GRA - Earnings call transcript Q2 2018

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Operator

Good day, ladies and gentlemen, and welcome to Second Quarter 2018 W.R. Grace Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time.

As a reminder, today's conference is being recorded. to Corporate call Development like Rohen, to now President, Vice and would turn over the Jeremy I Investor Relations. begin. may you Sir,

Jeremy F. Rohen

Thank Officer. Hudson quarter Bill and and today everyone, Festa, Officer; Grace's this you, and for Chief Fred President Mark. us Executive Interim and and joining Operating Officer; morning thank are President for Force, call. Chief Dockman, earnings you second Vice Chairman Financial With La me Grace's Hello, Chief

on posted of our under earnings could principal the will SEC release businesses are Our future may Please uncertainties our some and presentation section risks and Investors that contain on results recent grace.com. performance. filings, our differ our website which our at view based and affect that future the today of materially. identify current actual our forward-looking Please note statements comments see

measures morning's are and in We Reconciliations financial of non-GAAP more and on will Fred will strategic discuss posted certain financial detail second recent and other measures, initiatives highlights which in earnings earnings materials materials. in our then described will business update our and Hudson are associated morning, this will financial non-GAAP and performance, our contained quarter developments. provide our key address cover an website. results. This on I disclosures

the that, with to over call Fred. turn earnings please I'll So, turn and to our slide in presentation, X

Fred E. Festa

the Thanks, and Great. on to call. morning, Jeremy, and good everyone welcome

growing first fuels continue by and businesses. for income our large stricter growth strong XX% our the confident in business sales disposable for as of with performance customer The demand in continued strength a long-term long-term growth we continue from health pleased remain support all in materials and the experience about on driven standards execute initial and cleaner growth petrochemical for of plastics, organic drivers acquisition catalysts in positive very are part environmental year polyolefin and we and year-over-year, across sustainable Building leading QX quarter were quarter, and to feedstocks, demand up momentum, first solid full and catalysts a strong household We our performance the segments. to half the our strategies. XXXX strategy. strong its prospects

contribution of growth was Commercial strong delivered EBIT excellence year's organic input for value effects teams repeat growth of Notably, from our the our earnings, insurance We the on good operating the line. and growth last plants. continued double-digit and Excluding focus performance our acquisition, that quarter costs to by commercial X.X%. and XX%, recoveries the did this higher despite initiatives selling driven acquisition, achieved top execution from quarter. not by enable strong was adjusted this

are to per we second half our to adjusted Turning of the raising $X.XX share. to $X.XX year, outlook EPS the

plants and all in positively are pockets results. solid strength from businesses impact continued discuss expect detail. performance will of from companies, across we most Like our We tariffs to experiencing the inflation. operating Hudson and specialty more volatility chemical

proactively We managing across company risks. on are the these focused

to this are with Grace commercial non-executive We our personal expect our following company board results. on a Our impact XXXX executing supply will On where our I strategies do any meeting retiring have and X, necessary. Chairman. teams as mitigation not and of CEO be meaningful remain November as chain on note, the

to time, going know and do will call turn of succession confidence full Hudson he's Hudson. Hudson has and announced in the myself. of established board's plan. with the that, of May, the transition assume that in terrific we As job. With to role a I the board I'll line CEO support at over and the

Hudson La Force

with to growth time to and continue Investor look we execute leading I the Day as Grace, with forward March. exciting Thank discussed opportunities, you, company, profitability many Fred. we in at team. solid a you the at an strategy It's great

Our search as planned. is CFO progressing

a on initiatives Please key We we'll our to business talent this critical performance. have provide an I'll position, you keep review and in progress. then on and our add turn our strategic key to update great a updated opportunity slide X.

clear continue growth accelerating improving We Grace Model our through Value progress, to make and initiatives. profitability

We winning marketplace improving and our are operations. the in

give me specific Let two examples.

