W.R. Grace
5/19/2015 - 2:20 PM ET
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W.R. Grace
May 19, 2015
02:20 PM ET
Brian Maguire:
Everybody, we're going to keep it moving along. The next company we have is an oldie
but a goodie -- an oldie in terms of being around for a long time, but --
Fred Festa:
I thought you meant me.
Brian Maguire:
No, not you.
Fred Festa:
Around for a long time.
Brian Maguire:
No, the Company more than -- well you've been around for a long time, huh?
Fred Festa:
I have.
Brian Maguire:
We have CEO Fred Festa from W.R. Grace. You know, an old company, but maybe one
that's going to get reborn a little bit. Reborn last year with the emergence from
bankruptcy, but later this year targeting a split-off of the construction and packaging
business from the core of the Company. Maybe just spend a minute or two talking about
the pro forma makeup of those two businesses, and how you see them growing as
independent entities going forward?
Fred Festa:
Yeah good, well, thanks, Brian. Well, we announced the spinoff of our construction and
Darex piece of it in February, hope to finish that tax-free spinoff within 12 months. So
hopefully, by early February next year or sooner, and when we look at it we see a
construction chemical business supported by the Darex side, and roughly about $1.5
billion with $250 million of EBITDA as of '14. In the construction chemicals specialty
building materials segments, nice growth it's had, and it's entering a good time of the
cycle for that perspective.
From a capital structuring standpoint, we'll look like we're going to lever it around 3
times, maybe 3.5. We want it to be able to do a lot of acquisitions. We think it's
opportunities to consolidate some of the industry, some of the smaller players around that
space. What's left will be the legacy catalyst, both refining catalysts, polyolefin specialty
catalysts, as well as our silica gel portfolio. And that, with Chevron, that's the advanced
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refining joint venture, that'll leave us with about $1.8 billion in revenue, and a little over
$500 million of EBITDA from that side of it.
The NOLs, we get that question a lot, the losses that we had carried forward from the
Chapter 11 exiting, will stay with Legacy Grace. So we'll have another capital structure,
a little bit less levered, 2 to 2.5 times on the leverage side, very low cash tax rate, 10% in
that range, all the way through 2021 because of the NOL. So, we'll have two industryleading companies that will have the ability to focus, which on each of their segments,
and we believe very attractive, specific entities for our investors.
Brian Maguire:
And you'll stay with the catalyst business?
Fred Festa:
I will.
Brian Maguire:
Greg Poling , who has been in various roles at the new company, that's I think COO most
recently, he'll move over and take charge of the construction business?
Fred Festa:
That's right, and Greg's going to build his team and we're working with a -- and building
a Board around that. Hudson LaForce, the CFO, and myself, will stay. Greg will need a
CFO which we're looking for on that side, and then rebuilding the Board.
Brian Maguire:
And the acquisition opportunities that exist in construction, you think about them. As an
independent company, you think they'll be better-positioned to take advantage of those,
and they have been in the past? Or --
Fred Festa:
Yeah I mean, you know, you run into -- you hate to say it, but you run into the dilemma,
when you've got one set of your businesses operating at a 30%-plus margin, and the other
side of it a 15% to 17% margin, if you're looking at those businesses on the construction
side, and sometimes they've become dilutive. Dilutive to the overall margin perspective.
So, construction's got a number of opportunities and there are a number of bolt-ons out
there, and I think they'll be very inquisitive.
Brian Maguire:
Mm-hmm. We talk about the volume growth in the catalyst side of the business, and I
know you had an exciting announcement yesterday with your JV partner, Chevron and
ART. ART JV is going to be adding some new capacity at your Lake Charles site. You
say you'll start construction later this year, be up and running --?
Fred Festa:
Late '18.
Brian Maguire:
Late '18. So that seems like an endorsement of the growth outlook that you see, at least
on the HPC side of the business?
Fred Festa:
Yeah, I think the refining cycle is going to be a good cycle. You know, going through. I
mean, you had all the scare of high oil, low oil, and everybody was nervous, what would
the catalyst suppliers do during that cycle? And basically, as long as demand for
transportation fuels stayed up, which it has, everybody came through it including us, fine
through this period of time. So, as we look out both even in the FCC side of it as well as
the hydroprocessing side, you know, as utilization keeps continued to creep up, and new
refineries come online, there'll be a new one that's starting up right now in Abu Dhabi
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that's the career refinery. That's going to be the largest FCC unit in the world. That helps
with the capacity utilization issue.
