Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Rockwood Holdings, Inc. (NYSE:ROC)

Q2 2012 Earnings Call

August 01, 2012 11:00 a.m. ET

Executives

Seifi Ghasemi – Chairman, Chief Executive Officer

Robert Zatta – Chief Financial Officer

Timothy McKenna – Investor Relations

Analysts

Silke Kueck – JPMorgan

David Begleiter – Deutsche Bank Securities Inc.

John McNulty – Credit Suisse Securities

Mike Harrison - First Analysis

Chris Shaw – Monness Crispi

Richard O'Reilly – Revere Associates

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Rockwood Holdings 2012 Second Quarter Conference Call. At this time, all lines are in a listen-only mode. Later, there’ll be an opportunity for your questions and instructions will be given at that time. [Operator Instructions] As a reminder, this conference is being recorded.

I’ll now turn the conference over to Tim McKenna, Vice President Investor Relations. Please go ahead, sir.

Timothy McKenna

Thank you, Kathy. Good morning and welcome to Rockwood’s second quarter earnings Conference Call. Seifi Ghasemi, our Chairman and Chief Executive; and Bob Zatta, our Chief Financial Officer will give the formal presentation. After that, we’ll have the Q&A session. You can follow our slides on our website at www.rocksp.com.

Before the call begins, I’ll read a short statement. The conference call may contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, concerning the business operations and financial conditions of Rockwood Holdings and its subsidiaries. Although Rockwood believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, there can be no assurance that its expectations will be realized.

Forward-looking statements consist of all non-historical information, including statements referring to the prospects and future performance of Rockwood. Actual results could differ materially from those projected in our statement due to numerous known and unknown risks and uncertainties, including among other things the risk factors described in our Form 10-K on file with the Securities And Exchange Commission.

We do not undertake any obligation to publicly update any forward-looking statements to reflect events or circumstances after the date on which any such statement is made or to reflect the occurrence of unanticipated events.

With that, I’ll turn it over to Seifi.

Seifi Ghasemi

Thank you, Tim, and good day to all of you. Thanks for taking the time from your busiest schedules to participate in our conference call. We do appreciate your interest in Rockwood. During the call today, we will refer to the presentation material posted on our website. So please turn to page seven of that presentation.

I am pleased to report that Rockwood had a good second quarter. Our adjusted earnings per share was $1.24, which is 6% higher than last year. So for the first half of 2012, our earnings per share is 20% higher than the first half of 2011. We achieved these results despite significant headwinds as a result of translation of our earnings from Euros to dollars. As you know, Rockwood does not have much exposure to currency fluctuations from a transaction point of view.

The rest of the numbers on page seven are self-explanatory. And on page eight and nine, we have delineated the details of the performance of each one of our business units. I will skip these pages and then start on page 10 by commenting on the specifics of each one of our businesses.

I am on page 10 now. Our Lithium business continues to perform very well. The improved margins since both volumes and prices are higher than last year. We have started up our new state of the art lithium hydroxide facility in the United States and are moving ahead with the expansion program we have previously announced in Nevada and Chile that would see us double our production capacity to 50,000 tons per year by 2014. We expect our lithium business to continue to have a strong performance for the balance of the year.

Page 11, our Surface Treatment business again continues to do very well under the guidance of our excellent management team there. Margins improved to 21.2% as a result of higher prices and higher volumes in the United States and Asia. We fully expect this business to continue as a strong performance for the balance of the year. Our new state-of-the-art plant for this business being built in Michigan will come on stream by the end of this year and it will strengthen our position in the important U.S. markets.

Page 12, our Performance Additives sector where we have significant exposure to the construction market, volumes are slightly down, but prices are up. We have said previously in our calls for the last two years that we do not expect material improvement in this sector until 2014. Considering the outlook for the business, we have also moved the start off of our new Color Pigment business from 2014 to early 2015. This is the plant that we are building in Georgia.

