Orion Engineered Carbons S.A. (OEC) Q2 2017 Earnings Report, Transcript and Summary

Greetings, and welcome to the Orion Engineered Carbons’ Second Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ms. Diana Downey, Vice President, Investor Relations for Orion Engineered Carbons. Thank you. You may begin.

Thank you, operator. Good morning, everyone, and welcome to Orion Engineered Carbons conference call to discuss second quarter 2017 financial results. I’m Diana Downey, Vice President, Investor Relations. With us today are Jack Clem, Chief Executive Officer; and Charles Herlinger, Chief Financial Officer. We issued our earnings press release after the market closed yesterday and have posted the slide presentation to the Investor Relations portion of our website. We will be referencing this presentation during this call. Before we begin, I remind you that some of the comments made on today’s call, including our financial guidance, are forward-looking statements. These statements are subject to the risks and uncertainties as described in the company’s filings with the SEC. Actual results may differ materially from those described during the call. In addition, all forward-looking statements are made as of today, August 4, 2017, and the company does not undertake to update any forward-looking statements based on new circumstances or revised expectations. Also non-IFRS financial measures discussed during this call are reconciled to the most directly comparable IFRS measures in the table attached to our press release. I will now turn the call over to Jack Clem.

Thank you, Diana. Good morning, and thank you for joining us for our second quarter 2017 earnings conference call. Our agenda for today’s call is shown on Slide 3. Today we’ll cover the key metrics coming out of our second quarter, while commenting on the performance of two Carbon Black Business segments and their market. Charles Herlinger will then provide more detail on these financial results, and discuss our outlook for 2017. Following Charles, I will comment on major operational initiatives, progress on our strategy and some key performance metrics today. We’ll then open the lines to take your questions. Starting with our second quarter highlights on Slide 4, I’m pleased to report another solid quarter results for Orion, with good execution in both of our Carbon Black businesses, strong cash flow generation from operations, and near-record adjusted EBITDA, which rose to €58.4 million, just topping a pretty difficult competitor in the prior year’s second quarter. In-market demand was relatively strong across all regions. Specialty volumes continued to grow this quarter, albeit, at a modest pace compared to a recent performance. But for the full year, we have grown these volumes close to 8%, well above view of market growth. Rubber volumes were down in spite of recently strong market demand, but this was planned as we closed one unprofitable plant at year-end 2016, and are in the process of converting some capacity in Korea from rubber to specialties. While overall volumes were down, we improved performance in most of our key financial metrics. Net income in the second quarter increased 2% to €16.8 million. EPS remained stable at €0.28 per share, adjusted EBITDA rose 1.1% to €58.4 million and adjusted EPS rose by €0.02 to €0.37 per share. Cash generation from operations remain solid at €43.6 million, providing sufficient coverage for CapEx, dividend and interest needs. We reduced our leverage ratio once again, this time to record low of 2.37. In addition, we repriced our long-term debt facility and cut our annual interest expense. Charles will give more details on this a little later. Slide 5 provides detail on volumes and adjusted EBITDA of each business, updated views of our regional production coverage and key profitability trend lines. As you can see, we increased the percentage of specialty and more technical grades of Rubber Blacks to just under 60% during this quarter, consistent with our mixed shift to more profitable grades. Specialty volumes continue to lead our overall growth, but I’ll also note that technical rubber grades reached an all-time high of 35.2% of our rubber