Fuel Specialties businesses delivered continued sales growth driven by improved pricing and a richer sales mix particularly in Avtel sales which were up 29%. Despite our strong competitive pressures in this sector, I am pleased to report that we have maintained our gross margin at or above the 30% threshold on a sequential basis for the third consecutive quarter. While still comparatively small, our Oilfield Specialties business has shown good performance with additional business wins. We will continue to evaluate external growth opportunities in this area. You will recall that last year’s second quarter was a record for our Active Chemicals business. This year we fell short of that record principally and explicitly as a result of lower volumes in the depressed polymers and fragrance ingredients in EMEA. Our Active Chemicals business was particularly buoyant in the personal care market. Certain countries continue to show strong demand for our octane additives products and while the future for this business is still unchanged, we continue to record strong margin performance north of 50%. I will now turn the call over to Ian Cleminson and then return with some comments about our business and our strategies going forward and then we will take your questions.

Turning to Slide 6 in the presentation, the company’s total revenues for the second quarter were $178.5 million a 4% decrease from $186.5 million a year ago. The overall gross margin rose slightly from last year to 31.8% driven by continued strong sales from our higher margin octane additives segments and an improved sales and pricing mix in Fuel Specialties. Our GAAP earnings were $0.65 per share. On an adjusted basis our earnings per diluted share was $0.79. EBITDA for the quarter was $22.8 million, down from last year primarily the results of a pre-tax $12.2 million negative swing in foreign exchange driven principally by the retranslation of our non-US dollar balance sheets. Operating income for the quarter was $24.4 million, a 7% increase from the year ago period. Moving on to Slide 7, revenues in Fuel Specialties rose 1% in the second quarter to $114.5 million. The increase was primarily driven by a richer sales mix and improved pricing of 8% offset by 3% lower volumes and an unfavorable currency impact of 4%. By region, revenues were down by 3% in the Americas and remained essentially unchanged in EMEA and Asia Pacific and were up 29% in our Avtel business which is now operating at expected levels after a slow first quarter. Margins in this segment increased by almost 3 percentage points from last year and sequentially continued at the 30% level. Gross profits increased by $3.6 million to $3.7 million and operating income rose to $16.9 million, a 37% increase from a year ago. Turning to Slide 8, revenues in the second quarter in Active Chemicals decreased from last year’s record quarter to $44.9 million as strong pricing and improved sales mix of 6% was offset by 10% lower volumes and currency effects reduced reported sales by 4%.…

Overall, we are pleased with our solid performance during the first half of the year and as I am sure you understand we are taking a very guarded approach to the remainder of the year as we deal with the uncertainties of the economies worldwide. At the same time we are very confident that our business strategies are on track and that our business engines are solid as we pursue future opportunities. We are very conscious of the difficulties facing our customers in all of our key markets as they deal with slow growth an inconsistent consumer demand. We continue to drive our strategy of developing highly cost effective solutions to both improve customer products and reduce their cost. We are also continuing our investment in R&D targeting not only high performance products but also those with improved environmental impact. We are also very comfortable with our strong financial position which will enable us to respond to the market opportunities, continue to prudently evaluate and pursue appropriate and complementary acquisition candidates, and realistically consider programs that enhance shareholder value and returns such as stock repurchase and dividend policies. In the meantime, we are satisfied that investment interest in the company remains high and that during the quarter we picked up another publishing analyst, a good sign that the market shares our confidence in the future of Innospec. Now, I will turn the call over to the operator and Ian and I will take any of your questions.

[Operator Instructions] Your first question comes from John Tanwanteng, CJS.

What are your thoughts about the rest of the year? Is it better or worse than when you exited the first quarter and do you have expectations on pricing and foreign exchange over the next quarter or so?

I’ll let Ian talk about the foreign exchange but I’ll talk about the quarter. I think as every CEO in the market today is looking at the uncertainties in the financial markets and the geopolitics going on in certain countries. We would be irresponsible not to be doing the same, but in saying that I think we’re starting off strong, we’re seeing kind of a little glimmer of light that things might be improving and so our expectations are still I would say cautiously optimistic going into Q3 and Q4. But again, being a responsible management team and being a fairly conservative management team we’ll watch things and we’ll watch trends very closely.

