Celanese Corporation
Q2 2013 Earnings Call Transcript

Published: 19 Jul 2013

[Operator:]

Good day, ladies and gentlemen, and welcome to the Celanese Corporation Second Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to introduce your host for today, Mr. Jon Puckett. Sir, please go ahead.

[Jon Puckett:]

Thank you, Karen. Welcome to the Celanese Corporation Second Quarter 2013 Conference Call. My name is Jon Puckett, Vice President of Investor Relations. With me today are Mark Rohr, Chairman and Chief Executive Officer; and Steven Sterin, Senior Vice President and Chief Financial Officer. The Celanese Corporation's second quarter 2013 earnings release was distributed via business wire yesterday after market close. The slides for the call and our prepared comments for the quarter were also posted on our website, www.celanese.com, in the Investor Relations section. All of these items have been submitted to the SEC in a current report on Form 8-K. As a reminder, some of the matters discussed today and included in our presentations may include forward-looking statements concerning, for example, Celanese Corporation's future objectives and results. Please note the cautionary language contained in the posted slides. Also, some of the matters discussed and presented include references to non-GAAP financial measures. Explanations of these measures and reconciliations to the comparable GAAP measures are included on our website, www.celanese.com, in the Investor Relations section as applicable. This morning, we will begin with introductory comments from Mark Rohr and then field your questions. I'd now like to turn the call over to Mark.

[Mark C. Rohr:]

Thanks, Jon, and welcome, everyone. Since the prepared remarks were released last night, I'll keep my comments brief, and open the line for your questions. For the quarter, we reported adjusted earnings of $1.12 per share, which is consistent with expectations of muted seasonality in our end markets and relatively consistent performance. Coming into the quarter, we didn't anticipate favorable tailwinds from the global economy, which is why we focused on Celanese' specific initiatives to drive growth, and I believe our results demonstrate the success we're having with these initiatives. Second quarter segment income margin expanded sequentially to 22.3% for Advanced Engineered Materials, Industrial Specialties and Consumer Specialties. We are very pleased with these results, which showcase our success in delivering value through innovation and marketing. Segment income margin in Acetyl Intermediates was lower in Q2 than Q1 due to Celanese and customer turnaround challenges as well as raw material supply issues in one of our plants. These items alone reduced Acetyl Intermediates' earnings by about $15 million in the second quarter. We generated very healthy operating cash flow of $229 million and adjusted free cash flow of $154 million, positioning us well to pursue our growth initiatives and our balanced capital deployment strategy. Given the economic headwinds we faced this quarter, I'm really proud of our team's ability to deliver the results we did the old-fashioned way, by earning it. Our growth objectives this year are being achieved by collaboration with customers and commercializing unique applications that align with their needs. We also need to deliver on the remaining Celanese-specific items like productivity and the ramp-up of ethanol production facility in Nanjing. We have line-of-sight and a lot of work in front of us to achieve our earnings objectives of 12% growth in 2013 and barring further deterioration in our end markets, we should be able to do so. With that, I'll now turn it over to Jon for Q&A.

[Jon Puckett:]

Thanks, Mark. We have a lot of people on the line. We want to get as many questions as possible. [Operator Instructions] Karen, let's go ahead with the Q&A.

[Operator:]

[Operator Instructions] Our first question comes from the line of David Begleiter from Deutsche Bank.

[David L. Begleiter:]

Mark, just on the $15 million impact in AI, what was the impact versus Q1 and versus year-over-year, was it up or down in terms of the turnaround in supply disruption costs?

[Mark C. Rohr:]

Well, it was the full $15 million or so Q1 to Q2, on the surface, I can't recall anything on Q2 last year.

[Steven M. Sterin:]

Yes, I think it's about the same.

[Mark C. Rohr:]

It's about the same, yes. So the team says here it's the same, David.

[David L. Begleiter:]

Okay. And just on TCX, what's your expectation for TCX EBIT contribution or EPS contribution for the back half of the year?

[Mark C. Rohr:]

Yes, really not very much, David. We're starting that plant up slow. The ethanol market, like all industrial markets in China, is really sloppy today, so we're just taking our time in bringing it up. So we're not -- in our sort of projections for the year, we're not counting really for any contributions from ethanol that's material.

[David L. Begleiter:]

So breakeven basically?

[Mark C. Rohr:]

Basically.

[Operator:]

Our next question comes from the line of Duffy Fischer from Barclays.

