Good day and welcome to the Innospec Q1 Earnings conference call. For your information, today’s conference is being recorded. At this time, I would like to turn the conference over Mr. David Williams, General Counsel. Please go ahead, sir.

Thank you Lisa and good day everyone. My name is David Williams and I am Vice President, General Counsel and Chief Compliance Officer at Innospec Inc. Thank you for joining our first quarter 2013 financial results conference call. Today’s call is being recorded. As you know, late yesterday we reported our financial results for the quarter ended March 31, 2013. The press release is posted on the company’s website at www.innospecinc.com. An audio webcast of the call and a slide presentation on the results are also now available and will be archived on the website. Before we start, I would like to remind everyone 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 10-K 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.

Thank you, David, and welcome everyone to Innospec’s first quarter 2013 conference call. We have started the year with good momentum and we have had a very good first quarter. We are particularly pleased with the continued strong performance in the key strategic sectors of our business, globally namely fuel specialties and personal care. Thanks to our strong cash generation and management policies and attention to cost, we have maintained a very solid balance sheet position. This enables us to invest in our growth businesses as well as new product development and technologies while continuing to evaluate external growth opportunities for the company. We had a strong trading quarter in fuel specialties, registering 7% top line growth despite a continuing challenging market environment. New product development is still a priority for us in fuel specialties as we remain very customer focused. Our Avtel business had a strong quarter, benefiting from favorable order patterns, but we do expect this to normalize in the second quarter. Last year, as you know, we closed on the acquisition of Strata Control, whose products are designed to prevent and solve mud and fluid losses in oil and gas drilling The integration of Strata into our global business is proceeding reasonably well. Strata made top and bottom line contributions to Innospec in the first quarter and this deal is playing out as a good fit in our long-term growth profile. We expect Strata to be accretive for the full-year 2013. We are investing significantly in the global rollout of this business and we expect these actions to deliver sustainable growth during 2014. Importantly, gross margins continue to remain above the 30% level in our fuel specialties business. Performance chemicals has performed in line with our expectations in terms of top line performance, new product launches, and…

Thanks Patrick. Turning to Slide 6 in the presentation, the company’s total revenues for the first quarter were 199.4 million, essentially stable with 200.8 million a year ago. The overall gross margin increased slightly from last year to 32%, maintained by continued strong growth in fuel specialties and a solid performance in the personal care market of our performance chemicals segment. This was achieved on the back of a 51% dip in our octane additives business year-over-year. Our GAAP earnings were $0.75 per share, and on an adjusted basis our earnings per share were $0.72. This year’s first quarter reflected 8.9 million more in SAR expenses over 2012, essentially growth focused in research and development new product testing, legal costs associated with an enhanced compliance, crossover in the new Strata business, and the headcount additions as the company plans for the future. Stock-based compensation also increased significantly as a result of the 28% increase in our share price during the quarter. EBITDA for the quarter was 27.9 million and net income for the quarter was 18 million, down 6.6 million for 2012 first quarter. Moving on to Slide 7, revenues in field specialties for the first quarter were 140 million, up 7% from the year-ago period. The increase was primarily driven by a richer sales mix and improved pricing of 5%, offset by 1% lower volumes. The recently acquired Strata business contributed an additional 3% to revenues. By region, revenues increased 2% in the Americas and 3% in EMEA, but were down 1% in Asia Pacific due to reduced volumes. The Avtel business more than doubled compared to a year ago as a result of the timing of shipments. Margins in this segment increased by 4 percentage points from last year to 33.6%, partly driven by the higher margin Strata…