Just to pick up on what Patrick said, in terms of FX there’s 2 things really that we need to say. First of all, our business was impacted by FX on the revenues line and if you look at our Fuel Specialties and our Active Chemicals businesses both were -4% due to FX impacts. But our operating business is generally what we call naturally hedged so down to operating income we get the gains and losses and they tend to net themselves out to 0. Where we saw the FX impact in our business is when we translate our non-US denominated balance sheets primarily in Euro, Sterling, and Swiss Franc and that’s where we’ve had some movements in those currencies and that’s where we’ve seen some losses. In previous quarters we’ve seen gains in those areas and as we look out to the future I can’t predict where currencies will go but the important thing for us is where our operating business is naturally hedged and we can see some quality earnings coming out of those businesses.

And pricing?

We’re seeing some relief on raw materials. I think we’ll see the positive effect in latter part of Q3 early part of Q4 understanding the fact that obviously crude dropped down to the low 80s now it’s popped back up to the mid 90s on WTI, Brent is a little bit higher than that, about $12 typically on a premium basis. So we’re starting to see some fluctuations on raw materials but I think it’s a little give and get. I think we’ll be getting a little better pricing but we’ll be having to give up a little bit to the customers so I think you’ll see some improvement in pricing but I wouldn’t put a whole lot into it.

You guys have done a good job on the recovery in gross margins in the Active Chemicals segment. Is there more upside there given where Europe is and what people are saying about a hard landing in China?

I would probably leave it where it is. I think we’ve seen an improvement. The issue within Active Chemicals is the polymer business is in a state of flux due to the fact that most of that polymer business sits within EMEA and we all know what’s going on with the EMEA markets. If the EMEA markets would stabilize and start coming back up and we would see some glimmer of hope, I think you’d see our polymer business come back. But for right now from where we sit probably for Q2 and Q3 I wouldn’t take Active Chemicals any higher than where it sits right now.

One last thing, it sounds like you added fragrances to the list of segments under pressure in Europe. Is that new or did I just miss that before?

No, it sits there. It’s typically not under too much pressure, we just saw a little bit downside pressure in Q2 in the fragrance market. Again, it doesn’t have the pressure that polymers has but we saw some downward trends where we saw it pick back up in the Americas and a little bit in Asia Pac and it suffered in EMEA. But I think again, we’ll see that again balance itself out as well.

Your next question comes from Christopher Butler, Sidoti & Company.

I was hoping you can help me out, the language from the press release and your language from this conference call seems to be a little bit different. You’re referencing cautiously optimistic, some investments in R&D and I know you’re investing in sales facility but the press release was talking about cost containment, guarded, preservation of cash, a lot more negative. Should I take the conference call as a better indication?

I think take the conference call as a better indication. Sometimes when you put press releases out the written ways probably don’t express our true meanings. The comment around preservation of cash is more about not necessarily the concerns about the future markets it’s more about preserving cash for our capital management strategy which includes acquisitions, buybacks, and dividends. As we did in 2011 when one of the acquisitions that we were working on didn’t go through, I think you guys saw within 72 hours we put a buyback in place. We’re in a similar situation. Something is going to happen, it’s a function of timing. We’re not sitting on cash, we know sitting on cash doesn’t do our investors any good, it doesn’t help our company in growth. There’s just a proper timing for this and it’s all a function of timing.

Looking at Fuel Specialties gross margin there we typically see because of seasonality a step back in the second quarter sequentially but you held up pretty well. Is that just a byproduct of oil coming in a little bit during the quarter or is there a step up in product mix that took place as well?

A little bit of both.

My odd question for the morning, the harvest in the US with corn does that do anything for you as far as fuel mix as we look forward at all?

Yes, there was a little negative effect due to the fact of the drought conditions. There was obviously a downslide on diesel consumption on that side of the market, on the ag market. But I think we’ve seen the negative effect of that.

Your next question comes from Ross Berner, Weintraub Capital.

Two questions, 1 can you just talk a little bit about you talked about the acquisition opportunity in the past, kind of both in oil service and also small deals that would be bolt-ons, including all the way up to something that is potentially transformative. Can you just sort of give us a lay of the land in terms of things you’re looking at and how you’re thinking about the M&A opportunities in the market as it is now?

