Good morning, and welcome to the Orion Engineered Carbons Third Quarter 2015 Earnings Conference Call. Management will be utilizing a slide presentation for this call, which is available now for download on Orion Engineered Carbons' Investor Relations page at www.orioncarbons.com. Today's call will be recorded, and we've allocated one hour for prepared remarks and question-and-answer session. All participants will be in a listen-only mode. At this time, I would like to turn the conference over to Diana Downey, Head of Investor Relations at Orion. Thank you. You may begin.

Thank you, operator. Good morning, everyone. We issued our earnings press release after the market closed yesterday and have posted the slide presentation to the Investor Relations portion of our Web site at www.orioncarbons.com. We will be referencing the slides during this call. Today's speakers are Jack Clem, Chief Executive Officer; and Charles Herlinger, Chief Financial Officer. Before we begin, I would like to remind you that some of the comments made on today's call, including our financial guidance, are forward-looking statements. These statements are subject to the risks and uncertainties as described in the company's filings with the SEC. Actual results may differ materially from those described during the call. In addition, all forward-looking statements are made as of today, and the company does not undertake to update any forward-looking statements based on new circumstances or revised expectations. Also, non-IFRS financial measures discussed during this call are reconciled to the most directly-comparable IFRS measures in the table attached to our press release. I will now turn the call over to Jack Clem.

Good morning, and thank you for joining us today for our third quarter 2015 earnings conference call. I'll begin today's call by providing highlights from the third quarter, and will then turn the call over to our Chief Financial Officer, Charles Herlinger, who will provide more detail on our quarterly results. Finally, I will comment on the broader industry trends and our updated outlook for 2015 before opening the lines up to take your questions. Our specialty carbon black business continues to deliver outstanding results. 2015 has been a great year and year-to-date, we have grown volumes by 4.6%, expanded margins by 400 basis points and delivered 9% adjusted EBITDA growth. These achievements reflect the successful execution of our core strategic mission to be the global leader in carbon black specialties. In 2015, we've also seen specialty deliver year-over-year adjusted EBITDA margin and volume growth in every quarter. Specialty is our higher margin business and we are extremely pleased with its performance and value creation for the company as a whole. That being said, our rubber carbon black business experienced even stronger challenges associated with negative feedstock cost developments in the third quarter than what we experienced in the previous two quarters. We expect this to continue for the remainder of 2015. As a reminder, the issue here is that with overpriced petroleum there has been an increased demand for our petro-based feedstocks, making it more expensive to purchase these feedstocks at historical benchmark levels. We are taking several steps to address these issues. As most of you are aware, towards the end of the third quarter we announced a price increase on all carbon black sold by our rubber carbon black business. And while we have seen some success, the upside has not been sufficient to offset the impact…

Thanks, Jack, and good morning, everyone. Turning to Slide 6, on our consolidated Q3 results, our volumes increased by 4.8% or 11.9 thousand metric tons from the prior year to 258,301 metric tons. We continue to deliver on our commitments to strengthen our specialty carbon black business, which had a record volume quarter and even though rubber carbon black has experienced some challenges this year, we remain optimistic about the business where we continue to grow volumes. In fact, both businesses have delivered year-on-year volume growth during every quarter in 2015. Revenues decreased this quarter by €51.1 million to €278.7 million from €329.8 million as we continue to experience sales price declines resulting from pass-through of feedstock costs offset by foreign exchange translation effects from a stronger U.S. dollar and increased volumes. We delivered adjusted EBITDA of €48 million with an adjusted EBITDA margin of 17.2%. Now turning to Page 7. From a year-to-date consolidated perspective, we grew volumes by 2.7%, expanded contribution margin by 3.9%, grew adjusted EBITDA margin by 260 basis points, delivering adjusted EBITDA of €157.9 million. Moving now to Page 8. Cash inflows from operating activities in the quarter amounted to €30.1 million consisting of a consolidated profit for the period of 12.9 million, adjusted for depreciation and amortization of 17.6 million, excluding finance costs of 13.2 million impacting net income. Net working capital totaled €188.9 million as of September 30, 2015 compared to €198.2 million as of June 30, 2015. Days of net working capital end of the quarter at 64 days maintained at the same level as the end of the second quarter 2015. Cash outflows from investing activities in the third quarter of 2015 amounted to 9.5 million, composed of expenditures for improvements primarily in the manufacturing network throughout the production system, which…

