Albemarle Corporation Q3 FY2025 earnings call

• Net sales for Q3 totaled $1.3 billion, with adjusted EBITDA reaching $226 million, a 7% year-over-year increase.
• Cash from operations in Q3 was $356 million, a 57% year-over-year increase.
• The company is updating its 2025 outlook to the upper end of the $9 per kilogram scenario due to strong energy storage sales volumes and cost improvements.
• Portfolio actions include selling a 51% stake in Ketjen's refining catalysts business and the Eurecat joint venture, expected to generate approximately $660 million in pretax cash proceeds.
• Cost and productivity improvements have reached a $450 million run rate, exceeding the initial target of $300 million to $400 million.
• 2025 capital expenditures are projected at approximately $600 million, representing a 65% year-over-year reduction.
• Global lithium demand remains robust, with EV sales up 30% year-to-date and grid storage up 105% year-to-date, supported by the energy transition.

Energy Storage: Net sales volume growth expected to be up 10% or more year-over-year, with Q4 EBITDA expected slightly higher due to product mix and JV equity earnings. Specialties: Adjusted EBITDA up 35% year-over-year due to cost improvements, but Q4 net sales similar to Q3 while EBITDA lower due to weaker oil and gas demand. Ketjen: Expected stronger Q4 due to higher CFT and FCC volumes.

• Full year 2025 corporate results are anticipated to be toward the upper end of the $9 per kilogram scenario range.
• Full year 2025 free cash flow is projected to be between $300 million and $400 million.
• Lithium market pricing is expected to average approximately $9.50 per kilogram in 2025.
• Q4 EBITDA for Energy Storage is expected to be slightly higher due to product mix and JV equity earnings, while Specialties EBITDA is expected to be lower due to weaker oil and gas demand, and Ketjen is expected to have a stronger Q4.

• Volatility in lithium market prices.
• Uncertainties in global policy and regulatory changes affecting lithium supply and demand.
• Potential impact of inventory reduction timing on future cash flow.
• Dependence on the pace of energy transition and adoption of electric vehicles and grid storage.

Q: Strong results. I wanted to ask you about dynamics at Atlas. You mentioned you'll have better profitability because of higher spodumene prices. But how do you think this would evolve in maybe first half of '26? Would you see higher spodumene costs? Would that be again offset by higher equity income or not? If you could walk us through that dynamic for your lithium margins.

A: Yes. So maybe I'll start, Neal, you can add a little bit of color to that. But -- so we're not going to -- we won't predict the price for lithium, for salt or spodumene. But I mean the market is tightening. It is tight. It has moved up a little bit. So we're optimistic about that, but we don't plan on that. And I don't -- from a spodumene standpoint, I mean, it all depends whether if prices move up, the margin will either stay with salt or it moves over to spodumene. And we're a bit indifferent because of the integrated network that we operate. So I don't know that there's a big difference between the two. Recently, in the recent past, when prices move, most of the margin moves to the resource of spodumene. And then I think the other part is a little bit about the Talison and inventories and the way that, that gets costed. Neal?

Q: You used the $9 price as a reference point. In China today, are we closer to $10 or $11.

A: So yes, you're probably closer to $10 today. But as we look at it on a full year basis, it's kind of $9, $9.50, something like that.

Q: Are you giving any consideration to starting up any of your plants where you've paused production or lost all the plants?

A: So no, I don't -- no, I wouldn't say so. So we haven't brought that back. So we're just forecasting to the end of the year. So that's a couple of months. So -- and it would take us longer to bring those back on. So it's not in that -- they're not in that scenario, and it would depend on the market and how that works, but that's not really the plan as we think about it for next year either.

Q: When you talk about the full year adjusted EBITDA margin potential of 30% or greater at $15 a kg, are you speaking of the energy storage segment or the company overall?

A: The overall company.

Q: And then if I could ask in the capital allocation slide, you talked about with the $1.4 billion paying down or deleveraging, but then there's also another language about liability management opportunity. What does that refer to?

A: Yes, Vincent, I can cover that. I don't have specifics to share today, but we are obviously looking at a combination of things, not just gross delevering, but also anything else that we can do with our debt towers just across our entire debt stack. So that's what is meant by liability management. It might not always be gross debt deleveraging, but it might be actually just thinking about our debt towers and being responsible with that.