to excellence First, develop we continue focus initiatives our selling. strong with a value commercial on

in Our which year. customer-centered averaged innovation showing per our X% customer-driven are and quarter culture growth, is this up organic

we plan XXXX on We'll plants begin liability, projects have and improved is performance, other a traditional Grace investment System. Second, our XXXX. implementing full of measurable a the expected on These and manufacturing implementing will profitability. two making their excellence to one in improved to higher are lean They to ahead of strategy next a Manufacturing deliver are greater throughputs, the at investments benefits. manufacturing GMS years. and/or benefits year. high costs. GMS and than five track GMS operating including return XXX% yields lower operations is difference deliver of plants Today, with

ultimately show be benefits in dollars. these margins reinvested investing up a profit top of commercial will innovation key most in in will our greater in excellence. This focus on growth but of line investments is gross additional result higher through This growth will and Some component long-term in capacity, strategy. growth and

implement our invested investments include XXXX, in productivity $XX plants. and million our for including million and first and the products we to projects demand XXXX strategic excellence as support outlined, $XX value-added capital to as previously In capital, catalysts well growth of operating initiatives we've materials strong XXXX our increased programs. for of half As investment growth

our $XX For the continue $XXX above investments forecast year, million approximately full we spend. to of capital steady-state or million

our many demand manage investments match dynamics. market timing the said may shift to investments and have market so customer years, with of we to the align our we capital times As over

this investment closed biggest which Our acquisition, catalysts is the year polyolefin April X.

operating quarter's earnings the $XX progress with of performance pleased our million including and with have investment and case. We in are We integration. with revenue, the we commercial initial made results, delivered with line

track, us to confident deliver we full cost projected. integration the as will am capital and the expected. and revenue year, is enable we earnings full For I avoidance synergies will and achieve the on The

outlined, to strong with five-year in positioned growth are Looking we to term businesses sustainable drivers. markets we've we well fortunate previously that framework, high-value in are longer own the our financial

investing businesses our the continuously extend to accelerate growth competitive strengthen Value strengthen Model, our investments and enable Grace culture are to These growth, targets. the our capture our to formalize growth advantages, in markets. us long-term We and and will deliver our talent

to quarter. X, review polypropylene Overall, Let's high-performing Specialty by also and were our business up strong demand for our technology. and turn I'll to manufacturing and performance. for catalysts Technologies continue from acquisition polyethylene mix demand for pricing, improved driven results Catalysts the In the strong sales Catalysts, for slide and second XX%, quarter our are the and experience we benefiting

X% solid year-over-year chemical and organically, polyethylene licensing. grew the For catalysts quarter, growth catalysts, with from sales

XX%. Including We full in grew continue high organic technology-focused, in for were acquisition, with improved the initiatives. prices Technologies points XXX to FCC quarter. expect our up single-digit quarter consecutive the basis over catalyst year. value-selling the for from continued X%, business sales sales growth the Refining the momentum second

of share solid, strong. In joint be $X.X demand to to achieve Hydroprocessing We up X%. earnings and our are our remains of confident we full year catalysts million. X% were venture, our backlog ART pricing our will continues target

regulations. to new marine of date We online the HPC effective fuel fourth capacity the expect the XXXX, of IMO quarter in in XXXX for come our time

fuels. mix business and to continues catalysts shift to petrochemicals clean Our

continued catalysts acquisition this of high-growth come of With and our petrochemical the fuels of end our catalysts, polyolefin catalysts the max-propylene will rates year. and over hydroprocessing clean by and polyolefin, sales XX% from applications

Pricing X. solid improved slide Silica for a Technologies on Sales than our up markets. demand year-over-year, Materials Let's grew driven basis turn a XXX by strong consumer/pharma to in points. including XX%, quarter from were and quarter benefit sales coatings currency. more the in X% X%

last As rebuilt successfully we have sales quarter, our discussed pharma chemicals fine our teams commercial pipeline.

