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    Albemarle Corp (ALB)

    Business Description

    Albemarle Corporation is a global leader in transforming essential resources into critical ingredients for mobility, energy, connectivity, and health. The company operates through three main segments: Energy Storage, Specialties, and Ketjen. Albemarle's diverse product portfolio and strategic focus on innovation and sustainability are key drivers of its earnings growth . The company sells lithium compounds, specialty chemicals, and refinery catalysts, which are crucial for applications in consumer electronics, electric vehicles, and cleaner fuel production .

    1. Energy Storage - Focuses on lithium compounds essential for applications such as lithium batteries used in consumer electronics and electric vehicles, contributing significantly to the company's revenue .
    2. Specialties - Includes products that enhance fire safety, improve fuel efficiency, and reduce emissions, serving markets like electronics and automotive .
    3. Ketjen - Provides refinery catalysts that help produce cleaner fuels and other oil derivatives, with a focus on hydroprocessing and fluidized catalytic cracking catalysts .

    Q3 2024 Summary

    Initial Price$95.25July 1, 2024
    Final Price$94.32October 1, 2024
    Price Change$-0.93
    % Change-0.98%

    What went well

    • Albemarle is implementing significant cost reductions, targeting $300 million to $400 million of cost and productivity improvements, including a further reduction of its global workforce by 6% to 7%, to maintain long-term competitiveness and financial flexibility.
    • Despite market challenges, Albemarle delivered volumetric growth in energy storage and specialties, strong operating cash conversion of over 100%, and is maintaining its full-year 2024 outlook considerations.
    • The company remains committed to its long-term strategy in the lithium market, focusing on high-return projects and maintaining flexibility to capitalize on future market upswings while adjusting its execution in response to market conditions.

    What went wrong

    • Albemarle is reducing capital expenditures by more than $800 million to $900 million in 2025, which may impact its long-term growth prospects and ability to capitalize on future opportunities.
    • Persistent low lithium prices are pressuring Albemarle's revenues, and the company acknowledges that more supply needs to come out of the market to support price recovery, indicating potential challenges ahead.
    • Albemarle is considering selling non-core assets like Ketjen, reflecting potential strategic shifts or financial pressures that may affect the company's future performance.

    Q&A Summary

    1. 2025 EBITDA Outlook
      Q: Can you keep EBITDA flat if prices don't change?
      A: Management is not providing a specific outlook for 2025 yet but noted several factors. Current market pricing is 20%–25% below the average achieved in 2024, suggesting a pricing headwind. Additionally, an unusual $100 million uplift from the Talison JV in Q2 won't repeat in 2025. On the positive side, fixed costs are expected to come down due to $300–$400 million in cost and productivity actions, with 40%–50% run rate savings expected by year-end. Plant ramp-ups, especially in lithium, will continue to improve fixed asset utilization in 2025.

    2. Impact of CapEx Cuts on Volume Growth
      Q: How will CapEx cuts affect 2025 lithium volume growth?
      A: CapEx reductions won't significantly impact 2025 volumes, as growth is driven by assets already built and ramping up, like the Salar yield improvement project, Meishan in China, and Kemerton in Australia. However, longer-term growth forecasts have been adjusted from a 20% CAGR through 2027 to approximately 15% due to CapEx cuts and volume reductions.

    3. CapEx Reductions and Long-Term Growth
      Q: Are the reduced CapEx levels mainly maintenance capital, and could they go lower?
      A: The reduced CapEx of $800–$900 million includes both maintenance capital and high-return projects. Maintenance capital is targeted at 4%–6% of revenue on a normalized basis, although it may be slightly higher next year due to below-normal pricing levels. The company will continue to assess opportunities, but future CapEx will depend on high-return projects and market conditions.

    4. Cash Conversion Outlook
      Q: What's the outlook for cash conversion in the coming quarters?
      A: Strong cash conversion in the recent quarter was aided by working capital management, but such levels aren't repeatable. Going forward, Albemarle is focused on cash generation and aims to reach free cash flow breakeven. Factors affecting cash conversion include working capital management, cost and productivity actions, and dividends from the Talison JV. Notably, Talison JV dividends are expected to be zero in Q4, which will lower cash conversion.

