Harris Fein

Harris Fein, on behalf of Christopher Parkinson, asked about any observed changes in competitive intensity or behavior in the China market, particularly from local competition.

Answer

Dave Reeder (CEO, Entegris) stated that China market fundamentals, like the rest of the world, prioritize yield and performance, which Entegris products deliver through purity. He identified the primary challenge in China as guaranteeing supply, noting that Entegris focused on qualifying more overseas manufacturing for the China market in 2025. He expects 85% of Q1 China revenue to be supplied from the region, increasing to over 90% in 2026, enabling fair competition.

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.

Harris Fein asked about the rationale behind the timing of initiating a strategic review, especially given confidence in building momentum into 2027 and 2028. Harris also sought more color on how the company is weighing a full sale versus asset sales and licensing agreements.

Answer

Pierre Brondeau, Chairman, CEO and President, reiterated that the $1 billion debt reduction plan (including the India sale, licensing, and other asset sales) is part of the base operating plan and is independent of the strategic review for a full company sale. He emphasized that the company is focusing on these two separate paths, the base plan with partial divestitures and the full sale, as the principal actions, while remaining open to other beneficial ideas.

Harris Fein asked about the timing of initiating a strategic review, especially given confidence in building momentum into 2027-2028, and sought more color on weighing a full sale versus asset sales or licensing agreements.

Answer

Pierre Brondeau, Chairman, CEO and President, explained that the $1 billion debt reduction plan (including India sale and licensing) is part of the base operating plan, separate from the strategic review for a full company sale. He noted that while the base plan is robust, a full sale could offer greater financial flexibility to accelerate growth and maximize shareholder value, justifying the parallel processes.

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 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 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.

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).