Thanks Ian. Summing up, we feel that we are off to a good start in 2013 and our businesses are broadly on track with our expectations. Our fuel specialties business continues to perform quite well despite global economic challenges, and continues to deliver good margins. Our personal care business is in very good shape with particularly good sales and margin growth in the Americas. We are closely monitoring the remainder of our performance chemicals businesses in fragrance ingredients and polymers. We continue to evaluate external growth opportunities that are complementary to our global growth model. As discussed in previous quarters, we hope to finalize a second acquisition in the oilfield specialties in the second or early third quarter. This will create critical mass in this business group and allow us to report as a separate segment. After this, we will move our acquisition focus to personal care business opportunities. We are managing our business and finances well. We have a strong balance sheet and continue to generate good cash flow, which allows us the flexibility we need to deal with economic and market influences. We are investing in our businesses, driving new products and technologies to better serve our customers, implementing a new global ERP system, and continuing to enhance our compliance processes. We continue to have positive feedback from our investors and from the market. Transparency is an important objective for us and we will strive to maintain an open and effective dialogue with all stakeholders. Now I will turn the call over to the Operator and Ian and I will take any of your questions.

Thank you. [Operator instructions] We will now take our first question from John Tanwanteng of CJS Securities. Please go ahead. John Tanwanteng – CJS Securities: Good morning, guys. How are you doing?

Good morning, John. John Tanwanteng – CJS Securities: Your SAR was pretty high on a sequential and year-over-year basis. Can you break down what was due to the stock-based comp and increased compliance liability costs, and what portion of that was devoted to M&A expenses, if any?

Hello John, this is Ian. I’ll take that one up. Yeah, our SG&A costs were about 9 million higher year-over-year, and to a degree we expected about 4 million of that based on our internal forecast. The remaining 5 million really breaks down about 2 million on stock-based compensation and about 2.5 million on enhanced compliance costs and legal costs. So that’s where the bulk of that comes through. Obviously the enhanced compliance cost we think will be recurring in Q2 and possibly also in Q3 as we build out our compliance procedures. That’s an area that we need to focus on and we will continue to focus on. The SEU cost is driven by share price and obviously after a 28% increase in stock price over the quarter, we’ve obviously taken a higher charge there. John Tanwanteng – CJS Securities: Got it, thanks. The gross margins were actually very good in fuel and in TEL. What portion of that do you expect to be sustainable going into the next quarter and the rest of the year?

You know, John, I would think right now the situation that we’re in with raw materials and pricing to the actual consumer and customers, that we’ll be able to sustain those going into Q2. I think we’ll give you further guidance in regards to margins after the Q2 call. John Tanwanteng – CJS Securities: Okay, got it. And are you still on track to do a personal care acquisition by the end of Q3 or is that more of a Q4 event now?

It’s in the oilfield specialties is where that acquisition is probably going to be the latter part of Q2, first part of Q3. John Tanwanteng – CJS Securities: I meant the one following that.

We’ll be working on that latter part of the year, going into next year. We’ve got to make sure, John, that when we do these acquisitions that we properly integrate these acquisitions and we don’t overwhelm people. We expand into our global markets properly so that we have sustainability long term, so we want to make sure that we don’t overdo it and we spend our investors’ money wisely. John Tanwanteng – CJS Securities: Okay, great. Thank you very much.

We will now take our next question from Chris Shaw of Monness Crespi. Please go ahead. Chris Shaw – Monness Crespi: Yeah, hi guys. How are you doing?

Morning Chris. Chris Shaw – Monness Crespi: I was curious about the volumes in fuel specialties. I think you quoted them as down 1%. Was there any impact from—I know some customers, at least in the refinery business, were down in Q1. Is there any expectation that Q2 volumes could be better?

You know, Chris, right now I’d probably leave Q2 where it is. The economic outlook that we’re looking at right now, not only just in the Americas but I would say EMEA and A-PAC, there’s just a little bit of uncertainty sitting in the marketplace. We talked about the business closures that we had in Q4 of 2012, which would obviously carry over into ’13 and give us some promising volumes and margins moving into ’13. We still feel that way. The business performed extremely well, but I wouldn’t jump up and say that the volumes are going to increase substantially. I think that I would keep the volumes about where they are right now. Chris Shaw – Monness Crespi: And then in terms of—I mean, you’ve got Strata on board now for, I guess, four or five months. Are you finding there that’s—has there been any potential—is there anything more encouraging than you might have thought initially? Is the integration going well?