portfolio. The Specialty Carbon Black business accounted for well more than half of total adjusted EBITDA with 25% of total volume. Referring to the trend lines at the bottom of the page, feedstock cost pulled back a bit during quarter. This offered some relief on the margin pressure we have seen on our non-indexed specialty business, but the larger impact on the sequential improvement in their gross profit per ton was a strong demand for our premium grade. Rubber gross profit per ton saw some additional pressure in this quarter versus the first quarter of the year from differentials and lower energy contribution from our co-generation facilities. Our relative to last year second quarter, pricing efficiency gains worked in their favor. Slide 6 covers our specialty business. It had a very good quarter, in fact, its second best quarter ever. It faced, how ever, a difficult competitor as it was up against the spectacular prior-year results, our best quarter ever, which enjoyed strong mix, volume and falling feedstock prices. Volumes continue to climb, up 2.9% to 65-kilo tons with our strongest growth occurring in Europe. Specialty revenue increased 13.3% to €111 million versus €98 million in the prior year’s quarter. Gross profit and gross profit per ton rose sequentially due to a strong mix, but was down €3.8 million to €45 million versus prior year quarter. As a result of higher feedstock cost, not fully offset by higher volume and a stronger mix. As a result gross profit per ton fell 10.5% to €688.08 and adjusted EBITDA was down €3.9 million to €34.8 million. Turning to Slide 7, we’re pleased to report a continued improvement in our Rubber Carbon Black business versus prior-year quarter. The rubber in-markets were recently stable across our regions, but particularly strong in Europe. Our volumes were down due to the closing of our French plant at the end of 2016, reallocation of some of our rubber capacity to specialty in Asia and a lengthy maintenance related downtime in one of our U.S. facilities. Overall our volumes declined 12.1% to 201 kilotons in the second quarter. Offsetting this volume impact, were positive moves in price, fixed and variable cost improvement. Second quarter revenue was up 25.6% to €188.3 million and €149.9 million in last year’s second quarter largely due to the pass-through effects in the indexed business. Gross profit increased 3.2% versus last year’s quarter or €1.2 million to €39.3 million, reflecting improvement in costs, while the gross profit per metric ton followed, rising 17.4% to €195.4. Adjusted EBITDA increased 23.6% to €23.6 million. Pioneers of this industry know that there is substantial power billing capacity coming online in the U.S. There have even been recent additional announcements related to non-U.S. companies seeking to increase the production capacity here. Miles driven in the vehicle park continue to grow. So we’re guardedly optimistic that U.S. Rubber Black demand will resume its long-term growth pattern. This has been somewhat overdue, and as a result during this year, we took an extended downtime on one unit, which is now back up, but another unit before the end of this year. In addition, we have announced price increases on all Rubber Carbon Black sold in U.S. in order to ensure a sustainable supply of our products to our customers. On a somewhat related note, regarding supply, ChineseCarbon Black producers are seeing higher feedstock cost. This is resulted in reduced exports to practically all regions, except immediate Southeast Asian countries. In addition, the Chinese government has announced more stringent environmental standards for the control of emission, which will weigh heavily on some of the marginal producers in that country. This is a significant shift in the global supply profile for Carbon Black, as the vast majority of capacity additions needed to meet the growth in global tire demand, has been met with new capacity coming out of China. That adding of capacity appears to have stopped, if not possibly reversed for standard tire great. Tightening of the global supply demand picture is expected to follow. I’ll now turn the call over to Charles for more detail on our performance.