X track QX. to were and sales we will Please to address third on year outlook. full return in I and are year-over-year, quarter, slide turn This our to flat quarter and growth

For our EBIT million, we of share, EPS $X.XX $XXX to range outlook year, to a per raising $X.XX, $X $XXX the to adjusted and $X.XX our $XXX from raising with million of outlook end to up to million. the lower range full adjusted are

of the be the to the year, anticipate we EPS EBIT between adjusted half quarters. and For balanced two second adjusted

quarter, EPS last adjusted strong we be year. our several scheduled have to QX, turnarounds, especially XX% of up largest in XX% had For over we to the plant expect one an In we including product QX, third mix; plants. and

As decline points. a to sequentially result, expect margins less we basis gross XXX than

continue For margins the to up full expect year-over-year. year, we be to gross

affect have address our to in U.S. affect and turning and do other call At this any tariffs like tariffs the discussed implemented. other Now by the future would the tariffs to us China not that directly directly countries implemented countries before time, potential inflation businesses, way. and if material I'd Jeremy.

developments proactively are closely tariffs We potential occur. and these monitoring they addressing as

We year-to-date X% some manufacture our most United the these sales are China States, specialty of total export U.S. context, applications into sales. are For can with to and if about needed, sold costs. switching our products of outside

costs inflation, Regarding logistics end have and uptick of in since our the an input QX. we seen

teams supply to our to to our impact minimize execute and to integrated results. any Our commercial chain continue strategies continue develop and plans mitigation new

detail. inflation turn monitoring to diligently the to that, who financial and will in more discuss maximize With potential Jeremy, remain our in performance. our now of tariffs impacts are call and agile We the I'll order results

Jeremy F. Rohen

Thanks, Hudson.

points Lower a income insurance that was first and volume more manufacturing $XXX.X results. million XXX gross another the the in to of Adjusted higher up offset input of up headwind of change Let's $XXX.X year our XX.X% up million, strong as XX.X% and sales driven XXX and repeat basis costs of from higher basis by our and which our offset improving of quarter. points, basis turn basis contributed by gross Grace joint XX initiated Sales currency. quarter input quarter the performance points. on polyolefin the X.X% acquisition, to XXX quarter, XX.X% mix, pricing. QX slide costs useful discuss from average profit X.X% XX, strong catalysts margin EBIT on margin million constant from quarter. and this higher that driven lives up not ART pricing were last estimate, higher growth recoveries points. in than were and year-over-year. Adjusted I'll did depreciation was $XX.X XX.X% Adjusted Higher venture, second reported was EBIT reported expense for the

proceeds last we $X.XX reminder, will similar year. a up XX.X% was Adjusted as headwind compared experience per diluted insurance from share, QX. a in As EPS to

recoveries, due year, $XX.X Excluding reform, to million million, $X.XX Year-to-date, flow higher free to per insurance up cash change from XX.X% down effects was $XXX.X depreciable EPS was lives investments. versus last $XX.X or support year. of tax and productivity largely strategic the expenditures last million adjusted net the and of capital adjusted share growth

of part as we mitigation potential Additionally, materials our levels inventory key increased for certain plans our for raw tariffs.

Our of basis, a from adjusted includes result capital increase XX.X% invested as the measured in the realized. full down trailing XX.X%, on the a the only are of the one which X-quarter quarter quarter. EBIT ROIC, acquisition of was on return and as benefits acquisition will naturally acquisition is

XX. Now slide let's turn to

capital to the allocate we've allocation outlined We with in continue line capital before. disciplined strategies

First, returns in best growth our investing from come our opportunities. strategic

synergistic We and in build capital growth to high-return and to bolt-on acquisitions technology continue our invest will in capabilities. strategic projects manufacturing and

Second, dividends cash repurchases. shareholders to we'll return share and through

a adjusted Finally, EBITDA. X do targeting while X times net we will times of leverage to this range

we in We expect times. shareholders, million I'd the our year-end we cash through million like share $XX With $XX approximately open million repurchases. now call returned at QX, your to that, cash $XX and to in X.X dividends for to cash shareholders. Year-to-date, be questions. million $XX in to our net returned leverage In

Operator

John Markets. BMO question first of Capital from McNulty our And comes

Your line now is open.

John P. McNulty

question. my Yes, good taking morning. for Thanks

Fred E. Festa

Good morning, John.