Thank you, Charles. I'm now on Slide 10, where I would like to provide a bit more background on our recently announced QECC acquisition. As a reminder, on October 15, Orion announced agreements to acquire the majority stake at Qingdao Evonik Chemical Company, QECC, from Evonik, and a German investment company, DEG. We have been in discussions regarding QECC for some time and are pleased with this acquisition closed this month. We see this as a strategic opportunity to have a controlling interest in a company that has used our technology to perform well over the past few years, focusing on producing high-end rubber grade carbon blacks for China and for export. We are working to take over the minority shareholding and hope to have this accomplished in the near term, expecting that the final purchase price between €28 million and €30 million will be about five times EBITDA for 100% of the business with minimal debt assumption. While this is a relatively small move for us in the largest carbon black market in the world, it offers us a well-known and well-positioned asset and staff to gain significant understanding of this important market. Referring to Slide 11 and 12, North America continues to be a good market for Orion, and while the economy remains sluggish from a historical perspective we believe it will continue to improve into 2016. Specialty black sales volumes in North America were flat year-over-year as a result of some portfolio adjustments we made to improve our overall mix, but we benefited from reduced raw material costs as feedstock prices dropped. Carbon black sales volumes increased in line with the market in spite of a slow replacement tire market. In Europe, we continue to experience better than expected growth. Our specialty business saw growth in the…

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions]. Our first question is coming from Ivan Marcuse of KeyBanc Capital Markets. Please proceed with your questions.

Hi. Thanks for taking my questions. Just to clarify on the feedstock issue, I know that's been impacting through the year, but it seems to have gotten much larger in this quarter than it had been in the previous quarters. What sort of drove that sort of change? Is it – I don't know, what drove that change I guess is the question?

Ivan, this is Jack, good to hear from you. The differentials began to grow early in this year. And while they grew quarter-by-quarter, they peaked in the third quarter of this year. As we said in our discussion, we think we've seen those begin to relax. Actually, we've seen those relax in the fourth quarter but they did peak in the third quarter. And I think more than anything it was just an increased demand for this material. As the petroleum feedstocks were low, there was a huge demand for the materials, which drove up these differentials beyond the historical levels. Relative to some of the alternative feedstocks, particularly in Asia-Pacific, it seems that those alternative feedstocks took about several months, which is not uncommonly arbitrage opportunities in the old market to adjust to it. They seem to get the picture that they had lost out against some of the petroleum-based feedstocks. And sometime in the third quarter they begin to relax those prices, which brought the differentials back down. So what you're seeing is really a competition, a global competition in the old markets between some of the petro-based feedstocks and coal-based feedstocks and they seem to have kind of come back, at least coming back to the historical equilibrium. We're not there quite yet, but it's our anticipation and certainly our view right now that the fourth quarter will be better in that regard.

So you expected – yes.

Sorry, I was just going to underscore the – your question, Jack's answer. The impact in this quarter of these unfavorable feedstock developments was 7.5 million. And in the prior quarters, we were at the level – prior two quarters of about 5 million. Now we've talked about in the prior quarters that these negative feedstock developments, as I said, in the prior two quarters is about 5 million, were offset by a foreign exchange benefit of pretty much the same amount going the other way from 5 million. What's happened this quarter is the foreign exchange benefit compared with the quarter a year ago has decreased only 2.1 million, while these unfavorable feedstock developments that Jack was describing have increased to 7.5. So if you like, the spread between those two factors we've talked about all year has significantly widened and the impact is pretty much exclusively in the rubber area. And frankly the lot – every business has a lot of moving parts, but that explains the lion's share and more of the development of the rubber business versus where we'd hoped it would be.

So sequentially, you would expect your gross profit per ton to rise in the fourth quarter?

Well, I think the thing about the fourth quarter, Ivan, is that, as Jack said, the differentials are now moving in a favorable direction. It will take some time, however, for those feedstocks to be converted to finished goods and indeed work through our P&L. So that's why we are, as you can see can from the revised guidance, cautious certainly about the fourth quarter simply because of the timing of those effects working through to our P&L, which may well be in 2016.

Great. And then you – I may have missed this, but I think you said that it's – you talked about price increases last quarter. Did you see any impact of that or were [indiscernible] around strong resistance, really there's been no impact or just small or is this more of a 2016, if any, either way?

