Good day, and welcome to the Q1 2015 Innospec Inc., Earnings Conference Call. Today's conference is being recorded. And at this time, I would like to turn the conference over to David Williams, General Counsel. Please go ahead, sir.

Thank you, and good day, everyone. My name is David Williams, and I am Vice President, General Counsel and Chief Compliance Officer at Innospec Inc. Thanks for joining our first quarter 2015 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, 2015. The press release is posted on the company's Web site, 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 Web site. 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 10-K report as well as other filings we have with the SEC. We refer you to the SEC's Web site 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 presentations that follows, a copy of which is available on the Innospec Web site. With us today from Innospec are Patrick Williams, President and Chief Executive Officer; and Ian Cleminson, Executive Vice President and Chief Financial Officer. And with that, I will turn it over to you, Patrick.

Thank you, David. And welcome all of you to Innospec's first quarter 2015 conference call. Despite the political and economic turmoil we had to deal with we are reasonably satisfied with our performance in the first quarter. We have maintained the momentum we built for the second half of 2014 in our core businesses. It will be no surprise to any of you that we have been dealing with tremendous market pressure in our oilfields specialties business. We started 2015 positively with revenues and EBITDA up 22% and 35% respectively year-over-year. Our Fuel Specialties business had another strong quarter delivering 21% increase in sales supported by acquisition growth in Oilfield Specialties. I'm pleased to say that this business continues to perform to our expectations despite intense headwinds. Operating income for the Fuel Specialties business was off slightly year-over-year primarily from an unfavorable phasing of AvTel sales. Cost containment is particularly important in these volatile markets and we continue to pay close attention to controlling expenses. Fuel Specialties sales in EMEA were negatively impacted by foreign exchange as well as continued sanctions affecting Russia and the Ukraine. However, we are seeing continued improvement in gross margins in EMEA. In Asia Pacific, sales grew 11% year-over-year with steady improvement in volumes. The Americas region had another strong quarter as our strategy in this region benefited from solid economic growth with sales improving 8% before our recent acquisition. Sales of AvTel in Q1 were down compared to both Q4 in 2014 and the comparable period last year. We expected this and our order book indicates a much stronger second quarter for this product line. The collapse in oil prices and consequent reduction of rig count as clearly had a negative impact on customer activity. But, overall our oilfields Fuel Specialties business was close…

Thanks Patrick. Turning to Slide 6 in the presentation, the company's total revenues for the first quarter were $269.2 million, a 22% increase from $220.7 million a year ago. The overall gross margin increased from last year to 30.4% driven by a strong quarter from Octane Additives. Our GAAP earnings were $0.72 per share compared to $0.69 per share reported in last year's first quarter. On an adjusted basis, our earnings were $0.91 per share up 40% from $0.65 per share reported a year ago. This quarter for the first time we are adjusting for the amortization relating to the acquisitions, which will provide better visibility and reflect the underlying performance of the business and the EBITDA growth. EBITDA for the quarter was $36.7 million up 35% increase over last year. Net income for the quarter was $17.9 million. Moving on to Slide 7, revenues in Fuel Specialties for the first quarter were $199.4 million, 21% higher than the $164.2 million reported a year ago. The increase was primarily driven by a strong contribution from the recent Independence acquisition. Excluding the acquisition which added 24% to revenues volumes increased by 4% offset by an adverse currency impact of 7% in the quarter. By region, excluding acquisition growth revenues grew by 8% in the Americas and 11% in Asia Pacific due to improved volumes in both regions. In EMEA, sales fell 12% primarily due to the adverse currency impact and continued functions. AvTel volumes were down 53% from a year ago period largely due to water phasing and we expect a stronger AvTel performance in the second quarter. Gross margins in the segments were 30.8% during the first quarter and gross profit was $61.5 million up 18% from last year's $52 million. Operating income was $23.5 million. Turning to Slide 8,…

Thanks Ian. In summary, we closed the quarter with sales inline with our expectations and 49% year-over-year increase in operating income. Our businesses continued to deliver strong cash inflows and our balance sheet remains in a very healthy position with net debt down to $90.4 million. Fuel Specialties continued its strong performance in the Americas and our oilfield specialties business held steady despite a very challenging and volatile environment in the oil patch. Our AvTel business was down due to order pattern, but we expect this to correct in Q2. Personal care rebounded well as we said it would, while other performance chemical businesses were softer, but inline with our expectations. We continued to contain cost and manage our cash. We are pleased to be able to reduce net debt and also retire additional shares under our share repurchase program. In addition, we announced yet another increase in our dividend for the first half of 2015. We look forward to the future with confidence and appreciate the support of our customers, investors and employees worldwide. Now, I would turn the call over to the operator, and Ian and I will answer any of your questions.