Yeah, Chris. I mean, it takes time to get the integration, especially when you’re primarily a regionally focused business, to implement and get into your global network. It is taking some time, as we anticipated. It’s got great technology. We really have stepped up our game in not only the new technologies but also making sure that all of our sales force have these technologies in their portfolio and we’re expanding our horizons on the customer focus base. So I think it’s going well. I think you’ll see a lot of benefits from Strata in the latter part of this year, especially going into 2014, I think, is where you’re really going to see a very substantial jump in revenue. Chris Shaw – Monness Crespi: Okay, and then just one last one on performance. I guess I was a little surprised by the gross margin being down 200 basis points. I would think that—maybe I got the mix wrong in that business, but I would think the personal care had higher margins than the other businesses, so a greater percentage of that I thought might be keeping them at least flat.

Chris, this is Ian. You’re right – the personal care part of that business has gone extremely well. We’re pleased with the top line growth and we’re also pleased with the gross margins in personal care. What we said on the call earlier was that we have taken slightly lower pricing in our fragrance business, which has impacted the margins there and that was pretty much expected. Also in Q1, the polymers business, the mix in that business has been towards lower margin business and that’s impacted us as well. So we’ve taken a little of a hit in the polymers on the fragrance business, but the personal care side has been extremely strong for us. Chris Shaw – Monness Crespi: But I am right to believe that the personal care has probably the highest margins of those three?

That’s correct. Chris Shaw – Monness Crespi: Okay, thank you.

We will now take our next question from Christopher Butler of Sidoti & Company. Please go ahead. Christopher Butler – Sidoti & Co.: Hi, good morning guys. Just staying with performance, could you talk about the fragrances side to that business and what’s changed there? I think we’re all familiar with the polymers in Europe being weak, but this seems to be a bit of a shift.

Yeah, you know Chris, it’s a combination of things. It’s a combination of raw materials and it’s a combination of competition and weak prices in the marketplace. We see this on occasion and it typically rebounds, but this is just a situation where you have a soft market and you have two main suppliers where one main supplier tends to use this as a secondary byproduct and they sell out in the marketplace. I think it’s a situation that will work itself out over time, but there was definitely some weakness in that fragrance market this quarter. Christopher Butler – Sidoti & Co.: And looking at your Avtel business, can you quantify the shift that took place, and should we be thinking about this as something that might hurt you as we forward here a bit?

Yeah Chris, what happened in the Avtel business is that we’ve pulled some volume from Q4 from last year into Q1. I think we talked about that a little bit on our last conference call. We also benefited from a little bit of Q2 volume that was pulled forward. Our view of that business is that it’s unchanged for the full year. We’ve probably doubled what we did last year, or more than doubled what we did at this time last year. The long-term prognosis is about same year-over-year for the full year, so we’ll probably see a lower Q2 and Q3 in that business as it normalizes back to its normal run rate. Christopher Butler – Sidoti & Co.: And on the octane additives, you had mentioned sequential improvements. On a year-over-year basis, do we approach was a pretty strong second quarter in 2012?

Again Chris, we expect a slightly better second quarter, so you’ve seen what we’ve done in Q1. It’s probably going to be 1 or 2 million better on the revenue line, but not much more than that. The visibility we have right now for the second half is pretty unclear. We’ll update you on the next call, but I think as we sit here right now, it’s going to be difficult for us to match where we were last year in the octane additives business. Christopher Butler – Sidoti & Co.: And just to clarify unclear, I guess, is that truly unclear or is that a slightly negative unclear?