    5. Energy Storage Pricing and Mix Impact
      Q: Did realized energy storage pricing decline due to contract changes?
      A: There were no significant changes in contracts during the quarter. The apparent pricing decline is due to a shift in sales mix, including higher volumes of spot and spodumene sales, which affected average prices. Contracted volumes remain at about two-thirds of total sales, with some contracts having floors and ceilings. The mix effect should balance out on a full-year basis.

    6. Lithium Supply Reduction and Price Recovery
      Q: Does supply need to decrease for lithium prices to recover?
      A: Management believes both supply reduction and demand growth are necessary for price recovery. They expect more supply to exit the market if low prices persist, although it's uncertain how quickly this will happen. Demand remains strong, bolstered by fixed storage volumes exceeding expectations.

    7. Leverage Covenants and Limits Through 2026
      Q: How will leverage covenant limits evolve through 2026?
      A: The company has shaped covenant waivers based on trailing 12-month EBITDA, considering current and projected EBITDA patterns. Covenant limits rise to 5.75x in Q2 and Q3 of 2025, aligning with anticipated EBITDA trends. This approach provides a substantial buffer under the covenants.

    8. Cost Savings Range Explanation
      Q: Why is there a wide range in the $300–$400 million cost savings target?
      A: The range accounts for uncertainties in overhead reductions, operating cost improvements, and productivity actions at plants. The lower end is conservative, while the upper end is more aggressive, providing flexibility as the company works through these initiatives.

    9. Asset Sale Rumors and Clarifications
      Q: Are you planning to sell stakes in Greenbushes or other assets?
      A: Albemarle is always reviewing its portfolio but is not considering selling its stake in Greenbushes. Non-core assets like Ketjen are being considered for sale. The company clarified that rumors about selling Greenbushes are unfounded.

    10. Future Strategy Amid Price Recovery
      Q: How will Albemarle's strategy change if lithium prices recover?
      A: The company's strategy remains unchanged, but execution will adapt to market conditions. If prices recover, Albemarle will cautiously adjust its plans, ensuring that price improvements are sustainable before shifting strategy. The focus is on maintaining a cost structure that allows competitiveness through cycles while retaining flexibility to scale up if the market improves.