Thank you. [Operator Instructions] We will now take our first question from Jon Tanwanteng from CJS Securities. Please go ahead.

Good morning, guys.

Good morning, Jon.

How are you doing? Now that WTI has edged back up to the $6 range, what's the outlook for the combined wholesale business and do you feel like you can go back up to that $0.40 accretion that you previously targeted?

Yes. I think we will have to see if it stays there for a period of time, Jon. I mean it just started creeping out, it's up again a little bit this morning on pre-trading. The 60s is probably a nice range that you will start to see activity pick back up. There are lot of wells that are behind pipe right now that have not been tracked. So we feel very confident that in the 60s, it holds a pretty steady for a period of time that you will see increased activity in the market.

Okay. And any idea how close you can get to that previous target?

I think we are probably pretty close to it. We still feel very confident with it.

Okay, great. And then can you provide the margins in oilfield in the quarter at all or are you close to breaking out that information?

Yes. Jon, this is Ian. We will probably towards the end of this year, 2016 we will probably be splitting up the oilfield business. In quarter one, you have seen gross margins in oilfield in the high 20s.

Okay. Thank you.

Thanks Jon.

Thank you. We will take our next question from Ivan Marcuse from KeyBanc. Please go ahead.

Hi. Thanks for taking my questions. How much did oilfields contribute to this quarter – first quarter on a year-over-year basis, if you look at the full business?

Yes, Jon. Sorry Ivan, this is Ian. Yes, it's certainly positive. We are very pleased with the [fracstem] [ph] business, which is the Independence acquisition that was certainly on target with our expectations. The drilling business was down due to rig count and the production business healthy zone. So in terms of revenue growth, you are looking ahead probably in the top of $60 million revenue for the quarter.

Okay. And then if you look at -- sequentially I guess which may or may not be the right way to forecasting the business. Your sales fell in fuel specialties by $20 million some, I understand there is some seasonality in that but you also had an acquisition. Your operating costs rose quite a bit sequentially. So what's the difference there and explain the sort of margin fall-off, I understand AvTel is little bit weaker, but that's pretty small business from what I understand.

I think last year, we did about $165 million of sales in the fuel specialty segment. This year – this quarter we have done just short of $200 million a lot of that is from the acquisition growth which we highlighted, we added about 24% year-over-year. The other part of the decline was really down to currency impacts we had about 7% negative currency impact we might grow volumes 4% year-over-year. So that's the sort of basis of what we have seen. AvTel was down year-over-year that's quite a profitable business for us. But, we do expect that to bounce back in Q2 that was all down to water phasing.

I understand it. But, I was looking at more sequentially sort of trying to take apples-to-apples. So in the fourth quarter, you had $217 million sales, in this quarter you had $200 million sales. So $17 million reduction in your operating income from $37 million roughly down to $24 million. So if you look at, sequentially was it all currency or was that Delta or AvTel, how would you sort of gauge those moving parts?

Yes. I think most of it Ivan is really down to the way our business operates. You always see a very strong Q4 due to the winter products that we sell. You are very much aware of the cold flow and we have it in Q4. So a lot of this is expected drop of in activity in the business, it definitely kick up in the winter products.

Ivan just to add to that. If you look in Q4 2013, Q4 2014 and when you compare that to Q1 2013, Q1 2014, now rolling into 2015, you will see that differential, Q4 is always one of our strongest quarters. But, I think second to that, if you look at obviously you have some FX issues and although AvTel sales are not a large revenue quantity they are a very large operating income, a very good profit margins low as our cost. So that's part of the answer. The other is, if you look at the SAR cost, for the oilfield specialties business, it's generally higher. It's a very high intent personal business at the wellhead joining as a higher SAR cost then in the other businesses that we have.

Okay. And then if you – your last quarter I think you commented back in March or whenever – whenever the fourth quarter is supported, you expected the oilfield is sort of being at $260 million sales range. Is that still – is that still within your expectation?

That's still within our expectations.