Thanks, Jack. Good morning, everyone. Turning to Slide 8 and our consolidated second quarter results, our volumes decreased by 8.8% or 25.8 kmt from the prior year to 266.6 kmt, with much of this decline attributable to the closure of our Ambès, France facility. A prolonged maintenance turnaround in the U.S. and conversion of rubber capacity in Korea to specialty production. Despite the change in volumes, due primarily to the pass-through higher feedstock costs, revenue increased 20.8% to €299.3 million in the quarter compared to €247.9 million last year. Our overall contribution margin declined modestly in the second quarter, following 2.9% to €117.9 million versus €121.4 million in the prior year’s period, as both of our Carbon Black businesses contributed to the decrease. As a top waterfall chart on the right-hand side of the slide shows, the drop in contribution margin was largely the result of lower volumes, mix and price, with favorable foreign exchange effects providing a partial offset. Referring to the second waterfall chart on the right-hand side, the €3.5 million contribution margin headwind in the quarter was more than offset by production cost and below gross margin cost savings, in part associated with the closure of our French facility. As a result, adjusted EBITDA increased by 1.1% to EUR 58.4 million. Our adjusted EBITDA margin of 19.5% declined 380 basis points versus last year’s second quarter, primarily due to the pass-through effect of higher feedstock costs to our customers, increasing reported revenues. The last waterfall chart on the right-hand side of the slide, analyzes net income development, which increased by €0.3 million, essentially in line with the adjusted EBITDA development quarter-over-quarter. Now turning to Slide 9, which shows our year-to-date cash flow dynamics and our key balance sheet metrics as of June 30, 2017. Over the first half of 2017, we generated €61.2 million from operations, net of an increase in net working capital of €18.2 million, associated primarily revising oil prices. Our uses of cash over the same period, which include capital expenditures, interest payments, acquired debt repayments and dividends totaled €67.1 million. As a result, our cash position, prior to voluntary debt repayments decreased during the first half of 2017 by €5.9 million. Turning to our balance sheet, as of June 30, 2017, the company had cash and cash equivalents of €48.5 million compared to €73.9 million on December 31, 2016. The company’s noncurrent indebtedness as the second quarter was €571.8 million, with net debt at €542.0 million, taking current term loan B and local debt into account, which represents a leverage ratio of 2.37 times LTM-adjusted EBITDA. As a result of this positive development, driven by strong operating performance, S&P recently uplifted Orion’s credit rating to BB from BB minus. Our goal remains to move towards a low 2 times EBITDA net leverage multiple over the next couple of years through a combination of adjusted EBITDA growth and deleveraging. As a reminder, the total debt chart on the bottom right-hand corner of this slide illustrates some of our debt is denominated in the U.S. dollars, but reported in euros, and thus gets revalued every quarter as these currencies fluctuate. Slide 10 presents our full year guidance and further cash flow detail regarding base business requirements and capital allocation. We’re maintaining full year guidance for financial year 2017 of adjusted EBITDA between €220 million and €240 million. Looking into the second half of this calendar year, we expect for a variety of operational reasons that quarter four of 2017 will show stronger adjusted EBITDA growth over prior year as compared to quarter three of 2017. Our guidance is based on the assumptions that volume growth will be in line with current GDP expectations, and that oil prices and exchange rates will be at the level seen during the second quarter of 2017. While base capital expenditures, our guidance remains at approximately €60 million, with the total rising to over €80 million due to self-financing capital expenditures associated with the consolidation of our plants in Korea. As previously stated, we expect that the cash proceeds derived from the sale of our plant in Yeosu, Korea will more than offset all capital expenditures and other costs associated with this consolidation project, but with some timing differences spanning a year or so. The remainder of our guidance metrics are unchanged as well. We expect depreciation cost of €60 million and amortization €20million. Our tax rate expectations on pretax income is around a rate of 35%. Moving to the right side of Slide 10, and our analysis of our annual cash requirements, you will see that our estimates reflect a reduction in interest payment as a result of the May 2017 previously announced repricing of our term loans. On the basis having confidence and our ability to meet our capital allocation priorities and supporting dividend payments, investing in optimization CapEx and continuing in due course to deleverage the balance sheet, we’re now starting to take steps centered around changing reporting currency and associated topics in order to enhance the attraction at least in some investors eyes of owning Orion stock. We will, of course, take the necessary time to make these changes in how we report to shareholders in order to ensure that this is carried out in a controlled and transparent manner. I will now turn the call back over to Jack, who will comment on our operational priorities and other matters before we head to Q&A.

Thank you, Charles. We build our strategies of working and remain committed to the priority we see on Slide 11. In summary, we’ll drive the growth of specialties and technical rubber grades by converting are expanding capacity to meet the demand created by our broadening sales force and new product offering. We will continue to evaluate our production footprint to align our product mix, cost structure and capacity with demand. And we’ll continue to drive improvements in productivity. Turning to Slide 12, I’m pleased to report that we have had another quarter of LTM EBITDA growth, a record stability of which we’re quite proud. Our stock continues to offer competitive dividend yield to our shareholders and we steadily reduce leverage. Our stock prices has moved up from the average of last year, as we believe the markets are recognizing the value of Orion and our response to the investing communities request for consistent earnings, lower leverage and more liquidity. Accordingly, there was a recent sale of additional shares into the public market with a view to boosting trading liquidity even further. Our shares with public ownership have now increased to just under 60%. Furthermore, as Charles outlined earlier, we remain committed to those actions that improve the visibility and trading ability of investors in Orion’s share. With that, I’ll close this, and thank our investors for their confidence in Orion, our customers for the business and our employees for their hard work. With that, operator, open the lines up for questions.