    Key Metrics

    View all financials →

    Executive Team

    NamePositionStart DateShort Bio
    J. Kent MastersChairman, President, and Chief Executive OfficerApril 2020J. Kent Masters has served as the Chairman, President, and CEO of Albemarle since April 2020. He joined the Board in 2015 and was Lead Independent Director from 2018 to April 2020. Previously, he was CEO of Foster Wheeler AG and an Operating Partner at Advent International .
    Neal R. SheoreyExecutive Vice President, Chief Financial OfficerNovember 2023Neal R. Sheorey joined Albemarle as EVP and CFO in November 2023. He spent over 20 years at The Dow Chemical Company in various roles, most recently as VP of the Coatings and Performance Monomers business unit .
    Melissa AndersonSenior Vice President, Chief Human Resources OfficerJanuary 2021Melissa Anderson joined Albemarle as SVP, CHRO in January 2021. Previously, she was EVP, Administration and CHRO at Duke Energy and held roles at Domtar Corporation and IBM .
    John C. Barichivich IIIVice President, Corporate Controller, Chief Accounting OfficerNovember 2019John C. Barichivich III was appointed VP, Corporate Controller, and CAO in November 2019. He has been with Albemarle since 2007, holding various leadership positions .
    Kristin M. ColemanExecutive Vice President, General Counsel, and Corporate SecretaryNovember 28, 2022Kristin M. Coleman joined Albemarle as EVP, General Counsel, and Corporate Secretary on November 28, 2022. She has nearly 30 years of legal experience, previously serving at US Foods, Sears Holdings, and Brunswick Corporation .
    Jacobus G. FourieChief Capital Projects OfficerJune 2021Jacobus G. Fourie has served as Chief Capital Projects Officer since June 2021. He joined Albemarle in January 2019 as VP, Engineering and Project Execution. Previously, he was SVP of Capital Projects at Barrick Gold Corporation .
    Netha JohnsonChief Operations OfficerNovember 1, 2024Netha Johnson joined Albemarle in 2018 as President of the Bromine Global Business Unit. He became COO on November 1, 2024. He has over 20 years of leadership experience, including roles at 3M Company .
    Eric NorrisChief Commercial OfficerNovember 1, 2024Eric Norris joined Albemarle in January 2018 as Chief Strategy Officer and became President of the Energy Storage Global Business Unit in August 2018. He transitioned to Chief Commercial Officer on November 1, 2024 .
    Michael SimmonsPresident, Ketjen Global Business UnitJune 2023Michael Simmons joined Albemarle as President of the Ketjen Global Business Unit in June 2023. He has over 30 years of experience, including roles at Vantage Consulting and Shawcor .
    Cynthia LimaSenior Vice President, Chief External Affairs and Communications OfficerNovember 2023Cynthia Lima was appointed SVP, Chief External Affairs and Communications Officer in November 2023. She joined Albemarle in February 2023 as Chief Communications Officer and previously founded C-Suite Communications .
    Mark MummertChief Capital, Resources and Integrated Supply Chain OfficerNovember 1, 2024Mark Mummert serves as Chief Capital, Resources and Integrated Supply Chain Officer, effective November 1, 2024. Previously, he was SVP of Capital Projects .
    Donald J. LaBauve, Jr.Chief Accounting OfficerNovember 11, 2024Donald J. LaBauve, Jr. was appointed Chief Accounting Officer effective November 11, 2024. He has been with Albemarle since 1990, holding various finance roles, including CFO of the Energy Storage business unit .
    Stacy GrantGeneral Counsel, Corporate Secretary, and Chief Compliance OfficerOctober 7, 2024Stacy Grant became General Counsel, Corporate Secretary, and Chief Compliance Officer effective October 7, 2024. She joined Albemarle in 2023 as VP & Deputy General Counsel, Global Corporate Affairs .

    Questions to Ask Management

    1. Given the ongoing low lithium prices, do you believe more supply needs to be removed from the market to support price recovery, and what specific measures is Albemarle taking to address this supply-demand imbalance?

    2. Can you provide clarity on your asset sale plans, particularly regarding stakes in Greenbushes and other non-core assets like Ketjen, and how these sales align with your long-term strategic objectives?

    3. With the planned reduction of capital expenditures by at least $800 million or about 50%, how will this impact Albemarle's long-term growth prospects and ability to remain competitive in a market recovery?

    4. The targeted $300 million to $400 million in cost and productivity improvements has a broad range; what are the main factors contributing to this variability, and how confident are you in achieving the higher end of this target?

    5. Considering potential changes in government policies after the upcoming election, including tariffs and EV subsidies, how is Albemarle adjusting its strategy to mitigate risks and capitalize on the global energy transition?

    Share Repurchase Program

    Program DetailsProgram 1
    Approval DateN/A
    End Date/DurationN/A
    Total additional amount15 million shares
    Remaining authorization7,396,263 shares
    DetailsNo shares repurchased during 2021-2023

    Past Guidance

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Net Sales: Expected near the lower end of the $12 to $15 per kilogram scenario.
      2. Adjusted EBITDA: Expected in the middle of the $12 to $15 per kilogram scenario.
      3. Energy Storage Volume Growth: More than 20% year-over-year.
      4. Operating Cash Conversion: Approximately 50%.
      5. Capital Expenditures: Reduction by more than $800 million in 2025 compared to 2024.
      6. Cost and Productivity Improvements: Targeting $300 million to $400 million.
      7. Lithium Market Pricing: Based on historically observed pricing .

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Net Sales: $1.4 billion in Q2 2024.
      2. Adjusted EBITDA: $386 million in Q2 2024.
      3. Adjusted Diluted EPS: $0.04 per share.
      4. Lithium Pricing Scenario: Based on a $15 per kilogram scenario.
      5. Liquidity: $3.5 billion available.
      6. Net Debt to Adjusted EBITDA: 2.1x.
      7. Operating Cash Flow Conversion: 94% in Q2, expected 50% for the year.
      8. Volume Growth: Tracking towards 10% to 20%.
      9. Capital Expenditures: $300 million to $400 million below 2023 levels .