When there is the – the cost commentary that you have in the release what's that build around, if it sounds like the earnings contribution is going to be roughly the same what you expected last quarter. And then sales are going to be about the same, but you a little bit more incrementally negative quarter-to-quarter. How did you think about that or how should I think about it?

Sure. I think we always look at it in our fairly I would say cautious in what we say. We have seen oil spike back up in the 60s. It's a very volatile market going on. We have a lot of market dynamics as to where it's going, why it's there. But, I think for us, we would rather be cautious in the wind, but we still feel comfortable with 250. I think if oil can sustain itself into that mid-60s to low 60s, we could go beyond that. But, I still feel confident 250, the cautious is, let's not get over exuberant because oil price have jumped in the 60s. We are happy where we are. We think the 250 is a solid number, but let's be cautious on putting anything above that.

Okay. I will turn back in the queue. Thanks.

Thanks Ivan.

Thank you. We will now take your next question from Christopher Butler from Sidoti. Please go ahead.

Hi. Good morning, guys.

Good morning, Chris.

Good morning, Chris.

Not to beat a dead horse here, but as you look at the production side of your oilfield services business part of the reason that we are seeing that oil coming back is that production has come back down. Could you speak to how your business is going to handle that, whether you are seeing pricing pressure from customers who are trying to lower their cost and what kind of impact that might be as well?

Yes. There is no doubt Chris that you are seeing pricing pressures. And we have to be very understanding of what our customer needs because obviously, when prices have come down as where they are today. You are expectations are go back to your suppliers and come down pricing as well. So we have been cautioned, it has driven our GPs down a little bit in the oilfield side. If you look at a lot of companies that are in the sector, they have revenue up in the 20% to 30% range and GP is up even higher than that. For us I think you have seen production come down that's for multiple reasons, a) it's declining curve, when production goes on, 60 days you get steep declines in production, the other is that it takes a period of time for these wells to come on and nobody has really gone out there and have continuously fraced, there has been a big slowdown in fracing. There has obviously been a big slowdown in drilling. So there is a period of time that will catch back up, but you have definitely seen a slowdown in production, but that's not necessarily because people aren't producing all the wells, they have cut back on it. But, it is lot of us because, it's just a typical decline in the oil wells.

And as we look at the impact of the oil on your business, could you talk to any benefits that you saw in the raw material cost side in the quarter order to come?

Yes. Good question. We are seeing this – starting to see quite a bit of price, I guess if price released in raw materials, I think we will get the benefit of some of that in Q2 probably quite a bit of it in Q2.

And looking at the performance chemicals business, you expanded your gross margin about 100 basis points year-over-year, yet, the operating income declined over the time as well. Could you talk to what overhead cost have been put into that business, what caused that?

Yes. Chris, this is Ian. This business is all focused on personal care. I mean we are really pleased with the way we have seen that how the business grow. But, you would also aware that they are at some other markets that which aren't strong [indiscernible]. So we have seen some dynamics in the revenue line. In terms of margins, you are absolutely right. Expanding personal care means that the high margin business to us, it's fully helpful. Certainly the operating income, certainly on a path where it was this time last year, so we are pleased with that.

And just finally, what you are expecting for capital spending this year?

That will be in the $20 million to $25 million range.

I appreciate your time.

Thanks Chris.

Thanks Chris.

Thank you. We will now take our next question from Debra Fiakas from Crystal Equity. Please go ahead.

Good morning. Thank you for taking my question. I would like to switch timeline and talk a little bit more about the long-term and also switch to the balance sheet, if you could give us some comments on where you see your optimum leverage level? And then along with that, if you could comment on your view about additional acquisitions or your acquisition pipeline, if you have got one?

Sure, Debra. I will start the leverage question and I will pass it over to Patrick for the acquisition piece. There is no doubt about our balance sheet it very strong right now. We have low levels of debts given our EBITDA generation and was certainly below one-time level. We got the capacity to go much higher than that for the right acquisition. We will go above 3x, but we want to see ability to generate cash and delever sort of into 2 to 2.5 range. I think where we would feel comfortable.

I think adding to that Debra is that, if you look at our balance sheet and listen to what Ian just said, we like to have a balance of buybacks and dividends as well, as you can see we bought back stock in Q1, we bought back stock in Q4. We increased our dividend this year. It goes along with our balanced capital management program. We will be looking at acquisitions, it will be in personal care primarily. There will be some stressed assets in the oilfield sector, they are not there yet to the level that we want to be. And I think for us, we would really like to just shore up our business and sit tight and watch this market share gets itself up. Low crude price is not a bad thing for us for a sustainable period of time. It really – this market needs what we call a redirection. And I think for us with a lot of the stressed balance sheet out there, we will just be very cautious to have an open eye as to acquisitions.