I wouldn’t say it’s a negative unclear, Chris. I think it’s just truly unclear. I mean, we’re in market dynamics right now. You guys know the countries that we deal in, and obviously communication is at best difficult, to say the least. But we’re not negatively unclear; I think we’re just unclear as we sit here today. We’ve been very transparent about this business. Will it look like third and fourth quarter last year? We sure hope so. Do we have any clarity? We have no clarity whatsoever. Christopher Butler – Sidoti & Co.: And just finally, Innospec is a company that spent a lot to ramp up its compliance a few years ago. Why are we seeing additional expenses now? What needed to be done in order to upgrade your legal and compliance now?

Sure, I think a couple things. One thing is putting new monies in upfront to get you compliance program up to speed and up to par as where it should be. I think the second is to make sure it’s sustainable long-term with (a) acquisition growth and (b) organic growth, and that’s really where we have focused, is to make sure we put money into compliance that really helps us sustain future growth in this business. What we don’t want to do, Chris, is make a couple of acquisitions and not have compliance as our primary to make sure it’s sustainable long-term and this company doesn’t go back in history where it came from. So we have focused on compliance, we’re making sure we’re putting the appropriate dollars into compliance so that when we make acquisitions, it’s just a plug-and-play at that point in time. Christopher Butler – Sidoti & Co.: All right, I appreciate your time.

We will now take our next question from Andrew Dunn of KeyBanc Capital Markets. Please go ahead Andrew Dunn – KeyBanc: Morning guys and thanks for taking my question. Just real quickly, I was wondering if you would give us a little more color on what’s in the pipeline for that second oilfield specialties acquisition, if we can kind of expect it to look similar to Strata. And then also, I just wanted to make sure I understood you correctly in your earlier comments when that is complete, whether it is Q2 or Q3? Should we then expect the separate segment to be broken out in that quarter?

Sure Andrew, it’s Patrick. I think you’re pretty close to what we were talking about in the size. I think the size will be probably similar to the size of the Strata acquisition. It’s more the production side so we have balanced out the drilling side with the production side, and that was a strategy that we put forth in the beginning. So you’re right – probably latter part of Q2, into Q3, and at that point it will give us the revenue and the breadth and girth to move that into its separate segment and report that as a separate segment. Further from there, we will shift our focus away from oilfield to give it time to breath, to integrate not only from a compliance but from accounting and a global structure and strategy, and move our focus into the personal care side, and that’s really a strategy we’ve had for quite some time and that’s what we’re doing today. Andrew Dunn – KeyBanc: Great. And then secondly, I was hoping that maybe you could just give us a little more detail on the new product pipeline and what we might be able to expect to see there versus what we see in the first quarter.

Yeah, I think if you’ve looked at the sales growth in fuel specialties and in personal care in the performance business, a lot of that domestic growth – or I shouldn’t say domestic growth, organic growth – is based off a lot of new product technologies that were introduced either last year or even as recently as this year. We continuously strive to 45 to 50% of new products over five years in sales revenue, and that’s really what we’re striving for. The key in personal care really is to introduce products in the line because it’s a longer term from product technology to market, and in fuel specialties it’s obviously watching a lot of key factors and making sure that we’re on top of those. But the time frame of introduction in fuel specialties is a lot shorter than it is in performance chemicals. But we’re continuously putting out new products and we’ll continuously have a change in market, and we’re addressing those for our customers. Andrew Dunn – KeyBanc: Great, and then just one last question, more of a housekeeping issue. For the tax rate going forward, should we expect that to be a little lower, down around that 21, 21.5%, or is that going to be going up again for the remainder of the year?

Andrew, actually it’s the 22% mark. It’s going to bounce around 1 percentage point around that. I think 22 is a good place to model on. Andrew Dunn – KeyBanc: Great. Okay, thanks again guys.