Now please go to page 13. Our TiO2 business, we maintained our EBITDA margin at around 25% for the quarter, since higher prices offset the negative impact of lower volumes and some higher raw material costs. To give you more details, prices for the quarter, they’re 27% higher than the comparable quarter last year, while volumes are 28% lower. On a sequential basis, prices were about the same as the first quarter of 2012.

We also completed the acquisition of the new TiO2 plants in early July. This plant in Erlangen in Germany has a capacity of 107,000 metric tons per year and we consider this to be a significant strategic addition to our business, and will enhance our position for the long-term. The specific benefits of this business are, number one, as you recall last year when demand for TiO2 was strong, we were totally sold out at our two existing facilities. They did not have the opportunity for further growth. The addition of this new plant, which was not operating at full capacity, will give us excellent opportunity for growth when demand for TiO2 gets back to 2011 levels or even higher.

The second benefit is that the cash production cost of this plant is very favorable and very competitive since the plant can use both ilmenite and slag as a future start. Therefore this could help us improve our margins as they go forward.

The third benefit is that now that we have this plant, we can optimize our production of different grades of TiO2 at three facilities, and as a result realize savings by eliminating the need for multiple change of orders from grade-to-grade at each one of that plants, which costs [inaudible].

The fourth benefit of owning this plant is that we now have access to specific production facilities that comes along with this plant to be able to make DeNOx TiO2 catalyst material, a high growth material which is very high grade and it will help us increase our production of specialty grade TiO2 products which has higher margins and very good growth prospects. So these are the benefits and that’s why we acquired this facility.

Now, please turn to page 14. Our Advanced Ceramic business continues to perform very well with both volumes and – volumes are higher than before especially for our medical products mainly the ceramic to ceramic hip joints. The recent announcements by the different government organizations about the issues related to metal to metal hip joints has obviously helped us with the sale and market share of ceramic to ceramic hip joints. We expect this benefit to continue. The margins for the business now are at an all time high of 33.4%. We have an excellent management team in this business and we continue to expect the business to perform strongly for the balance of the year.

Now, please turn to page 15, where we have broken down details of the components of our sales. Prices were up 6% for the quarter. All of our business units except advanced ceramics saw an increase in prices. Currency translation as I mentioned before reduced our sales by 7.5%. And the decrease in volumes are mainly due to our TiO2 and performance additive businesses since all of the other businesses had an increase in volumes.

Now, I return the presentation to Mr. Bob Zatta, our Chief Financial Officer, to go through the details of the numbers and I will come back with some additional comments before we open the session for questions. Bob?

Robert J. Zatta

Thank you Seifi, and good morning to everyone. I am on page 17 of the presentation. This is our reported income statement for the second quarter of 2012 and the first half of the year. We reported sales of $905.6 million for the quarter as compared with $1 billion in the same period last year, a decrease of 9.4%. On a constant currency basis sales were down 1.9%. Net sales were down primarily from lower volumes and contained by eye sight pigments and color pigments partially offset by higher selling prices across those businesses.

First half of the year sales were $1.8151 billion, decrease of 5.2% from last year. On a constant currency basis sales were up 0.2%. We reported gross profit for the second quarter of $320.3 million or 35.4% of sales had with $345.6 million or 34.6% of sales last year. For the first half of the year gross profit as percent of sales was 36.5% compared to 34.8%. The improvement in gross margin year-on-year in the quarter and first half was primarily due to the higher pricing which more than offset lower volumes and raw material cost increases.

For the second quarter SG&A as a percent of sales was 18.5% up from 18.1% last year. And for the first half of the year SG&A as a percent of sales was 19% compared to 18.9% last year. The year-on-year percent decrease was 7.7% in the quarter and 4.8% for the first half of the year driven primarily by FX. We also has some restructuring and severance accruals in the quarter and first half of the year related to the continued streamlining of operations a write-off of the trade name which was related to the separation of lithium and surface treatment businesses earlier this year. We talked about that previously.