And the same thing, people are still refining heavy crude oil, and that's the HPC
announcement, the hydro processing with Chevron. This is capacity to really upgrade
very dirty, heavy oil, heavy oil that a lot of this used to heat our homes with oil. Now
you're seeing natural gas and others. It's taking that oil and turning it into transportation
fuels, and we've got a very good view of that because of our other partner, Chevron
Lummus, on the licensing side. They have licensed these units, and a number of these
units were already being either in production or built already.
So, we've got good visibility on that, so I think the refining side of it, from the catalyst
supplier, will be entering a good cycle over the next three to five years.
Brian Maguire:
How do you think about adding capacity in the FCC side of it? I know you've had
potential JV or a project in the Middle East to add some -- maybe describe your own
utilization rates today and how you see the need to add capacity there going forward?
Fred Festa:
Yeah, we see that there needs to be capacity to support the demand in late 2018. Our
joint venture that you mentioned with Al Dahra was formed, which started a lot of
permitting work, some engineering work on that. This is to build a new facility in Abu
Dhabi, in the port of Abu Dhabi, for a regionally-scaled FCC plant. Given the demand
for transportation fuels rising 3% to 4% a year, the catalyst demand is there. Utilization
for the industry, we believe for the FCC catalysts, is at 90% or approaching 90%. So, as
we look out for the next three years, it needs that type of scale.
Brian Maguire:
And you mentioned some of the gyrations that oil prices have caused, and it probably was
more concern than was warranted, maybe around how much of an impact that would
have on your sales, at least so far we've seen in the first quarter. But now that we're a
couple, a month into it, and maybe people are digesting the new range of oil, what kind of
an impact do you think it will have, any kind of lasting impact, positive or negative for
the Company?
Fred Festa:
No, I think as you saw it, I mean, a number of the worries were, would the refineries
really be harmed, and you saw in some of the refinery, the margins were actually good
coming out of the first quarter. So, a number of announcements on that side, and a lot of
that is because their ability to change the slates of crude, their ability to flex where they
can, but most importantly the demand for transportation fuels. Miles driven is up, and
miles driven continues to be up. So, for us the important piece is that miles driven,
whether it be gasoline or be diesel. And I think that will continue, and whether it's at 3%
a year or 4%, that's still a big number off that base. So we feel confident about that.
Brian Maguire:
And that sort of an environment, do you still see refiners value the technology that you
bring to the table, as much, and as you're introducing new products into the market do
you see a good uptake on those?
Fred Festa:
Yeah, even more so. I mean, we had a lot of trial activity and activity around new
catalysts when there was a -- I wouldn't call it a panic, but a lot of reach out from the
refineries, hey, help us with this new product, help us with this slate, we've got to get our
margins here or there. So, they're still trying. The opportunities they have, they have a
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big fixed asset, which is a refinery, and you're adding catalysts to it. And that's really the
value creator in this, being able to tweak the catalysts versus the hardware.
Brian Maguire:
Mm-hmm. And I think in the past we've had some -- one of the things driving some of
your higher value catalysts was propylene demand, (inaudible) max propylene. Do you
see that changing going forward, is there any risk from some of these new on-purpose
propylene projects that we see less demand for that? Or are you seeing all your
customers still want to do that?
Fred Festa:
No, we're seeing two things. We're seeing the on-purpose propylene is continuing. I
think that'll have a spot, but it won't be a dramatic -- you know, the cheapest way to get
propylene is still out of the FCC unit. And the second cheapest way is through the MTO
process, coal to olefins that way, and then you have the on-purpose side of it. SO, I think
all three will be, and we participate in two of those three.
Brian Maguire:
Let's talk about the specialty catalyst part of the portfolio is probably about a quarter of
the segment at this point, after you bought Dow's polypropylene catalyst business,
licensing business, UNIPOL. The growth there seems like it's even probably better
volumetrically than the FCC catalysts might be. How do you see, what kind of group
targets do you have for the top and bottom line there?
Fred Festa:
You know, we've been consistently in the high single digits on a volume basis. We've
been introducing some new products, some new products around especially around -- on
the polypropylene side, phthalate-free as consumers become more cautious on certain, on
the chemical side of it. And that's been a good uptick, and as we've taken that
acquisition, the UNIPOL acquisition which is licensing and catalysts and combined it
with our legacy specialty catalysts, we've been able to really expand into the MDO, the
coal, to olefin side of it. And as well, into some of the single-site opportunities.