Thank you. At this time, we’ll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Mike Sison with KeyBanc Capital Markets. Please proceed with your question.

Hey, guys. In terms of Specialty Carbon Black, when you think about the gross profit per ton decline, what needs to happen – for gross profit per ton decline, what needs to happen sort of close that gap.

We saw margin compression in that market. And we had several price increase initiatives underway. Several of those price increases, as you see sequentially have taken effect Q1 of 2017 to Q2 of 2017. So we’re confident we’re going to continue to see additional initiatives there to continue to close that gap. Because you have to recognize that competitor that you’ve got from the second quarter 2016 was a particularly difficult competitor. So overall, we’re comfortable with where we are right now. We think we can probably climb back against some of that margin pressure as we have shown from Q1 to Q2. But again, you’ve got a pretty hard competitor when you look at that Q2 of 2016.

When you think about the gap that you will see in 2017 versus 2016, and if your price increases, and our volume growth is continue to be pretty good, if those – if you get those price increases, what would the improvement in gross profit per ton be as we head into 2018?

Yes, I mean, we’re not really give – position to give that type of guidance at that level of detail. I can tell you that, as we said before, there’s a lot of moving parts here. For one part, we do have this margin compression, we think we’re overcoming that, as you seeing from the first quarter to second quarter. And the second part, you have to recognize is that we are expanding our volumes pretty substantially in some of these emerging regions. And that, as we said before, has the impact of bringing in a margin in this regional production, particularly in China, where we’re bringing specialty production into that facility in Qingdao, and average margins versus the premium materials that we make, for instance, in our facility in Germany. So it’s not a particular answer that I So, it’s not a particular answer that, can you give you a specific, we’re planned, because are number of moving parts. We’re comfortable with some relaxation in that gross profit coming from expansion of materials, expansion of products sold at margins that don’t exceed or don’t meet the margins that we have for our most premium products, simply because that – our goal there, our strategy has always been to expand the sales into these underpenetrated market, and recognizing that some of that is going to come at margins that come below gross profit margin that come below some of the more premium materials that we’ve had in the past. Ultimately – goal here as we said all along, is to maintain the premium profile of that business which we have with kind of EBITDA margin that you see in this facility, while continually expanding the overall EBITDA. So as we add these materials, there will be accretive to EBITDA and we’ll tolerate this issue with gross profit dilution, so to speak.

Right. So, given the volume growth continues to be healthy and new products continue again in different areas, when do you think we’ll see sort of inflection point in EBITDA will grow, which reflects the better volume growth, profoundly Carbon Black.

You mean quarter-over-quarter or year-over-year?

Yes, year-over-year.

We shall continue growth in EBITDA year-over-year.

For Specialty Carbon Black?

Yes we have Mike, and we have for number of years shown growth. We had a spectacular performance – highest chance of – we had spectacular performance in 2016.

I understand that, I think your growth has been great. I just going forward, when do we get back to EBITDA growth for Specialty Carbon Blacks?

We look forward to doing that next year, if not this year.

In 2018.

If you look at quarter one versus the quarter we are reporting on now, you’ve seen a pick up in adjusted EBITDA, so there’s your growth. And to just get back to the point what Jack said, gross profit, the metrics, Sison, we said this repeatedly many times on these calls, is an important diagnostic for us in running the business. It’s not an end goal. The end goal to your second question is, is adjusted EBITDA and cash flow.

Okay, great. Thank you.

Thank you. [Operator Instructions] Our next question comes from the line of Kevin Hocevar with North Coast Research. Please proceed with your question.