There's been some impact, Ivan. It's certainly not as great as what we had hoped it would be. We've seen some increases in various parts of the world. In fact, in most of the geographies we've gotten some increases but not of the scope that we had announced. There has been resistance to this price increases but we have seen them pass through in this year.

Great. So you'd expect 2016, that will see the full effect of these?

Full effect – quite frankly right now we're in contract season, so I'm a little reluctant to speak at any length about pricing in 2016.

Great. And then the last question, I'll jump back in the queue. You talked about your capital allocation changing and/or you're looking at it, your balance sheet sort of cash, you're generating a lot of cash. When do you expect to come to sort of a decision about increasing the dividend or doing buybacks or – I guess or put certain projects that you're looking at? How would you gauge that? Is that more of a near-term thing or, I don't know, what's the sort of timing on that?

Timing, Ivan, really fits in very well with our next update for the fourth quarter. We'll have gone through our budget season, which is important in terms of obviously scooping out the shape of what we think next year will look like. Give us some time to look at these moving parts. Some of them are not entirely obvious and we need the time to go through these steps. So the way in which we deal with this positive situation of having strong cash generation is transparent and it follows a logic that our investors can follow and can anticipate. But again, I'd just like to emphasize, it's against the backdrop already of paying a dividend and continuing to pay a dividend obviously at the high end, very high end of the U.S. chemical market index as being one of the highest in the U.S.

And you basically need, if I understand correctly, €40 million to €50 million to run the business and everything over that is sort of excess?

Yes. That's a good number, yes.

Great. Thanks.

Thank you. Our next question is coming from John Roberts of UBS. Please proceed with your question.

Good morning.

Good morning, John.

Your attempts to raise rubber black prices would imply that your raw material costs are actually up year-over-year. The oil benchmarks are obviously down a lot so the spread between your raws and the benchmarks actually widen to where your raws were up in the third quarter?

It's about the spreads, John, not the absolute level, but the spread between the index that we buy oil at and the index that we pass on to our customers. And it's that basis differential which has widened during this year, the thing that we call the differentials. So while we might have a $50 oil or $40 oil or $30 oil, it doesn't really matter. What matters is that that spread in the difference between what we charge our customers and what we buy the raw materials at.

Okay. Thank you. And are we – do you think we're in a new environment of volatility in this spreads so the while – maybe the worst has past here in the most recent spike that we've had that we should think that in the future, we'll probably see this repeat at some point?

It’s dangerous to speculate about what happens in this oil market. It's pretty complicated. Probably everybody on this phone knows and recognizes there's a lot of moving parts. Shale oil goes up, it goes down, you got coal material. It's based on steel production, a lot of different opportunities and a lot of different challenges. We've seen these differentials move negative. We've seen them move positive as we've talked before. So I can't discount the notion somehow or another that we would see something like this in the future. But I also would say that we've seen spikes the other direction as well. So ultimately, it appears that these type of oil markets tend to kind of settle themselves out around historical levels. So volatility going forward probably I would say maybe no more than what we've seen in the past simply because oil markets tend to find equilibrium in these types of environments, but we shall see.

Okay. Thanks. I'll get back in the queue.

Thank you. Our next question is coming from Duffy Fischer of Barclays. Please proceed with your questions.

Good morning, fellows. Just to kind of re-hit some of these questions. So on the spread contracts the way they're at, when you look back, were they not appropriate? I mean, were there ways you could have done it to have less volatility or there's just no way that you're going to get kind of the perfect match?

Duffy, without incorporating sort of a transparent look-through process where your feedstocks are actually exposed, it'd be very difficult to get a perfect match. Historically, the benchmarks that we've used, the benchmarks such as 3% U.S. Gulf Coast, 1% Singapore, these kind of numbers are – they're very widely traded and they're very widely known. And to have a benchmark like that, which in the past has shown very good correlation has served us well. Some of these – in the past some these benchmarks have attempted to use WTI or Brent or something of that sort and while those correlation can be pretty good, they're not close enough. So we settled on these particulars ones. We continue to look and see whether or not there's another way to do this. But quite frankly, I think unless it comes to a point where you have just total transparency to your customer base, which is problematic I think, it'd be difficult to find a perfect correlation.

