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AL

Arcadium Lithium plc (ALTM)·Q2 2024 Earnings Summary

Executive Summary

  • Q2 revenue was $254.5M, GAAP diluted EPS $0.07, adjusted EPS $0.05, and adjusted EBITDA $99.1M; adjusted EBITDA margin was 39%, supported by low-cost Argentine operations and contract pricing floors .
  • Realized average pricing for combined lithium hydroxide and carbonate was $17,200 per product metric ton; total combined hydroxide/carbonate volumes rose modestly sequentially, while spodumene volumes/prices improved off Q1 lows but remain challenged .
  • Management accelerated cost actions (tracking to high end of $60–$80M synergies in 2024) and deferred two of four expansion projects, cutting expected capital spending by ~$500M over the next 24 months; Nemaska continues as planned .
  • 2024 guidance framework was updated: D&A lowered (~$100M), adjusted tax rate narrowed (25%–30%), and CapEx range trimmed to $550M–$700M; full-year scenario ranges reflect lower H2 price assumptions ($12–$15/kg LCE) .
  • S&P Global Wall Street consensus estimates were unavailable for ALTM at the time of analysis; as a result, beat/miss vs consensus cannot be determined (S&P Global data unavailable for ALTM).

What Went Well and What Went Wrong

What Went Well

  • Adjusted EBITDA margin resilience (39% in Q2) amid weaker spot pricing due to low-cost footprint and contract structures; CEO: “this approach helped us to achieve higher realized pricing… and to deliver strong underlying profitability” .
  • Synergy execution and cost discipline: tracking toward high end of $60–$80M savings in 2024; accelerating toward $125M annual run-rate within three years post-merger .
  • Capacity ramps progressing: Fénix Phase 1A fully commissioned; Olaroz Stage 2 producing and moving toward design quality; hydroxide units in Bessemer City, Zhejiang, Naraha finalizing qualifications .

What Went Wrong

  • Sequential pricing pressure in lithium chemicals (carbonates/hydroxide) versus Q1, driven by lower market prices, lagged indices on certain contracts, and product/customer mix; realized hydroxide/carbonate price fell to $17,200/mt from $20,500/mt in Q1 .
  • Spodumene still uneconomic at current spot levels; Q2 realized ~$1,000/dmt SC6 with ~$700/ton cash cost; management actively assessing Mt. Cattlin care-and-maintenance if prices persist in “three digits” .
  • 2024 volume growth expectations for hydroxide/carbonate effectively reduced to ~25% YoY vs prior 40% multi-quarter narrative, reflecting ramp timing, conversion economics, and mix optimization .

Financial Results

Consolidated P&L and Margins (YoY and QoQ trend)

MetricQ4 2023Q1 2024Q2 2024
Revenue ($M)$181.8 $261.2 $254.5
GAAP Diluted EPS ($)$0.18 $0.01 $0.07
Adjusted Diluted EPS ($)$0.34 $0.06 $0.05
Adjusted EBITDA ($M)$90.9 $108.8 $99.1
Adjusted EBITDA Margin (%)50% 42% 39%

Notes: Q2 2023 comparables (predecessor Livent) for context: Revenue $235.8M, GAAP diluted EPS $0.18, Adjusted EBITDA $134.5M .

Product/KPI Mix

KPIQ1 2024Q2 2024
Combined LiOH + Li2CO3 volumes (mt)~9,300 ~10,800
Avg realized price LiOH + Li2CO3 ($/mt)$20,500 $17,200
Spodumene volumes (dmt)~30,000 ~23,500
Spodumene realized price ($/dmt, SC6 eq)$920 $1,000
Mt. Cattlin cash operating cost ($/dmt)~$700 ~$700

Non-GAAP Reconciliation Highlights (Q2 2024)

Item (Q2 2024)Amount ($M)
GAAP Net Income attributable to ALTM$85.7
EBITDA$144.8
Argentina remeasurement (gains)/losses$(57.6)
Restructuring and other charges$21.9
Inventory step-up (merger)$4.7
Blue Chip Swap gain$(16.8)
Adjusted EBITDA$99.1
Adjusted EPS (diluted)$0.05

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Combined LiOH+Li2CO3 volume growthFY2024~40% YoY increase (50k–54k LCE) ~25% YoY increase (7k–12k mt increase) Lowered
Combined LiOH+Li2CO3 volume growthFY2025Not specified ~25% YoY increase (from 2024) New/Introduced
Revenue scenario ($M)FY2024 (H2 pricing case)~$1,250 at $15/kg; ~$1,900 at $25/kg LCE avg ~$1,100 at $12/kg; ~$1,200 at $15/kg (H2 pricing) Framework updated (lower price cases)
Adjusted EBITDA scenario ($M)FY2024 (H2 pricing case)~$420 at $15/kg; ~$1,000 at $25/kg ~$380 at $12/kg; ~$470 at $15/kg Framework updated (lower price cases)
SG&A (incl. R&D) ($M)FY2024~115 ~115 Maintained
D&A ($M)FY2024~145 ~100 Lowered
Adjusted tax rate (%)FY202425%–33% 25%–30% Narrowed/lowered midpoint
Diluted shares (avg, M)FY2024~1,150 ~1,150 Maintained
Capital spending ($M)FY2024550–750 550–700 Lowered high end
Capital spending planNext 24 monthsPrior $1.6B (2024–2026) plan Reduce by ~$500M; pause Galaxy; sequence Fénix 1B/Sal de Vida Lowered/Deferred projects