Hi, this is actually Kevin Cleary on for Kevin Hocevar. Good morning, I was wondering if you guys could detail what utilization rates you guys are operating at regionally right now?

Yes. Europe is very, very tight as we look around the system. And I’ll speak – in generally speaking, the entire capacity both rubber and specialty. Although specialty tends to be more globally-focused as you know as opposed to regionally focused but the capacity utilizations tend to run about the same right now. So overall, Europe extremely tight, I mean, we were running in the – in sort of a low to mid-90s, and it’s even tightened a bit more as we move through this year. So we see good utilization there. U.S. demand seems to be sort of clocking around that middle 80s, is our view right now. We’re a little lower than that because we mentioned, we took a line out of production this year for significant amount of maintenance overhaul. That line is, as we mentioned, is back up and running right now, but we’ll plan to bring another line down by the end of this year. So we’re running, we think, a bit below capacity utilization in the U.S. right now which is probably in the mid-80s or so. Korea where we operate middle-to-high 80s kind of where it’s been all along. Operating rates in Brazil are a little tensed – a little opaque to us right now, but our facilities are running quite tight down there, as they are in China, and we service this to South African market currently. So overall, if you look at our whole – total system right now, we’re running in the high 80s.

Great. The line you are idling in the U.S., could you ballpark what percent of U.S. industry capacity you think it is?

We have a 75,000 ton unit, and I think we probably commented on that in the past, 75,000 tons was rattling in one of the three lines down there. So that would be some percentage of the U.S. capacity, which is roughly 1.7 million, 1.8 million tons, so you could do the math, it is 1% or 2% change.

Okay. All right, thank you.

Thank you. [Operator Instructions] Our next question comes from the line of John Roberts with UBS. Please proceed with your question.

Thanks and nice quarter.

Thanks, John.

Thanks, John.

It sounds like the technical rubber blacks are becoming more important. Do the technical rubber grades overlap with both specialty and tire grade carbon black that is, are some technical rubber grades are higher-margin than the low end of specialty blacks and are there some tire black rates that are higher-margin to low end of technical rubber black, I’m just trying to understand the mix effects and the range that this technical rubber growth is going to fit into?

There is obviously a continuum there, John, I mean where you have at the low-end ASTM blacks that is sold to the tire industries, which is sold roughly, whatever you want to call the base margins. And then you have some of these technical rubber grades, which include not only mechanical rubber goods but also some of the bespoke products that we sell to the tire industry, which can sell substantial margin improvements over, what I would consider, the base margin of tire black. Maybe it’s another 50%, maybe it’s as much as 2 times or 3 times depending on the particular application and the customer. If you switch over to the Specialty Black, as you can see, our Specialty Black margins are tapered – are usually average at least are much higher than all of the rubber blacks that we sell. However, there are some low end specialty blacks, which reach down to that technical rubber black margin. And in some instances maybe all the way down to the tire, but that’s not an interesting area for us. Our target is more the high end of that. So its kind of a long answer to your question, John, but there is indeed overlap from technical rubber grade up into specialty margins and technical rubber grade down into tire and some specialty margins down into the technical rubber grade band of margins.

Okay. And then secondly, you will drop below 2 times net debt to EBITDA in the next several quarters. Buyback is an optimal given the float in future secondaries by private equity, your dividend yields are already high. The other options are ramping CapEx or acquisition, but sound likely. How are you thinking about free cash flow as you go forward here?

I think your analysis is pretty much on target, John. We will look for – I mean we do have some interesting organic CapEx projects which we’ll talk about in future with very nice returns that we are looking at, but other than that, obviously, this is shareholder money and that’s where we’ll end up.

Okay, thank you.

Thank you. [Operator Instructions] Our next question comes from the line of Arthur Roulac with Three Court. Please proceed with your question.

Hi guys, good morning. I had a couple of questions. The first one was, can you just illuminate a little bit more, I guess you were saying that 3Q is going to be softer versus 4Q, so I guess, you should expect midpoint of guidance sort of 230 for the year, which I guess, would equate to sort of €57 million roughly per third and fourth quarter, should be expect the third quarter to be softer and the fourth quarter to be stronger then?