John P. McNulty

areas. a of guess I So couple

guess, came Materials Tech where margin I but look surprise, they On from. I the sales big were solid really that's us the area, the kind the mean, side like really on volumes the of for

in about So I came some drove leverage should kind the out there of of pricing? parse you we volume that was where from, of sustainability the level it can what I margin? strength think or it of this the how whether guess guess

Hudson La Force

factor for combination a things. was the all Thanks improvement. that It no Hudson. question. Hey, of the There's John, it's accounted one for of

We are this improving pricing in business.

I are higher the growing, We those margin and things contributed good all to manufacturing think plants mixing improvement. of faster We segments. margin had performance towards our in

John P. McNulty

right have was we, is retrenchment or drifting you or Okay. But think blip what about the of there way where and these anything kind margin from see back of, not there's a to kind that levels, one-time it?

Hudson La Force

the it about over right in to think tell way we will I think referenced and it. the time, script. is Certainly, I it you

MT And turnarounds full in have through going by quarter, QX. We plants I turnarounds. mean, CT will are those and three affected this that be

because turnarounds from expect QX the the should that's in you decline of trend. a So the cost change to not but those of sequential QX

John P. McNulty

it, of the is are Manufacturing had you way you, guess Grace going I XXXX? have sounds that the on you cost working Got It to kind or initiatives the okay. with quantify may highlighted. kind line even it to how indicated as of in maybe hoped what get kind that about and you different or XXXX be growth then the fall benefits to should And then, driving things. System thinking of really regard a kind whatever, invested that cash some would used be think better. that guess, like and in. just things capital back mean, I it bottom is you're about does there into whether being of you as side guess, reinvested and and seeing, have efficiency of, it and or or it's And I generation in when to, starts in sales than way R&D we I flow a result all actually, get does

a helpful? there little So would color be

Hudson La Force

in percent think of see the a would of gets that we line. or second I of two think in we years – pieces, And think that our implemented benefit we'll on One in with gross we'll it more. is bet, create and you do benefit the what But two of plants pieces: X% won't or margin over this the all do as benefit. of two John. You then, three program I how do is, margin that this create all I

of growth, is I continued in but most terms this all of don't journey. investments most it. it of of I a reinvest GMS reinvest will We we'll think – we'll faster in it, think reinvest

to we'll operations it's probably and not plant make, to journey, reinvest excellence. and and continue point event, innovation an commercial is Another GMS in a

right is, of that So of way basis, more to – a point it But, pieces net couple margin or there. all gross of out think, a most but not I the overtime, on reinvested. but

John P. McNulty

then last if And Great. I ask one maybe question. can

Albemarle You've least on there? any time. guess, for focused are at I had squeezing upside there of the assets room in value kind that you a of point maybe Do guys know, bit the right or the is fair pricing assets to for out of the got, those of feel you've terms pricing is at really, surprises this you the of, I assets? in little true kind that now value. laser or

Hudson La Force

your a with for terms We able getting we this but time. had There will surprises. good of part John. the We're business people, to look business and strong that in technology of very Grace, acquisition, happier we to is those happy bought And of and are people we results the the no in that bought, the look from joined opportunity, the be This the to have effort, drive We it the innovation. response as we're the we'll we quality a couldn't expect diligence this very question, do, maximize second asset. we the with manufacturing value be to the performance improve and over and commercial to maximize customers. of continue

John P. McNulty

Thanks Great. very much.

Fred E. Festa

with to the just Grace combination the acquired to asset me that our one achieve, more value And receive value the similar value, of in that. we've is to Let will asset by turn, been delivering add able in deliver BASF, back. on to the The to we we, more value point customers.

the accelerator, and proving so XX is accelerator first an that over that's days, So true. far,

John P. McNulty

much very color. for Thanks the Great.

Operator

the question Suisse. Credit you. Thank our Parkinson from Chris line of of next comes And

Parkinson S. Thank Suisse line is now Great. Credit - LLC you. (USA) Securities Christopher Your open.

you inflation too. the And Thank ability model China, thinking to any inflation, the pricing broad quickly on us walk last offset and the or you. raw your through earth, color of key surcharge including some be been Can very on Obviously, Just, the material a quarter front. longer-term the just just there's on on rare in thoughts inputs in going lot procure a to should the efforts about strategy? we alumina.

