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Innophos Holdings Inc. (IPHS)
Q3 2009 Earnings Call
November 03, 2009; 10:00 am ET
Randy Gress - Chairman, President & Chief Executive Officer
Neil Salmon - Chief Financial Officer
Mark Feuerbach - Vice President, Treasury, Financial Planning & Analysis
Bill Farran - Vice President & General Counsel
Edward Yang - Oppenheimer
Christopher Butler - Sidoti & Co.
Previous Statements by IPHS
» Innophos Holdings, Inc. Q1 2009 Earnings Call Transcript
» Innophos Holdings Q4 2008 Earnings Call Transcript
» Innophos Holdings, Inc. Q3 2008 Earnings Call Transcript
I would now like to turn the conference over to your host for today, Mr. Bill Farran, Vice President and General Counsel of Innophos. Please proceed.
Thanks for joining us today for the Innophos Holdings Inc. conference call, to discuss third quarter 2009 results. Conducting the call today are Randy Gress, Chief Executive Officer; Neil Salmon, Chief Financial Officer; Mark Feuerbach, Vice President of Treasury, Financial Planning & Analysis; and myself, Bill Farran, General Counsel.
During the course of this call, management may reiterate forward-looking statements made in our November 2 press release regarding financial performance and future events. We will attempt to identify these statements by use of words such as expect, believe, anticipate, intend, and other words that denote future events.
These forward-looking statements are subject to material risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. We caution you to consider the important risk factors that could cause actual results to differ from those in the forward-looking statements as contained in this conference call and in our earnings reports and filings we make with the SEC.
We will make a replay of this conference call available for a limited time over the telephone at the number set forth in our press release and via a webcast available on the company website. In addition, please note that the date of this conference call is November 3, 2009. Any forward-looking statements we may make today are based on assumptions that we believe to be reasonable as of this date, and we undertake no obligation to update these statements as a result of future events.
Now, I’d like to turn the call over to Randy Gress, CEO of Innophos. Randy.
Thanks Bill, and good morning everyone. Thanks for joining us today. I will start off with some comments about the third quarter and discuss our current outlook. Then our new CFO, Neil Salmon will give us the highlights for the quarter, which will be followed by some legal comments from Bill Farran. I’ll finish with a short summary, after which we will take your questions.
First however, I’d like to welcome Neil Salmon who joined Innophos as Chief Financial Officer in early October. I’m very pleased to have Neil on the Innophos team, as he brings strong financial experience in 20 years in the chemical industry. Most recently, he served as Chief Financial Officer for ICI’s Adhesive’s Business Group, a $2 billion business unit with global operations.
I’d also like to take this opportunity to express my appreciation to Mark Feuerbach for serving as Interim CFO over the last quarter and doing a terrific job of overseeing the finance organization.
Now, let’s discuss our business results. Our financial performance during the quarter suffers from difficult comparisons against the record setting third quarter 2008. However, when we look at results on a sequential basis, I’m pleased to see several encouraging trends. Net sales for the third quarter 2009 were $161.9 million with the rate of decline sharply reduced since the first quarter of 2009.
On our second quarter call, we talked about expectations for downward selling price pressures to continue, and prices excluding our commodity fertilizer co-product, GTSP were down 8.9%. However, it’s clear that the rate of decline is slowing. We expect further price declines in the fourth quarter, but at a more modest rate.
Third quarter 2009 total sales volume excluding GTSP rose 2.8% over the second quarter 2009, with encouraging growth in the U.S. partly offset by ongoing demand weakness in Mexico. Let’s address Mexico first, we continue to experience weak demand and a challenging competitive environment as well as a limited ability to respond competitively given our unfavorable contract pricing on rock.
On the positive side, phosphoric acid sales have stabilized, and the loss of business at the company’s largest customer in recent years had no further impact in Q3. We also delivered good volume growth in specialty horticultural products sold into the U.S. Although, fertilizer markets remained soft overall, volumes of GTSP were up during the third quarter. We were able to move out most of the quarter’s production and have little inventory remaining. With the GTSP cost rate down to current market prices in the second quarter, our GTSP sales have no margin impact.
Now switching to the U.S. and Canada. Total volumes were up 6.6% over the second quarter 2009. Specialty Salts and Specialty Acids are core business in major area of strategic focus, drove this improvement with an increase of 9.7% in U.S. and Canada and 12.6% company wide.
A portion of the increase was partly seasonal as our third quarter traditionally marks the beginning of the holiday baking season while a significant portion of the improvement resulted from our business achieving strategic growth initiatives in focused market segments such as food, beverage, pharma and pet food. These segments are proven to be value driven, and we’ll continue to provide opportunities for growth in the future. Having maintained our leadership position, Innophos is well-positioned to benefit from economic recovery and further alignment with key global customers.