IPHS

Innophos Holdings, Inc. (IPHS)

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Innophos Holdings, Inc. (IPHS)

Q4 2013 Earnings Conference Call

February 19, 2014 10:00 a.m. ET

Executives

Mark Feuerbach - Vice President of Investor Relations and Chief Financial Officer

Randy Gress - Chairman, Chief Executive Officer and President

Analysts

Larry Solow - CJS Securities

Christopher Butler - Sidoti

Edward Yang - Oppenheimer

Chris Shaw - Monness Crespi Hardt

Peter Cozzone - KeyBanc

Richard O'Reilly - Revere Associates

Elie Mishaan - Corsair Capital Management

Presentation

Operator

Good morning, ladies and gentlemen, and welcome to the Innophos Fourth Quarter and Full Year 2013 Results Conference Call. My name is Donna. I will be the operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded.

I will now turn the call over to Mark Feuerbach, Vice President of Investor Relations, and currently serving as CFO. Mr. Feuerbach, you may begin. Sir, you may begin.

Mark Feuerbach

Good morning, and thank you for joining us today for Innophos' fourth quarter and full year 2013 results. Joining me on the call today is Randy Gress, Chief Executive Officer. Randy will start with comments on our fourth quarter performance and progress in executing our strategic initiatives. I will then provide detail on our financial results and a look ahead to the first quarter and full year 2014. Randy will then conclude with some final remarks before we open the call up for your questions.

During the course of this call, management may make (technical difficulty) in our February 18th press release regarding financial performance and future events. We will attempt to identify these statements by use of words such as expects, believes, anticipates, intends, 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 risks and other factors as set forth in the forward-looking statements section and in Item 1A risk factors in our Annual Reports on Form 10-K as filed with the SEC that could cause actual results to differ from those in the forward-looking statements made in this conference call.

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 webcast available on the Company website.

In addition, please note that the date of this conference call is February 19, 2014. 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.

Now, I would like to turn the call over to Randy Gress, CEO of Innophos. Randy?

Randolph Gress

Thanks, Mark, and good morning everyone. Overall, we are pleased with our performance for the final quarter of 2013 as we generated our strongest net income of the year, driven by our highest levels of operating income and margin for Specialty Phosphates in six quarters.

Our improved income and margin was supported by the strength of our specialty ingredients product line, where volumes grew 4% organically compared to the prior year period, as well as improved cost and higher overall average selling prices for the U.S. and Canada business.

We also achieved a number of important accomplishments in 2013, positioning us well to deliver above market growth rates while strengthening our product portfolio and market position.

In Mexico, our Coatzacoalcos facility has improved its performance each quarter since the challenges we faced in the first half of the year. Our actions to improve the future reliability and capability of this facility have enabled significantly improved operating performance.

I'm pleased to report that we have just achieved the best yield of any quarter this year at Coatzacoalcos, up roughly 500 basis points from our first quarter 2013 (low). And we also set new monthly and annual production records at our specialty ingredients plants.

As we continue to improve our operating performance in Mexico, we are now focusing on the facility upgrades that will enable us to drive even higher growth and profitability. More on that in just a moment.

In China, we started up our food ingredients manufacturing facility and will have to support growth in the Asia-Pacific region. These efforts helped grow exports from U.S. and Canada to Asia by 10% in 2013.

Overall for 2013, export sales from U.S. and Canada remained strong, up 9% year-over-year, driven primarily from growth in the Asia-Pacific and Europe. We view the export regions as strong growth areas for Innophos, especially for the food and beverage markets.

Turning to product development, our sodium reduction product Cal-Rise continues to perform very well, recording over 60% volume growth for 2013 compared to 2012. We continue to invest in product development and applications to support above market growth rates.

Additionally in the fourth quarter, we completed our fourth acquisition in the high growth nutritional ingredients space with the purchase of Chelated Minerals International. This acquisition will integrate well with our other recently acquired minerals businesses, AMT and Kelatron which are also based in the Salt Lake City area.

These businesses provide high quality custom ingredients in the mineral fortification industry, and are expected to grow in excess of the 6% to 8% projected market growth rates for 2014.

Overall, growth from acquisitions contributed 3% to our Specialty Phosphates revenue for the fourth quarter, and it will remain an important part of our strategic growth initiatives.

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