Hudson La Force

ingredient that the tick to some it in underlying of we and of Obviously, an inflation catalyst all guidance so. inflation as six We natural Chris, XX themes our thought that QX, was sources again. which see up Hudson. inflation the biggest for gas, products. The and are inflation it's during days The leveling caustic use which our in the we of haven't changed into alumina, off, last ago sequential our or that processes; wouldn't for this is year. much energy is factored manufacturing months really over started us on use source; we

In it's this, a mitigating we're how things. terms combination of of

surcharges comment as and in any a through can helpful. with regional our on just but have would manufacturing supply can into early in place in you And if Thank productivity, quantify, the we're in and we sure Securities so I ART our on understand speak. just team thinking, is XXXX I thought initiatives It results just to also will procurement there and think exposure, this we're early, to We products. chain further your you key all focused make and bit basis, to a walk goes your it's IMO broader pulling put have and longer-term pricing it's Credit any our you. some you on us just That's be be value how Suisse outlook. customers, But And it's too realize about all year. cases. just LLC (USA) S. helpful. Parkinson of those - Christopher probably maximizing levers our productivity for

Hudson La Force

Chris. You bet,

And business catalyst is applications, That's standards fuels. the demand We'll biggest a sulfur. top-line hydroprocessing products. for is new would hydrocracking shippers beyond for those see levels meet by higher were and our clean these and type of to hydroprocessing it, fuel addressed best I XXXX expect For year And many which new see standards areas mid- has to through as everybody, the And these permitted mid- think marine new, being high-single grown another to this high-single to fuels digit fuels the driven transportation. effect. trend of joint ART for XXXX that in refiners our we towards benefit tighter value it IMO regulations, where last with digits venture. about strategy are and in the regulations see way the cleaner really will we'll ART in to these in ART of to it years in one high still the story XXXX. chapter That's to those for continue the come, products. experience growth and We'll for marine years,

capacity adding take time - these at Credit advantage very business in of will end XXXX, Christopher Importantly, much. of just you Securities LLC Thank this Parkinson of (USA) that we are some new additional Suisse the in demand to the come from S. regulations. online

Operator

of our from Thank you. comes McCarthy Partners. And of question next Vertical the Research Kevin line

is now open. Your line

Kevin W. McCarthy

has in morning. good strong U.S. The fairly been both propylene overseas. complex the and Yes, year-to-date,

impact, new and a the deals speak like licensing, look then, what if be to maximization for that, you've any, months? XX where looks next you What areas. downstream months there. six few could like the wondering would you outlook seeing does over polypropylene licensing One it inked FCC if propylene to and and the Just two second and might in be would be catalysts;

Hudson La Force

see in more six We've see we been continue and Hudson licensing. We demand hard to remains the for share last We in demand future FCC see refiners announced strong. our in demand propylene propylene. world for to for demand our UNIPOL in maximize in of year expect it's catalysts. plastics and of before directly it The the more we some run max your polypropylene short strong has units for again. to nine is to and opportunities, terms Kevin, polypropylene it our propylene We view, or polypropylene number a months, licenses catalysts continue the announce over.

Kevin W. McCarthy

Okay.

of what catalyst? in follow-up, is terms to of latest ability a their As resume shipments you're and from hearing the restart Takreer FCC

Hudson La Force

to Their most in end restart of shipments we the that year. and November Nothing XX There would of that their to at region, expect update in But in be this we is part the any first recent further shipments has was next year. would last circumstance, refinery days. them public to not they changed the until specific. next expected inventory the resume expect year, to

Kevin W. McCarthy

a good. lot. Very Thanks

Operator

next line Goldman our from of And Bob the you. comes of Sachs. Thank Koort question

Your line is now open.

Robert Koort

East Thanks meet year? very ramps, for your of is the much. have tying you capacity over there customer that retain restarting some maybe those Middle And scope help into last one that demand? the customers volume any is opportunity replace to that Maybe in that last the any idle to do

Hudson La Force

to when combination. volume, Hudson. We to some supply it existing it's do Bob, will It have will add shed back be the capacity fully incremental a they have be to also but we are mix, some will customers one online. some customer

I volume some you'll growth see think, from us.

