Good day, ladies and gentlemen, and welcome to the Kronos Worldwide Second Quarter 2012 Earnings Conference Call. My name is Derrick and I will be your operator for today’s call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. I would now like to turn the call over to your host, Ms. Janet Keckeisen, Vice President of Investor Relations for Kronos Worldwide. You may begin, Janet.

Thanks, Derrick. Good morning and welcome to the Kronos Worldwide 2012 second quarter earnings call. With me this morning are Steve Watson, Chief Executive Officer; and Greg Swalwell, Chief Financial Officer. The earnings release that was issued this morning can be found on our website at kronosww.com. During the course of this conference call, we will make forward-looking statements. All statements relating to matters that are not historical facts are forward-looking statements that represent management’s beliefs and assumptions based on currently available information. Although the company believes that the expectations reflected in such forward-looking statements are reasonable, it cannot give any assurances that these expectations will prove to be correct. Such statements by their nature involve substantial risks and uncertainties that could significantly impact expected results, and actual future results could differ materially from those described in such forward-looking statements. We assume no obligation to update or revise any forward-looking statement. Please refer to the earnings release for a discussion of some of the factors that could cause actual results to differ materially. In an effort to provide investors with additional information regarding the company’s results of operation, we will refer to certain non-GAAP information. We ask that you refer to the earnings release for a reconciliation of this non-GAAP information to our GAAP financial statements. I will now turn the call over to Steve.

Thank you, Janet, and welcome to everyone participating on this conference call. In addition to Janet and Greg, with me today are several members of our management team: Rob Graham, Executive Vice President and Chief Administrative Officer; Kelly Luttmer, Vice President, Global Tax Director; John St. Wrba, Vice President, Treasurer; Tim Hafer, Vice President, Controller; and Brian Christian, Vice President, Strategic Business Development. I also want to again give special recognition to our operating management team, including Doug Weaver, Dr. Ulfert Fiant, Klemens Schluter, Joe Maas, Ben Corona, and all the individuals working in technology, manufacturing, sales and marketing, who together make our team exceptional. Our operating and financial results for the second quarter of 2012 remained solid. As we had expected and previously reported, our production costs have increased significantly, driven primarily by substantially higher feedstock ore costs. Lower customer demand for our TiO2 products, particularly in Europe and certain export markets resulted in lower sales volumes in the second quarter and first six months of the year. Although, our average selling prices were significantly higher in the second quarter and first six months of 2012 as compared to the same periods in 2011, our segment profit declined for the quarter primarily as a result of the lower sales volume and higher production cost. The company’s average TiO2 selling prices at the end of the second quarter 2012 were comparable to the end of the first quarter of this year. We reduced our production volumes during the second quarter to approximately 86% of practical capacity utilization in order to align our production and inventory levels with current and anticipated near-term demand levels for our TiO2 products. We currently expect to operate our facilities at approximately 90% to 95% for all of 2012. While aggregate global demand for TiO2 products…

Thanks, Steve, and good morning to everyone on the call. We reported operating income or segment profit, which is the term that we use in our earnings release, of $114.2 million for the second quarter of this year, down from a $146.6 million in the second quarter of last year. Despite a quarter-over-quarter 24% increase in our average selling prices, our segment profit declined in the second quarter of this year due to higher raw material costs, and lower sales and production volumes. For the first half of the year, our segment profit increased from $258.8 million in the first six months of 2011 to $327.1 million in the first six months of this year, as the favorable impact of higher selling prices more than offset the negative impact of our higher production cost, the most of which impacted our second quarter as I’ll discuss here in a second, and lower sales and production volumes. As I mentioned, our average TiO2 selling prices in the second quarter were up 24% as compared to the second quarter of last year and for the first six months of this year, our prices were up 28%. Our average selling prices at the end of the second quarter were comparable to where they stood at the end of the first quarter of this year. Our sales volumes in the second quarter of this year were 123,000 metric tons, down about 16% from the second quarter of 2011 and our sales volumes in the first six months of this year were 253,000 metric tons, down about 7% from the first half of last year. The decrease was due to lower customer demand, as Steven mentioned, primarily in Europe and certain export markets. We’ve reduced our production volumes in the second quarter of this year in…

(Operator Instructions) And our first question is coming from the line of David Begleiter from Deutsche Bank. David Begleiter – Deutsche Bank Securities: Thanks. Good morning. Steve, please comment on your expected production costs in Q3 versus Q2 rate of increase or in that realm?