Okay. And would you guess that this spread issue you’re feeling currently is impacting all the players in the market or do you think that others are doing things differently and so maybe competitively, you've been disadvantaged versus competitors?

I don't think we have been, Duffy, not at all. I think that's a pretty transparent market. These differentials are typically published. We hear from our suppliers, we hear from our customers, we see public announcements by the other public company that participates in this area, they all point to the same thing.

Okay. And then just last one, to go back to your Slide 9 and kind of the rethink of the capital allocation. Is this just you ended up with a couple of tens of millions of dollars more than you thought earlier or is this something that could be more structural going forward that were going to take the company in a different path than what we thought a year ago?

Let me comment and then I'll turn it over to Charles. As you know, we've been very cash generative since we started. We have a fairly large cash balance right now and we've been questioning internally what we do with that, whether we deploy more for some additional self-help projects in our capital investments. We weren't quite entirely sure about the situation with our Chinese plant, but that seems to be settled now. So there's a few of these moving parts which are beginning to settle out currently. So with that being said, this brought up the notion that we ought to take a very hard look at this large cash balance that we've gotten right now. Charles, any other comments to add to it?

I think that's it. The only thing I’d add actually, Duffy, is that from various investors at various times, we've had quite different comments. Why didn't you do this, that and the other? And this area is obviously one that is a combination of opinion and facts, what is the most preferable thing to do in a particular situation. What we believe is that this business is going to remain strongly cash generative and we want to go through a rather transparent process, so our investors understand the logic we're going through. Frankly, not all of them may agree with the end result but at least we won't come across with being arbitrary and somewhat unclear and that's the goal here. And we'd just like to – in coming to those conclusions, we'd just like to go combine it with the upcoming budget season, which we're into. So we've got the shape of 2016 in our gun sights as we draw these conclusions.

Great. Thanks, guys.

Thank you. Our next question is coming from Jeff Zekauskas of JPMorgan. Please proceed with your questions.

Hi. Good morning.

Hi, Jeff.

Hi. Your EBITDA idea for the year of 203 to 210 has a gap of 7 million and you just did in the third quarter, it's seems pretty wide for one quarter to go. Is that because of an uncertainty about your fourth quarter prospects or is that a function of, I don't know, but the way that you talk about the year?

Without stating the blindingly obvious, Jeff, there are some uncertainties. We have seen exchange rates move quite a lot that can still impact us in the fourth quarter. The other factor I think I would highlight and Jack may have a couple of comments on top of that is the point we touched on earlier. Differentials are starting to move in the right direction, which is good. It's just difficult for us to judge the speed of moving A and B, how quickly that works through our inventories into our cost of sales, it's really those two factors and that can be quite significant.

Again, the fourth quarter can be a bit tricky sometimes because depending on prices of materials, prices of oils, contract seasons and that type of thing, you can have some spikiness associated with volume demand particularly in the rubber areas. Specialty area, it's held up so well during the year. I don't have really a lot of concern about that, but there could be a bit of uncertainty associated just with the demand in the fourth quarter in the rubber market.

Can you remind me why your selling expenses are so much higher year-over-year even though your revenues are lower?

Yes, a couple of factors. The main factor is a chunk of our sales cost, Jeff, is in dollar and Korean won denominated currency. And so when we translate that back to euros, they obviously in the nominal sense increase. We like a stronger dollar and a stronger Korean won because overall it helps our profitability throughout the P&L, but that's the main reason. A secondary reason, and I think it's very much behind that, is we do continue to invest on a selective basis in our sales function in this area. We’re pretty through that. We’ve talked about it previously, but that's another factor as well.

Can you talk about pricing in carbon black in a very general way by geography, in other words, in general which geographies seem to have the greatest price pressure and which one seem to have the least and why?

With respect to, let's just break it into the two businesses to begin with.

Sure.

The rubber that includes the specialty business. Specialty business, say generally it's more or less the same level of pressure around the world. Some of our premium products, we've been able to hold on to our prices as oil has fallen. So we've seen a margin expansion there, which quite frankly is tantamount to the price increase and we've enjoyed that throughout the world and been able to hold on to it, a lot of it for the most part throughout the year. So specialty area, I guess to summarize that question, globally around the world we've seen some base price increases where we have some indexes, we've seen also some real price increases, but largely the effect that we've enjoyed as much as anything is just an expansion of margins as we held on to pricing as the raw materials fell. Now, turning to rubber black, again kind of a sensitive area, Jeff.

