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AMCOL International (NYSE:ACO)

Q4 2012 Earnings Call

January 25, 2013 11:00 am ET

Executives

Ryan F. McKendrick - Chief Executive Officer, President and Director

Donald W. Pearson - Chief Financial Officer, Chief Accounting Officer, Senior Vice President and Treasurer

Analysts

Richard Wesolowski - Sidoti & Company, LLC

Albert Leo Kaschalk - Wedbush Securities Inc., Research Division

L. Todd Vencil - Sterne Agee & Leach Inc., Research Division

Ralph Marash

Operator

Good morning, ladies and gentlemen. Welcome to the AMCOL International Announces Fourth Quarter 2012 Earnings Results Conference Call. I would now like to turn the meeting over to Mr. Ryan McKendrick. Please go ahead, Mr. McKendrick.

Ryan F. McKendrick

Thank you, Michelle. Good morning, and welcome to AMCOL International's fourth quarter 2012 earnings conference call. I'd like to have Don Pearson start out today to provide some insight into this morning's announcement of our restatements, as well as providing a review of some of the financial highlights for the quarter. So Don?

Donald W. Pearson

Thanks, Ryan, and good morning, everybody. In the press release, we also had an announcement of a restatement, so I just wanted to review that briefly. In our reviews of controls and the results, we concluded that we had a material weakness in internal controls over financial reporting relating to European operations of our Construction Technologies segment, and this is for the year 2011 and the first quarter of 2012. We put a table in the 8-K that was filed and the press release, showing the impact on the 3 years, 2009, '10 and '11, and the first quarter of 2012. So we plan to refile the 2011 10-K, which will be amended as soon as possible. And with that, we'll also refile the first quarter 2012 10-Q, and I'll be happy to answer any additional questions on that later on.

For the results for the quarter. Earnings were $0.37 for the quarter compared to $0.39 in the prior year quarter. Sales were up 2.3% with a slight decline in the gross margin of 60 basis points, to 26%. Income taxes in the quarter were lower than the annualized rate of 27%. It was about 25% compared to 35% last year, so I'll just briefly comment on that. In the prior year, the 35% was really driven by the mix of income at the end of the year relative to what we thought that would be, and the geographical dispersion of that income resulted in a much higher-than-normal effective tax rate at the 35%.

And this year, the lower rate was really driven by some tax planning initiatives that we put in place in the fourth quarter. However, the key point is the rate for the 2 years together were 27.5% plus or minus, this year and last year. And I expect to have a effective tax rate of around 28% going into 2013.

On the balance sheet and cash flow, I really want to highlight the continued work we've been doing on working capital. We're seeing results in that and the operating cash flows, which were up $70 million compared to the prior year. And we paid down $12 million in debt. And on the free cash flow, which would be the operating cash flow minus CapEx, we ended the year at $34 million versus negative $22 million last year, so about -- over a $50 million improvement in free cash flow.

So Ryan, I'll turn it back to you.

Ryan F. McKendrick

Great. Thanks, Don. So as Don indicated, AMCOL posted worldwide sales of $239 million for the quarter, about 2.3% increase over last year's fourth quarter, with earnings per share of $0.37, $0.02 below last year's fourth quarter. The earnings were impacted by write-offs associated with exiting from product lines in our Construction Technologies segment, and that accounted for approximately $0.02 per share. In addition, lower sales for drilling fluids and for pet care, along with the volume-related gross margin reduction accounted for an additional $0.05 per share of negative impact versus the prior year fourth quarter.

We continued to see solid performance in many of our product lines, including metalcasting, Oilfield Services, waterproofing products and our construction-related drilling area. We're also investing in several emerging opportunities, including mercury sorbent technology for the power industry and a suite of products in the bio-agricultural market sector. And we're also actively managing some challenges in other product lines.