David Begleiter – Deutsche Bank Securities: And same question on the operating rates, given the 86% in Q2, do you think it will be higher in Q3 and Q4, which should be above your peer? Are you expecting some demand pickup in the back half of the year for TiO2?

Yeah. I mean we think that it’s reasonable and that’s our expectation right now that there will be some pickup of demand in the second half of the year as compared to the first half of the year. For example, we’ve seen some economic data that would suggest that Europe, which as we’ve said was relatively weak in the first half, but there are some expectations that demand should pick up there in Europe in the second half of the year, particularly in Northern Europe where you look at our sales in Northern Europe compared to Southern Europe, we felt like about five times as much product in the Northern Europe versus Southern Europe. So that’s one reason why we think that there are some expectations of demand in the second half of the year should be a little bit better. And where we end up in that 90% to 95% range is really going to be a function of just what is the extent that we have demand for the product in the second half of the year, as well as some of our expectations as we get to the end of the year as to what the first half of 2013 would be?

We also, on the demand question, the indications are that inventory supplies at the producer level have started trending down. And from the empirical data that we’ve been able to gather, we believe most customers are running very, very low on inventory of both the raw materials in TiO2 and their finished products. So, we believe that that there will be some inventory restocking towards the end of year. David Begleiter – Deutsche Bank Securities: Any impact from the low-cost inventory in Q2?

There would have been some, but clearly not to the extent we had it in the first quarter? David Begleiter – Deutsche Bank Securities: Thank you very much.

Your next question is coming from the line of Trey Grooms from Stephens. Trey Grooms – Stephens Inc.: Hi, good morning.

Good morning, Trey Grooms – Stephens Inc: Couple of things on inventory, so it’s bumped up some here sequentially, but you mentioned some pullbacks in production. It sounds like you guys are going to kind of increase that some here in the back half. So, could you kind of give us some color on where do you see inventory kind of shaking out as we kind of look out to the rest of the year?

With respect to our finished goods inventory, if you look sequentially the end of the first quarter to the second quarter, our finished goods levels are going down. We would much rather have cash in the banks, and inventory on the balance sheet as part of our working capital. So, one of the reasons we could reduce the production in the second quarter was to try to drive those inventory levels down. And we would have an expectation of trying to continue to drive those inventory levels down in the second half of the year?

Yes. you have to keep in mind too; it depends on far back your comparison goes. If you go back to the end of last year, clearly the cost of our inventory per metric ton were substantially less, being the current cost of inventory per metric ton. And that was one reason that we built inventory, and we bought a lot of ore back in 2011 was to produce that low-cost inventory. So, if you go back to 2011 numbers, there is a very big difference between the actual costs per metric ton. So, on a sequential quarter-to-quarter, we’re probably getting to a more of a steady state with what our costs of inventory and production are. Trey Grooms – Stephens Inc: Okay. That’s very helpful. Thank you. Also turning back to the cost question from earlier, a couple of things, one, how do we think about, you had mentioned that obviously the lower cost inventory that was built last year, really impacted the first quarter, but your wording in your guidance for the 50% to 60% increase in unit cost, I believe is really disappointing to the material produced in 2012? How do we think about the impact that the 1Q – the material sold in 1Q being built in ’11, how that impacts this guidance?

The 50% to 60% guidance was in respect to what we produce, not what flows to our income statement. So, going on your reasonable assumption that the bulk of our cost of goods sold in the first quarter was from 2011 production that’s not factored into the 50% to 60% number, which is really a pure what we expect to produce in 2012. Trey Grooms – Stephens Inc: Okay. so, it’s really just kind of going forward, some impact in 2Q, but not much from that inventory. So it’s really just kind of a 2Q through the balance of the year kind of number, right?

Yes. Trey Grooms – Stephens Inc: Okay. And then also looking at that, it would imply though that I think that the 3Q would see a pretty substantial bump up in this kind of cost per ton, if my math is correct, and just trying to get a feel for really what’s changed the 2Q into the 3Q?