[Duffy Fischer:]

Just a question on the issue with supply, did that affect North America or Asia? And was it more of just foregone sales or did you have to go out and purchase product to then resell it at a loss to your customers?

[Mark C. Rohr:]

Yes, both. I mean, we supply from other locations. We have a global system out there which can negatively impact you and then we actually buy and resell, too.

[Duffy Fischer:]

Okay. And then what was the operating rate for Singapore in the second quarter?

[Mark C. Rohr:]

Well, Duffy, I'm not going to get into that kind of clarity. We are running that facility. We have been running it at all year, and we try to run it in a way that maximizes profitability of our overall business.

[Operator:]

Our next question comes from the line of Laurence Alexander from Jefferies.

[Laurence Alexander:]

Could you elaborate on -- I mean, given the sort of the softer environment, to the degree to which you can pull forward productivity initiatives and maybe sort of buckets or the kind of markets or sales that you might be walking away from or be able to bottom slice?

[Mark C. Rohr:]

Yes, well, on the first side, the answer to your question is we are working hard to pull forward productivity initiatives, Laurence. And that's what I'm trying to say in our comments is that we had -- we've not anticipated business to slide as much as it's done this year and so we've had -- we've already started pulling those things forward. I hesitate to give you a specific number. What I will say is that the productivity things we're working on are pretty evenly spread across the businesses, so it's not more on one business necessarily than in other business. And so I don't know if you're really going to see them as any kind of one fell swoop as they go through.

[Laurence Alexander:]

And then as you look at the opportunity for AEM to -- or Ticona to take share in the automotive markets with the new product launches, how lumpy should we expect that to be? That is, are we going to see a strong year than a slow year? Is it going to be it's going to take a couple more years to really start to show up? Or how do you see the cadence of that?

[Mark C. Rohr:]

Obviously, very consistent, to moderate -- modify that in just a second. But our base business is going to be very consistent. We have -- we think our penetration's up 5% to 6% quarter-over-quarter, so a hard example of that, and at the same time, you're seeing European auto builds at the lowest level in the last 2 decades. So we are able to, through this increased penetration and applications, we're able to grow in what is even a declining market in the case of Europe. And of course, we're growing positively with the positive market in the U.S. When you look at AEM as a total, you have affiliate earnings in there. And so as you look at the back half of this year, we have major outages scheduled at Ibn Sina. We also have the impact of lower MTBE pricing rolling through that. So there's going to be a pretty good pressure on AEM, as they get towards the back half of this year, some of this, next quarter, and some, next year. So you'll see the quarter-to-quarter earnings move around as affiliate earnings move around in there, but I think if you'll get year-over-year-over-year, should be pretty steady.

[Steven M. Sterin:]

Yes, and as you look at the margins of AEM excluding affiliates, we saw very strong performance in the first quarter, even better in the second, and we expect those margins to continue to hold up within that range. So the underlying business, as Mark referred to, was really our direct business, everything except the affiliates, then a little bit of volatility in the affiliates this year because of turnarounds. But overall, the base margins were strong.

[Operator:]

Our next question comes from the line of Frank Mitsch from Wells Fargo Securities.

[Frank J. Mitsch:]

On the Consumer Specialties business, filter tow business, you cited the higher wood pulp cost having a negative impact on margins. What's the potential there to turn that around? Or is it pretty much 2013, we're going to live with the lower margins in that business because of the higher raws?

[Steven M. Sterin:]

Yes, from here forward through the rest of the year, it should be relatively flat, maybe a little bit lower on average, but no major changes from here. Part of Q1 being a little bit lower than Q2 is just the timing of using last year's inventory versus this year's, but it should be pretty flat.

[Frank J. Mitsch:]

All right. And Steve, you spent $6 million on share buyback, obviously at a slow place. What should we be thinking about in terms of Celanese and share buyback for the balance of the year?

[Steven M. Sterin:]

Yes, we think especially at this price, we should be buying back more shares as we move forward. Cash generation has been strong. We're over $1.1 billion which is the lowest since the first reporting period of our IPO. So we feel really good about where we are with cash to fund the business, where the cash is. And the $6 million really is just to keep us offsetting dilution, but we'll be more opportunistic as we move forward, using cash to buy back shares.

[Operator:]

Our next question comes from the line of Kevin McCarthy from Bank of America Merrill Lynch.