So let's start, first of all, with the Performance Materials area, which is our newly named -- segment name for the Minerals & Materials area. The U.S.-based metalcasting business was about even with the prior year Q4. Automotive demand in the U.S. market is expected to be slightly up as we move into 2013, and as such, even though we continue to see softening in demand for some nonautomotive-related castings, we are expecting a steady year for metalcasting business in the U.S.

In Asia, as we anticipated, we are beginning to see a nice upward trend for volumes in China, and demand in Thailand and in South Korea also was pretty steady. China's recently announced infrastructure stimulus appears to be creating some rebound in demand for the metalcasting business there.

On chromite, sales for Q4 were about 20% higher than prior year Q4 and well ahead of last quarter, with pricing and margin remaining fairly stable. We are 1 year to 18 months behind our original volume ramp-up schedule, as we continue to work on expanding customer base and improving quality of the plant.

In the pet products category, demand for cat litter at the retail level remains fairly flat. But overall, bentonite volume has been impacted by formulation changes involving blending of lower-cost materials with bentonite at certain packaging facilities for cat litter. So that impacted volume on the cat litter business.

With respect to fabric care and personal care, which are major components in our specialty materials product line, we're encountering challenges in growing these businesses, but we do continue to work toward developing commercial success for new technology and new product applications in these areas. We're going to be evaluating a number of opportunities and alternatives for these businesses as the year progresses.

Last point within the Performance Materials area is on drilling fluids. Drilling fluid additives are included in our basic minerals product line. It's another area where we've been experiencing lower sales versus prior year as our U.S.-based -- our land-based drilling activity has declined. Several of our large customers were significantly overstocked. We expect activity in this area to gradually improve as the year progresses.

Moving onto on to Construction Technologies, which is the Environmental -- the old Environmental segment. Let's start off with building materials, which include sales of our construction products for concrete and waterproofing. Business grew nicely in the U.S. but was offset by a decline in sales in international locations. Our global management team for this product line, along with new products that broadened the available target market, we're expecting them to generate growth in this product line in 2013. We're continuing to invest in new products in the global expansion of our presence in building materials and in drilling product lines within the segment.

Moving on to lining technologies. In this area, we supply products for landfill lining systems. The drop in lining tech sales contributed to the overall drop in Q4 sales for the segment. Demand is expected to remain relatively weak globally for our traditional product end use, and other opportunities have been slow to develop. The operational streamlining of manufacturing facilities within this segment, evidenced by the gross margin improvement, has reduced costs in the U.S. and is now well underway in Europe. Other cost reduction initiatives involving consolidation of production capacity, exiting certain businesses and closure of several European offices are also underway.

So finally, in our Energy Services segment, sales for the quarter were up 33%, with the operating profit up 37%. Domestic business drove the increase in sales revenue, as our 3 largest domestic service areas, being coil tubing, well testing and filtration all showed nice increases. A good trend and part of our strategy is the growing number of our customers are utilizing bundled services involving 2 or more lines of services provided by our company, with our specialized filtration technology being a key component of these packages.

A rebound in coil tubing margins from Q3 was particularly strong, as we were impacted in Q3 by one-time costs for repairs and equipment upgrades that did not occur this time.

International locations, which accounted for 25% of the segment sales for the quarter, it's up from 20% last year, continued to perform well, contributing approximately half of the increase in operating profit for this segment. I had the opportunity a couple of weeks ago to meet with several of our major customers in Houston, and the outlook, from their perspectives for 2013, continue to be pretty strong for us.

In summary, as we begin 2013, we're going to continue to actively manage our portfolio of product lines. In 2013, this is likely to result in consolidation and restructuring to address some of the challenges within those product lines that don't fit our performance objectives. We expect to incur restructuring charges associated with these actions to be in the range of $3 million to $5 million in the year.

So that's a quick summary of business results and operations, and we'd now like to open the call for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question is from Rich Wesolowski from Sidoti & Company.

Richard Wesolowski - Sidoti & Company, LLC

Would you mind elaborating a little bit on the businesses that you've chosen to restructure, how you landed on those and maybe what prompted the timing of the decision to undertake the restructuring, how much revenue they are and cost savings, et cetera?