Yeah. I’m not sure we would be expected to see a significant from second quarter to third quarter.

Like Greg said, I think we consumed a majority of our low-cost inventory in the first quarter. Trey Grooms – Stephens Inc: So, really nothing has changed on the cost front too much from 2Q to 3Q?

In slight fluctuations that – but not...

But not in the fluctuation you’re going to see if you’re comparing feedstock cost in 2011 to 2012. Like we stated in previous calls, our feedstock costs, some contracts re-price quarterly, some annually. So obviously, there’s going to be fluctuations. but you’re not going to see the bump from 2011 feedstock cost of 2012. But obviously for example, our quarterly contracts that re-price, there is going to be potential for a change in feedstock costs quarter-to-quarter. Trey Grooms – Stephens Inc: Okay. And then just one last question for me and then I’ll jump back in queue. But some of your competitors have mentioned their expectations for price kind of in the back half of the year, maybe seeing some decline there. You guys gave some guidance on that at least for the full-year that you expect full year ‘12 pricing to be up relative to 2011. But as far as the back half goes, is it reasonable for us to anticipate some price pullback just in the near-term as well?

I mean one reason we gave the guidance is because as you know, we were implementing a series of price increases throughout most of 2011. so where we started at 2012 was in a significantly higher level of work we started at the beginning of 2011. So the expectation about our selling prices in the second half of the year are largely driven in part by what happens to our price curve during all throughout 2011.

If you’re comparing our 2012 quarter to 2011 quarter, quarter three and four, we still believe will be substantially higher than the comparable quarter in 2011. We also believe that there’s a high likelihood that we will see demand pickup in the second half, especially towards the end of third quarter and beginning of fourth quarter, and we anticipate that that will also provide at least a stabilization of prices, but we also believe that there’s a likelihood that you’ll see some up tick in our TiO2 product pricing in that period of time. Trey Grooms – Stephens Inc: Okay, that’s helpful. Thank you very much. I’ll jump back in queue.

Your next question is from the line of Edward Yang from Oppenheimer. Edward Yang – Oppenheimer & Co.: Hi, good morning. I’m a little confused by the guidance on the cost per ton again, because it sounds like sequentially you’re not expecting volumes to move around too much. And on aggregate cost of sales basis or cost of goods sold, you're not expecting much movement there as well. But if flow that through then I have a really hard time getting to that 50% to 60% year-over-year increase in cost per ton for 2012. So is that just a function of the difference between the costs of sales, which is tied to your sales volume versus your guidance, which is more tied to production volume?

Yes, I think that's exactly what it is. I mean the 50% to 60% increase only applies to tons produced in 2012, and like we have stated now, a majority of the tons that we’ve produced in the first quarter of 2012 did not hit the income statement in the first quarter of 2012. But the 50% to 60% applies to production, which doesn't take into account the cost of inventory that we had going into the year, which we are able to have on finished goods and a little bit on ore as well. We saw some increases in feedstock and made a strategic decision to increase our ore inventories coming into 2012. And as Greg has alluded to previously, we’re in a position now what we’re trying to get those inventories down a little bit, hence the 86% production levels in the second quarter. Edward Yang – Oppenheimer & Co.: Just to extend that thought out a little bit then, the elevated cost per ton of production, that will – some of that will hit the P&L in 2013, and then you would tied that to whatever sort of pricing that you would get next year for example?

I guess that will depend on what we end the year with, what our inventory level is at the end of the year, but that 50% to 60% increase in production cost on those tons produced in 2012 are starting to hit the income statement in the second quarter of 2012 and will be there in the third quarter and fourth quarter and depending on what inventory levels are at the end of the year, will spill over into 2013 depending on whatever that number is. Edward Yang – Oppenheimer & Co.: Okay. And what’s your outlook for ore prices that’s been such a controversial subject. I think in the prior quarter, you’ve mentioned that both the TiO2 manufacturing industry and the ore industry are joined at the hip. And Steve also mentioned some new capacity coming online at the end of this year. And with the demand for TiO2 still slag, do you expect to see some relief there. And if you do then, why wouldn’t that help your cost per ton guidance?