Excellent. And if I could ask just one follow-up question, in your earlier comments, you made mention of the fact that you see the oil wells that are in production just following their natural decline over time, is it your view that we have not yet seen wells being taken out of production. And now that we have seen this little pop-up in pricing and granted that it might be because -- simply because of the reduced production, what do you think the reaction is going to be to take wells out of production or actually try to put them into more new wells into production.

Yes. I think you are definitely seeing some wells that are not economic at prices be brought down from production just because of your operating cost. So there is no doubt that happened especially well that have high water content. As you also seen operators who have dialed back due to low oil prices. The problem that you have which is very typical in this market, you have a lot of wells in the Permian and Eagleford and the Bakken that declined on a very quick decline rate, steady out over time. It's a big decline curve. And so if you are not backing that up with continued wells behind it, that's where you see a big slowdown. So I do think it's a cost effect. I do think you will some dial-up back – bringing production back up in the 60s, but it's not near enough for the slow down the coin of drilling. So I do think, you will start seeing some drilling but a lot more fracs then because there is a lot of wells that have been drilled but not been completed yet. And I think you will see a lot more wells coming on. I'm not sure, it's going to catch the decline, but you will see more production coming on.

Okay. But, then that wouldn't that be the opposite effect of what you are hoping for in terms of seeing this capitulation in the oilfield that will allow you to do additional acquisitions in that particular segment?

It would. And that's why we put in our script that we are very cautious. Oil needs to stay in the 60s for us to see some of these wells come back on and some of the CapEx's that companies have put out to jump back into it's drilling program. I think what they will do is – they will frac what's behind pipe right now versus drilling to see if oil prices sustain at 60. So not all companies in the oil sector will benefit from the oil staying 60, you still will have a lot of stressed balance sheet. And they are stressed right now. It's a function of can they hang on for a period of – a quarter or two more quarters.

All right. Thank you very much.

Thank you.

Thank you. We will now take our next question from Chitra Sundaram with Cardinal. Please go ahead.

Thank you. It's just incredibly confusing, I'm to understand how – almost $35 million increase in fuel specialties revenues you would have slightly down operating income, so would you please breakdown Q1 2014, Q4 2014 and Q1 2015, what the contributions on the revenue line were from oilfield and AvTel. And I think we all have a general sense of the profitability, so we can do the math and understand what exactly has happened here. And then secondly, what is the impact of amortization from intangibles on the fuel specialty operating line sequentially? Thank you.

Sure, Chitra. Let me take that question. Overall, Q1 2015 versus Q1 2014, we see the 21% increase in our revenues. That is driven by 24% increase due to the Independence acquisition. You then look at what else is in there, we have seen 4% volume increase year-over-year and we have seen a negative impact from exchange rates of 7% year-over-year. So when you look at that, that's what accounts for the increase in revenues, when you actually look at the AvTel business, AvTel is probably in the region of about $4 million in sales behind where it was last year. And in terms of amortization in Fuel Specialties it will be about $3 million charge across the whole quarter.

So if AvTel was down $4 million year-over-year, what was down sequentially?

It was probably down about the same amount.

Okay. So it was down $4 million sequentially and year-over-year, oilfield services was up obviously, dramatically year-over-year, what was the change sequentially?

I would say it's probably about $10 million increase sequentially.

$10 million increase, so if you take $24 million and you add back $3 million for amortization, $27 million versus $37 million in Q4 of 2014 and $4 million change in AvTel it just -- the math I'm not able to understand, how you can have $7 million hit, sorry, not $7 million, well, yes, $7 million hit driven from $37 million to $30 million in operating income?

Yes. We got this a little bit. Chitra you got to remember that Q4 is a much stronger revenue quarter, so you will expect some Q1, our core businesses in the regions to stop to fall off a little bit. And also don't forget there is a currency impact in there as well.

What is the currency impact on the cost line, you delineated it on the revenue side, how does it impact you on the cost line?

Yes. The way we think about it Chitra is that its – we are broadly naturally hedged down to operating income. So we added a some percentage of negative impact on the sales line. But, we will see broadly an equal and opposite positive impact on our cost line both in cost of goods and also in our SAR line. So down to operating income, you will see only a minor impact at that level.