I valuable think, you'll customers. mix our we shift, see focus as on most more

Robert Koort

Got you.

of like. under last it of the margin little And the it's and for a focus enhancement, as look pricing, years. bit couple over So sounds refining we on investors obviously

You future? about target the on for X% X% on pricing there, the to to year. that this nature expect should improvement for longer-term sustain we foreseeable itself Based talked being contracts

Hudson La Force

on, Bob. That's we're what focused

Robert Koort

Thank Got guys. you, it.

Hudson La Force

Thanks.

Operator

comes the of from UBS. our Robert Thank you. question line John of next And

is line now open. Your

John Roberts

Thank there your forward, or roll? hedges about to is you. Any anything effect the from alumina think going quarter costs as in

Hudson La Force

do most warrants in our John. We exposure, effects some had alumina We comment. hedge that nothing small of but QX,

partly least hedges XXXX. into at do carry Our in,

rolling a hedge have We program.

six we So the may on the next just XX see alumina path inflation. as It months. will we that take into to really prices roll XXXX, additional some depend over

Fred E. Festa

would on that, Hudson's I point. add to

dynamics supply it. from sourcing and well very variabilities not looking at hedging we of much is side use it Our have our guys there that a mix how as within market as a chain product but on nice perspective job, only done the

we've So hedge a program, done it's just more financial a nice than job there.

John Roberts

your growth reflective recently Specialty you some big of had the be rate. mix the that individual Catalysts above the Is look organic growth then growth wins boosted regional industry the organic there? global in to or And that well

Hudson La Force

value had we licensing. on five the touched our reflects really it too, now, was some think of UNIPOL Fred technology and BASF just the effect. successes Albemarle was integrated ago in And customers have we've I acquisitions, we've years it that technology an this for early the we're too that integrated bring But we an quarter a have our is advantage for that of to these us. little as finding to breadth as

John Roberts

Okay.

a but is really the it's synergy talking just the the deals. it lag. organic happens to actually business? about the this acquisitions So previous from reflects its on – sales We're It with benefit of prior the base

Hudson La Force

but technology innovation we've yes, and of customers the we it the with more that getting really starts out getting more we've isn't up. It's acquired. more pick Well, out technical This of acquired. –

John Roberts

you. thank Okay,

Operator

our And you. Spitz comes of of Bank [Roger Spitz] question from America. Robert (sic) Thank next

Your now line open. is

William Sappern

Bill for guys in volume I changes was FCC Roger. could hoping is in Sappern catalysts you on this ART? Hi, provide

Hudson La Force

were catalysts number up sorry, I my a flat in to FCC have little mind. an in exact the don't bit quarter. I'm

Fred E. Festa

year the of up. half first the for definitely think I

Hudson La Force

Definitely.

Fred E. Festa

little bit quarter a was just flat. Second

Hudson La Force

for on We order And a up. digits ART, in QX up year. single They volumes be the strong had for catalysts will mid-to-high last timing. are year the FCC ART

William Sappern

Great. XXXX follow-up, And interest you. you quick a Thank provide cash can guidance?

Hudson La Force

can. We

Jeremy F. Rohen

Yes our outlook. latest think we've it into – and incorporated I

Hudson La Force

$XX the number? what's million? it Bill, Is

William C. Dockman

million. $XX

Hudson La Force

$XX million.

William Sappern

thank you much. it, Got very

Hudson La Force

bet. You

Operator

the Katter Thank And next from with of our line comes you. question Baird. David

now is line open. Your

David Katter

rest the of some benefit provide and can should was year? on for I Good the we morning, in quarter how guys. the the currency about think you hoping that context

Hudson La Force

currency. get from did positive a We

points, as look of consistent thought three our at for On of to But the our was what into points of we the currency forward are a percentage of going couple incorporated the dollar top-line currency percentage maybe full has current it year strengthened year. to what couple the half Very second as beginning diminish year. the the the that's top we levels The line, has outlook that we've diminished. of with tailwind growth.