[Kevin W. McCarthy:]

Mark, would you provide an update on your longer-term ethanol plans in China beyond the recent brownfield start up at Nanjing? I think thinking back to your Technology Day, you were in discussions with the state-owned enterprise. And I was wondering if you could let us know is that still active, and are you thinking more about being a principal versus licensing in that market at this juncture?

[Mark C. Rohr:]

Yes, Kevin, yes, it's still active. We're still working our tails off over there. I think we've had a lot of difficulty, to be honest, getting the state-owned enterprises really to engage for their own reasons. And we're taking a slightly different tack now. Now that we have a plant that's starting to operate, and the key word's starting, we just started it up, we're going to go ahead and de-water some of that material and test it. And then we are going to start working with other groups, other interested potential buyers in China, and we'll start working through the regulatory process ourself. It's going to be a long slog to get fuel ethanol in the Chinese market, though.

[Kevin W. McCarthy:]

Okay. And then second question on AEM. Your year-over-year volume growth there of 7% was quite good. I was wondering if you could provide a little bit more color as to how much of that is being driven by autos versus the other end-use markets you're serving there and what the back half of the year might look like.

[Mark C. Rohr:]

Yes, it's about half, it's about half auto. And the other areas, we're doing more on health care, we're doing more on consumer electronics. We have a number of niche operations that are starting to work well for us as well. I don't want to elaborate on them too much. But we managed to offset the weakness in European auto, in particular, and we managed to grow materially in those areas I mentioned in new markets. So it's a very healthy portfolio and what we're seeing is that the skill sets we bring in chemistry and applications, we can apply them to other markets and they are very, very well received beyond automotive, and that's really what's happening for us.

[Operator:]

And our next question comes from the line of Robert Koort from Goldman Sachs.

[Robert A. Koort:]

Mark, when you start up your Clear Lake methanol plant, what will that do to your cost structure across your acetic business?

[Mark C. Rohr:]

Well, I'm thinking I answered that question. In a fundamental sense, you're replacing 2/3 of the southern contract volume. So actually, costs will go up a bit when that happens. We have opportunities to buy that other 1/3 at a market discount. How much, Bob, I'm not sure. So you should view that our costs will go up a little bit at that time.

[Robert A. Koort:]

Okay. And then as we go through the back half of the year and you start ramping your TCX plant, would you expect your acetic production in Nanjing or in Asia broadly will go down or will you still sell about the same amount in the second half?

[Mark C. Rohr:]

No, it's -- I mean, it will go down as we push more into -- I mean, we're -- we have some capacity available to us. So we can make up some of that, but largely speaking, it will go down as we move material into ethanol.

[Steven M. Sterin:]

Just one more comment on methanol, too. As we look towards our Ibn Sina deal that we announced a couple of years ago, in the roughly 2016 time frame when that unit starts up, our interest in that venture steps up from 25 into the low to mid 30s, which gives us effectively more cost-based methanol so that'll be out there as well, Bob.

[Operator:]

And our next question comes from the line of Vincent Andrews from Morgan Stanley.

[Vincent Andrews:]

I think on the last call, talking about the Nanjing startup, one of the things that was discussed was you were trying to find sort of the right pricing or contract structure sort of right out of the gate. So could you just give us a little bit of an update on that?

[Mark C. Rohr:]

Yes, that's one of the reasons we are taking our time with it. The market is used to being served by a bunch of small producers that, to be very honest, they don't produce our quality. So we're going in very slowly in trying to structure the relationships and the contracts in a way that we can maximize our netback. So that process is underway, and we're having success with it, but I want to be very clear, we're going very slowly with it. We're not trying to go in and jam the stuff in the market overnight. I do want to mention, Vincent, too, that so much of the industrial chemical market in China is just in turmoil now because demand is just not growing. And that certainly is showing itself in ethanol. We're seeing those prices move down a bit, and we're just trying to be thoughtful on how we get into the market.

[Vincent Andrews:]

Okay. And just as a follow-up, you in your prepared remarks, there was a reference to liquidity issues in China, which has been in the news recently. Is there anything specific to what you're seeing or hearing from customers that's different than what you would suspect?

[Mark C. Rohr:]

Well, no. I think you probably have a pretty good handle on it, but there's, generally speaking, there's a lot of concerns over liquidity as a minimum. And so you see in inventories, it's just nobody's building inventories, everything is rock-bottom. Everything is transaction to transaction, kind of deal. People are trying to push out terms to just unbelievable periods of time. So we see that rolling through business, and you shouldn't have a view that demand just dropped off precipitously because of it, but there's an element of caution that's been put into commerce there that's causing everyone to pause and to move slowly.