Sure, I understand.

Because we’re still in a lot of negotiations right now. I'd say more or less kind of the same pressure. Probably the lowest utilization in the system right now from our viewpoint and probably from an industrial viewpoint is in South America, so you would expect the work to be pretty hard down there. The Asia-Pacific market seems to be struggling right now as well, because of a lower demand with some of the Asia-Pacific economies, so there is some real headwinds I'd say there. And Europe and the U.S., I'll call it really kind of equal right now for us which maybe a bit surprising because people probably have the notion somehow or another that the U.S. is operating at a much higher rate than Europe is. Quite frankly right now, we're operating pretty close to the same rates in both Europe and the U.S. So we feel about the same level of pressure.

I realize that you have an exceedingly small presence in China, but can you talk about business conditions in China and whether it's becoming more competitive or less competitive, if there's a greater level of export out of China for the various producers or a smaller amount, whether capacity is really increasing or slowing down. Can you give us a sense of how China is fairing today?

Without just speaking for what the general public probably has already heard and read about this at any rate, I could speak to our particular market. And the markets that we serve are high-end markets, satisfied primarily by the premium products that we manufacture in our specialties business, and those specialties come out of Korea, they come out of the U.S., they come out of Germany and they go into China, and we've seen a very nice growth in those areas. A lot of it serves some high-end applications in various markets, not so much dependent on automotive market, but more dependent primarily on consumer demand and we've seen our efforts to penetrate those markets with these products to be very successful. So while I wouldn't debate the notion that China has slowed down, I would just say our particular performance there tapping into these niches has been quite successful. I take this opportunity also, Jeff, to give you a commentary about the facility in Qingdao, which we were able just finally to come to a conclusion taking up the majority share of that business from Evonik. We've worked on this for quite some time, but this month we were able to sign a purchase agreement with them as well as finally close on the takeover of 67% of that business in fact this week. So we're very pleased with that performance actually. And when we see the visibility of that facility, which we've watched for the last four years, recognizing again services a very special area of the Chinese market, which is high end, high end rubber applications, it's operated actually in the high 80% when we have at least all of the evidence says that the carbon black market in China is operating well below that if probably – I mean I've heard numbers from 50% to 60%, maybe 75%, but any rate this particular facility is operating higher. So, Jeff, having said all of that, I would say the markets that we serve which are the specialty and premium markets, we've built our import business into China and this particular facility that we're picking up in Qingdao are actually sort of defying the conventional wisdom of what's going on in China right now.

Okay, great. Thank you so much.

Thank you. Our next question is coming from Kevin Hocevar of Northcoast Research. Please proceed with your questions.

Hi. Good morning, everybody.

Hi, Kevin.

In the specialty carbon black segment, has all of the lower raw material benefits been given back in price at this point because I noticed EBITDA per ton was down about 5% and revenue per ton has come down about 10% sequentially in the last two quarters. So just wondering if you could comment on that, and how has pricing been trending I guess sequentially throughout the quarter? Has it stabilized or do you still think that there is a little bit room to the downside there?

First of all, we haven't given raw back and revenue per ton is always a little bit deceptive because of just the changes in prices and some of our specialty materials are indexed to raw materials as we said before. I think the figure is something less than 50%. So as that less than 50% figure that's indexed moves with the price of feedstock, you're going to see a reduction in the revenue. There's also some mix issues going on, some regional mix issues and some product mix issues, which can affect the contribution margin or the gross profit per ton as well. So you're seeing that also. I mean just generally speaking as I said a little bit earlier, we've been able to hold on to a substantial amount of the margin. We've seen some of these margins within products expand. Some of it is offset, of course, by some of the other factors that I've just mentioned, like mix. Charles, do you have any more comments on that?

No, we've talked about it in previous calls, Kevin, that our goal with specialties is to maximize the overall EBITDA. And I'm not telling you anything that everyone in this call in a sense doesn't know, but it's always that balancing act between growing volumes, the mix and price. And we think, Jack said it already, but I'll emphasize it, we think that we – our specialty carbon black team has done a good job, a very good job of balancing those different considerations. And you can see that in the development of the absolute EBITDA number and the EBITDA margin obviously which in part affected by the price, the selling price coming down. But it's a healthy business that's done very well.