This is Rob Graham. That sounds like a very good question. We have seen ore particularly with the cutbacks in production. We’re seeing ore suppliers, more availability in the market in the beginning of the year and into last year, it was tight. We have seen and we do expect additional ore suppliers to come into the marketplace over the next year or two. The long-term balance is one where it is a relationship where the ore suppliers and our industry are closely tied together; we do believe that they understand the dynamics of our industry long-term. We are also backward integrated with respect to our sulfate production. So and that mitigates the impact of these overall cost increases. So, then we also try to use a different mix of ore in our production plan to adjust for changes in ore cost, all of which we do think will favorably impact our ability to increase margins going forward. Edward Yang – Oppenheimer & Co.: Okay. And maybe just a final question, with the equity financing, I think there was some possibility of special dividends, you had paid a special dividend $1 last year, what's your latest thinking there?

On that point we did carve out in the loans that we had the ability to without affecting any type of covenants or about is there anything pay up to $1 special dividend that’d be $0.50 after the split. It’s still a consideration, we basically set our regular dividend policy at a rate that we feel comfortable that we’ll go pay up cycle, down cycles all the time, and what we're – our philosophy on the special dividend is, our company generates great deals of cash especially in up cycle. That we're going to – we basically consider on periodically, we don't having a set date or time. Right now, we have – we didn’t do it in the spring, but that's always under consideration as we have our Board Meetings. If we have excess cash that we don't see a need for inside the company, and we don't have a significant amount of CapEx anyway. Our philosophy is that, we would – we believe that you should sell the lot of that excess cash on stockholders. So I don't have a definitive answer for you on that other than that our basic philosophy, to continue to send excess cash out the door out to the stockholders. Edward Yang – Oppenheimer & Co.: All right, thank you for your time.

Okay.

Your next question is coming from the line of Neal Miller from Fidelity Investments. Neal Miller – Fidelity Investments: Good morning. Hi, Steve…

Mr. Miller, we would prioritize you. Neal Miller – Fidelity Investments: Well, I’m with you, Steve. so one of the questions I have is, there's been several references to the microenvironment. and then I’m wondering about linking either stabilization or increasing house stock prices. in other words, my data is somewhat out of date, but in June, I think there were 18 cities in China, which had year-over-year increasing housing prices. And I think there are 33 cities where prices were stabilized. I’m wondering about the same factor in the U.S. Could that be something that we should all pay attention to, in terms of the macroenvironment linking either increasing prices or stabilization with outlook?

It’s interesting, that the knee-jerk assumption always is the more new houses there are, need a big up cycle in TiO2 that really doesn’t track very much. Neal Miller – Fidelity Investments: Yeah.

Housing was really flat in 2010 and 2011 clearly, when our TiO2 had historic banner years of all time. New housing stock has a factor, but we have found because a lot of our big customers obviously coating, painting and other coating, a significant amount of paint and it may actually lean toward more being used when new housing is down, because – as long as there’s enough purchases, as long as there’s enough activity that tremendous amount of paint gets used on for closed houses, remodeled those type of things. So my view is that the housing starts, new housing is a fairly strong indicator of how the economy is doing. and the overall economy, how it’s doing has a pretty strong correlation to TiO2 demand. So, I look at it as one of the factors that we look to, how is the economic activity in any given region of the world operating versus a direct correlation to TiO2. But there is an indirect correlation, that I think your assumptions and premises are pretty accurate on an indirect basis. Neal Miller – Fidelity Investments: What just seemed to me if – what you’re residing in is worth something, you’ll move toward improving it, but we’ll see. Another area of question would be on forward ore contracts. I know on the past, you all have extended terms, Steven give your comments on more of supply, are you playing it more closer to the best or are you willing to engage in forward terms?

Well, as you’ve already know having familiarity with both titanium markets, metal and TiO2, there’s not too many ore producers out there. So, there right now for the last year so, they have – no question they had a shortage of ore situation or they increase their prices very rapidly. As I promoted quite often that they had to in order to get to a level to produce more ore, because there just was a shortage of ore. They definitely increase your prices and got their margins up very substantially, and there’s plenty of ample ore now, and we believe there is going to be a significant amount of ore available. Now how that equates to their pricing, that doesn’t necessarily correlates that they will significantly reduced their pricing, logic would tell you that they would want to move from our products. But there is no – we have no assurance of that. We historically have not gone out very far with pricing on ore. One is that ore guys don’t want to do that. But the other thing is, we also didn’t want to do that. Now we’ve had longer-term agreement for supply. But that is for the quantity versus the price. We avoid price no longer than probably a year and in the last year so, it’s been a short as the quarter for some of them, semi-annual for some of them. So two different things there, one is the assured supply and the other is the pricing. Neal Miller – Fidelity Investments: Thanks.