[Operator:]

And our next question comes from the line of Jeff Zekauskas from JPMorgan.

[Jeffrey J. Zekauskas:]

I guess I was wondering why you guys maintained your earnings guidance. Normally, in the fourth quarter, there's seasonal weakness in AEM and Industrial Specialties, and you've got various price pressures in ethanol, so you're not really going to have a contribution there. How do you get a fourth quarter that will more or less earn what you earned in the third or the second given these seasonal factors and the general weak economic climate?

[Mark C. Rohr:]

Well, Jeff, I mean, you're right that a weak quarter -- I mean, the fourth quarter has been historically a weak quarter for Celanese. We have made structural changes to the business that aren't in prior numbers like the Spondon shutdown, like the acetate dividend normalization. We've taken steps to reduce BU other spend and we add those things with incremental sales, of course, and a little bit stronger auto build sales. We can work up to that number. But you're right in saying there is some risk with that. What I'm trying to convey to investors is that we're aware of that and we're working our tail off to try to offset those and generate that number, but there is risk.

[Operator:]

Our next question comes from the line of Chris Nocella from RBC Capital Markets.

[Christopher J. Nocella:]

Just a quick question, do you have a sense of what the cost curve for industrial ethanol is in China?

[Mark C. Rohr:]

No, I don't. No, and I'm sorry, I don't. Well, as we looked at that, we felt pretty confident that there is, given our low-cost asset position, that there's good margin in that business. What is going on right now, to be very honest, is China is long on ethanol, prices are pretty weak and so we are just being slow with it.

[Christopher J. Nocella:]

Okay. And then just taking a quick look for 2014, this year, in 2013, you had some company-specific things that helped earnings growth like the acetate, the acid shutdowns and stuff like that. I mean, are there any company-specific measures that you'd like to highlight for 2014?

[Mark C. Rohr:]

There are, but I rather start highlighting those next quarter if I can. We're working on a lot of things. I think you're wise, Chris, in outlining it, generally speaking, that there's not going to be a lot of strong inherent chemical demand growth in the world. So you've got to go out and make your own way and we have a number of things we are working. And we'll be happy to share those in the quarters ahead.

[Operator:]

And our next question comes from the line of Hassan Ahmed from Alembic Global.

[Hassan I. Ahmed:]

I just wanted some clarification around the supply issue you talked about, raw material supply issue you talked about within AI. Was this at one of your facilities, or was it also a third-party, one of your suppliers for, call it, methanol, experiencing some curtailments or the like? I mean, the only reason I ask this is, because we've been hearing a fair bit about natural gas curtailments in Trinidad and associated lower operating rates on ethanol.

[Mark C. Rohr:]

Yes, I don't want to tell exactly who it was, but it was one of our raw materials provided by third-party providers. We've not had problems getting methanol.

[Hassan I. Ahmed:]

Got it. But it's, again, just reading some of the journals and the like, it seems that these gas curtailments are going to get more severe for some reason, September seems to be mentioned again and again. So are you expecting any sort of reductions in supply?

[Mark C. Rohr:]

No, no, no. We're talking with those guys routinely and it's not -- we're certainly not expecting that or anticipating that.

[Hassan I. Ahmed:]

Fair enough. Now a follow-up on the methanol side of things. Obviously, your plans are in the works as far as methanol goes. You've talked about roughly a $615 a ton replacement value and there's been a couple of new, well, I shouldn't say new, some brownfield plants that have been announced and the range is anywhere between $400 to $600 a ton in terms of replacement value. Yet it seems that some of the newer greenfield facilities would be anywhere between $800 to $1000 a ton. So are you still comfortable with the capital outlay guidance that you've given?

[Steven M. Sterin:]

Yes, we are very comfortable with the capital guidance we've given on that. We've made substantial progress in bidding out a lot of the large equipment purchases and well on our way to get that thing up and running in 24 months. Some of the ones that you've seen might have been lower are ones that are integrated in refineries, existing refineries. So that helps their capital economics, you got existing gasification of hydrogen and those types of things. And you're right, the greenfields have been a lot higher. But one of the reasons ours is lower and closer to a brownfield is we used to operate a methanol unit in Clear Lake and we're able to take advantage of some infrastructure that was already in place.

[Operator:]

Our next question comes from the line of Andy Cash from SunTrust.