Earnings Call Themes & Trends

TopicQ4 2023 (prior)Q1 2024Q2 2024Trend
Market supply/demandPrice support above historic floors; supply forecasts lag reality EV demand strong; supply growth from Africa/lepidolite; indices lag reality Prices testing new lows; inventories with traders/futures; long-term upside skew Near-term weaker; long-term constructive
Contracting/pricing floorsMajority hydroxide under floors/ceilings multi-year ~2/3 hydroxide under floors; average price $20.5k/mt Floors underpin resilience; average price $17.2k/mt; ratio dips as market-exposed volumes rise Mix shifting, floors still supportive
Cost savings$60–$80M 2024 target On track; 11% workforce reduction High end of range; accelerate to $125M/year in ≤3 years Accelerating
Capex and projects$1.6B 2024–26 plan; sequencing considered Slower cadence in 2024; funding flexibility Pause Galaxy; sequence Fénix 1B/Sal de Vida; ~$500M cut over 24 months; Nemaska continues Deferral and discipline
Operations rampOlaroz/Fénix progressing; Mt Cattlin price pressure Fénix 1A near nameplate; Olaroz 2 increasing; hydroxide qualifications Fénix 1A fully commissioned; Olaroz 2 progressing; hydroxide units near qualification completion Gradual improvement
Mt. Cattlin economicsSC6 realized $850/dmt in Dec Q; plan reduction 2024 $920/dmt, cash cost ~$700 ~$1,000/dmt; considering care & maintenance if prices stay “three digits” Remains challenged
Technology/portfolio—Lithium metal/butyllithium integrated network benefits Acquisition of Li-Metal Corp. assets to enhance lithium metal processes Capability expansion
Regulatory/legal—Argentina court ruling low risk to expansions No material weather delays at Argentina sites Stable execution backdrop

Management Commentary

  • “We continue to focus on leveraging our low-cost, high quality operational footprint and a commercial strategy of securing long term contracts… helped us to achieve higher realized pricing… and to deliver strong underlying profitability.” – Paul Graves, CEO .
  • “Adjusted EBITDA margin of 39%, demonstrating our leading low-cost position in Argentina and the earnings power of our business in this challenging market conditions.” – Gilberto Antoniazzi, CFO .
  • “We have therefore decided to defer investment in two of our four current expansion projects… reduce our capital spending over the next 24 months by approximately $500 million.” – Paul Graves, CEO .
  • “We expect to realize synergies in 2024 towards the high end of our $60 million to $80 million guidance range… accelerating its plans to achieve total cost savings of $125 million per year.” – Management .
  • “Investor Day on September 19… detailed review of our expansion plans, financial outlook and broader strategic objectives.” – Management .

Q&A Highlights

  • Financing/liquidity: H2 CapEx cadence similar to Q2 and far less cash burn than H1; revolver usage anticipated; aim to self-fund CapEx alongside operating cash flow .
  • CapEx reductions: ~$500M savings skew to 2025; with contract volumes and floors, 2025 fundamentals improve even at $12/kg scenarios .
  • Pricing floors/nonlinearity: At current price levels, floors fix a substantial portion of pricing; EBITDA sensitivity below floors is nonlinear, above floors becomes linear with market .
  • Mt. Cattlin: Active consideration of care-and-maintenance if spot spodumene stays in “three digits,” given ~$700/ton cash cost .
  • Nemaska rationale: Protected by progress, partner contracts, environmental footprint, and 50% capital share; ex-China hydroxide scarcity expected .

Estimates Context

  • S&P Global Wall Street consensus estimates (EPS, revenue, EBITDA) for ALTM were unavailable at the time of analysis; therefore, we cannot assess beat/miss vs consensus for Q2 2024 (S&P Global data unavailable for ALTM).
  • Given lowered 2024 scenario frameworks (H2 pricing at $12–$15/kg LCE), reduced CapEx, and narrowed tax/D&A, consensus models may need to reduce near-term volume growth and margin assumptions while recognizing cost savings upside .

Key Takeaways for Investors

  • Margin durability in a weak price environment is driven by contract floors and low-cost Argentine assets; adjusted EBITDA margin held at 39% despite lower chemical prices .
  • Management’s ~$500M CapEx deferral and high-end synergy execution are proactive to preserve liquidity and improve 2025 cash generation; Nemaska remains a strategic priority backed by customer commitments .
  • Product mix optimization favors selling more carbonate versus uncommitted hydroxide in current economics, while maintaining firm hydroxide commitments under contracts .
  • Mt. Cattlin remains the key swing asset; sustained “three-digit” spodumene pricing raises probability of care-and-maintenance to avoid value destruction .
  • 2024 outlook reset to lower H2 price scenarios ($12–$15/kg LCE) with D&A cut and tax rate narrowed; monitor Investor Day (Sep 19) for updated project phasing and funding roadmap .
  • With inventories shifting to traders/exchanges and greater supply chain integration, price discovery is volatile; near-term headwinds persist but longer-term lithium hydroxide ex-China scarcity supports medium-term thesis .
  • S&P Global consensus was unavailable; focus on company scenario analytics and contract structure resilience until broader estimate visibility improves (S&P Global data unavailable for ALTM).