Your next question is coming from the line of Gregg Goodnight from UBS. Gregg Goodnight – UBS: Good morning all, very nice disclosures always. Question on your inventories, your 86% operating rates in the second quarter, your inventories came down, I was wondering on a volume metric basis. How much did your inventories come down? Can you give us some guidance either qualitatively or quantitatively?

We produced 6,000 metric tons less than what we sold during the quarter of finished goods. Gregg Goodnight – UBS: Okay. On a percentage, are your inventories – where you’re going to want them or?

Well, as the finance guy, I would like to have no inventories. But then my sales and marketing people tell me that just not possible.

I keep asking the sales guys, can't we keep that in advance, so that we’re carrying credit. But I mean one thing to really focus on is that the inventories look like if you back up a year or two, when you look and say, wow, look at these guys, their working capital is $1 billion. Well, ore is 300%, 400% higher. Our finished goods are at least 200% higher. The sales when we sell stuff, the pricing that we put in over the prior couple of years wasn’t quite a double, about that. But when you look at it same volume, I just use the rule of thumb backed back up three years ago, same exact volume in dollar terms is probably twice as much sit on the inventory. So, that’s one thing you always keep in mind, it looks like inventories have just bloomed everywhere, but it really has an effect of the cost of production that goes into your inventory, and then into your receivables before you collect the money, everything is ratcheted up in price. So, the volume levels that we’ve been carrying, we feel very comfortable with. I agree with Greg, I just assume not show any inventory, but we kind of like to have some level just so we can serve as our customers well, but the level we’re add at now – we’re definitely in a comfort zone that we’re comfortable with that. And there is no overriding reason right now to significantly reduce it or increase it other than for as we see the year play out here if we see kind of a shortage situation potentially developing or the demand picking up, and that’s why you see our percentage of production probably ramping up to some extent as we’re anticipating that so. But I did want to point that one factor that, if you take a couple years back and start comparing it looks like we’re just below with inventory and we’re not, it’s basically the same levels as it historically was. Gregg Goodnight – UBS: Thanks for that color. Second question, geographically. Your operating rates in the second quarter on average were 86%, would you comment on the differential between, say North America and Europe?

Kind of the longer lines of relative strength versus weakness in our sales volumes with a weakness in Europe as we mentioned, that’s probably where you saw the bulk of our reduced production rate. Gregg Goodnight – UBS:

We do look at our ore mix at all of our plans. there are certain optimal mixes that you can run. and our chloride plants and we’re talking exclusively by chloride at this point. They are designed to run primarily on a higher slag mix under rutile or synthetic rutile. However, all of those things are getting adjusted to get optimum performance based upon the availability and cost consideration. So yes, we do take that into account and we do adjust our ore mix accordingly. Gregg Goodnight – UBS: On a year-over-year basis, would you care to give some guidance on the mix this year versus the mix last year?

Well, it will be higher. I don’t have a specific percentage. But we will be running a higher mix of slag versus rutile and synthetic rutile. Gregg Goodnight – UBS: Okay. Well, thanks for that. Good luck.

And Derrick, before you take the next question, I want to just circle back and make hopefully a clarification or a point that I’d like to couple the prior questioners to just keep in mind. There were couple questions about that 50% to 60% increase in our per unit metric ton production cost. And I think based on the question; you all may have been trying to look at our reported results on a quarter-by-quarter basis, looking at the cost of goods sold providing by our sales volume, which obviously makes perfect sense. I just want to point out that with our big international presence, you need to keep FX in mind, so if you’re trying to compare like cost of goods sold per metric ton at TiO2 that we sold in the second quarter of 2011, looking at that same metric cost of goods sold per metric ton at TiO2 that we sold in the second quarter of this year. There is a FX impact primarily with the respect to the US dollar versus the euro, because of that our euro production cost and the US dollar basis are much lower this year compared to last year. So, if you’re trying to do that metric, and you are maybe like I’m not coming up to that 50% to 60%, my guess is that FX is probably going to be a big explanation for maybe some what you were. Thank you, Derrick.