The next major item is net interest expense. The composition of interest expense is shown at the bottom of the page. Net interest expense decreased in the second quarter and first half of the year compared to the same periods for the prior year primarily due to the prepayment of debt. Also in June 2012 we entered a new facility agreement for our TiO2 pigment venture in the amount of €430 million. The proceeds were used to repay the outstanding balance under the previous facility to pay a dividend for venture partners and for general corporate purposes. In connection with this refinancing and repayment of our outstanding TiO2 term loans we recorded charge of $2.7 million in the second quarter which was comprised of fees of $2.4 million and the write-off of deferred finance costs of $0.3 million.

This brings us the income from continuing operations before taxes, which is $124.9 million for the second quarter and a $137.3 million in first half. Against this the income tax benefit is $108.8 million for second quarter and $78.2 million for the first half of the year and this is due to the reversal of the $139 million of our domestic federal valuation allowance on net deferred tax assets. Now we’ve talked about this before and in the second quarter we determined with our auditors that it was more likely than not that we will be able to utilize the federal deferred tax assets in 20 years and so as a result we made this reversal. On an adjusted basis, the effective tax rate for the second quarter is 23%. I will talk a little bit more about that in a few minutes.

We then show our net income attributable to the non-controlling interest in the TiO2 in timber joint ventures. This resulted in net income of $224.9 million for the second quarter and $300.7 million for the first half.

Page 18 presents the reconciliation of net income to adjusted EBITDA. For the second quarter beginning with net income of $224.9 million, we’ve added back guidance which get us to the pre-tax income from continuing operations of $124.9. Then adding back the interest expense and D&A brings us to a subtotal of $204.9. We then have several one-time adjusting items which brings us to an adjusted EBITDA in the quarter of $221.1 million.

Page 19 provides a detailed reconciliation of net income and EPS with continuing operations on a reported basis, the net income and EPS from continuing operations as adjusted. As you can see, the adjustments are shown on an after-tax basis include the same items already identified in the previous charts. This gives us an adjusted EPS of $1.24 per share for the second quarter and $2.47 for the first half of the year.

Page 20 provides a detailed reconciliation firstly between the income from continuing operations before tax of $124.9 million, the normalized as adjusted profit before tax which is $142.3 million. Secondly, from the reported income tax benefit of $108.8 million was a normalized tax charge of $33 million. This is where we get the effective tax rate of 23% in the second quarter, as I previously mentioned. And this lower effective tax rate is due to a beneficial foreign earnings mix in our second quarter results.

Page 21 provides a summary of our cash and debt position at June 30th, 2012. As we discussed above, we entered into a new TiO2 facility agreement and used the portion of the proceeds to repay the outstanding balance of the term loans under the previous facility.

Page 22 shows the long-term trend in Rockwood’s leverage ratio. We have continued to deleverage the company in accordance with our plan.

And finally, page 23, presents our free cash flow for the quarter and first half. As you can see, we generated free cash flow of $39 million in the second quarter and $20.3 million in the first half of the year. I would point out that in the second quarter, it was impacted by the payment of 2011 bonuses, which was in the range of about $50 million, still without that we would have generated a lot more free cash in the second quarter, and this puts us I think in good shape in terms of going forward to hit our numbers for the full year.

And with that, Seifi, I’ll turn to back to you.

Seifi Ghasemi

Thank you, Bob. As all of you and most of you know, we did announce that the Rockwood will start paying a dividend of $0.35 per share. We did pay our first dividend in July and we are obviously committed to continue the program. The outlook for our core businesses that is Lithium, Surface Treatment and Advanced Ceramics is positive. I indicated earlier that we do not expect any material improvement in our performance out of this sector.

Our mid to long-term outlook for our TiO2 business remains positive since we do not see any change in the fundamental drivers of the business, since little if any additional capacity will be coming on a stream in the western board in the near future.

With that, I would like – we would like now to open it for questions and we would be delighted to answer any questions that you have. Cathy?

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Our first question will come from Silke Kueck with JPMorgan. Go ahead please.

Silke Kueck – JPMorgan

Good morning.

Seifi Ghasemi

Good morning, Silke.

