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AL

Arcadium Lithium plc (ALTM)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 revenue was $203.1M, diluted EPS was $0.01, and adjusted EBITDA was $42.9M; sequential declines were driven by lower realized prices, lower hydroxide/carbonate volumes, and higher costs .
  • Average realized pricing for combined hydroxide/carbonate fell to $16,200 per product MT (vs. $17,200 in Q2 and $20,500 in Q1), with volumes down ~6% LCE QoQ; hydroxide pricing was roughly flat QoQ due to long-term agreements .
  • Arcadium withdrew operating and financial guidance due to the pending all-cash acquisition by Rio Tinto; no Q3 earnings call was held .
  • Mt Cattlin was placed into care and maintenance, resulting in a non-cash impairment charge of $51.7M in Q3, underscoring market price pressure in spodumene .
  • Stock reaction catalyst: Rio Tinto transaction at $5.85 per share (90% premium to $3.08 on Oct 4, 2024), valuing diluted share capital at ~$6.7B; expected close mid-2025, subject to shareholder, court, and regulatory approvals .

What Went Well and What Went Wrong

What Went Well

  • Management achieved “strong average realized pricing in a challenging market,” with nine‑month YTD hydroxide/carbonate averaging $18,000/t, reflecting contract strategy and customer mix; hydroxide pricing held roughly flat QoQ .
  • Product mix resilience: Butyllithium and lithium specialties delivered ~$39.4M revenue in Q3 at ~$82,100/LCE, providing high value and reducing portfolio volatility .
  • Continued cost and operational discipline: management emphasized executing cost savings and prioritizing high‑return expansions (Sal de Vida and Nemaska) amid market weakness (“We remain focused on cost and operational discipline…”) .

What Went Wrong

  • Adjusted EBITDA declined to $42.9M (from $99.1M in Q2) as average realized prices fell, hydroxide/carbonate volumes decreased, and costs rose .
  • Operational headwinds: total volumes fell ~6% QoQ on an LCE basis, with weaker overall demand and slower ramp at Olaroz Stage 2 affecting carbonate output .
  • Significant charges: $51.7M impairment (Mt Cattlin care & maintenance), $9.7M restructuring/other charges; gross margin dropped to $56.2M vs $127.8M in Q3 2023 .

Financial Results

MetricQ3 2023Q1 2024Q2 2024Q3 2024
Revenue ($USD Millions)211.4 261.2 254.5 203.1
Diluted EPS ($USD)0.17 0.01 0.07 0.01
Adjusted EPS ($USD)0.18 0.06 0.05 0.01
Adjusted EBITDA ($USD Millions)119.7 108.8 99.1 42.9
MetricQ3 2023Q1 2024Q2 2024Q3 2024
Gross Margin ($USD Millions)127.8 144.4 80.4 56.2
MetricQ1 2024Q2 2024Q3 2024
Adjusted EBITDA Margin (%)42% 39% 21%

Segment breakdown (Q3 2024):

ProductRevenue ($USD Millions)
Lithium Hydroxide85.6
Lithium Carbonate56.0
Butyllithium & Other Lithium Specialties39.4
Spodumene Concentrate22.1
Total203.1

Key KPIs (pricing and volumes):

KPIQ1 2024Q2 2024Q3 2024
Combined Hydroxide + Carbonate Avg Price ($/product MT)20,500 17,200 16,200
Combined Hydroxide + Carbonate Volumes (product MT)~9,300 ~10,800 ~8,750
Spodumene Volume (dry MT)~30,000 ~23,500 ~32,400
Spodumene Realized Price ($/dmt, SC6 eq)~$920 ~$1,000 ~$770

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($mm)FY 2024~1,100 to ~1,200 Withdrawn Withdrawn
Adjusted EBITDA ($mm)FY 2024~380 to ~470 Withdrawn Withdrawn
Adjusted EBITDA Margin (%)FY 202435% to 39% Withdrawn Withdrawn
SG&A ($mm)FY 2024~115 Withdrawn Withdrawn
Depreciation & Amortization ($mm)FY 2024~100 Withdrawn Withdrawn
Adjusted Tax Rate (%)FY 202425% to 30% Withdrawn Withdrawn
Diluted Shares (mm)FY 2024~1,150 Withdrawn Withdrawn
Capital Spending ($mm)FY 2024550 to 700 Withdrawn Withdrawn

