Albemarle Corporation Q2 FY2025 earnings call

• Second quarter financial performance: Net sales declined year-over-year mainly due to lower lithium market pricing but higher volumes in energy storage and specialties offset partially. Adjusted EBITDA was down year-over-year but lower input costs and cost and productivity improvements mitigated some impact. - End market and macro conditions: JV operations in Jordan continued safely and achieved record production in Q2. OBBB in the US was assessed with certain tax implications. Global lithium demand remained strong due to stationary storage and EVs. - Initiatives: Progressing initiatives to optimize lithium conversion network, improve cost and efficiency, reduce capital expenditures and enhance financial flexibility. Achieved 100% run rate of $400 million cost and productivity improvement target, reduced 2025 capital expenditures to $650 million to $700 million range.

Second quarter net sales were $1.3 billion. Adjusted EBITDA was $336 million. Lithium market pricing decline was offset partially by higher volumes in energy storage and specialties. Energy Storage expected sales volume growth on an LCE basis to be near the high end of the 0% to 10% range. Specialties continued to expect modest volume growth with Q3 net sales and EBITDA projected to be similar to Q2. Ketjen expected modest improvements in full year 2025 with Q4 being the strongest quarter. Revenue contribution: Net sales of $1.3 billion, adjusted EBITDA $336 million.

Maintain 2025 outlook considerations and expect positive free cash flow in 2025 assuming current low lithium market pricing persists. Energy Storage expected sales volume growth on LCE basis near high end of 0% to 10% range. Full year EBITDA margin expected to average in mid-20% range assuming $9 per kilogram price scenario. Further reduce 2025 capital expenditures to $650 million to $700 million range. Intend to repay $440 million eurobonds with cash on hand as they mature in November.

Lithium market price volatility risk, potential supply curtailments in China risk, impact of policy changes risk.

Q: Could you just go into why the 2H mix may change between contract and spot versus where you were in 2Q, and does this mix potentially extend beyond 2025, implying less than a 50-50 split between the 2 in 2026?

A: Jerry Kent Masters said it's about customer demand, customers draw more on contracts at certain periods, and mix moves around between quarters, and mix will be similar going into 2026 with contracts likely to be negotiated and extended.

Q: Kent, can you talk about what you're seeing from a lithium supply standpoint? How much of global supply is offline? What's happening in China vis-a-vis some of the integrated -- non-integrated producers on the spodumene side, and the lepidolite side?

A: Jerry Kent Masters said continue to think more capacity needs to come out of the market, a couple of sites came offline in China, not clear exactly why, and watching that closely.

Q: If that it takes several years to get back to tighter conditions, can you maintain free cash flow positive if we're at $9 per kilo on average in 2026, 2027, 2028, or can you walk through kind of what incremental adjustments or headwinds you would face in the next few years relative to 2025?

A: Neal R. Sheorey said hitting 100% run rate against cost and productivity target, ramping facilities, JV in Australia's growth program ending and dialing back capital expenditures, and continuing to be efficient with capital spending are factors.