David Katter

online? your can And it EPS when – on that and to what of expansion touch on might accretive helpful. might comes that the JV ART that's thoughts how then it Got maybe be kind you

Hudson La Force

a exactly That's never many we've as a It's I tell how am adding. sure, as said you, we're it's been. pounds expansion. precise material not it will – we've expansion. I is gigantic

Fred E. Festa

supports, tied the And in it CLG. you all with we're as know with licenses

on visibility those We very and good and licenses have backlog. that

So sold it this expansion really on. even – out it comes before is

Hudson La Force

Yes.

David Katter

at helpful. for you're Then last me, that's one looking versus delevering Great, as one buybacks.

above near focused delevering, to that, targeted that Now range, you we term balance how that decision? going on or you're kind do evaluate should or kind your of is that of think be

Fred E. Festa

think would where we as stock are I next we'll rule make year will top we it. programs where early decisions out in year of balance our growth cash year. that down not level, where at have the the as end I the debt are have – where of on we'll – in end But on toward side as paying into At we well some is or and market some at it, are, the our optionality sheet, those on look and excess the of obviously the we'll we consideration we take

Hudson La Force

be balance will either a It way.

David Katter

congrats Got it. the Thank you, on guys, quarter. and

Hudson La Force

you. Thank

Fred E. Festa

you. Thank

Operator

Thank Alexander Jefferies. you. from of Laurence line the of And next our question comes

Your line is now open.

Daniel Rizzo

on you Rizzo for guys Good morning. This is How Dan doing? Laurence. are

Hudson La Force

Good. Thank you.

Daniel Rizzo

out soon was as that, ramping beyond as wondering, IMO demand driven just just I think that in sold are be ART of that mentioned with I it XXXX. online. comes or mind for in You you will that by expansion considering expanding the anticipation beyond if additional

Hudson La Force

capacity ready on our businesses. at It Nothing this long-term in that's along comment part to that's are we planning, do of that of point. about as our all as so nothing thinking it our ready we is thinking – to far we're something that for

Daniel Rizzo

I it year? you're expansion doing mean, could brownfield additional what do next beyond has does or you to or be greenfield

Hudson La Force

are what of part and are possible evaluating. are we both Both

Daniel Rizzo

Yes, okay.

Fred E. Festa

operations of the debottleneck, Remember, got we network a Just hydro-processing we've to to. Hudson's world if add can need that to around point. we around our

Daniel Rizzo

there opportunity I involved you of then, technology on are as also into few past mean, and but Okay. there done catalysts opportunities with kind was the that this you've are in and, you've like in if synergy the the focused space. And revenue wondering important moving Albemarle obviously, I polyolefin cost the with what

Hudson La Force

of recently, something category focused operating excellence I very would more System much it's we've Grace whether our the into and and plants plants or acquired we're Manufacturing broad it's lump that existing the on.

Daniel Rizzo

you much. right. All Thank very

Operator

next Thank our Capital you. Markets. Loop comes Kapsch And of from question Chris

open. now is line Your

Chris Kapsch

Yes, year-over-year. said, the think on could I pricing parse particularly, you just FCCs. my question out better more focuses X% Wondering pricing dynamic in and, you the, than if

benefit Is if the getting wondering that? parse Just Just Or you could of of fire in it the up lapping or mentioned it and Is more those price trial cost-driven initially, that were value sort picked apples-to-apples, of you at customers? contributors wake you volumes. also, selling, presumably, sort pricing? volumes of to increases? – least, the you sorry, of volumes as the some the inflationary or low-value mix out lapping, were Takreer

if wondering you how of variance. that see balance XXXX? to contributed playing over the the So, pricing out And that

Hudson La Force

the applications parts customers. of biggest running in far, bringing all to and hard are us improved the running and technologies refiners prices. the demand our right octane hard come U.S. now. to of is these high-performing They're driver, at good maximize hard many by products propylene They catalysts maximize to new Chris, And in that are running world.

fundamental And here. driver so, that really is the

Operator

Mike Securities. next from of Harrison our Thank Global Seaport you. question of line And the comes

Your is open. line now

Michael Joseph Harrison

morning. Good Hi.