So listen, we'd love to do another one of those if we could find one. It's been a good deal
for us.
Brian Maguire:
As far as the getting all the cost synergies that you targeted, you're pretty much there at
this point?
Fred Festa:
Yeah, we're actually ahead, we're ahead of the model that we had laid out. We finished
the deal, as you know, for those of you that don’t know, in the end of 2013, and we had a
great 2014, and '15 looks just as well.
Brian Maguire:
And the licensing opportunities, are you starting to see those pick up as, maybe as an
independent company that's not part of a bigger chemical company? Does it change
customers' willingness to partner with you and work with you?
Fred Festa:
Yeah, I don't think that dynamic has really come into fruition. I mean, UNIPOL operated
pretty separately from the big Mother Dow. You know, our ability is to work with those
customers. I think one advantage we may have, we have a broader suite of
polypropylene, other catalysts that we'll bring, we bring to the party on that side. But
from the licensing side, I don't think there's been a dramatic change.
Brian Maguire:
And there's a much broader kind of chemicals catalyst, it's kind of a green space for you,
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you don't really participate in much. Do you see yourself wanting to get bigger into that
area, is it as attractive as the core catalyst business you've got? I mean, you talked about
earlier some of the construction acquisitions could be dilutive. I mean, if you thought
about getting into that space, would it be as attractive, or does it need to mature a little bit
more?
Fred Festa:
No, it would be. I mean, it's segment by segment. I mean, we participate today in the
sponge nickel specialty catalysts that go into BDO applications from BDO all the way to
some hydrogenation side of it, but there's many more on that side. Those are very good
margin catalysts. If you think of the automotive catalysts that would be one that we'd
probably at this point in time stay away from.
Brian Maguire:
Mm-hmm. Maybe shift over to the construction business for a little bit, the trends have
been pretty good for volume and I think we're seeing the pickup in US non-res spending,
drive the volumes there. You know, at this point how far below normalized would you
say we are in the US for sales or earnings?
Fred Festa:
We've had a nice pickup in the fourth quarter, first quarter. I think we're approaching
mid-cycle recovery in North America, in the non-residential construction. You're seeing
it in a larger, some of the larger cities, some of the construction activity, as well as
secondary into strip malls and so on, and we're supplying a lot of the high end on that
side. So, we're bullish, we're bullish on the construction activity, especially in North
America and you know, whether it's mid-cycle or early mid-cycle. It feels about that
right now.
Brian Maguire:
And how is the pricing in that industry going? I think you've got on the one hand, very
strong demand. There's some input costs, deflation going on, so how does that balance
out, and where do you think pricing will be?
Fred Festa:
Well, it's been positive because -- and the trends are positive on it, because some of the
customers -- if you follow that industry, cement pricing is up. Cement pricing is up
almost $9.00 to $10.00 a ton which is about 10% on that side. So, generally the
chemicals piece can follow onto that, or alternatively, when somebody's put it pouring a
large ready-mix, they'll either use X amount of cement or Y amount of chemicals. And
you can get the same result, either overdoing the chemicals or overdoing the cement.
So, having that dynamic on the cement definitely helps us.
Brian Maguire:
I guess the materials part of the business has been kind of a tale of two different
divisions, it seems like. Some of the silica-based stuff is continuing to grow nicely but
the packaging part of it has stalled out a little bit. Is that something that you expect to
continue, or is there any hope that that packaging part of it is --
Fred Festa:
Yeah, we've sized the Darex packaging, sealant and coatings, to be a slow grower. Slow
grower, you know, it may grow 1% to 2% one year, may grow nothing in another year.
But to get a constant $100 million of cash out of that, and that's what we put with the
construction side of it, that gives us that base. So, that's how we're thinking about it.
We think there are some synergies between construction and the coatings around some of
the architectural coatings, some of the specialty applications, and we'll see. The new
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company will be able to take advantage of that.
Brian Maguire:
And just thinking around uses of cash, one of the attributes you have is not a lot of capital
intensity for a lot of your businesses. The NOLs give you a really good cash flow profile.
Last year you did a really big share repurchase program, (inaudible) taking a little bit of a
pause or just at least deceleration in the pace of that. How do you think about that pace
going forward? Will it change materially once you're through the separation, and
between the two businesses, how do we reallocate cash?