Silke Kueck – JPMorgan

So both Trimax and Huntsman this morning commented on their conference call that based on in the second half of 2012, TiO2 prices may be moving lower sequentially. Is that a function of just currencies moving lower or are prices in local currencies moving lower as well.

Seifi Ghasemi

Silke, on the advice of our legal counsel, I am prohibited from making any forward-looking statements about prices. So I apologize, we are not going to make any comments about prices moving forward. I gave you the exact numbers for our price increases for what has happened up to now and we will every quarter give you the exact number for changes in price, but we are not going to make any forward-looking statements about prices.

Silke Kueck – JPMorgan

Not even directionally as like whether you agree or disagree with what your competitors are saying?

Seifi Ghasemi

I have absolutely no comments here. My lawyer is sitting here saying, don’t say anything. So…

Silke Kueck – JPMorgan

Okay, okay. What volume impact, if any, do you expect from the Uerdingen plant this year. My recollection is that it wasn’t really operating –well operating at very low levels, and so do you expect that plant to ramp-up immediately or just partially or what type of volume contributor would it be this year?

Seifi Ghasemi

We expect the Uerdingen plant to produce in the second quarter of this year, approximately 40,000 to 50,000 tons of TiO2.

Silke Kueck – JPMorgan

In the third quarter?

Seifi Ghasemi

In the third and fourth quarter, in the second half of this year.

Silke Kueck – JPMorgan

So 40,000 to 50,000 tons per quarter or combined for the second half?

Seifi Ghasemi

Combined for the second half.

Silke Kueck – JPMorgan

Okay, that’s helpful.

Seifi Ghasemi

Approximately, you know, it depends on exactly our sales and so on, but order of magnitude that's what we expect.

Silke Kueck – JPMorgan

And then my last question on TiO2 again, can you discuss how your ilmenite and slag cost adjust, is that sort of one-time phenomenon in the second quarter and prices will then stay at new cost level or do you have to contend with new up prices every single quarter?

Seifi Ghasemi

Our current agreement with our suppliers is that there is a commitment on volume, but prices do get adjusted quarter-by-quarter.

Silke Kueck – JPMorgan

Okay, that’s helpful. Thank you very much. I’ll get back into queue.

Seifi Ghasemi

Thank you, Silke.

Operator

We will go next to David Begleiter with Deutsche Bank. Go ahead, please.

David Begleiter – Deutsche Bank Securities Inc.

Good morning.

Seifi Ghasemi

Good morning, David. How are you?

David Begleiter – Deutsche Bank Securities Inc.

Good. Thank you. Seifi, are you able to comment on the prospect for you TiO2 business in terms of a potential IPO?

Seifi Ghasemi

David, again, we have publicly stated that for the long-term, we do not consider TiO2 a core business. We think it’s a great business, but we don’t consider it a core business. Therefore, as a result of that, we continuously review our strategic options in terms of what to do with divest. And you should expect us that we would continue to look at that. I don’t want to make any specific comments about this or that, but in general, you’d expect us that we would be reviewing our options with our bankers and advisors, as we go forward. And if we get to the point that we have made a decision that is worthwhile announcing, we would obviously announce that.

David Begleiter – Deutsche Bank Securities Inc.

Understood. And just on Uerdingen, are the average selling prices of the Uerdingen products, will it be similar in the back half to the average selling prices of your existing two plants?

Seifi Ghasemi

David, you’re getting me to comment on future prices, I apologize, I cannot do that.

David Begleiter – Deutsche Bank Securities Inc.

Understood. And maybe just on Lithium pricing. Can you comment on sequential and year-over-year trends in Lithium?

Seifi Ghasemi

Lithium, I can say what we’ve already said publicly, we increased our prices effective July 1st of this year by $1000 per ton, which is about 22% and we are in the process of implementing that pricing. And as for the last two quarters, obviously the prices were up, because we had announced another 20% price increase in July of 2011. So you would expect that year-to-year prices will be up.

David Begleiter – Deutsche Bank Securities Inc.

Thank you very much.

Seifi Ghasemi

Thank you, David.

