Innophos Holdings, Inc. (IPHS)

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Innophos Holdings Inc. (IPHS)

Q2 2010 Earnings Call Transcript

August 03, 2010 09:00 am


Mark Feuerbach - Vice President, Treasury, Financial Planning & Analysis

Randy Gress - Chairman, CEO & President

Neil Salmon - VP & CFO


Edward Yang - Oppenheimer

Christopher Butler - Sidoti

Frank Mitsch - BB&T

Jeff Zekauskas - JPMorgan

Elie Mishaan - Corsair



Good day ladies and gentlemen and welcome to the Innophos second quarter 2010 results conference call. My name is Steve, and I will be your operator for today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of today's call. (Operator Instructions). As a remainder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to your host for today, Mr. Mark Feuerbach, Vice President of Treasury and Investor Relations. Please proceed, sir.

Mark Feuerbach

Thanks for joining us today for the Innophos Holdings Inc. conference call to discuss second quarter 2010 results. Conducting the call today are Randy Gress, Chief Executive Officer, Neil Salmon, Chief Financial Officer, Bill Farran, General Counsel and myself, Mark Feuerbach.

During the course of this call, management may reiterate forward-looking statements made in our August 2nd press release regarding financial performance and future events. We will attempt to identify these statements by use of words such as expect, believe, anticipate, intent and other words as to note 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 and other factors as set forth in the forward-looking statement 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 a webcast available on the company website.

In addition, please note that the date of this conference call is August 3rd 2010. 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 would like to turn the call over to Randy Gress, CEO of Innophos. Randy?

Randy Gress

Thanks Mark and good morning everyone. Today I will be providing you with an update on the strong second quarter results. After the quarter’s highlights, Neil will summarize the financial results and then I will conclude, we will then take your questions.

Both net sales and operating income were up on a year-over-year and on a sequential basis. Pricing and volumes in both the specialty phosphates and GTSP and other business segments improved sequentially. In fact I am pleased to report specialty phosphates achieved a fifth quarter of sequential volume growth improvement and the first sequential pricing improvement since 2008.

This quarter, net sales were $184 million, up 10% year-over-year and a 9% improvement sequentially. Specialty phosphates revenues increased 1% versus last year with volumes up 21% and prices lower than a year ago when pricing had just begun to adjust from earlier peak levels. Compared to first quarter, pricing improved moderately on a sequential basis and volumes improved 3%.

Our Mexican business continued its strong recovery with specialty phosphate volumes up almost 40% year-over-year. There are three primary contributors to Mexico’s recovery and improved cost position relative to market, recovery of market demand and significant success in establishing new export markets with sales to South America being the primary contributor to volume growth.

The mix has also improved with a greater proportion of specialty salts and higher grade acid versus historical levels although there is still further to go in fully repositioning the business.

US and Canada Specialty phosphates delivered year-over-year volume growth of 16% with the improved economic environment contributing together with ongoing success in our commercial programs. Improved economic conditions were most evident in the recovery of phosphoric acid sales to industrial markets although volumes were still somewhat below pre-2008 levels.

Our ongoing success in strengthening our position in the more differentiated specialty salts and specialty acids was also evident. Sales of these products were much less effected by recessionary conditions and we were already near pre-2008 volumes. On a sequential basis, US and Canada volumes were a little lower than the first quarter. We did not detect any sustained change in the demand environment and the reduction was attributable primarily to three factors.

First after a loss of primary specialty food salts inventory following flood damage at a third party warehouse in Nashville, we had to increase lead times and reschedule some orders. Our nearby manufacturing facility, together with our supply chain team have done a terrific job of responding and we don’t believe we have lost any business as a result of this. However, it did affect second quarter sales moderately.

Second, we had our scheduled maintenance shutdown at Geismar, Louisiana. The plant shutdown and went well and the facility was back up on schedule. We also took advantage of our new network strength, utilizing some Mexican supply to compensate for the Geismar outage.

However in what a strong PWA demand environment, we opted to reschedule some orders to better accommodate the outage. Finally, across the first and second quarters, we saw some impact from further home auto dish wash reformulation of Sodium Tripolyphospate or STPP with higher orders in Q1 in anticipation of the change and minimal further orders in Q2.

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