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Lithium pricing and demandManagement highlighted resilient long-term demand, floors on hydroxide pricing, and scenario framing at $12–$15/kg; ASPs supported by contracts and lagged indices .Realized pricing remained strong vs market but declined QoQ; hydroxide pricing roughly flat due to long-term agreements .Continued emphasis on pricing resilience via contracts; market caution persists .
Capex and project pacingAnnounced $500M capex reduction over 24 months; pausing Galaxy (James Bay) and sequencing Fénix 1B/Sal de Vida; Nemaska unchanged .Focus shifted to cost discipline and prioritizing Sal de Vida/Nemaska in messaging .Discipline maintained; expansion prioritization reiterated .
Mt Cattlin operationsDiscussed potential care and maintenance amid 3-digit spodumene prices and $700/ton cash costs .Mt Cattlin impairment charge of $51.7M recorded; plan to place into care & maintenance .Decisive action taken; asset curtailed .
Contract structure and floors~2/3 hydroxide volumes under contracts with floors and take-or-pay; non-linearity vs market at low prices .Hydroxide pricing held flat QoQ supported by long-term agreements .Floor pricing benefits continue .
Argentina ramp & FXOlaroz Stage 2 slower ramp vs Fénix DLE; FX remeasurement and Blue Chip Swap effects in non-GAAP reconciliations .Slow Olaroz ramp weighed on volumes; non-GAAP adjustments detailed .Ramp progressing; FX adjustments remain impactful .
Nemaska (Bécancour)Proceeding given customer backing, 50% JV ownership, ex-China hydroxide need .Project prioritization reaffirmed .Continued execution .

Management Commentary

  • “We continued to deliver strong average realized pricing in a challenging market in the third quarter… Our nine-month year-to-date average realized pricing of $18,000/t for combined hydroxide and carbonate demonstrates our ability to achieve higher pricing than market indices” — Paul Graves, CEO .
  • “We remain focused on cost and operational discipline, executing cost saving initiatives and prudently advancing our expansion projects, prioritizing Sal de Vida and Nemaska Lithium” — Paul Graves .
  • On capex/price discipline in Q2: “We will invest in our growth on a timeline that is supported by the market and our customers… reducing our total capital spending over the next 24 months by approximately $500 million” — Paul Graves .

Q&A Highlights

  • Capex reductions and funding: Management expects lower cash burn in H2 2024 vs H1; capex savings concentrated in 2025; plans to use operating cash flow and access the $500M revolver as needed .
  • Mt Cattlin care & maintenance: Low spot pricing (~$700/ton spodumene) makes operating uneconomic; care & maintenance evaluated in Q2 and formalized by Q3 impairment .
  • Contract floors and pricing: Non-linear sensitivity at low market prices due to floors; proportion of contracted hydroxide volumes remains high, easing ASP pressure .
  • Nemaska economics/ex-China hydroxide: Project supported by customer commitments, low-cost hydro power, and strategic ex-China hydroxide demand; 50% ownership reduces near-term cash demand .
  • Inventory/technology roadmaps: Limited restocking given visibility issues across LFP/high‑nickel/mid‑nickel blends; intermediaries holding carbonate inventory via exchanges .

Estimates Context

S&P Global consensus estimates for ALTM Q3 2024 (EPS, revenue, EBITDA) were unavailable in our system due to missing Capital IQ mapping, so formal beat/miss analysis vs Street could not be determined. Focus instead on company-reported sequential and year-over-year changes and the Q2 scenario framework for H2 pricing sensitivity .

Key Takeaways for Investors

  • Q3 softness was primarily price- and volume-driven; adjusted EBITDA fell to $42.9M with adjusted EBITDA margin at 21% as carbonate/hydroxide prices and volumes declined while costs rose .
  • Hydroxide pricing proved resilient (flat QoQ) owing to long-term customer agreements, partially cushioning ASPs amid broader market weakness; but mix and demand still pressured profitability .
  • Structural moves: Mt Cattlin impairment and care & maintenance reflect management’s willingness to shutter uneconomic capacity in a 3-digit spodumene price environment, reducing cash drain .
  • Execution focus: Prioritization of Sal de Vida and Nemaska continues, with slower Olaroz ramp weighing on near-term carbonate output; product mix optimization remains a lever .
  • Guidance withdrawn due to pending Rio Tinto acquisition; deal terms ($5.85 cash per share, ~90% premium) and closing conditions (mid‑2025 target) set the near-term stock narrative around deal risk/arbitrage rather than fundamentals .
  • For modeling, use Q2 scenario framework to gauge sensitivity to H2 pricing ($12–$15/kg LCE), noting the presence of pricing floors in hydroxide contracts and a lower share of market-exposed volumes historically .
  • Watch catalysts: regulatory approvals and shareholder vote timing on the Rio deal; Argentina ramp trajectory (Olaroz Stage 2), carbonate/hydroxide qualification cadence, and any updates on capex pacing or additional cost actions .