Ryan F. McKendrick

The restructuring is primarily directed, Rich, to the Construction Technologies segment of the business. And the timing is based on the fact that we see continuing compression or contraction within especially the lining tech segment of that business. So basically, we're rightsizing a lot of these businesses. In terms of the cost reductions, basically they're in 2 buckets, primarily from our European operations, where one bucket is in manufacturing-related cost reductions. We've identified about $1.5 million in annual operating cost reductions that are already underway in terms of staff reductions, reduction in overhead costs. And the other bucket is primarily in business support structure, overhead cost reduction. There are a number of office closures that are underway, primarily in Europe. And the associated cost reductions, primarily from SG&A, associated with those activities, is going to be somewhere in the area of $2 million a year.

Richard Wesolowski - Sidoti & Company, LLC

Great. Are there any -- is there any restructuring going on in your domestic lining tech or other construction material business?

Ryan F. McKendrick

Yes. In the lining tech area, there's some consolidation of the sales force. And also on the production side, we've already undertaken a pretty significant headcount reduction and kind of rightsizing at one of our plants. As an example, and this has been ongoing through the last several months, but in the first half of 2012, our total staffing at Cartersville was 53 people. Now it's at 32. So that's already about $750,000 realized to-date on an annualized basis, and there's more to come.

Richard Wesolowski - Sidoti & Company, LLC

Great. And the blurb in the press release regarding the restructuring suggested operations that don't fit our strategic and financial performance goals. The financial performance goals I see in the Construction Tech, but I was curious if there are any strategic businesses or kind of non-core operations, smaller business, that you are considering restructuring, divesting or downsizing in 2013.

Ryan F. McKendrick

Yes. I think the continued elimination of the whole contracting business is something that's been underway for a while, and that will continue. There are couple of others, Rich, which I think we shouldn't really highlight at this point. But there are a couple of others that are being considered.

Richard Wesolowski - Sidoti & Company, LLC

Okay. More on the results. You achieved a revenue gain from price in minerals, yet your margin fell. And I'm wondering if that's explained by the volume and plant utilization or something else.

Ryan F. McKendrick

It's primarily because of volume and plant utilization, that's correct.

Richard Wesolowski - Sidoti & Company, LLC

Okay. And lastly, you seemed to hit the balance geographic mix of the Oilfield revenue growth that you've been shooting for, for many quarters. But the margin, as in September, was well below your 30% plus bogey. I'm curious if the shortfall was similar in type to what you had in September or did something else prompt it?

Ryan F. McKendrick

Completely different, actually. The margin situation was impacted in Q4, first of all, by the fact that we still have a very large component of our U.S. business as land-based as opposed to offshore-based. The offshore is coming back, so we're seeing and expecting gradual margin improvements because of that. But secondly, in our domestic filtration business, which is an important part of our business, we have some margin compression there because we have some significant startup costs on a big project within that segment.

Richard Wesolowski - Sidoti & Company, LLC

That's with the land-based filtration?

Ryan F. McKendrick

Yes.

Operator

Our next question is from Al Kaschalk from Wedbush Securities.

Albert Leo Kaschalk - Wedbush Securities Inc., Research Division

In terms of the restructuring charge, Ryan, maybe you could take us up a couple thousand feet here. But it sounds like you're spending $3 million to $5 million or will incur some expenses. If you think about maybe targeted savings coming out of this program, is that 2x that number? Is it $10 million? Is it $3 million? Have you thought about this exercise in that regard? And if so, could you share, bigger picture, what this costs?

Ryan F. McKendrick

Yes, I think when we look at the targeted savings that I just went through, it should be somewhere in the area of $3.5 million per year on a combined basis. And that, Al, does not include any plant closures. But I think -- that's in view of the restructuring charges that we may incur, that's not a bad return.