Your next question is coming from the line of Des Kilalea from RBC. Des, your line may be on mute. Des Kilalea – RBC Capital Markets: Sorry, it was on mute. Thanks very much. A few questions, the first follow on the previous questioner on the different price of ore. Could you give us an idea how rutile, SR, and slag have performed previously, and what you might expect over the next six months. And then also could you say at the moment what is ore as a percent of pigment costs do you expect? And then finally, Chinese pigment some of it seems to come out of China and has been kind of maybe hurting pigment prices in some markets. Can you comment on that?

Rob, you want to take that ore.

Yeah, I can do that. That was a three-part question as I recall. Des Kilalea – RBC Capital Markets: Yes, it was

what I can tell you is that there is more ore availability in the marketplace, and as we’ve said based upon – our expectation based on our mix of contracts, we do expect the overall cost of the products produced to go 54% to 60%, and that is a large percentage of that cost increase year-over-year is ore mix. As one of the previous questioners noted there is significantly more synthetic rutile and rutile availability, which was in very tight supply over the last couple of years, and with cutbacks in production by other producers in the TiO2 industry, there is some additional availability of high-grade chloride feedstock. So I think that answers the first part of your question. The other two parts, Greg, I’ll turn it over to you on that.

Well, let me clarify something about the China too. There’s the middle part that I don’t have data for. The Chinese TiO2 market has historically been a low grade, it’s an ilmenite based low grade for feedstock. They have very limited in almost non-existing chloride production. The quality of TiO2 is lower quality that is that comes from this type of low grade ore. It has been primarily consumed internally in up until this last year or so in the Chinese domestic market. The Chinese government has obviously announced plans to stimulate the domestic economy in China and before that time period and even though it’s been pretty robust growth by global standards, they have been over the last year exporting a lot more of the lower grade TiO2, but the quality and reliability of delivery, and frankly once the economy comes back a bit, which we expect will be happening in the very near-term, a lot of that supply into the marketplace will evaporate as well. So customers’ reliability and quality and service and particularly on the high grade, both ore feedstock as well as the high grade TiO2 we think is not really impacted by the Chinese situation. Des Kilalea – RBC Capital Markets: Thanks. and then just the one question, sorry I pushed them all – just what do you estimate ore cost as a percent of pigment production cost would be at the moment?

We don’t disclose the components of our production costs, but we have said that our raw material costs are a very significant component of our overall production costs and there obviously a much higher percentage in 2012 as compared to last year. Des Kilalea – RBC Capital Markets: Thank you very much.

Your next question is from the line of (inaudible) from Tellus Asset Management.

Good morning. Can you talk about the working capital changes during the quarter and for the six months, and also just briefly talk about the liquidity going forward?

Yeah. I mean on the working capital, obviously if you look at our inventory, you can just look at the recorded amount of the inventories in our balance sheet, and Steve kind of alluded to this point earlier, because our production costs are significantly higher this year compared to last year, I mean even with flat, even quantities of inventories at all levels, raw material costs, finished goods (inaudible), you would still be seeing the recorded amount of our inventory increasing using the working capital just because of the higher cost. Similarly, if you’re looking over a several quarter period, and looking at our receivables, because our selling price has been going up significantly throughout most of 2011, you’re going to see an increase in the recorded amount of our receivables obviously another use of working capital even if the underlying metric ton sold were to be flat over that period. so but in terms of liquidity, we knew last year that the feedstock, we were expecting the increase in feedstock ore cost, that’s one reason why we were working to increase the selling prices, because we knew that among other things we needed to have working, better cash generated to help fund those working capital requirements. As mentioned earlier, we refinanced the most, really only significant portion of debt that we had outstanding then that was – at that time was due next year that’s been refinanced on a much longer-term basis. We put a North American $125 million revolving working capital facility in place, there is currently nothing outstanding on that. Our best case is we would never have to use that, but that does provide us some dry powder, in case time-to-time we want maybe take advantage of some favorable ore purchase or something like that. So from our liquidity standpoint, we’re very comfortable where we sit today.