Operator

We have a question from John McNulty with Credit Suisse. Please go ahead.

John McNulty – Credit Suisse Securities

Yeah, hi, good morning, Seifi.

Seifi Ghasemi

Good morning, John, how are you?

John McNulty – Credit Suisse Securities

Good, good. Just a couple of questions. So, in the Lithium business, I guess, in the first quarter, you weren’t selling any of the derivative potash production that you had, did you sell any in the second quarter, and if not, when are you thinking that may actually start? You may get the approvals on the ports and all those kind of issues, results that you can actually start selling into the market?

Seifi Ghasemi

Thanks for the question, John. We did sell some potash in the second quarter, and we expect the volumes to increase in the third and fourth quarter, and we will be kind of at full capacity to sell whatever we make, which is approximately 175,000 ton a year by the fourth quarter. The issue is not so much port facilities and so on, the issue is that we will sell the potash at a time when we think the prices are right, because that's a product that you can keep in a storage John. So, our decision in terms of how to sell is very much dependent on potash prices. If we think they are too low, we wouldn’t sell.

John McNulty – Credit Suisse Securities

Okay, fair enough. When you think about the earnings power of the TiO2 asset that you bought whether it’s normalized or peak or however you want to think about it, is the profitability of that plant or the margin of that plant similar to your core TiO2 that you’ve already owned, would it be moderately less, moderately more, how should we be thinking about the margins for that business.

Seifi Ghasemi

John, obviously when we bought the business the margins were lower than what we’ve, because the plant currently produces mainly commodity TiO2, not like the rest of our business where most of our businesses are specialties. But, we fully expect to improve the margins of the new plant as we go forward. So, in a year or year-and-half from now, we expect the margins in that plant to be similar to the rest of our business.

John McNulty – Credit Suisse Securities

Okay, that’s what I was looking for. Then just one last question, with regard to cash flows, it looks like you've had a reasonable amount of cash tied up in working capital and I am assuming some of that's on TiO2 and kind of the inventories that have been sitting there. Can you walk us through how to think about kind of the level of inventory that you’ve got and maybe where we should be expecting it to get to on a more normalized level, say by the end of the year and how that unlock some of the cash?

Seifi Ghasemi

Well, let me be specific, John. We expect for the year to generate a free cash of around €250 million. As you saw from the numbers that Bob showed you, we have generated up to now, I mean at the end of it second quarter, for the first half about €20 million. So, you should expect that it would generate a lot of free cash for the balance of the two quarters. That's usually what happens any day, but we obviously will bring down our inventory and working capital down. Therefore, we feel pretty good about €250 million free cash. One other thing that will help is that our CapEx, we have been telling you that our CapEx might this year be around $400 million, we expect that to be closer to around $300 million. So as a result the combination of those two will have our free cash.

John McNulty – Credit Suisse Securities

Great. Thanks very much.

Seifi Ghasemi

Thank you, sir.

Operator

We’ll go to next to Mike Harrison with First Analysis. Go ahead please.

Mike Harrison - First Analysis

All right, good morning.

Seifi Ghasemi

Good morning, Mike. How are you this morning?

Mike Harrison - First Analysis

Doing well. Thank you. Seifi, can you break out the organic sales growth of 5.4% in lithium. How much of that was pricing? And how much was volumes roughly?

Seifi Ghasemi

I can, but I will not do that, because that’s too detailed a competitive information, Mike.

Mike Harrison – First Analysis

Can you at least give us, just a little bit color on whether volume was flat up, down year-on-year?

Seifi Ghasemi

I assume slight, about – Mike, I will feel very uncomfortable disclosing those numbers, because it is really not to the heart of our competitive situation. The market is very tight, I don’t want to kind of give too much information on that. Sorry about that.

Mike Harrison - First Analysis

You’re probably not going to like the rest of these questions then, but I’m just trying to get a sense of – you commented that butyllithium volumes were lower year-on-year in the second quarter, and obviously you probably got some year-on-year pressure from potash volumes, but I’m just trying to get to a better sense of what your underlying volumes out of Chile look like. One would assume that with the competitor seeing some operational difficulties, you would have picked up some additional volume at least on the commodity side to offset the butyllithium volumes offset the butyllithium volumes, is that fair, Steven?