A little bit. I mean, we just think we’re going to have a good fourth quarter. And we think that just because of timing of various projects, and so and so forth that the fourth quarter will be a bit stronger unusually than the third quarter. But your summary is good. One isgoing to be clearly above that midpoint of €57 million or more maybe a bit below. I described Q3 in anyway soft, just trying to give some feel for the second half of this year.

Got it. All right, that’s very helpful. And I think the question the KeyBanc guy, I don’t know what his name is, was trying to get was, specialty has grown incredibly, I mean I think it was EUR 100 million back in 2014 to EUR 137 million this year. The first half of this year because of rising oil, you had this margin pressure and I think he was just trying to get at, when will that sort of margin pressure start abating and then when will you start seeing sort of the specialty side comp up as your – I guess, price increases catch up to the rise in the raws.

It’s coming to abate already in Q2. You’ve seen the pick up in adjusted EBITDA, you have seen the pickup in gross profit per metric ton versus the first quarter. We – again, that’s a diagnostic, not an end in and of itself. But we see that moving in that direction quarter for quarter. We will have a few ups and downs, but as Jack described, this is a very good business, very good profile, we’ve got great products. So yes, that’s what we expect.

Okay. And then on the Korea side, can you just remind us, again, the total investment in converting those facilities? I think there was maybe €20 million to €25 million of CapEx associated with – as well as some other costs? Maybe you can give us an update as to where things stand with Korea when it should be done, et cetera?

Let me comment on just the activity there and Charles can comment on the scope of it. As you recall, what we announced there was the notion of closing the northern plant, which is in the suburb of Seoul, Korea and consolidating that facility down to the southern tip of South Korea into the facility we call, Yeosu. It’s very complicated move because there are a number of lines, number of grades that have to be moved from one location to the next location. And so it’s a bit of an orchestration process, which has actually gone off very well for us. We’ve been able to qualify the majority of grades now in the other locations. We’ve done conversion of a couple of units down there, which have largely been rubber in the past into specialty and qualify those to be able to produce all that what we need to produce in those areas. And recognize what we’re doing here as we make this move, we will have an overall reduction of rubber capacity but bit of an increase in our specialty capacity particularly in the high-end areas. We’ve also engaged real estate consultants with regard to the land in Seoul in this plant that we call Bupyeong, in order to assess the value of the property and begin the process of actually working with the local government there for rezoning in order to be able to sell the property ultimately, which as we said in the past will more than self finance all of these activities. These investments that I have just talked about as well as severance cost, remediation cost of the closure of that facility. So in essence, the target was to have this sort of wrapped up sometime in terms of the move and the production and all that probably sometime in the middle of next year, third quarter of next year, and the sale of the property, which is going to take a bit longer because it’s just takes a while in that country. Sometime close of 2018, it may work its way into early 2019, but we’re targeting right now the end of 2018. And that’s the plan if it sits right now, Arthur.

I think just in terms of numbers we said this year, base CapEx spend about 60, but add on another 20 or so far this Korea project this year to be a bit more next year consistent with Jack’s description. That gives the order of magnitude, at 20 plus. And the land sale will more than cover that all ancillary cost and there’ll still be some leftover, truly sort of self-financing project through an asset that wasn’t obviously because of the way things were accounted for valued fully at its current value in our balance sheet. So very good project for us and it’s shifting the footprint towards specialty.

Great and thank you. My next one is, I guess, there is a plan to maybe convert your reporting currency into dollars, so people, I think, there’s a large – lots of people out there that are confused by the euro financials and the U.S. dollars stock. Is that sort of the plan and is there – is that something that maybe you do try – do at the end of the year for 2018, or is it a longer process?