Okay. There was a plan to increase the size of the European revolver, are you still thinking, because right now as I understand it’s fully utilized the European revolver?

Yeah, subsequent of the quarter-end, we did reduce the outstanding balance on that. So we did not paid-off, but we’ve reduced it by €25 million. And we are currently in discussions with the banks about renewing the facility, first of all and then also increasing, if we think it’s highly likely we will increase the amount of the facility from €80 million to €120 million. I mean still it’s been €80 million since we put it in place back in 2002 and obviously our working capital needs have grown something. So, we think increasing it makes sense. I think we’re doing it within the existing bank group, and hopefully we’ll have it done perhaps by the end of August or mid-September.

Okay, thank you.

Your next question is coming from the line of Sanjay Pamnani, Foundation Asset Management. Sanjay Pamnani – Foundation Asset Management: Hi, quick question on the inventory increase that we saw sequentially, it was about $19 million. Your finished goods actually there was de-stocking of 6,000 tons like you mentioned and Q2 Doug you said, you recognized a lot of the higher cost raw materials. So I’m just trying to understand the inventory increase of $19 million. How much of that works in finished goods versus the raw material price increase that you are buying up right now, can you just help us understand that?

You are talking about at the end of the first quarter to the end of the second quarter? Sanjay Pamnani – Foundation Asset Management: Yeah. The difference between inventory, between Q2 and Q1 of 2012, it’s about $19 million?

I think, we have a higher level of feedstock ore at the end of the second quarter as compared to the first quarter, just units on hand. Sanjay Pamnani – Foundation Asset Management: Okay. This is the raw material?

Yes. Sanjay Pamnani – Foundation Asset Management: Okay. And just on the margins between the chloride and the phosphate, can you maybe help us understand, has there been any light fluctuations in the margins of those people. on the phosphate side, you’ve talked about being vertically integrated. So you’ve probably had, you see less of the raw material price impact versus the fluoride plant, you’ve seen those credits in the margins between those two finished products?

Well, there is some noise in that analysis from our perspective, because we are virtually fully integrated on the sulfate side having our own mine in Norway, which feeds a 100% of the feedstock for our European plants and then obviously we have a much smaller SB plant in North America where we’ve sourced that ore from third-party. So a significant majority of our feedstock on the SB side comes from our mine. So obviously, our margins on a Kronos Worldwide basis would be higher on our SB product versus the industry as a whole because we are capturing some profit at our mine in Norway. But I think the question stands more towards the industry as opposed to Kronos specifically. And as Rob was alluding to, in China, there have been some short-term fluctuations in the market with Chinese product being more readily available and having an indirect impact on our business. As that product goes to a lot of the lower end markets and then make some other product available and increases the competition levels up in the realm where we like to deal in the higher quality grades for both SP and CP. However, we think those fluctuations are really just been a short-term impact. And long-term, we’re still bullish on the fact that the shortage situation is going to come back, in 2011, it wasn’t like the worldwide economy was all that strong. We would only need to get back to those levels and we would have an extreme shortage again. So I think from an industry standpoint, there has been some kind of merging of margins on CP and SP, and maybe a little bit higher for us because the vertical integration on the SP side, but going forward, we would expect it to go back to a more normalized basis.

And let me add one everything Brian said is that, absolutely accurate. But one thing there are differences in quality – significant differences in quality between the sulfate we produce and a lot of the sulfate you are seeing on the marketplace right now. So the quality is also a significant factor and that is – once you are getting and seeing in terms of some of the very low pricing is not really the same product or the same quality of Kronos sulfate grade which is a very high quality grade as well as we have certain sulfate grades out of our North American plant that are food grades and very highly specialized products as well. So you really have to look at the entire package of what you’re actually selling into the marketplace, which is a much higher quality product coming out of Kronos.