    Q1 2024 Earnings Call

    • Issued Period: Q1 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Adjusted Diluted EPS: $0.26.
      2. Net Sales and Adjusted EBITDA: $1.4 billion and $291 million respectively.
      3. Productivity Improvements: More than $280 million.
      4. Energy Storage Volume Growth: High end of 10% to 20%.
      5. Tax Rate: Modest benefit at $15 lithium price, typical rate in mid- to high 20% range at higher prices.
      6. Cash Flow Conversion: Below historical averages.
      7. Capital Allocation: Focus on high-return growth.
      8. Lithium Demand Growth: 2.5x from 2024 to 2030.
      9. Spodumene and Carbonate Bidding Events: Regular events planned.
      10. Capital Expenditure: Potential reduction to $1 billion by 2025 .

    Q4 2023 Earnings Call

    • Issued Period: Q4 2023
    • Guided Period: FY 2024
    • Guidance:
      1. Energy Storage Volumes: Increase by 10% to 20%.
      2. Specialties Segment:
        • Net Sales: $1.3 billion to $1.5 billion.
        • Adjusted EBITDA: $270 million to $330 million.
      3. Ketjen Segment:
        • Net Sales: $1 billion to $1.2 billion.
        • Adjusted EBITDA: $130 million to $150 million.
      4. Corporate Costs: $120 million to $150 million.
      5. Capital Expenditures: $1.6 billion to $1.8 billion.
      6. Energy Storage Margins: Approximately 30% margin .

    Competitors

    Competitors mentioned in the company's latest 10K filing.

    • Shell Catalysts & Technologies - Competitor in the CFT catalysts market .
    • Advanced Refining Technologies - Competitor in the CFT catalysts market .
    • Haldor Topsoe - Competitor in the CFT catalysts market .
    • W.R. Grace & Co. - Competitor in the FCC catalysts market .
    • BASF Corporation - Competitor in the FCC catalysts market .
    • China Petrochemical Corporation (Sinopec) - Competitor in the FCC catalysts market .
    • Nouryon - Competitor in the PCS market .
    • Lanxess AG - Competitor in the PCS market and in the Specialties business .
    • Arxada - Competitor in the PCS market .
    • Israel Chemicals Ltd - Competitor in the Specialties business .
    • Sociedad Quimica y Minera de Chile S.A. - Competitor in the lithium compounds market .
    • Sichuan Tianqi Lithium - Competitor in the lithium compounds market .
    • Jiangxi Ganfeng Lithium - Competitor in the lithium compounds market .
    • Rio Tinto plc - Competitor in the lithium compounds market .
    • Pilbara Minerals - Competitor in the lithium compounds market .
    • Arcadium Lithium - Competitor in the lithium compounds market .
    • Tesla - Competitor in the lithium compounds market .

    Latest news

    Recent developments and announcements about ALB.

    Financial Actions

      Dividend Policy

      ·
      Mar 8, 2024, 12:00 AM

      Albemarle Corporation (ALB) has announced a significant change in its dividend policy related to its new Series A Mandatory Convertible Preferred Stock.

      • Dividend Policy: Dividends on the Preferred Stock will be payable on a cumulative basis when, as and if declared by Albemarle’s board of directors at an annual rate of 7.25% on the liquidation preference of $1,000 per share of Preferred Stock (or $50 per Depositary Share). Albemarle may pay declared dividends in cash or, subject to certain limitations, in shares of Common Stock or in any combination of cash and Common Stock on March 1, June 1, September 1, and December 1 of each year, commencing on June 1, 2024, and ending on March 1, 2027 .

      • Conversion Details: Each share of the Preferred Stock will automatically convert on or around March 1, 2027, into between 7.6180 and 9.1400 shares of common stock, subject to customary anti-dilution adjustments. The conversion rate will be determined based on the volume-weighted average price of the Common Stock over a specified period .

      • Market Listing: Albemarle has applied to list the Depositary Shares on the New York Stock Exchange under the symbol “ALB PR A” .

      This announcement reflects Albemarle's strategic financial planning and offers investors a structured dividend and conversion plan over the next few years.**