Albert Leo Kaschalk - Wedbush Securities Inc., Research Division

And it sounds like -- is the to-be-determined facility cost a function of volume or demand in the market that you see near-term, or are these a little bit longer strategic decisions, where you -- these could be permanent closures -- idle versus closures?

Ryan F. McKendrick

There are several plants that we have that do more than one thing. So when we're talking about closures, in most areas it would be kind of idling or channeling production from one facility to another to really optimize production costs. But it would not necessarily involve the closure of a plant because there may be a number of other businesses or product lines that are supported by that plant.

Albert Leo Kaschalk - Wedbush Securities Inc., Research Division

So there's still then some risk, I guess, with the -- given you don't have solely dedicated facilities to a particular product line, that the operating capacity may not reach sort of the optimal. You may be always striving for that based on the ramp in demand from a global perspective?

Ryan F. McKendrick

Yes, so that's why it really is more of a strategic decision, which is driven by logistics costs and so forth. But closing a plant for us is a big deal. And I think before we start talking about what's in consideration and so forth, we really need to make some firm decisions there, and we're not at the point where we can make that kind of announcement at this point.

Albert Leo Kaschalk - Wedbush Securities Inc., Research Division

Okay. I realize you didn't want to talk about strategic decisions on business, but pet products and fabric care/laundry care have been businesses that historically, at least on the pet side, we've always talked about a GDP-type view, but the performance has been pretty poor. And I'm just wondering if these are -- do you look at these more going forward here on an ROIC basis and return on capital such that [ph] maybe it makes sense to look alternatively at whether you should be in these businesses?

Ryan F. McKendrick

Yes, let me talk about both of those because they're both quite different. First of all, on fabric care. In that area, AMCOL provides additives to major powder detergent manufacturers, okay? Our primary product is a fragrance carrier, and we're experiencing declining demand there, right? We have been working on development of technologies, including more efficient replacement for phosphate-based detergent builders and other products, utilizing some of our expertise in the agglomeration and extrusion technology. But quite frankly, we've been disappointed to date in our lack of commercial success. And that's one of the businesses that, although we're working hard to develop those commercial successes, we've got to look at a number of opportunities and alternatives as the year progresses there. When it comes to pet products, we're seeing flat to lower product demand at the retail level for that product category. However, alternate product formulations involving blending of other materials with bentonite at packaging facilities has resulted in lower overall demand for bentonite. In other words, bentonite is making up, instead of 100% of their formulations, maybe 70%. So on the upside for pet products, there are product rollouts that we anticipate taking place in 2013, with the major customers for packaged products, which is where we want to be. But overall this product line fits well within our product portfolio. We've got a relatively large market, a significant market share, as well as mineral reserves and production infrastructure that serve additional bentonite markets, so that it really positions us there as a low cost producer. So even though it is not a growth area for us at this point, it really fits in, from a strategic standpoint, with our production facilities and with the basic strategy of the company. Okay? So those are 2 different businesses.

Albert Leo Kaschalk - Wedbush Securities Inc., Research Division

Is this a demographic change that's taking place and we're in the early innings or 1 and 2 years into it? I mean, versus just a volume of [indiscernible]

Ryan F. McKendrick

There is some evidence that there's a demographic change in terms of the number of households that are cat owners. But a bigger driver in terms of the volume impact here is the substitution of alternate materials for bentonite. And what drives that is cost. I mean, if you have a packaging facility, for instance, located out in California, and you can bring in 100% bentonite and ship it all the way from the Western plants that we produce or you can bring in 70% bentonite and bring in some locally sourced filler-type material at a much lower cost, then -- and there's no real discernible difference to the consumer in terms of the clump ability and the performance of the material, then that's a real cost driver. And I think we are at a point now where most of that displacement has taken place. But we're not looking at the trend continuing considerably and to reduce more volume because of that.

Albert Leo Kaschalk - Wedbush Securities Inc., Research Division

So that's a -- that's the consumer brand that's dictating that in terms of the formulation?

Ryan F. McKendrick

That's right, that's correct.