So really FX isn't an issue on the operating income line, you are suggesting I think that the majority of the reduction sequentially is because of just operating leverage from the volume differences in core products.

In core products and also in AvTel.

Yes, virtually. Okay. Setting aside AvTel, but just on the core side, now, the cold flow though isn't that – I mean you had a very cold winter here and it went through March, so this is just simply the U.S. But, surely cold flow is an important revenue driver in Q1 as well?

It is. But, if you look at cold flow typically Chitra, the order in Q4 and then hoping that's the last couple of months of winter winds down, so that they use their inventory. So you typically see a bigger order pattern in Q4 for cold flow and it started to melt away as winter goes away in Q1.

So then just jumping back then to the oilfield services, the fact that you are able to get – you still feel comfortable with the 250 to 260 kind of revenue number. I haven't done the math. Thank you for all the detail you have given me. But, it would appear that the profitability of the oilfield services business, obviously, the drilling was a lot more profitable is impacted. What is the – you said it's kind of tracking against plan, when you look at the $27 million, let's say of operating income, I'm adding back the amortization. The embedded profitability of oilfield services, where – how does it look sequentially and how does it look year-over-year? Even if you give yourself credit for the – in the Independence acquisition of Q4?

Sure, Chitra. I will take part of that and turn it over to Ian. The part of that is, as we alluded to early is that we are starting to see some raw material relief, which is why we still feel very confident. And so that's kind of – that's part of why we are feeling confident in not only revenue but also getting margins back up where things are sustainable.

Yes. And in terms of the – sorry, go ahead.

No. Sorry please.

In terms of the profitability, the production side is – remains profitable. The fracstem is highly profitable and growing. That is the drilling business that is negative right now. And we have seen some price erosion and price pressure which is impacting the gross margins in the oilfield no doubt about it. But, overall, the oilfield business generates a positive return for us.

And on the performance chemical, so you are kind of flat on the revenue side, and the operating, but you all did see some gain on the gross profit side, I know this question was asked earlier, but I wasn't – I still quite didn't understand why the operating income was then flat. What is the cost between – it's got to be something in SG&A that's causing you to give you profitability.

Yes. I mean what we have seen is that we have probably added about $1 million of SG&A year-over-year. That's driven by a couple of things. We obviously got some higher R&D cost in there. We are putting some additional headcounts to sort of build for the growth in that business. And also it's a little bit of phasing in some of the expenditure year-over-year. So there is no explosion in cost base, it's all controlled and expected.

So is it just a building up of cost from there – there wouldn't be much more to accrue sort of Q2, Q3 and therefore the profitability kind of catches up, is that how we should think about it?

Sure. I mean obviously, when you are growing a personal care market in the mid-teens, we got to support that growth and that's some of the cost that we have built in this quarter.

Yes. But, I mean, we wanted to be profitable growth, right, so I mean, that's why I'm trying to understand, so is it just that building out an infrastructure, so we take the hit somewhat in Q1, we get the gross profit, profit growth but we don't get any operating income growth. And then in the outer quarters, it kind of catches up, is that how we should think about it, or is it just that it will continue to see year-over-year or sequentially maybe continued increase in cost?

Yes. I think you got it about right, Chitra. We are building cost, you will see that leveraged in future costs on the revenue line.

Okay. Thank you.

No problem.

Thank you. We will now go to our next question from Gregg Hillman from First Wilshire Securities Management. Please go ahead.

Yes. Good morning, gentlemen. Yes, Patrick can you just talk about any like future regulatory impact on your oilfield service and particularly requiring the producers to call out the chemicals are putting down for fracstem or even for drilling. And yes, could you comment on that whether that would be negative, positive for you and also to what extent your chemicals that you are selling are environmentally harmful.

Yes. If you look at it Gregg, a) the chemicals that we sell are very environmentally friendly that we put down all and that's part of our sales push and that's of course the reason why we have been so successful in fracstem and production. So we have very good environmentally friendly products. I think b) technology is starting to change, we put a lot of money into technology to really expand that marketplace as well as personal care and the continued focus on detergents and fuels and as well as sulfur free products in personal care. But, specifically to oilfield, regulations really haven't changed much over the last conference call. I think things have kind of slowed down just due to market conditions. Up from a regulatory standpoint, we really haven't seen a lot of change Gregg. There is a big appetite for technology in this market and that's why we feel so confident in the future of this market that then when there is a change that we are in a very, very good position to take advantage of it.