Seifi Ghasemi

Mike, I mean, that's exactly why I don't make any comment because of what you just said. I mean the industry is going through some changes and I just don't want to give too much information on it. Let us satisfy it, Mike. I mean, even if we give you our internal report, you will have some additional questions, I am sure.

Mike Harrison – First Analysis

In terms of the butyllithium volume decline though, was that a temporary thing, what caused it, can we get some details on that.

Seifi Ghasemi

Mike, I'm not conceding that we had a deterioration in the volumes of butyllithium. I'm not making a comment on that. I don't know how you get that information, but…

Mike Harrison - First Analysis

Your presentation says lower volumes of butyllithium applications in Asia?

Seifi Ghasemi

Yeah, but that doesn't mean that our total volumes are down.

Mike Harrison - First Analysis

I understand, but I'm asking why did the volumes decline in butyllithium in Asia, as you – what happened there and is that an ongoing problem or was that temporary?

Seifi Ghasemi

Mike, the reason that the volumes are down is for the same reason that the two volumes are down. It's because much contrary to previous expectation, China did not perform well during first half of the year. You know that very well. That has caused significant issue for everybody. Our TiO2 volumes are down because of the weakness in China. Butyllithium volumes are down because of weakness in China. I mean Chinese economy did not come back after the Chinese New Year as it usually does and that has created a lower demand for most of the products. There isn’t anything strategic going on, Mike, if that is what your concern is. We are not losing any market share or anything of that nature.

Mike Harrison – First Analysis

And it wasn’t any kind of an operational issue?

Seifi Ghasemi

No, no, no. Didn’t have any operational issues at all.

Mike Harrison - First Analysis

Your presentation also commented that SG&A costs were higher in the Surface Treatment business. And I was just wondering what was driving those higher costs?

Seifi Ghasemi

SG&A is higher in our Surface Treatment business and also in our Lithium business and that is a clear strategic decision that we have made to strengthen research and development in both of those businesses. So our Lithium business has higher SG&A, Surface Treatment has. Those are core businesses and we are spending a lot of money for R&D to differentiate ourselves. That’s a massive commitment on our thought, but we think that that’s how we’re going to differentiate ourselves in the long-term.

Mike Harrison – First Analysis

In the TiO2 business, if I exclude the impact of volumes from the Uerdingen the acquired plant, do you expect your TiO2 volumes to increase in the second half versus the first half?

Seifi Ghasemi

Difficult to predict. I don’t know on that one. I cannot comment. The market is too fluid for us to make a prediction there.

Mike Harrison - First Analysis

Okay. And then on the ceramics business obviously the marginal performance there was very strong. Was that mostly mixed that was driving the performance there?

Seifi Ghasemi

Yes. That’s mainly because we were selling more of the medical products which have a higher margin than the other one. That’s correct.

Mike Harrison - First Analysis

And then last question is for Bob. Just in terms of the tax valuation allowance reversal, how does that impact the go forward tax rate and I apologize if I missed your comment earlier.

Robert J. Zatta

Okay. You know we have talked about this before. We expect our effective tax rate in the balance of the year to be a little bit higher than what the average has been for the first half of the year. We are looking at somewhere on the 25%, 26% range. And that’s really more a mix of. It has evaluation allowances really will affect this. It’s really the mix of earnings. Then for 2013 and beyond based on our forecast we did expect the rate to be up around 28%. That sort of what we are looking at.

Mike Harrison - First Analysis

Alright. Thank you very much.

Robert J. Zatta

You are welcome.

Seifi Ghasemi

Thank you Mike.

Operator

We now have a question from Chris Shaw with Monness Crispi. Go ahead please.

Chris Shaw – Monness Crispi

Good morning guys how are you doing?

Seifi Ghasemi

Good morning Chris. How are you doing?