Albert Leo Kaschalk - Wedbush Securities Inc., Research Division

Okay. If I may just shift over to Oilfield Services or Energy Services, the top line has been fairly strong. The margin profile is -- and you touched on earlier, a little bit softer than probably expectation. But can you talk about the volume and price components of -- that's impacting that mix? And I guess you'd have to probably to talk about offshore/onshore and the international impact to help us appreciate the trend. In other words, I just saw 30%, I think, top line the last couple of quarters year-over-year. I would suspect you don't expect that type of progress in '13. But where are you trending in terms of that business now?

Ryan F. McKendrick

Oilfield Services, we're still pretty confident that we're going to get some decent growth rates here. We're not expecting a somewhere in the 30s, but I think mid-teens or something is a reasonable growth rate for us to model going forward. As far as the gross margin, I still feel confident that we can be pushing toward that 30% sort of a target as we move into the year. The reason we feel confident there -- a couple of things. First of all, we're seeing very good utilization rates on our coil tubing business. We're seeing a lot more activity starting to develop offshore in the Gulf of Mexico, which is typically a higher-margin area for us. And we're also seeing pretty firm business in our international markets, which is almost all filtration work, which, again, is higher-margin work for us. And you can see that even though we had -- I think it was -- our total portion of business for the segment went from 20% international to 25% international, that the international contributed about half of the total operating profit growth to the segment in the last quarter. So it's marginally better than the domestic business.

Albert Leo Kaschalk - Wedbush Securities Inc., Research Division

Not to split hairs, but again, given the different services you offer it may be a little bit different, but are you price positive in all of the segments or all of the business units within the segment or are there services where again, with the bundling going on it may be even harder to call this out, but in other words, is it 75% of the growth is from volume and the balance price? Or are we actually still flattish or are we flattish on price in a given quarter?

Ryan F. McKendrick

Depending on what service sector we're talking about, in the filtration area, pricing is pretty stable. Coil tubing has actually seen some price -- some pricing pressure, and well testing has as well. I think it's something like 37% of our coil tubing revenue now is under long-term contract, and we are only seeing about a 10% differential between the contract work versus normal day rates. But we're pushing more toward trying to lock up this work under longer-term contract because the advantage there is we get much better equipment utilization. We're typically guaranteed a certain number of days of work on a monthly basis, and that really helps quite a bit. I mean, equipment utilization is really a key driver in terms of the overall efficiency and margins that we derive from the business, which is volume-related, basically.

Operator

Our next question is from Todd Vencil from Sterne Agee.

L. Todd Vencil - Sterne Agee & Leach Inc., Research Division

Ryan, just circling back on the conversation you just had. Did you say that you feel good about the top line 2013 and Energy's growth staying in the 30s?

Ryan F. McKendrick

No, no. Like 15% sort of...

L. Todd Vencil - Sterne Agee & Leach Inc., Research Division

15%. Sure you didn't say 50%?

Ryan F. McKendrick

No.

L. Todd Vencil - Sterne Agee & Leach Inc., Research Division

I apologize for missing that. And pushing back toward that 30 point, I mean, do you think you can get there this year on the margin, sorry?

Ryan F. McKendrick

I think we'll be trending toward that. I would expect to be there by fourth quarter. I'm sticking my neck out on this, but I think we can get there.

L. Todd Vencil - Sterne Agee & Leach Inc., Research Division

Okay. I'm writing that down. And then on the SG&A, I mean, I think it's been $10 million to $11 million a quarter thereabouts. But -- I mean, is that a pretty good walking around number? Or does that flex higher as revenues go up?

Donald W. Pearson

You're talking to Oilfield, Todd?

L. Todd Vencil - Sterne Agee & Leach Inc., Research Division

Yes. I believe you call it Energy now.

Donald W. Pearson

Just making sure you're paying attention. Yes, there's a pretty variable cost structure here. So you will see an increase in SG&A there. I mean, there's a large amount of safety and compliance put in since the Horizon accident, maybe $4 million or $5 million. So that nut is kind of stable and fixed on the SG&A. So you get a little bit of leverage there. But there is a variable component with the selling costs as the sales go up.