First of all absolutely right, that’s what we’re going to do and that is the reason why we’re going to do it. We haven’t deliberately set a timetable yet because we want to map it out and from subsequent quarterly updates, we’ll provide that. It’s certainly not something we will be doing this year, but it is something that could well manifest itself or show itself in 2018. We’ve also got the – get our brain around, we report on an IFRS basis, that we believe there are lot of material differences between IFRS and U.S. GAAP, but it would be interesting to consider sweeping that up as well. And that’s why I alluded to over the comment associated topic. So that’s giving a bit of sort of flex at the moment on timing. I don’t overload, we don’t overload the organization and the finance function and above all, we want to do two things, obviously, do it in a controlled manner and make sure investors understand the changes such as they will be, hopefully, as we implement them. This is no surprises, full visibility process. But the direction of travel and the reason the direction of travel is as you summarized up.

Got it. Thank you. And then, I guess, finally I think someone else had asked this just on the allocation of capital, I suppose quite soon your deleverage is going to be probably close to 2 times at the end of year, maybe a little bit above that, I think that was generally the target for next year or sort of being a decision where you have surplus cash flow coming in. I would, again, encourage you and the board to maybe at least consider given the extra float of starting to repurchase shares when you are starting to look at the company valued on 2018 numbers close to 6 times. Reading reports other people think some of your competitors should be priced at 9 times forward, so there’s a sort of a massive three-turn arbitrage there by buying back stock in the open market and it would seem even public now it would three years, at the end of this year, it will be 3.5 years, the company has delivered and it’s grown EBITDA a lot and really is only $2.50 higher than we’d IPO-ed. So please consider, I know, you guys are and thank you for all of your hard work.

Thank you. We will do, we’re – we remain as a management team very significantly invested in the company. In fact, the incentive program – we have the long-term incentive program, we have is holding company stock. And basically, it’s meant that the proportion of number of shares on balance each manager holds is roughly the same as it was when the IPO-ed. So what I’m trying to say is that, we’re as a management team very much incentivized to do what is in the interest of all shareholders, clearly. And our board understands that obviously as well. So sentiments, and again, the direction of travel, if I may overuse that phrase of your statement is well registered.

Thank you. And thanks for all the work.

Thanks.

Thank you. [Operator Instructions] Mr. Clem, it seems there are no further questions. I will turn the floor back to you for any final remarks.

Okay. Again, thanks for joining our conference today. I think everybody has to agree that at this point in 2017, we have positioned ourselves massively in this market for success and even in the eyes of the investing community. I think we’ve made a point today and in past discussions that we believe this is a solid and robust company, sustainable company capable of doing quite a bit, but undervalued by the market as one of the – as Arthur Roulac mentioned a little bit earlier. We made a move to increase liquidity. We think that opens up some opportunities for us to appreciate – for the markets to appreciate our stock a little bit better and we – as Charles has mentioned, we are taking some additional steps to remove some of the impediments that we think exist out there, which will ultimately remove any of these hesitations that companies – investors have with respect to our multiple versus other multiples out there in the marketplace. But looking inside the business itself, I think you have to see that this rubber business has responded very nicely to some of the initiatives that we’ve had out there. We saw some pricing moves going into this year. We see an overall tightening of the business as we move into 2018. Supply and demand dynamics are I think favorable at this point and we’ve taken some moves both in Europe and the move that we’ve taken in United States in order to accelerate some of that supply and demand dynamic, which we think would be helpful for the industry. So in addition to a nice improvement that we are seeing in the Rubber Black Business, we see it continuing to strengthen as we go in to 2018. With respect to the Specialty business, it’s a great business. We did see some headwinds this year. It’s been spoken to on this particular phone call. But we have little to no concern about its ability to continue to outpace the market. Its growth rate has been spectacular, 8% or so year-to-date this year. No doubt, we will end up much higher than the market growth rate also this year as we continue to expand our premium grade and overcome some of these headwinds that we saw with price of feedstocks. So I’m very confident in that business, and I think the listeners on this call are ought to also be very confident in our ability to continue the spectacular growth that we’ve seen in that Specialty business, while enjoying the recovery that we’ve got going on rubber business. So with that, I’ll close. We appreciate your interest in Orion. Certainly, look forward to speaking to you, again, in the next earnings call, which will be in November. Thank you very much.

Thank you.

Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.