Harris Fein

Harris Fein inquired how much of the stronger volumes this quarter were due to opportunistic spot sales and the impact on volume growth next year, as well as the latest on critical minerals support from governments and its potential shift in strategy.

Answer

CEO Kent Masters explained that stronger volumes were partly due to opportunistic spot sales from inventory reduction, a one-time benefit not expected next year. He noted strong demand in both EVs and fixed storage, with fixed storage being a significant upside surprise. Regarding critical minerals support, he expressed satisfaction with governments focusing on building a diverse supply chain, expecting a mix of tax incentives, trade policy, and direct investment to help Western markets reinvest, but declined to speculate on specific government actions.

Harris Fein inquired about the drivers of stronger volumes this quarter, specifically the role of opportunistic spot sales and the impact on next year's volume growth, as well as the latest on critical minerals support from governments and its potential to shift Albemarle's strategy.

Answer

Kent Masters, CEO, attributed stronger volumes to opportunistic spot sales from inventory reductions and robust market demand, particularly from fixed storage. He noted that inventory reductions are a one-time benefit. He expressed satisfaction with governments focusing on critical minerals, expecting a mix of tax incentives, trade policy, and direct investment to support a globally diverse lithium supply chain, but did not speculate on specific government actions.

Harris Fein asked about the line of sight to bridge the food ingredients margin to the mid-teens next year, and any opportunities to prune the portfolio further, similar to the soy crush business divestiture, in the interim before the strategic update.

Answer

CFO Michael DeVeau highlighted the food ingredients team's fantastic job in margin improvement, noting the trajectory from 9% to 14% (adjusted for portfolio) towards 15%. He stated that priority one for 2026 is returning the business to growth for P&L leverage. He also mentioned the ongoing productivity push (plant optimization, raw material optimization) started two years ago, which will continue into 2026. These two levers provide a strong line of sight to improve both top-line and margin. CEO Erik Fyrwald added that IFF is investing in high-profit margin growth opportunities, such as expanding capacity in the sold-out Tara Fruit Inclusions business.

Harris Fein asked about the line of sight to bridge the food ingredients margin to the mid-teens next year and any opportunities to prune more of the portfolio, similar to the soy crush business, in the interim.

Answer

CFO Michael DeVeau praised the food ingredients team's progress in margin improvement, noting the trajectory from 9% EBITDA to 14-15% adjusted. He stated that the line of sight for recovery is strong, driven by strategic pruning of lower-margin businesses (which impacted 2025 top-line), a return to growth, and a significant productivity push (plant and raw material optimization) that will continue into 2026. CEO Erik Fyrwald added that IFF is investing in high-profit margin growth opportunities, such as expanding capacity in the Taura Fruit Inclusions business.

Harris Fein, on behalf of Christopher Parkinson, asked for more color on the $30-$40 million revenue impact from new China restrictions and inquired about the expected gross margin drag from the new Taiwan and Colorado facility ramps.

Answer

CEO Bertrand Loy clarified the China impact stems from new entity list restrictions on U.S. exports and affects both divisions, noting the headwind is already included in the 4-5% outperformance target. CFO Linda LaGorga stated that ramp-related inefficiencies are factored into the 2025 guidance, which still calls for margin expansion, with headwinds expected to subside by H2 2026.

Asked how the company is optimizing its product mix given the market pricing discount of hydroxide to carbonate, and inquired about the current state of inventories at the cathode producer level and any signs of restocking.

Answer

The company stated that in its portfolio, qualified hydroxide sells at a significant premium to carbonate, especially outside China, and they will continue to pursue this market. Their China assets provide flexibility to sell carbonate if market conditions warrant. Regarding inventories, they are very low across the supply chain with little appetite for restocking, due to uncertainty among cathode producers about future battery technology roadmaps (LFP vs. high-nickel).