L. Todd Vencil - Sterne Agee & Leach Inc., Research Division

Got it. Okay, good. That's very helpful. If I look at Construction Technologies and try to think about the top line, Ryan, it sounds like you're telling me that building materials are growing, lining and contracting are going to be shrinking this year. Is that the right way to think about it?

Ryan F. McKendrick

Contracting will be out this year.

L. Todd Vencil - Sterne Agee & Leach Inc., Research Division

Contracting will be completely out this year.

Ryan F. McKendrick

Right. Lining tech will be, I think, flat, and I think building materials and the drilling products area will have some pretty significant growth, in the low double-digit sort of area.

L. Todd Vencil - Sterne Agee & Leach Inc., Research Division

Got it, got it. That's helpful. And then, margins have been solidly above 30% for 3 quarters. I mean, is that -- can we maintain that and maybe even grow that a little bit?

Ryan F. McKendrick

Yes. I think having that target of 30% for the segment is very achievable. We've made a lot of progress there on the manufacturing side to really help ensure that.

L. Todd Vencil - Sterne Agee & Leach Inc., Research Division

Okay. You did about $53 million of SG&A. This year you talked about $2 million of reduction, of which you've already got $750,000, I guess, in place. You said most of that $2 million will be SG&A. I mean, are we going -- is that kind of a first half of this year timeframe, we get all that with the absence [ph] of the $2 million.

Ryan F. McKendrick

We should be at a run rate of that, assuming that reduction, by midyear. But of course, that's going to be offset by some of these restructuring charges because there's a lot of severance involved with that.

L. Todd Vencil - Sterne Agee & Leach Inc., Research Division

That makes sense. And then, again, just making sure I got my -- everything squared away. On Performance Materials, it sounds like North America metalcasting is up a little. Asia is doing a little better. Pet and specialty, you're going to stay down. So does that net out to a flattish top line this year in performance minerals, do you think?

Ryan F. McKendrick

Top lines, low single-digit growth.

L. Todd Vencil - Sterne Agee & Leach Inc., Research Division

Got it. And we saw a little swag in gross margin in the quarter, again, at 23.3%. Does it sort of hang in there and work out a little higher or do you think can come back to that more mid-20s more quickly than that?

Ryan F. McKendrick

I think mid-20s is a reasonable target for the group, being at 25% sort of the target area is not out of line.

L. Todd Vencil - Sterne Agee & Leach Inc., Research Division

Will it take you a little while to get there or can it just sort of move upward?

Ryan F. McKendrick

We're at about 23% right now, I think it is. I think the fact that we're expecting some upswing in Asia, primarily in the foundry side, will help there. And one of the big drivers there could be the chromite business this year. And a lot depends upon the exchange rates and the overall market conditions there to drive pricing. I think we should still target 25% as kind of the upper level of the target range.

Operator

Our next question is from Rich Wesolowski from Sidoti & Company.

Richard Wesolowski - Sidoti & Company, LLC

Just choosing [ph] on that last comment, Ryan. I don't know whether it was explicit former comments of management or just my interpretation of them. But I thought that 25% was the kind of base case in your expectation for minerals, and now it sounds like it's more toward the upper end. Has there been a change in that directed by the detergent and the kitty litter, or are these the margins you'd expected all along?

Ryan F. McKendrick

I think with the volume impact that we've had with reductions in the outlook for petroleum products, and for the pet, that puts big a strain in terms of the margins we can gain at the gross margin line. And we don't see either one of those things, especially the drilling products area, rebounding to the level that we were at when we were in the first 2 quarters of this year. Just as an example, our average tonnage going through our Western plants for drilling fluid additives in the first part of the year was around 33,000 tons per month. Second half of the year, it was 20,000. That kind of volume reduction really makes a big impact. And so we're seeing volume increase gradually as we go through this year. But I think it's going to normalize somewhere around 25,000 tons per month, which is a little bit of a drag in terms of the overall cost structure going through these plants. Lower volume really translates into a lower gross margin.