Fred Festa:
Yeah, I mean you know, when we emerged from Chapter 11 last February we initiated a
$500 million, as you know, share buyback, completed that in about a year, Board
approved another $500 million and what you're referring to is the pace over the first
quarter hasn't been at that 12-month pace. And we said, we said that we would be -meter that out as we looked at positioning the assets around the world to get ready for the
spin, where we wanted to put cash, and so on on that side. But, we generated -- last year
we generated $450 million of free cash flow, we'll generate $430 million or more of free
cash flow this year. Because of a number of attributes. Our high margins as well as our
good working capital, and we pay low cash tax rate. I think you'll see that continue.
When the companies split, I think you'll see both in the position to be able to return cash
to shareholders.
Grace Construction Products has a lower capital intensity and Grace Catalysts and
Materials will have a little higher capital intensity, but it'll have the low NOLs cash tax
side of it.
Brian Maguire:
Why don't I open it up to the audience for some questions. Bob?
Unidentified Audience Member: Thanks. A couple questions on each part of your business. On the construction
part, what I thought was interesting today, PPG said they were sold out of glass for the
next six months. So, that means business is great. When you're looking, Brian, I ask you
when you're looking where you are now compared to your past peak, how far below are
you regarding your past peak? In terms of the construction side?
Fred Festa:
You know --
Unidentified Audience Member:
Fred Festa:
And can you break that down to US and Europe, please?
Yeah. We're -- for the US side, I would think we're probably 300 basis points below the
peak cycle, this 2008-2009 type of cycle in North America. So, that's where I'm
characterizing a more mid-cycle. Europe, we're not even close to mid-cycle recovery.
For us, Europe has been -- UK has been good Germany's been good, the southern part of
Europe is slow. We restructured our portfolio out of that, those regions basically, three or
four years ago, but stepping back all across the globe, North America is good. The Latin
America, the construction side has really been tempered over the last 12 months, it's
really slowed down on that piece of it. And Europe, you've got certain regions are good.
Middle East is back. Middle East is back, Middle East is back probably around a midcycle recovery, close to North America.
Unidentified Audience Member: And just following up on North America, if you look at North America, do you
think there's the runway, there's still a long way to go on the runway, you know, or
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putting in baseball terms, what inning do you think we're in North America?
Fred Festa:
Yeah, I think we're probably in the 6 th or 7th inning. I think what you're going to find, in
this recovery and the construction in North America, it's not going to be as dramatically
up. It's going to be a slower climb back up to the top cycle, but all the indications are that
-- and commercial construction, you look at the architectural index which we follow
closely, we follow the jobs that are out there, and so on. North America looks pretty
good.
Unidentified Audience Member: Just going through catalysts, we all know that you compete against Albemarle
and BASF. Is there anybody else who's considered a major player, or a player out there
that you know, you compete against?
Fred Festa:
Yeah, I mean, those two primarily in the FCC side. If you look at hydroprocessing,
there's more players, six to seven players, some names you'd know, some names you
wouldn't know. And then if you spread out you've got UOP (ph) on some of the hydro
cracking catalysts, and then you've got a myriad of guys in the specialty chemicals side of
it. That answer your question, Bob?
Unidentified Audience Member: Yeah, I actually had another, but I was just wondering is there anybody out there
that's big other than those two guys that you were just -Fred Festa:
Yeah, I mean, Honeywell. Honeywell's got a good size with UOP on that piece of it.
Unidentified Audience Member:
Okay that's cool, thank you.
Brian Maguire:
You know, one question we get a lot is, in the past the catalyst business has one of the
good attributes has been, it's been able to get pricing over time. The last couple of years,
that's -- there's been some challenges there, other than passing through the rare -- and for
a while, all you wanted to do was just get the rarer surcharges in, and you got those in,
and then they came back out. But it's been a couple of years since we've had a big round
of pricing in the industry. Is there a case for that to happen in the next couple of years,
and what do you think needs to happen for that to play out?
Fred Festa:
Yeah, I do, and a lot of questions on that this morning from the groups we've been
meeting with. I think the industry utilization, capacity utilization, is getting to the point
where it's fairly high and it's getting even higher, winter career comes on fully, and I
think if you look out from the end of '15 and out through the end of '18, that's a long time
before any capacity is going to come on. That tends to you know, you get pricing
through the belly of new products, you get that all the time. But you get a big
sustainability when that utilization is that high, and it's either there or getting close to
that. And so I think the next three years following that will be good, will be a good
period for the FCC catalyst side of it.
In hydroprocessing, again, it depends on what segment you're in and the resid we actually
feel very good about it, you know, by putting in that capital we're putting in.