We will now take our next question from Alex Beckwith of Sandfire. Please go ahead. Alex Beckwith – Sandfire: Hi, good afternoon. I have a question around the cost increases, specifically the $2.5 million of compliance and legal fees that you mentioned. Why was that unexpected? I mean, what suddenly cause you to have to make that investment? I know it said it’s going to carry on into Q2 and Q3. I mean, that’s a 7 or $8 million unexpected expense that you suddenly thought of in the last three months. I’m just wondering what happened please.

Sure Alex, this is Ian. (Inaudible) about six, seven months ago. As Patrick said earlier on, we’ve taken a different approach to our compliance. We want to keep (inaudible) in there, we want to make sure that we’re absolutely ready for all the acquisitions that we make, that we’ve got the correct resources in the right places in our business. So that’s why we’re putting a lot of effort into this area. It’s important to us. Alex Beckwith – Sandfire: Okay. And then one follow-up, please – you said it’s going to continue into Q2 and Q3. How much of it is going to drop out afterwards? I guess some of it will be replaced by some full-time headcount additions that you’ll be making. How much is non-recurring and how much will recur in future?

Yeah, we expect a similar number in Q2. At the moment, we think possibly Q3 as well but we’ll wait and see, and our expectation is that once we get through this period, the vast majority of that will drop away. Alex Beckwith – Sandfire: Okay, so it’s purely (inaudible) helping you in the company? I would have thought maybe you’d have to make some full-time additions and therefore would be recurring.

Yeah, we have made some full-time additions, but they were already into the Q. Most of this will be third party expense. Alex Beckwith – Sandfire: Okay, perfect. Thank you. Oh, sorry – am I still online?

Yes, you are. Alex Beckwith – Sandfire: Sorry if I missed it – my line is pretty bad today. What was the share comp in Q1 last year?

I don’t have that number to hand, Alex, but I don’t think the stock price moved as high. If you go offline and you email me, I’ll get that number for you. Alex Beckwith – Sandfire: Okay, thanks a lot.

We will now take our next question from Paul Svetz (ph), an investor. Please go ahead.

Yes, thank you. Two questions, please. Patrick, could I ask you to articulate somewhat the strategy or vision you have for the oil services business in the long term? And the second question is over time, I’ve been conditioned to think of the lead tetra ethyl business as someday having a floor driven by things like aircraft fuels, et cetera, and at that point may be sustainable by whatever you have for capital invested in it. Is that still the expectation?

Yeah Paul, let me take the first question, and obviously I’ll try to keep it as short as possible. It’s probably a question that we actually do when we go on the road show to more give you a better feel for the business. The thought process on the oilfield specialties is obviously a spinoff of fuel specialties due to the fact that a lot of the products that we have in field specialties and, quite frankly, in personal care from a (inaudible) standpoint have application fuels and cruding. The thought process is that we’d like to treat the crude down hole through the pipeline, through the refinery to the consumer, and we’ve got a few of those business segments that we still have to fill in. If you look at the drilling side on the lost circulation, when you have crude sitting at $75 above, that’s a good business; if you get nat gas around $4.25 MBtu on dry gas, you’ll see an uptick in rig counts on dry gas, which inherently will move this business up significantly. The protection that we put in place is on the production side of the chemicals. If rig count drops off, you still have to produce wells because you still have to produce revenue, you still have bills with E&P companies. So that gives you some protection on the production side of the business, but if you get the growth model where you have gas at 4.25 and above and crude staying above 70 to 75, you get the benefit of both. Again, a lot of similar technologies that are used in fuels and in personal care are similar technologies that are used downhole in the oilfield business. So that’s kind of giving you a short version of why we ventured into this business and what our thoughts are of this business. We will report it separately if we get the second acquisition done at the latter part of this quarter, and we feel very strongly that this is a business that we should be in. It’s got great margins, it’s very technology driven, and it really fits our portfolio. In regards to your second question, if you look at mo gas there’s only a few countries left in motor gasoline for tetra ethyl lead. You are correct in a portion of what you’ve said that you have the aviation portion, and if you recall Avtel sits in fuel specialties. You are correct that Avtel will not go away for a period of time. The view right now is that potentially you will see Avtel go away in 2018. I think it could be longer due to the fact that there is not a replacement product for Avtel right now. So that benefit is, yes, we will have Avtel business, it does sit in fuel specialties. It won’t go away for a significant period of time. The only issue we have is where mo gas sits, and that’s the unknown.