Richard Wesolowski - Sidoti & Company, LLC

Understood. Have you noticed, separately, any pricing pressure outside of coil tubing in your onshore services in the Oilfield?

Ryan F. McKendrick

In well testing, it's pretty steady at this point. There was some pressure in the second half of last year. But right now, we're very busy with well testing and not seeing a lot of pricing pressure. In the other areas, on the filtration side, pretty steady. So coil tubing I think, we've seen a lot of pressure in some of the areas. But at this point, no, I think we're -- the utilization's way up, and the demand for the services is pretty strong. So we're not seeing a lot of downward pressure at this point.

Richard Wesolowski - Sidoti & Company, LLC

Would you -- I know, I'm bouncing around here, I apologize for that. Would you remind us of your 2013 financial expectations for South Africa and relay how much CapEx related to that site you'll spend, or have budgeted for '13?

Ryan F. McKendrick

Let's see. I think -- I don't think we have much at all in terms of the capital.

Donald W. Pearson

As far as capital goes, that's kind of winding down. So it's substantial. If it would hit $5 million, that would be a high number. It's maybe several million, if that.

Ryan F. McKendrick

But the overall outlook for the chrome business, I mean, if you look at the 3 basic elements of that business, the market conditions are -- we had record sales of foundry grade chromite for the quarter. Pricing is fairly steady. We're generating low double-digit operating profit contribution for the business. The demand, I think, in China continues to be pretty soft, and that's affected our ramp up of volume. It's going to take more time to build that sales volume to our 10,000 ton per month range that we'd really like to target. So we're probably 65% of the way there now. Given market softness and several operational hurdles encountered at the beginning of the project, we're probably 1 year to 18 months behind our original plan, okay? But the plant is fully operational, performing pretty well. We obviously continue to tweak the operation to improve consistency of quality and improve yield, and we do that all the time. On the political side, we get a lot of publicity about labor action in the Republic of South Africa, but so far, we've not been impacted.

Richard Wesolowski - Sidoti & Company, LLC

Okay, that's a good rundown. I appreciate it. What is your 2013 CapEx budget, if you haven't mentioned it already, for the company as a whole?

Donald W. Pearson

Yes, Rich, this is Don. We're probably going to be somewhere around $80 million. It could be a little bit lower, could be higher. But that's probably a good placeholder. And half of that is towards Oilfield.

Operator

Our next question is from Al Kaschalk from Wedbush Securities.

Albert Leo Kaschalk - Wedbush Securities Inc., Research Division

I think I've just got that question answered. But you said $80 million of CapEx?

Donald W. Pearson

Yes.

Albert Leo Kaschalk - Wedbush Securities Inc., Research Division

For 2013, and you mentioned half of it is in Oilfield?

Donald W. Pearson

Right.

Albert Leo Kaschalk - Wedbush Securities Inc., Research Division

Is there any other category where there may be an uptick in the season or a downtick in '13 relative to '12?

Donald W. Pearson

We're looking at -- in the minerals area, there's a couple of projects that could swing that. Other than that, it's pretty stable at $80 million.

Albert Leo Kaschalk - Wedbush Securities Inc., Research Division

Ryan, the company made an announcement on a small investment related to mercury. Just in terms of the ability to manage a lot of these diverse businesses, are there -- as you make these investments or you downsize others, can you share a little bit about more your thought process, maybe the board's directive on the size or scale of some of these businesses that you need to be at or are targeting, whether it's 12 months or 3 years?