I think when we endeavored on the acquisition path we’ve always stuck to our strategy of looking at smaller acquisitions below $100 million that had multiples that were in line with what we expect to pay. We looked at some transformational deals, the multiples were still extremely high in those highly publicized markets so therefore we kept to pretty much our strategy of smaller deals and that’s really what ties in to the dividends and buybacks. Transformational deals you put a lot of things on hold due to the fact that you don’t know where you’re going to land. When we look at the acquisitions that we’re targeting right now we know that we could do those acquisitions and we could do buybacks and dividends at the same time. Again, it’s just back to a function of its timing. We do have some things in play that are on the smaller side that will enable us to enhance both hopefully our Active Chemicals and the Oilfield Service sector and that’s really where our target is right now until we see something in fuel specialties that is transformational or makes sense for us to go after. But multiples in these markets are still extremely high and we’re not going to go out and pay something of a nine or 10 multiple for a transformational deal. It just doesn’t make sense for us.

All the transactions you're looking at you consider to be accretive even with the multiple that you have?

Absolutely.

Then I guess my last question is you talked about conserving cash as being one of your primary strategies going forward. That idea seems a little bit in conflict or contradictory to both making acquisitions and implementing a buyback. I’m not sure what you really meant to say. If you intended to buy back stock or make these smaller acquisitions that wouldn’t seem like conserving cash. Are you saying you’re conserving cash for those reasons?

That is correct. I think it’s always in the text that sometimes gets misrepresented. Yes, the conservation of cash is strictly around acquisitions and buybacks, and dividends. That’s what we meant when we talked about conserving cash. I think the word was preservation of cash.

Do you sort of feel like the first thing you do is exhaust the acquisition opportunity? I mean, would you announce an acquisition opportunity and a buyback at the same time? If you feel like there’s enough capital and cash flow, cash on the balance sheet and the free cash flow going forward to do both why not do the buyback first since you know that’s going to be part of your plan regardless?

Again, we’ve got a couple of things going right now that we’d like to just see those play out. Your original comment about would you or potentially could you announce both at the same time, that’s not out of the question. It’s just a timing issue.

You next question comes from R. Gregg Hillman, First Wilshire Securities Management.

Could you review again who the end customer is for the polymer business in Europe, the industries?

It goes into the automobile industry and the industrial markets, predominately the housing market.

What is it used for? Or, what’s the functionality of the polymer?

It’s sulfur flexible plastic hosing, plastic PVC windows, those types of things.

A fairly commoditized market.

Is it a market you want to stay in?

It’s not a primary market for us. As you can see when we bought that asset that asset was primarily for Fuel Specialties for ethylene vinyl acetate to keep diesel from jelling. So during the winter time you’ll see the primary go to Fuel Specialties and then a secondary really is to go to those other markets. So, it’s a must for us and it’s kind of a secondary for that industrial and automobile markets.

On your new oil service chemical business do you serve offshore oil rigs with any chemical products?

Not at this time but some of the acquisitions that are in line we'll be doing some offshore servicing.

I take it they use a lot of chemicals?

That is correct.

Then just in the United States with the catalytic converters and Navistar I think going towards urea do you make anything that goes into catalytic converters for diesel trucks?

No, we don’t, not for necessarily for the converter and we’re not in the urea business obviously. But, no.

I guess just in new products in general is there anything you can say that’s already been publically stated or [indiscernible] anything like that?

What I can say is we’re continuously putting out new products and I think you guys have typically seen the percentage out there is 35% to 40% of new products over 5 years constitute our sales. I think that we’re on that track. I mean, we are pushing the envelope on technology not only because the fact that the environmental impacts, the engine impacts, the regulatory impacts, but I think also to keep ahead of the game and to make sure our customers are getting the best products for the marketplace and that’s our focus. We’re always putting out new products. I think we’re always pushing the envelope on R&D and we’ll continue to do that.

[Operator Instructions] We'll take the next question from Chris Shaw, Monness Crespi.

Can I ask about Fuel Specialties for a second. In the release I think you said North American sales were down 3%, Europe and Asia were flat. I was just curious about that because I thought Europe would be worse off. What’s going on in North America right now that’s causing the weakness?