Thank you. That’s very helpful. Now I understand why you put it where you did.

You’re welcome.

As a reminder, if you wish to ask a question, please press star, one on your telephone keypad. We will now take our next question from Gregg Hillman of First Wilshire Security Management. Please go ahead. Gregg Hillman – First Wilshire: Hi Patrick and Ian. Just continuing along with fuel specialties, Patrick, can you talk about how some of your products are differentiated relative to the competition, your surfactants and some of the other categories?

Yeah Gregg, without getting technical over the cell phone, we’ve talked about this in other quarterly conference calls. With the changes in engine technology and changes in fuel, obviously you have to have a change in additive technology. And every time you change fuels, whether it’s hydro treating or hydro cracking, whether it’s sweet crude or whether it’s heavy crude, you have to change the fuel, you have to change the additives because the engine technology has changed. So we’re continuously looking at high pressure fuel injection, gasoline direct injection. There’s a lot of different mechanisms that are driving this business. Everything that we’ve done, Gregg, from a technology standpoint is not a here today, gone tomorrow. It’s something that’s sustainable, it’s long-term. We’ve planned on this market being the way it is. That’s why you’ve seen fuel specialties grow the way it has grown, from organic growth because there has been no acquisitions in fuel specialties. It’s all been organic growth. That does not happen unless you have technology. So as you can see, some of the increase in spend that we had in Q1 was based around technology as well, and we will continuously focus on technology. Gregg Hillman – First Wilshire: I don’t know if you understood me, but I was asking specifically about oilfield specialties and how you’re differentiated.

Oh, sorry. One of the keys there, Gregg, is that we have different products that do different things. Again as you said, we have surfactants that go downhole that we think are different than the competition. We have loss circulation material which we think is a great technology that Strata brings to the table that we really just need to refine and roll it out globally. To us, that is going to be a technology play, but quite frankly it’s also going to be a service play. We have to make sure that our customer is number one and that we take applicable technologies to that customer base. So we are focusing on surfactants, we are focusing on asphaltene dispersants, net H2S and LCM, which are really the forefront of the oilfield business. Gregg Hillman – First Wilshire: Okay, that’s fine. Maybe just one last question in oilfield specialties. Just in terms of channels and whether you need to have alliances to get the customer, could you address that point – channels of distribution and possible alliances for distribution?

Yeah, sure. A lot of it, Gregg, is we already sell to a lot of the companies that actually have E&P divisions, so it’s a benefit for us being a public company that has a lot of exposure in fuel specialties that we can back-integrate into the oilfield sector. But the other half of that is you have a lot of small to midsize E&P companies that we have to make a product and customer entry into, and we rely on some of the relationships that the acquisitions that we’ve made and/or some of our product portfolio and technologies have provided us to get into. So there is two different ways, Gregg – you hit the market from a small to midsized E&P with those who have refineries and pipelines. We’re typically already doing business with them, and so we utilize those relationships to help us in the oilfield sector. Gregg Hillman – First Wilshire: Okay, but then how do you get to the smaller E&P companies? Do you need to deliver it to them in the field, and do you have to partner with somebody?

We can deliver it in the field. Some we’ll apply ourselves; some, we’ll partner with somebody. That’s correct. Gregg Hillman – First Wilshire: Okay, fine. Thank you.

As there are no further questions, I would like to turn the call back to the speakers for any additional or 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. We look forward to meeting up again with you next quarter. Thank you and have a great day.

That will conclude today’s conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.