Ryan F. McKendrick

Sure. Okay. I think this mercury sorbents business is a good example of something that we really thought through from a strategic perspective, Al. I mean, part of our strategy is to develop energy-related product lines with a clear technology differentiation, with a proper scale capability. So what we're doing in this business is we're manufacturing and supplying Novinda Corporation with a chemically modified clay-based reagent for removal of mercury from coal-fired power plant emissions. AMCOL, as you said, just announced that we've acquired a minority position in Novinda Corporation. But we are the primary supplier to this company. So full-scale trials for a number power plants have yielded very promising results. And we expect demand to ramp up gradually over the next couple of years as Novinda secures supply contracts for customers. And we'll be sharing more information in upcoming quarters as this business develops. But when you look at the overall size of the addressable market in the U.S. for this type of material, it's about $1.5 billion. And we think, obviously, if we can -- with our partner as Novinda, capture a 10% market share, that's a big opportunity. So I think your question is very fair. I mean, we need, from a strategic standpoint, to be aligned in these kind of mega trends that are growth areas. And to be identifying opportunities with the proper scale so that we're not talking about success being defined in other $10 million operations. We need to be targeting things that could be $100 million operations. So I think that's a -- thanks for that question.

Albert Leo Kaschalk - Wedbush Securities Inc., Research Division

Yes. I just wondered down the -- I mean, obviously, it's early and the market opportunity is developing in, like, chromite there [ph] . Is there an opportunity that you facilitate an opportunity to make further investments here or -- with the same company or are you limited in terms of just to the more of the supply base?

Ryan F. McKendrick

No, obviously -- obviously, we're not limited to just the supply base. And the reason we took an initial equity position with Novinda is obviously, that we want to be part of that market-facing part of the business as well. Another good example of how we're progressing in some of these new areas is in this bio-agricultural field as well. Another important global kind of a market trend, where we are really investing pretty heavily in technical development. We've got a great sales group built to actively promote some of these mineral-derived humic acid, agricultural products for improving crop yield. We think over the next 2 to 3 years sort of a time horizon, this is going to be a nice attractive growth area for AMCOL as well.

Albert Leo Kaschalk - Wedbush Securities Inc., Research Division

Finally, if I may, and just a question given that it was a substantial part of your business in legacy AMCOL, is the iron casting business -- metalcasting. Automotive trend longer term is lighter weight. Are you able to update or provide us any progress and when should we think about, if there is progress, on your move to go to more of aluminum-type castings, if applicable?

Ryan F. McKendrick

We haven't really got a significant product offering at this point into the aluminum castings business. But if you look at a strategic sort of an objective for us as we move forward, that would be one for us to look at pretty seriously. At this point, we haven't seen a great deal of erosion in casting production as a result of light-weighting vehicles to aluminum. But I would say, in looking at this thing on a 5-year time horizon, that's something that's probably going to start to impact castings going into automotive. At this point, we have a couple of product lines that are in kind of the development stage, but nothing significant that would be specifically directed toward aluminum castings.

Albert Leo Kaschalk - Wedbush Securities Inc., Research Division

Is this a North America trend or would this be a global automotive mandate?

Ryan F. McKendrick

I'm sure it will be global.

Operator

Our next question is from Ralph Marash from First Manhattan Co.

Ralph Marash

This is probably for Don. Could you give some color on the financial restatements?

Donald W. Pearson

Sure. This really surrounds our European operations for our Construction Technologies group. And as we talked about in our second quarter Q filings, we highlighted the identification of some issues. As we were going through Q4, we identified additional items which would change your opinion from the magnitude of these, and becoming material. And when you look at the numbers that we laid out in the chart, we believe we've identified and isolated the issues, and have got corrective actions in place. So with that said, we expect to refile 2011 and restating the prior years accordingly for '09, '10 and '11 in that amended 10-K filing. And we'll also refile first quarter 2012, and we're going to do that very -- as soon as possible.

Operator

This concludes today's question-and-answer session. I would now like to turn the meeting back over to Mr. McKendrick.

Ryan F. McKendrick

Thank you, Michelle. And that concludes our call for today. And I look forward to speaking with everyone again next quarter. Thank you.

Operator

Thank you. The conference has now ended. Please disconnect your lines at this time. We thank you for your participation.

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