Speaking of technological innovation in oilfield service, you have done a press release about the TrueClean water service couple of months ago. Do you have any idea what the addressable market is for that.

We have an idea, it's not something that we will actually expose to. It's a large market obviously, especially in the Permian basin, the Eagleford. We just have to make sure that we continuously test this technology out and make sure it's fit for purpose before we start putting in market share size on it.

Okay. And then Patrick, and then finally kind of like a longer term strategic question for your company, does it makes sense for you to have another leg to stand on in terms of the segments that you are addressing especially chemicals in other words like a very long-term for oil and gas looks that will level out or trend down due to alternative energy taking higher market share. And will it make sense for you to eventually and get into – do you have another leg to stand on beside this performance chemicals?

Yes. First up, I disagree with you that turn of energy making a big debt in the carbon market, not going to happen, not well on the life. I think secondly, we feel very confident our three-legged stool as we have said before Gregg that personal care is a very high profitable business. It's very keen to technology, same with fuels and same with the oil fuel sector. What we don't want to do is start getting out of our round of markets we don't know, just because we think we know what we are doing as a management team doesn't necessarily know what the hell market means. So our view is, we have got a three-legged stool that we will stand on, we think is very strong for profitable growth. And we really don't want to get outside that norm right now. Doesn't say things couldn't change in the future, but that's where we stand right now.

Okay. Thank you.

Thank you.

Thank you. We will now move on to our next question from Matt Dhane from Tieton Capital. Please go ahead.

Great. Thank you. I was hoping that you folks could discuss the market share trends in your primary oilfield basins you operate in the Permian, Eagleford, Bakken, how are those shaping out, what are you seeing that's changing among your market share in those areas?

Yes. I think Matt that's probably a positive for us due to the fact that we don't have a large market share. So I think we haven't seen the negative hit on the revenue and bottom line basis like a lot of the majors have. Our view is we have been very select in what customers we go after. We have been very select in where we introduce our technology. We can't be all things to all people. And I think as we grow this business and get more stable and foundation more stable, we will expand it more. But, for us that's probably the positives that we do have a very small market share in the Permian Basin and the Eagleford, and the Bakken.

Okay. So that's helpful. I also wanted to hit on just so, I'm clear, the earn out amount adjustment that you folks are doing there. Is that now decreasing just due to the market turn down oilfield?

Yes. It will be. That's one of the reasons why we structured the deal that way as well Matt.

Make sense. Final question for you, you discussed the fact the production and fracstem are holding up well for you on the oilfield space drilling is obviously the struggle. If you were to break out your revenues roughly within the oilfield space, how does that play out between the three areas today and how does that compare to say like three months ago?

Yes. I would say it's probably stayed about the same, it's probably 55 to 60 fracstem. The rest of that being mostly production and maybe 5% on drilling.

And three months ago was roughly 5% drilling as well?

Yes. Still about the same.

Okay. Great. Thank you.

Thanks Matt.

Thank you. We will now move to our next question from Chris Shaw from Monness Crespi. Please go ahead.

Yes. Good morning guys. How are you doing?

Good, Chris.

Good, Chris.

To talk a little bit more again about the gross margins just sort of tracking raw materials, I thought there would be – see more benefit, I think it's – just simply talking about fuel specialties declined somewhat – it's – I guess was there a decent raw material benefit to margins this quarter, we just can't see because of this sort of decline a bit or the slowing in oilfield and the sort of year-over-year and sequential AvTel decline is that – I mean maybe is that a way to answering it. If you look at the core fuel specialties was there actually a decent margin benefit.

There was. And you just answered your own question actually. You are spot on exactly what happened.

And you think that actually – so do you think sequential will see higher gross margins for fuel specialties given that AvTel up most likely in 2Q and raw materials –

Oilfield.

Okay.

I think you will probably see a little bit of higher oilfield too.

Okay. Great. And similar question in performance that you had a gross margin benefit there. But, I would think some of the other surfacting guys had a big benefit and should that see gross margins be potentially up again in 2Q in that business?

I mean the issue you have there as you – now, personal care is probably 55% of the revenue-ish. The issue you have there is – you still have polymers which was down a little bit. You have fragrance which is about where we expected it to be. So you really have two businesses that are somewhat stagnant, if not down to 10. And so you are seeing personal care really take-off and that's brought the GP up. It's also brought the revenue line up. And I think you will continue to see that just do the pipeline of personal care growth.