[Andrew W. Cash:]

Just a couple of quick ones here. On acetic acid, could you give us some direction, was the second quarter margins less than the first quarter margins and how are they trending into the third quarter?

[Steven M. Sterin:]

Yes, Andy, I'll give you a little, overview. Utilization rates were about the same Q1 to Q2, in the mid-70s, and we're in a pretty flat and long part of the cost curve as we've shown before, so we don't expect nor we've been seeing very much movement in margins on the whole. China, if anything, moved up a little bit. You saw some price movement there, but rest of the world, relatively flat, and that's what you'd expect.

[Andrew W. Cash:]

Okay. And just a question on Slide 11, Industrial Specialties. On the quarter, you did $18 million EBIT, which is about 50% lower than the year ago. I was just curious, on Slide 11, you got a sideways movement. Is that sideways movement compared to last year's $86 million, which should imply that you're going to have to average about $26 million for the remaining third and fourth quarter this year? Just curious if that's possible.

[Mark C. Rohr:]

Yes, so what's behind that is, we saw strong [indiscernible] demand which-- particularly in Asia, strong Asian demand at the end of 2011 and into the first half of 2012. That dropped off substantially as the PV market got really long in inventory. So our EVA business is down. However, on the other hand, our emulsions business actually had a record quarter this quarter, so we are doing really good there with our expansion in VAE in Asia, getting out there, as well as some of the remodeling that's taken place with existing home sales. We tend to have a better participation in existing home sales than we do in new home starts because we tend to go through the retailers versus contractors. So emulsions is doing well and should carry us forward.

[Mark C. Rohr:]

And I think, Andy, there is some -- it's going to have to have a good fourth quarter though, to your point, emulsions, to carry to that.

[Operator:]

Our next question comes from the line of Mike Ritzenthaler from Piper Jaffray.

[Michael J. Ritzenthaler:]

So just to follow-up on Andy's question there, is it going to take something bold like the 10-gigawatt initiative per year in China to return the Industrial Specialties to prior profitability or are there other Celanese-specific drivers that could do that?

[Steven M. Sterin:]

So I'd think about it first by business. Emulsions, there's continued opportunity in China and in Asia to grow our low VOC paint coating and adhesive binder systems. And that's a very encouraging market. We've had experience there. We've already built 2 reactors and ramped those up pretty quickly. So we think -- that's really been in one small part of China, in around Nanjing. We see other opportunities in China for that. So we think we see growth coming from that. EVA, we haven't made a call yet. But the market is so long in photovoltaic and there's challenges in that market. There's product initiatives going on between Europe and in China with import duties. So we're not counting on that anytime soon, so we're really trying to drive into other markets. There are specialty markets for EVA like medical, controlled release applications, where we can make headwinds and offset some of the photovoltaic, but it's not going to come from PV anytime soon in our opinion.

[Michael J. Ritzenthaler:]

Okay, that makes sense. And we had the opportunity to taste the Qorus products at IFT this past week and we were pretty impressed with it. And I was just curious about how long it takes to commercialize a new sweetener like that given your previous experience and the level of competition of sweeteners? And is there any sort of profit impact that you could provide to put Qorus in context within the larger company, and including the cannibalization effects with the current products?

[Mark C. Rohr:]

Mike, were you at the cocktail hour?

[Michael J. Ritzenthaler:]

No, no, just at the trade show.

[Mark C. Rohr:]

Okay, I was just checking. Apparently, that was a big hit. Yes, Mike, it takes longer than you'd like to think to do this. I think we have 50 projects we're working now. We have a host of trials. We have some commercialization started, and the response is really good, but it's going to -- it takes a while. So I don't quite how to say it other than that. Depending on how we range it, it can be anything from making -- these are all good contributions, but $5 million to $10 million to a much, much, much larger number. So what we're trying to do is to really measure the effectiveness of our rollout techniques with each customer and get feedback on that to try to do a better job projecting. And if you will be a little bit patient with us, we'll start to forecast kind of what that means as we end this year and we start looking at next year.

[Steven M. Sterin:]

You also asked about cannibalization. We are working really hard not to do that. In particular, these products go into sugar replacement-type applications, either complete sugar replacement or partial. So we see this as a new market space for our product.

[Operator:]

Our next question comes from the line of John Roberts from UBS.

[John Roberts:]

Sequential comparisons are usually for companies that don't have seasonal issues in their businesses. And last quarter, I thought it was maybe you were making the switch because of the JVs, changing in terms of how you're recognizing that. But it sounds like it's deeper than that. It sounds like you think that with the auto seasonality or coatings seasonality, that you can actually smooth this out.