Yes, it's probably worth emphasizing, Kevin, again just moving that EBITDA margin up just practically to 30% so far this year has been a result of not only good products but also good execution. But we wouldn't hesitate to take on some lower margin business, and lower margin still is superior margins to what we'd see in our other business, the rubber business, just simply to add to the strength of that business and expand our share of wallet of the customers that we serve.

Okay, great. And in terms of the differentials issue that you've been talking about, it sounds like this will be €20 million some or €20 million-ish headwind this year and it sounds like it's mitigated quite a bit. So how should we think about in 2016, I mean is that going to be kind of how we see it today? Will it still be a little bit of a headwind and if that drops, if that narrows substantially, I mean could that be a nice benefit to your earnings next year if this headwind does not repeat?

Clearly, they've relaxed but they have not gone back where we'd like to see them which is more or less on parity with the benchmark. But clearly right now we're seeing figures that are less than half of the impact that we saw previously. How that's going to play out in 2016, again I guess it gets a bit complicated with what you think is actually going to happen in these oil markets. My hope of course is that we're seeing it relaxing and moving back towards parity. But I'm not in a position really to make that prediction right now.

Okay, all right. Thank you very much.

Thank you. Our next question is coming from Paul Walsh of Morgan Stanley. Please proceed with your questions.

Thanks. Morning, Jack. Morning, Charles.

Good morning.

Good morning, guys. Two questions if I can please, I’m afraid I have a question as well on the differential. What I'm trying to understand is the extent to which – I mean clearly your selling prices are down more than your raw materials are and some of that might be the indexes that you're linked to on your contracts versus what you're actually seeing in reality. But what I'm trying to understand is what are the competitive pressures in the rubber carbon black business at the moment, i.e., to what extend are your competitors pricing more favorably and that is playing a role rather than it just being simply about raw materials? And my second question, I know the crystal ball is somewhat murky at the moment, I think it is for everybody, but when you look at your EBITDA run rate of sub-50 at the moment, I look at consensus numbers next year, calling for 55 plus per quarter next year. So I obviously don't want to throw you into a forecast for 2016, but the run rates we're seeing in Q3 and Q4, do we see that in the early part of next year as well before it starts to recover because of these timing issues or are you still pretty confident frankly of delivering growth next year?

Let me comment on the first part and that's pricing issue, and again as we mentioned a little bit earlier, I think we've recognized that these differentials are an industry-wide issue. There's been enough publication, I think enough discussion from suppliers and customers to recognize it. Everybody is seeing the same thing. So I think the question you're asking is, are we competitively disadvantaged by this and I believe the answer is no. Are we seeing more or less price appreciation or capture than our competition, I think the answer there is probably we don't know what their pricing is, but we sense that it's not much, if any different. This is specifically a rubber industry discussion I'm giving you right now. In the rubber industry, at least in our business, and I think for the most part, the other competitors in the rubber business participate largely on one-year agreements, sometimes multiyear agreements, but for the most part, one-year agreements and those prices are set at the beginning of the year and those prices are set on those benchmarks. So to the extent there's a basis differential associated with the benchmark, we have to deal with it. So the fact is if we see these differentials beginning to move, we have an opportunity to move pricing up. But as I think we said in the last conference call, that was on the figure which was in our business less than 20% of an opportunity to move pricing up. And probably --

Just to be clear on – sorry, Jack.

And probably not that much different. I'm speculating about the rest of our competition.

Okay. What you're not seeing is competitive pressures leading to lower pricing and spread compression, it's very much around the other side of the coin.

That's correct. We're not seeing – at least in our business we're not seeing demands for either renegotiating pricing or things like that. We're just seeing simply a resistance to absorbing this additional cost from differentials on that small slice of business which is not covered by contract.

And on your second question, Paul, I’ll obviously say we'll have to wait and see in terms of the budget for next year. But the more direct answer is no. We don't expect to stay under 50 as we move into next year. This has been for the reasons we've discussed at length now on this call because of the feedstock disadvantages on the rubber side, we're below where we expected to be on the rubber side, despite good volumes et cetera. The fourth quarter is – because of the half month of December effectively, historically, a little bit weaker than the other three. We started this year well. We have two quarters, which averaged 55 million or so of EBITDA and we would certainly expect to get back to that level. I mean, clearly, there are a number of variables we've talked about, a lot on this call, but we don't see this business being a sub-50 quarter-per-quarter business off the back of just this quarter, no.