What's the raw material for polymers, I assume that's dropped off significantly.

Yes. It is dropped.

And then how confident I guess but how I mean just your view of you sort of touched on it but in oilfield the potential for the stressed asset to the available, I mean are the sort of chem -- oilfield chem guys or servicing guys, are they getting the stress right now? I mean do you see those kind of solid players out there having some issues either balance sheet or what have you?

Lot of issues. Yes, lot of issues. Lot of balance sheet issues. Remember this market was chased by a lot of private equity a lot of start ups. It's been a oversaturated market, leverage balance sheet, and we are definitely starting to see the small players really struggle if not go out of business or look for someone to bail them out. And we are starting to see some of the mid-majors really hurt, when all the oilfield fuels, look at the announcement starting in the market.

All right. And then just back to performance chemicals and specifically personal care, when you put the – at 16% volume growth, that's impressive, what exactly I mean, are you guys, is this not a cross-selling from the recent acquisitions or is it just expanding the add-on. Is it just product demand or how that seems like a very set numbers to me? Any color there?

I think it's what we stated all along is that we felt the product pipeline from a technology standpoint, personal care was very strong. We have very strong pipeline of products moving forward and that's quite frankly all it's been. It's just personal care, organic growth through our platform on new products. And we see them continuing.

Okay. Great. Thanks.

Thank you. We will move on to our next question from Jon Tanwanteng from CJS Securities. Please go ahead.

Hi, guys. Can you talk a little bit more about the octane visibility, I think you mentioned in the press release, you are seeing in the pocket for the first half but what about beyond that?

I think beyond the first half Chris is always we – we are just waiting to see. We got these questions on going. But we will wait see how they develop and I think we will have more news on the next call for you.

Okay. And then can you provide an update on the fragrances business at all, if you still plan to digest that or hang to a further while?

Yes. I mean I would say its continued where we stood in Q4 that is probably a business that doesn't fit our portfolio and it will be divested more than likely at some point in time.

Any idea if that's going to be sooner or rather than later?

We can't comment on that today.

Okay. Thank you.

Thank you. We will now take our next question from Ivan Marcuse from KeyBanc. Please go ahead.

Couple of quickies. One, on the octane, I think you sort of guided sort of that I don't know $14 million, $15 million for the first half of contribution for EBIT. So I mean I'm sorry about $10 million, should we imply, is that second quarter, should we see a couple of million, $1 million, $2 million or how to think about it in terms of EBIT.

$5 million to $6 million in revenue additional in Q2.

Yes. Couple of million of EBIT.

Got you. And then the corporate you guided this, I believe you said $10 million to $11 million for the remainder of the year and the quarter, for your expenses, that you pointed out were lower year-over-year, why would your corporate expense raise, I guess fairly sharply in the second quarter where [GO] [ph] is around sort of the $7 million to $8 million and then I guess, it would be up year-over-year going forward even in the third and fourth quarter?

Yes. We benefited in the first quarter Ivan from some recovery of label costs which we won't see again. So we have – more comfortable in that $10 million to $11 million range.

How much was the recovery in labor cost, couple of million bucks?

Yes. Pretty short to that.

Okay. And then just to clarify, my last question, the raw material, so you see an expansion in your variable margin going into the second quarter, or does your pricing, is your pricing a little bit more real-time?

I think you will see a slight expansion.

Okay. And what was raw material, was your basket down in fuel specialties this quarter, and the performances was it down, or is it pretty much flat?

It's gone down a little bit on the quarter.

Thanks for taking my question.

Thank you, Ivan.

We will now take our next question from Chitra Sundaram from Cardinal. Please go ahead.

Sorry, I just – two little pieces of data, what was the change in fuel specialties volumes sequentially between Q4 and Q1, Q4 of 2014 and Q1 and what was the FX impact on revenue sequentially, I think?

Chitra, I have not got that information right now. I would have thought the FX would have been more impacted in Q1 than it was Q4. I'm not sure on the volumes, but I can certainly follow-up you later today on that.

Okay. Good stuff. Thank you.

No problem.

Thank you.

Thank you. That will conclude today's Q&A session. I would now like to turn the call back to Patrick Williams 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 in this call, please give us a call. We look forward to meeting up with you up again later in the year. Have a great day.

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