Brian Maguire:
So you think about the margins in catalysts, they're already probably the highest of any
segment of any company we look at, or close to it. Is there any reason why they can't go
higher? I mean, is there a law that you can't earn more than a certain percentage in the
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business?
Fred Festa:
You know, I don't know if there's a law, but there's general dynamics that come into -you know, it's very hard -- you can't be formulated out. You know, the refineries have
been built for these type of catalysts, so you can't be formulated out like I'm some type of
it -- but you know, you want to be also responsive to your customers' needs and you want
to be -- so you're constantly looking at that, as well. But --
Brian Maguire:
There's room for it to go higher?
Fred Festa:
Yeah. I mean, it's on the margin side. We've moved this margin up nicely and I think
there's still some room in the margins.
Brian Maguire:
Okay, any more questions from the audience?
Unidentified Audience Member: Just on the construction product pricing side, you know, in the past the message
has been, should kind of track the pricing dynamics you see in cement, based on the
cement additives. But pricing in Q1 was maybe a little weaker than I think people had
anticipated on construction products. Can you kind of got through the dynamics of how
pricing flowed on that business, how it looks for the rest of the year, and you know,
maybe where you're giving some up if you are actually gaining traction there
Fred Festa:
Yeah, you're getting a mixed picture because you're getting a lot of the hyper-inflation
from the Latin American side on the raw materials piece of that. So, as we're measuring,
as we're measuring the absolute price, you're not seeing that expansion. So, you know,
we're getting the raw material inflation, we're going out on that side. We've got to catch
up and get ahead of it on that piece. So, I'm comfortable that we'll capture that, and the
pieces -- look at the margins. The construction margins continue to expand, they
expanded in the first quarter, and I think you'll see that throughout the year.
Unidentified Audience Member: Fred, is the vigor of the catalyst business correlated to refining spreads, or just to
throughput?
Fred Festa:
It's really correlated to miles driven. You know, demand for transportation fuel is the
key. We've looked at this, I don't know how many times, and with all the -- you know,
the rigor of all the best quantitative math guys to try to get the best correlation, and we
find it's generally miles driven. We need to have a healthy industry so if the spreads in
the margins that the refiners are making are healthy as generally bodes well for us on that
side of it. Crack spreads generally play into that, but the price of oil, high or low,
generally hasn't been the factor. Does it cause people panicking a little bit in the markets
in the industry? Sure, it does, when it goes from $100 to $30, but that generally hasn't
been a -- the underlying factor for catalyst demand.
Brian Maguire:
And the other question sort of related, we've got it in the past, is how the changing fee
slate impact your demand. I think all else equal, you'd rather heavier? Sour? Kind of
crude, as we get a little bit more of the lighter, sweet stuff in the US, does that mean that
we -- refiners crack less of the heavy stuff? Or do they just change regionally sort of
where that heavy stuff goes?
Fred Festa:
It'll change, you know. It'll change regionally where it goes. You're seeing a lot of heavy
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go to Asia now, and into China specifically. There's just so much of the sweet, or the
shale crude, that can be even used in North America, just because of the transportation,
moving it around on that side. But you know, we've got good catalysts now to be able to
crack that, because it's got its own unique properties to it.
And with the price where it is, I think it's going to reach -- you know, over the next six to
nine months it's going to reach a dynamic that I think -- and stability that I think will play
itself out for the next cycle. How much shale will be out there, where the movement of
heavy oil is, how that's going to formulate itself around with the HPC crackers, and so on.
Unidentified Audience Member: Fred, I think your company's doing something a lot of the folks in this room
wished other companies in the industry were doing, so I'm just curious, how did you guys
get the courage to split the company up? How did that, where was the genesis of that
outcome?
Fred Festa:
You know, again, we -- we lived under this umbrella of Chapter 11 for a long period of
time, and every day we'd wake up and say okay, how do we protect the shareholder base?
Because you had the asbestos guys pulling on one side, you had the creditors pulling on
the other side, and we were able to balance that. And I think because we had one goal,
how do we protect the shareholder base and maintain value? And at the end of the day
we did that protected all the creditors, the debt holders, and paid off all the asbestos side.
So, we had a mindset of constantly looking at that, and maybe a little bit of a you know, a
routine around what's the -- how do we value this company? What's the best way to
value it? And then what you find is, you tend to then look internal, and look yourself in
the mirror and say, okay. Are we really making the right decision? Are we really
making the hard decision? And we came to the conclusion, by splitting these companies,
these two companies will be able to grow better, faster, and some of the compromises we
make. Even though they may be small compromises, we won't have to make those
compromises on each piece and they will run to create the most value. And now our job,
as we're going through right now is, we know there's going to be incremental public costs
to the new company. We're trying to offset 100% of those by looking at the two
companies, so we don't have any of those sides of it.