We've grown profit in our specialty business every quarter. There is no reason for me to believe that the momentum that that team has built is going to do anything, but continue if not increase, at the growing market with a lot of good things going on and sales penetration and product extension. So I'm very pleased with that. And with respect to the rubber business, there is still a lot of stuff to do there. We're seeing just the natural market forces begin to pull back a bit on this differential issue, which is good. It’s nice to see those headwinds subside a bit. But there's also a lot of self-help things going on with improving our efficiencies. And quite frankly, when we are faced with this type of situation in our feedstocks, we employ some approaches towards feedstock flexibility that we didn't have to do before. So we're investing heavily right now to increase that feedstock flexibility just to mitigate the impact of these type of changes going forward in our feedstock slate.

Another thing, Paul, and just – a bit of context from our point of view. The specialty businesses where a lot of value of this company is and if you look at the relative proportion of specialty EBITDA to total over the last three, whatever years, you can see a heavy shift underscored in this quarter of EBITDA moving in that direction. And that's something we're also very comfortable with. And while we understandably are talking a lot on this quarter about the development of rubber, without deliberately wanting to have it underscored once again how strong the specialty business has been and how satisfied we are with this performance, and how much – the question we used to get awhile ago was, guys, do you think you can meaningfully shift your EBITDA towards the specialty. Now, there are couple of ways of doing that obviously and that's not lost in the sea. But throughout this year and indeed you've seen that even in the strong quarters of 55, you've seen the specialty business really pounding away and delivering high-quality EBITDA.

That's great guys. Thank you.

Thank you. Our next question is coming from Chris Kapsch of BB&T Capital Markets. Please proceed with your questions.

Good morning, and sorry for beating this one to death but I did want to drill down a little bit more on this negative feedstock variance issue. And if I understood your response to another question regarding the disconnect between your raws and the benchmark indices that are used in your legacy contracts. I think you said the key issue is more related to the alternative industrial-related demand uses for your resid [ph] feedstocks or not so much their overall availability within the global refining complex. I want to understand if that's sort of accurate. And then if that's right, is there any reason to think that these alternative demand applications for the resid feedstocks would abate going forward?

Well, they have abated, Chris, and I think you're largely correct in the first comment. But let me try to add just a little bit more to it. There's a lot of carbon black feedstock that moves out of United States around the world. It's used in Europe, it's used in India, it's used in Southeast Asia, it's used in many, many places around the world. And why is that? It's because the United States is unique in its ability to or in its capacity to crack petroleum feedstocks into high octane gasoline. That produces as a byproduct a very, very good carbon black feedstock. So that carbon black feedstock is there's more of that produced in the United States than can be consumed in the United States, so it's used around the world. While it leaves the U.S. for these other locations, it also finds itself in competition oftentimes with local feedstocks. Sometimes those feedstocks can be lower in which case the demand for the U.S.-based stuff kind of subsides. Sometimes the material is higher because of the local demand or because of local vagaries of those particular economies in which case there's a greater demand for the feedstock. What's driven this one recently for us is the dramatic drop in the price of petroleum bringing down the price of our feedstocks in the United States, which again are used all over the world relative to the drop in the price of oil-based feedstocks which are a result of – primarily a result of steel production. So, yes, when we saw petroleum prices fall and the price of coal-based oils not fall, there was this opportunity for people to have a huge demand on this material out of the U.S. Gulf Coast. However, if I was selling oil-based feedstocks, I would have to finally respond to that because I would like to have that revenue, which I've historically had in the past and that's what I think we've seen. As a result, the demand on the U.S. has backed off a bit, which has helped these differentials to subside.

I see. That's very helpful. And then just on the follow-up, so you've already seen the variance starting to subside. In your formal commentary, you mentioned that you would expect this to further abate in '16. So just wondering what are the key contributors to this negative variance further diminishing next year. Is it in fact now we're seeing greater availability of these feedstocks or is it also you're shifting to alternative feedstocks or is the variance, the diminished variance going to be a function of traction that you think you'll get with your pricing initiatives or is it really going to be all of the above?