Chris Shaw – Monness Crispi

It’s good. Ask on the performance additives I know for a long time you caution that it’s going to be weak through – maybe it get better on 2013, but I was a little surprised I mean North American constructions been a little bit better. Are you guys not seeing that? Is it just that like relative to housing your products are may be like later in the cycle. Any comments around?

Seifi Ghasemi

Chris, we are not seeing any improvement in new housing construction in the United States. We just don’t see that. And if it is going on – I mean we monitor this thing very closely. We are not seeing – obviously construction business in Europe is weak, and in the United States it’s kind of not getting much weaker, but it is not really getting that stronger.

Chris Shaw – Monness Crispi

What exposure do you have for the housing versus like commercial construction?

Seifi Ghasemi

Probably about 75% of our business is housing and about 25% is commercial.

Chris Shaw – Monness Crispi

Okay. Let me for a second shift gears, did you guys ever talk about the accretion or maybe the illusion of the new TiO2 plant what that would do for the second half?

Seifi Ghasemi

A new plant will be accretive.

Chris Shaw – Monness Crispi

At 50,000 tons that’s basically running full out right?

Seifi Ghasemi

I am. I just like to make sure that everybody understood. I said that what I predicted will be. I don’t know exactly what it will be. But the plant certainly has the capacity to produce that. But we overall are going to run all facilities in general at around 75% capacity. A new plant has a cost advantage over some of our other facility. So we might run the new plant at a higher rate that we would run the rest. Overall we will probably be at around 75% of capacity which is approximately 330,000 tons.

Chris Shaw – Monness Crispi

And then just on the shift in the CapEx or lowering your guidance for the year and is that just getting pushed out into 2013 and if so what projects is that – that are getting pushed out of that?

Seifi Ghasemi

As I mentioned that’s our color pigment business. We were planning to have doing that plant on a stream at the beginning of 2014 which would have meant that spending a lot of money this year and next year. But now we have decided to bring that on stream beginning of 2015. So that reduces the CapEx expenditure this year and next year.

Chris Shaw – Monness Crispi

Okay. Understood, thanks.

Seifi Ghasemi

Thank you.

Operator

[Operator Instructions] We have a question from Richard O’Reilly with Revere Associates. Go ahead.

Richard O'Reilly – Revere Associates

Good morning gentlemen. Two quick question. More from lack of knowledge on my part. Your competitor in Lithium had talked about the rainfall problem, production problems at their ponds, and you don’t have that same problem. Can you just explain to me you are in different countries, but is the weather pattern that different in the two areas?

Seifi Ghasemi

Yes, it is. They are on the another side of the mountain and we are in the other side of the mountain.

Richard O'Reilly – Revere Associates

Okay, fine. And that’s what I thought. Okay. And obviously on the western side. Second question. You called the TiO2 pigment business not core. What do you call the performance additives? How is that classified down?

Seifi Ghasemi

We think it’s called because the U.S housing market, we used to build 2 million new houses every year. Right now we are building around 400,000. So we believe that the new housing market in the United States might not go to 2 million but even if it goes to a million, million and a half that business has a significant potential for growth. We have a unique position. The market is very consolidated and as a result we think that business has very good potential. Therefore that’s why we say it’s a still core.

Richard O'Reilly – Revere Associates

Still core, okay fine. Okay that’s it, thank you then.

Seifi Ghasemi

Thank you Richard.

Operator

Mr. Ghasemi, we have no further questions.

Seifi Ghasemi

Well, I would like to thank everybody for participating and we look forward to talking to everybody next quarter. Thank you very much everyone.

Operator

Thank you, and ladies and gentlemen this conference will be available for replay after 1:00 pm today till midnight August 15th. You may access the AT&T executive playback center at any time by dialing 1800-475-6701 and entering the access code 251143. International callers dial 320-865-3844 using the same access code 251-143. That does conclude our conference for today. Thank you for your participation and for using AT&T executive teleconference. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Rockwood Holdings' CEO Discusses Q2 2012 Results - Earnings Call Transcript
This Transcript
All Transcripts