I think a couple of things. I think there was timing of shipments in Q2. Quite frankly, I think there was some destocking in Q2 due to the fact that customers are expecting price relief on a raw material basis. That’s why we saw a little bit of weakness in the US market in Q2 and I think you’ll see back to regular demand in Q3.

Is that bearing out already through July? I would think with oil moving up the anticipation of lower prices would be over at this point?

It is.

I noticed in the Octane additives this year-over-year and this might have been happening from previous quarters but it was a pretty big drop in admin cost. Is that the legal expense from the law suits and stuff?

Yes, that’s right. We had a $3 million pre-tax charge in this quarter last year that’s not recurring this time around so you’re spot on.

Just Avtel where is that geographically? Is that more Europe versus more U.S. or is it sort of split evenly?

It’s more U.S.

The next question is a follow-up question from Jonathan Tanwanteng, CJS.

In the Octane segment you got a nice extension in being able to clear low margin inventory there. I know you said the business would not be as good as the first half but is the margin opportunity still there? Then just I guess longer term, I know you guys are expecting this business to be terminal eventually but any change given where the FAA has talked about Avtel?

I think it’s 2 things, I think there are opportunities to keep pushing lower cost inventory through for the remainder of this year but into next year it really depends on demand and order patterns. Obviously, the higher demand the more volume we can push through the plants and the lower the unit costs so we’ll have to wait and see next year. I think as we move through into ’13 and possibly into ’14 our expectations are that the gross margins in that business will deteriorate from where they are today. In terms of the FAA announcement that relates to our Avtel business and that’s in our Fuel Specialties and they’re saying pretty much in line where our thinking is round about 2018 for that market and we don’t see any real change from that right now.

We'll now take a follow-up question from Chris Shaw, Monness Crespi.

I just want to know how much of your cash is in Europe versus the U.S.? Is that an issue in terms of looking at deals and trying to conserve cash right now?

We have most of our cash is swept into our central treasury function which is based out of the U.K. but we can move cash around the globe and when the deal is there and in place we’ll have the cash in place to do that.

And you can do that efficiently on a tax basis?

Yes, we can.

We'll now take a follow-up question from Ross Berner, Weintraub Capital.

Can you just talk a little bit about volume trends so far this quarter?

Yes, I can tell you it’s been basically a volume and price mix that’s really helped out Europe. I think Asia Pacific we’ve seen volume about where we expected, fairly square, fairly even. U.S. we saw volume demand drop a little bit and again I think a lot of that was a little bit of destocking going on with the expectation of raw material cost coming down. But I think if you look at fuels overall diesel is up a little bit on consumption. It’s flat in Europe, it’s up about 3% in Asia Pacific and it’s up a couple of percent in the Americas. If you look at gasoline it’s down across the board in all 3 regions. Then if you look at Active Chemicals on a volume basis, personal care is way up on a volume basis and then of course as we expected on a polymer basis, volume is down.

One last observation is that stock is down almost 10% on virtually no volume. I know you’d be precluded from being in the market today but I don’t really understand why the stock is down so much but this is the kind of day you’d want to have a buyback in place.

Understand and note taken.

We'll take the next question from Ivan Marcuse, Keybanc Capital Markets.

You may have answered this but I just have a couple of quick ones. On a sequential basis from first quarter to second quarter what did volumes do exclusive of pricing when you look at Fuel Specialties? Were they down pretty evenly from quarter-to-quarter across the regions or was there another region that maybe declined more than another?

We saw volumes in EMEA fairly flat. We saw volumes up a tad in Asia Pacific and as we discussed right before you came on, the volumes in Americas were off a little bit. We think some of that had to do with some destocking going on in Q2.

If you go into Q3 I guess you would expect a sequential increase. Then with materials falling off would you expect a gross margin expansion?

Minor, very minor.

As there are no further questions I would like to hand the call back over to Patrick Williams for any additional closing remarks.

Thank you all for joining us today and thanks to all our shareholders, customers, and Innospec employees for your interest and support. If you have any further questions about Innospec or matters discussed on this call please give us a call. In the meantime we look forward to meeting up with you again next quarter. Thanks again. Have a great day.