So, again, I think it's just a mindset, and you know, for good, right or indifferent, we were
-- we got forced into that mindset for a long period of time, so we got used to it.
Brian Maguire:
This year, one of the headwinds to growth is currency, obviously. You have a pretty big
currency bogey to overcome. But you've talked about trying to course-correct for that a
little bit? Some of the actions around costs to offset that, how were those progressing,
and how much of it do you think you'll ultimately be able to offset?
Fred Festa:
You know, on an earnings perspective it's $60 million for what was said on the last call.
We're trying to chip away at it, and the way we're chipping away at it is trying to
maximize our supply chains. If we can make a product in Europe at a lower cost, and
that same product would be sold in Asia for US dollars, we get a benefit of that. A lot of
it's around that supply chain.
It's harder to move it than it is on paper. But I think we're doing a nice job on that side of
it, and setting up some of those dynamics. Are we perfect on it? No, but I think we're
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making progress.
Brian Maguire:
And when it comes to making some stuff in the US and then selling it in a foreign
country in their local currency, are you able to offset that with pricing actions? Or is it
too competitive to be able to do that?
Fred Festa:
Generally in Latin America it's not an issue on the pricing side, with the hyperinflation.
We're able to get the price they need, the product. What's good about the catalyst is, most
of the catalyst bought outside of North America and Europe is denominated in US
dollars. So, you sell a catalyst into Asia or you sell a catalyst into Europe, it's a US
dollar-denominated sale. So, if we can make it in Europe we have a nice advantage there,
versus shipping it from North America.
Brian Maguire:
We'll open it up to the audience one last time? Got one there?
Unidentified Audience Member: Hi, you mentioned in one of your investor day presentations that you know, you
intended to grow your FCC revenues about 3% to 4%. Your HPC and polyolefin revenue
is about 6% to 8%. That defers slightly a bit from let's say the catalyst group projections,
that you know, that say that the FCC would only grow around 2% maximum, so that's a
little bit of an outperformance that you're projecting by Grace. And for the polyolefins I
think you're only projecting around 5%, (inaudible) you're projecting around 6% to 8%.
Can you please elaborate a little bit more on what's the contributing factor there?
Fred Festa:
Yes, you know, and we believe -- again, it depends on what study you look at. FCC
demand is going to be driven by miles driven, as well as propylene usage. The FCC units
are still the biggest or cheapest way to generate propylene. So, if you add those two in,
we still believe 3% to 4% -- is it, you know, are we off a percent or something? You
know, we're not sure on that side of it, but we still believe it's miles driven and then
propylene from those units on that side of it.
On the polyolefin side, you've got to be able to parse that polyolefin side into the
polypropylene. We've got a polyethylene base as well as a polypropylene, and the
polypropylene has been a faster-growing segment. So, we're confident what we've been
seeing on that side of it, on that 7% to 8%, and I don't know if we were just kind of -- if
we were off on the hydro processing or not, but we feel pretty good about that as well.
Unidentified Audience Member:
Fred Festa:
Okay. No, you're in line to hydro process.
All right thank you, good! (laughter)
Unidentified Audience Member: The second question I have is, can you please help me to understand why is it
that Grace is able to enjoy better return on invested capital compared to competitors?
Given that your exposure is mainly to FCC catalysts which has higher volume but lower
value?
Fred Festa:
Yeah, again, I don't have all the statistics for our competitors. I mean, we run -- if you
look at our working capital, we run our working capital fairly lean. Again, I think that
was a legacy of coming out of Chapter 11. We needed to, we thought we were going to
come out a lot earlier than we did, and we needed to generate a lot of cash because we
were going to go to the markets in 2008 and 2009 for funding and we didn't think there'd
W.R. Grace
5/19/2015 - 2:20 PM ET
Speaker ID
Page # 11
be any debt. So, we got in that routine, and if you look at our working capital it's
generally been lower. But I think across, I believe, our margins are better. So, the
combination of lower working capital, higher margins, on a pretty well-installed capital
base that's fairly depreciated on that side of it. That's why we're able to generate those
returns.
Unidentified Audience Member:
Okay.
Brian Maguire:
I think we'll have to end it there. Thanks so much, Fred.
Fred Festa:
All right, thank you.