[Mark C. Rohr:]

That's the plan.

[John Roberts:]

Okay. And then maybe a more detailed question. You cited specifically North American auto in the engineering plastics business where you had the penetration. Are there any model lines of cars or specific applications across a series of model lines that kind of stand out there that we can pay attention to?

[Mark C. Rohr:]

Yes, yes, yes.

[Steven M. Sterin:]

Yes, general statement, you tend to see us more in sophisticated vehicles. So more likely, vehicles where they're trying to drive higher MPG. In the U.S., GMC and Ford do a lot in that area. In Europe, the leaders in the space has been for a long time and continues to be Volkswagen. We work closely with folks like that. But you're really seeing it across the board. The German producers and the European producers tend to be ahead in terms of how much pounds per vehicle. But North America is a growth opportunity for us, particularly in GMC.

[Mark C. Rohr:]

Yes, if you look at GMC's new light truck, I think it's K2XX platform, is completely redesigned, a brand-new platform that rolls out in 2014 model. And that's an example of a model that we are heavily involved in.

[John Roberts:]

And you're shipping into that now and that -- and that goes into effect in the quarter because you singled out in the quarter the North American auto penetration?

[Mark C. Rohr:]

Yes, it's starting to ramp up.

[Operator:]

And our next question comes from the line of Nils Wallin from CLSA.

[Nils-Bertil Wallin:]

I was just wondering if you would provide us with an update as to the timing of the EPA and TCEQ approvals for your methanol plant and then how such timing may affect the goal of bringing on that plant online, on time in 2015.

[Mark C. Rohr:]

Yes, we're in the final phase of approval. We are going through public comment periods, and there's 3 permits that are involved

[Nils-Bertil Wallin:]

Great. And just a housekeeping question, what was the year-on-year change in volumes for Consumer Specialties given the Spondon shutdown?

[Steven M. Sterin:]

In terms of total volumes for the Consumer Specialties space, there's 2 things I want to point out. You've got remember, last year, in the first quarter, we had an outage at one of our facilities that pushed a tremendous amount of volume into the second quarter, so I probably want to talk about this on a first half versus first half basis. Consumer Specialties' volumes in the first half were 101 kt, and they're 97 in the first half of this year. So a minimal impact, but we're seeing a much higher dividend come through from our joint venture.

[Operator:]

Our final question comes from the line of P.J. Juvekar from Citi.

[P. J. Juvekar:]

Mark, you talked about a long slog with the SOEs in China to get them on ethanol. Do you think that China goes more with methanol in the gasoline, especially with states having, like, M5 and M10 mandates? Any thoughts on that?

[Mark C. Rohr:]

Well, I think methanol is used in gasoline today. It is -- it's used at the provincial level. And it tends to be in the provinces that have a lot of coal and a lot of methanol produced, right, as an outlet. It is not endorsed by the state and it's not endorsed by the large refining and blending industry because of the hazards associated with it. So we don't see methanol increasing in China. In fact, it even seems to be decreasing a little bit right now. So no, I don't think that's the issue. I think the issue really gets down to what the preferred oxygenate is, and without getting into too much detail, some prefer other oxygenates and want to continue to promote those. So it's just a -- it's a complicated, and I'll say, it's a complicated arena for us to deal in. What we are encouraged by, though, is that the social pressure being put on the government to clean up the air quality is getting very intense. So those men and women that fuel that social pressure are sort of demanding that the fuel standards within China be upgraded to international standards, and that's going to be good for oxygenates like ethanol, it's going to be good for other businesses and folks that take out sulfur and things like that.

[P. J. Juvekar:]

Yes, yes, the environmental point is a good one. And then on just ethanol, this Nanjing startup, you had talked about $0.05 to $0.10 contribution per quarter from that. Did I hear that maybe it's pushed out more into 2014 than 2013?

[Mark C. Rohr:]

Yes, I think we said $0.05 to $0.10 for that business this year, and that's where we ended last year, we are starting this year, what we had looked at. The contribution this year is going to be de minimis from that business. The ethanol market is really sloppy there, and we're just taking our time with it. And it's really too early to forecast what the number will be for next year.

[Jon Puckett:]

Thanks, P.J. And thanks, everybody, for your time this morning. We'll be around for calls later today.

[Operator:]

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program, and you may now disconnect. Everyone, have a good day.