I think it's – I hate to answer it that way, but I think it is all the above. We're not going to sit still. As I mentioned a little bit earlier, we're increasing some flexibilities to use different feedstocks around the world to help push back on this particular effect. At the same time we think just the market forces have pushed these differentials back into more of the historical norm. And while I don't know what it's going to do next year, I wish I did, I think probably the general trend is in the right direction at this point in time. And of course we've done what we can do in the area of pricing thus far this year to get on top of that. But again, pricing in 2016 is something that I really can't speak to right now because of this contract season that we find ourselves in the midst of.

Okay. And then finally to the extent that you do shift some feedstocks to alternatives, does that – is there risks with respect to your plant operations from a yield standpoint? Thank you.

No, not really. We have a very sophisticated process by which we look at feedstock. And not only from the ability to deliver the type of quality that we need but also the impact that we have on throughput as well as the total valuation of the feedstock on what we call the yield adjusted basis.

Thank you.

Thank you. We're showing time for one additional question today. Our next question is coming from Robert Ferris of Harvey Partners. Please proceed with your questions.

Hi, guys. It’s Jimmy [ph] for Robb. Your stock has obviously been pretty neglected by Wall Street here. You've got a 15% lever free cash flow yield. My question is, when you look at the business and you've got this specialty black business that you've got 30% more EBITDA margins, a 112 million-ish of EBITDA at a multiple that aligns with coating businesses, which don't even have as high EBITDA margins, as that business alone is worth more than your entire enterprise value of the company. So I guess with those three guys in the world that do what you do there, you've got three or four plants in the U.S., Germany and South Korea that can do it on its own. With your stock price down here with the dividend yield above 5%, why wouldn't this be like, let's look at strategic alternatives for this specialty black business because it's worth $6 more than your stock price alone?

That's a good question. But more than anything, it's a great observation about the quality of that business. I mean we're frustrated by the fact that this business with that type of EBITDA margin and with that type of growth prospects and frankly with the type of demonstrative performance that it has doesn't reflect more on our total stock price. We think it is a bit neglected. We've heard the issue of liquidity and all of that and while I guess that's got to be, to some extent, a part of this particular equation, I feel a little bit like sometime we spent too much time talking about the problem child and not enough about what we really like, which is the specialty business which has been spectacular. Your question about strategic alternatives, the business right now works together well. What we have done is we've mentioned in this most recent announcement is we pushed more of the operations and supply chain activities into the different segments. We were centralized in the global operations business in the past, but we've done a step to take those more aligned into the business. This is something that we've had actually planned to do for some time but we really needed the opportunity to get a little bit more mature in our approaches in those businesses. And I think we're finally there. We have leadership down. We have the approaches necessary actually to push more of those operations into the segment. So having eliminated the central operations group, but kept the core of operational excellence in benchmarking within our innovation group really will allow us to have those two segments operate more independently. And I think it's going to improve those performance even more so.

Okay. And I guess – yes, okay. I would just – if you guys could pay attention to maybe obviously the disconnect between your stock price and the specialty business. But going forward, I mean I guess the good news is the negative feedstock variance issue should be behind us as we look past the fourth quarter which I think is pretty positive.

That's our view of it, right now, Jim and you're right. We have paid a lot of attention to the disconnect between those businesses and the stock price.

Okay. Thanks very much guys.

Thanks for the question.

Thank you. I will now turn it over back to management for any additional or closing comments.

Again, a good set of discussions. As I said a little bit earlier, we spend a lot of time talking about the rubber business and while we have a lot of confidence in our rubber business and we've shown a lot of growth there, we do have a lot of activities in place right now and some market forces which I think are acting to help us. We see growth in the economies next year. We don't think that the U.S., the Europe, even Asia Pacific is going to be stable and we intend to take our fair share of that growth as we go into next year. There’s still a lot of self-help going on as well as some of these market forces that we think will continue – allow us to resume at least the upper growth in EBITDA and EBITDA margin that we're committed to in the rubber business. So our optimism remains in that area. Specialty business, again a spectacular quarter, a spectacular year. We have no reason to believe that that momentum won't continue. So having said that, thanks for your participation this morning and thanks for the good questions and we look forward to speaking to you again. Thank you.

Thank you very much.

Ladies and gentlemen, thank you for your participation. This concludes today's teleconference. You may disconnect your lines at this time and have a wonderful day.