Hudson La Force

Mike. Hi,

Michael Joseph Harrison

some what being during additional specific they made the of some to tariffs? by are of materials. bear, wondering, you raw materials tariffs impact those And tariff just or those just you to I contemplated. be referred half inventory have affected year You avoid are to seeing could the that in come that order first already was the purchases on

Hudson La Force

effect. tariffs raw some in materials – This to efforts into could proactive in case, was not some in of in really anticipation additional case – certain inventory, come

announced So not to been that's response in anything already.

Michael Joseph Harrison

the could of opportunities Are able any And acquire just organically that in you wondering All in to growth be to if take to also going address there? on opportunities you are in actions you was space chemical then, catalysts. see order you you to see opportunities? taking that need capitalize to right. really the advantage Or

Hudson La Force

smaller the customers. we're combination develop. introducing our position what a to some of part We saw cat of QX It's that technologies and existing been a to was both. we chem an do now. that have we've business of continuing in of some newer benefit It's Part technology

effect, focus And with so, have the need but technology. to we M&A, have we a continue the that business advancing we really on would to big

Michael Joseph Harrison

Thanks much. very

Operator

you. Thank

of question line the next Goldman Bob Our with Sachs. comes Koort from

open. line is Your

Christopher Evans

a is on This to IMO Evans revisit for moment for guys. Hey, I hoping Bob. Chris again. was

base there other distillate changes you maybe upstream? that positioned to add you're low a You're at other into refinery, get seeing their strategies my shift major sulfur the In oil. to fuel production, very to maybe high capacity or process the are maybe sulfur distribution looking refineries difficult potential as life refineries process to CapEx/OpEx customer high is hydrocracking for Instead, with directly it's understand your their dilute hydrotreat insights chemist address a uniquely the refinery seeing some maybe products? units limits. I Or to sulfur prior and the

Hudson La Force

complex types wanted ones optionality on new up regulations. think of investments Chris, question, insightful the some these complex that customers than and make that an or hydrocracking adding we've capacity the refinery implementation from And seen the the firm too investment decide on they're think more either most It's the complexity plans. What it's We've I Medium you're those to the right that a about books seen benefit. more about the benefit you seen hydrotreating make investments customers we've to will they these looking of fence And but anything has, these refineries as most plans proceed. to is whether or track. that customers had capacity. else accelerate were who are refineries on will

Some aren't decision for it's much customers tougher a refineries, that operating them. complex

Christopher Evans

see Grace? the Is value it from is more proposition maybe volume an as the just value opportunities as or it widen? the process to you benefits And from of create your how catalysts accruing specifically enhanced new potential then spreads units do

Hudson La Force

I think I think the in come is will volumes. volumes. through the come biggest part part through in opportunity. But will clearly biggest a margin There

Christopher Evans

Great. Thank you.

Operator

I'm time. Jeremy back And like closing remarks. further no to Thank you. turn at questions to would this now showing Rohen the I for call

Jeremy F. Rohen

over your for forward your Grace. many in the months. time everyone interest of and you, today Thank you. you Thank Mark. the seeing We on to look road coming you, Thank

Operator

gentlemen, disconnect. a participating today's for day. and and great Ladies may This program you does Everyone you all the conclude thank in have conference.

Jeremy F. Rohen	W.R. Grace & Co.
Fred E. Festa	W.R. Grace & Co.
Hudson La Force	W.R. Grace & Co.
William C. Dockman	W.R. Grace & Co.
John P. McNulty	BMO Capital Markets (United States)
Christopher S. Parkinson	Credit Suisse Securities (NYSE:USA) LLC
Kevin W. McCarthy	Vertical Research Partners LLC
Robert Koort	Goldman Sachs & Co. LLC
John Roberts	UBS Securities LLC
William Sappern	Bank of America Merrill Lynch
David Katter	Robert W. Baird & Co., Inc.
Daniel Rizzo	Jefferies LLC
Chris Kapsch	Loop Capital Markets LLC
Michael Joseph Harrison	Seaport Global Securities LLC
Christopher Evans	Goldman Sachs & Co. LLC

W.R. Grace & Co. (GRA) 26 Jul 182018 Q2 Earnings call transcript