Innophos Holdings, Inc. (IPHS)

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Innophos Holdings, Inc. (IPHS)

Q3 2012 Earnings Call

November 1, 2012 10:00 AM ET


Mark Feuerbach – VP, Treasury, Financial Planning & Analysis

Randy Gress – Chairman, CEO and President

Neil Salmon – VP and CFO


Peter Cozzone – KeyBanc Capital Markets

Edward Yang – Oppenheimer

Chris Butler – Sidoti

Rich Glass – Lockwell Investments

Larry Solow – CJS Securities

Chris Shaw – Monness Crespi



Welcome to the Third Quarter 2012 Innophos Earnings Conference Call. My name is Larisa and I will be your operator for today’s call. At this time, all participants are in a listen-only mode. Later, we’ll conduct a question-and-answer session. Please note that this conference is being recorded.

I’ll now like to turn the call over to Mr. Mark Feuerbach. Mr. Feuerbach, you may begin.

Mark Feuerbach

Good morning and thank you for joining us today for Innophos’ third quarter 2012 results. Joining me on the call today are Randy Gress, Chief Executive Officer, and Neil Salmon, Chief Financial Officer.

During the course of this call, management may make or reiterate forward-looking statements made in our October 31 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 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 numbers 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 November 1, 2012. 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?

Randy Gress

Thanks, Mark, and good morning everyone. My opening comments will concentrate on third quarter performance and how we have continued to deliver on our strategic initiatives. Neil will then summarize our financial results and provide a look ahead to the fourth quarter and after which I will conclude with some final remarks and then we will take your questions.

Overall for the company, we achieved net sales of $211 million in the third quarter, up 5% from last year. Diluted earnings per share was $0.74 compared to the $0.92 recorded in the third quarter of 2011 after excluding the previously disclosed adjustments for the prior quarter.

The decline in earnings per share was primarily attributable to lower profitability on sales of our co-product GTSP with the GTSP & Other segment continuing as expected at about a break even earnings level.

Specialty Phosphates revenue was up 4% with the primary contributors being 2% organic volume growth in our U.S. and Canada Specialty Phosphates business, a 3% benefit from the effect of consolidating our recent acquisitions, Kelatron and AMT, and a 5% price improvement as we continue to enjoy the benefit of price increases implemented over the last 12 months.

These gains were partially offset by a disappointing quarter in our Mexico Specialty Phosphates business where revenue was down 15% compared to a strong year ago quarter. Market conditions were similar in the quarter to the generally weak conditions we saw last quarter with demand from end markets similar or moderately lower than a year ago. The 2% organic growth achieved by the U.S. and Canada business represented continued above-market growth through progress in the execution of our growth strategy.

A number of factors contributed to the volume shortfall in Mexico Specialty Phosphates. At the beginning of the quarter, Hurricane Ernesto caused some disruption to local transportation and to plant production. Although, I’m pleased to say our improved contingency plans were successful in reducing the impact of the weather disruption compared to similar events in the past.

We then experienced some manufacturing operating issues, which although successfully rectified, further contributed to a shortfall in production volumes in the first couple of months of the quarter. Normally, we would have been able to catch up on these shortfalls later in the quarter. But in this case, we then went into the planned maintenance outages, which we talked about during the second quarter earnings call, with older inventory levels in plants are preventing any catch up ability.

The quarterly result for Mexico was below our expectations, but for specific reasons and we expect to get back to our prior volume run rate in the fourth quarter. However, we are now in the middle of the next phase of our planned maintenance activities. And that will make it difficult to offset the third quarter shortfall with additional growth in the fourth quarter.

Overall, the Mexico business remains in good shape and we continue to make progress in improving the orientation of our product line to more differentiated food and beverage end markets.

Turning now to our growth initiatives, we continue to see strong performance from our first bolt-on acquisition of Kelatron Corporation and are pleased with the initial results from our second bolt-on acquisition of AMT Labs.

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