I think just amplifying on what Rob just said is that, the TiO2 it appears like a commodity, but it really is sold and manufactured and utilized much like the specialty chemical and to take the point Rob just made, the differences between grades even and higher qualities are pretty extensive. And then if you look to the low end of sulfate that are coming out primarily out of China versus even the sulfate that many of the big producers including us produce is a very, very significant difference. What we have seen and what is all of all back a year or two ago was all these extenders and things that could reduce TiO2, we will take and develop in those type of things which never did take off very much. We never did believe that that was going to add much of an impact. They’ve actually been displaced even more. Some customers are utilizing the lower grades of Chinese sulfate and effectively extenders higher grade qualities. I think there is more of an impact on probably those products that were supposedly kind of reduce the use of TiO2 by the sulfate coming out of China. The big thing that – we tell people and we’ve seen over and over again is the Chinese exports and imports are on, off switch. Right now with their lower growth, they got some excess production and their sending to the Northern marketplace and it’s been used on the low end and extenders and that type of thing. But as John pointed out, there is some moves in China to pro growth, a small uptick in that and we expect that that volume coming out of China will disappear, which will leave the customers that are utilizing it now, they’ll have to find another source because that just goes away. It’s not a very reliable source but when its there, it does get used at the low end, it does get used to mix and other grades and that type of thing. Sanjay Pamnani – Foundation Asset Management: Got it. Thanks.

Your final question is coming from the line of Bob Koort from Goldman Sachs. Robert Koort – Goldman Sachs: Thank you very much. Good morning.

Good morning Robert Koort – Goldman Sachs: May be following on those last points a bit, will it be fair to characterize the chloride market prices as a little bit more firm than sulfate because of that competitive position at the low end in sulfate.

No question about it, it’s a chloride – there are uses of sulfate grades that are on textiles, papers, those type of things sulfate gets used, the higher grade sulfate. There is not a dramatic difference in quality of high grade, very grade sulfate and high grade chloride, but there is a huge range of quality and grade in sulfate whereas most at least the Western world production of chloride is tighter band of quality that comes out of a chloride plant. So I think it will be fair to say that the use of chloride in finished products by customers, many of them, they wouldn’t consider using the sulfate grade, it doesn’t have the same characteristics. So they’re pretty bound to the chloride. There is definitely markets for both but I think the basic premise to your question is, it’s probably pretty accurate but there is a tighter band around that and there is less of a likely ahead of production outside of the current chloride producers. Robert Koort – Goldman Sachs: And what would you attribute, in the first quarter you guys had substantially better volumes, even here in the second quarter than the industry. So what is that about your products later, your go-to-market that’s provided you a much better volume development than the industry has seen?

Just better product. Robert Koort – Goldman Sachs: Okay. And then the last thing, you noted that the ore industry has sufficient margin to reinvest, but even though you guys pretty down significant margins, you are not quite there yet. So what kind of metrics do you put behind those comments and I would suspect maybe some of your customers think you are making plenty of good margin to start expanding, so what’s the difference do you see.

Well, we were hearing that a year ago, that dolly aren’t guys making enough money to expand yet, and no question, as an industry as a whole, it was looking like it was headed that away. There were some announcements, DuPont made some announcement, everybody looked at it, we’ve been in the industry for a very long period of time and a margin at one point in time doesn’t do you a bit of good, because you started – our rough calculation, if you start at a Greenfield plant today it’s five years before you get production off of it at a very, very significant cost, 150,000 metric tons plant we’ve roughly deal like with the bells and whistles on it, you’re talking $1 billion investment. The key to expansion of production capacity is the sustainability. You got to lookout and what’s the likelihood five years from now, you’re going to be producing profits that will actually give you return on that investment. I think everybody learned in the TiO2 industry 27 years ago, the paying of our – putting too much production in too early. So from – the margins now aren't even remotely close, it’s even questionable to do much the bottlenecking at the current levels of profitability, and that was through the thanks of our friends of the ore producers that took a big chunk of the gross profit margin out the TiO2. So we have a lot of ground to make up before, I think anyone even remotely think about putting a major expansion. But the key is very costly, very long time frame and you got to have a same person, people that are not financially rationale might go out and build the plant, but they also may lose it, because the profitability is not…

At this time, I’m showing no further questions in queue. I would like to turn the call back over to Kronos Worldwide for any closing remarks.

Thanks for listening today and we’ll talk to you in three months.

Ladies and gentlemen, that conclude today’s conference. We thank you for your participation. You may now disconnect. Have a great day.