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Albemarle's 2Q17 Earnings: An Ongoing Story of Strong Performance

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Part 3
Albemarle's 2Q17 Earnings: An Ongoing Story of Strong Performance PART 3 OF 5

ALB’s Lithium and Advanced Materials Segment Rose 36.2% YoY in 2Q17

Lithium and Advanced Materials segment

Albemarle’s (ALB) Lithium and Advanced Materials segment is the company’s largest revenue contributor, accounting for 43.1% of ALB’s total revenues in 2Q17 compared to 64.9% in 2Q16. The segment reported revenues of ~$317.9 million in 2Q17, a significant increase of 36.2% on a year-over-year (or YoY) basis. In 2Q16, the segment reported revenues of $233.4 million.

ALB’s Lithium and Advanced Materials Segment Rose 36.2% YoY in 2Q17

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The increase in the segment’s revenues was primarily driven by the combination of higher volumes and higher prices. The segment witnessed increased sales volume in its Battery-Grade Lithium business. The acquisition of Jiangxi Jiangli New Materials Science and Technology Co. Ltd.’s lithium business also helped improve the segment’s revenues.

However, the continued weakness in organometallics resulted in weaker volumes of its PCS business. Plus, the bankruptcy of one of ALB’s customers and its currency hedging strategy had an adverse impact on ALB’s revenues.

Segment’s adjusted EBITDA

The Lithium and Advanced Materials segment reported adjusted EBITDA1 of $132.6 million, an increase of 60.3% on a year-over-year basis. In 2Q16, the segment reported EBITDA of $82.7 million.

The segment’s adjusted EBITDA margin stood at 41.8% in 2Q17 compared to 35.6% in 2Q16. This implies an increase of 620 basis points on a year-over-year basis. The segment’s adjusted EBITDA and margin were primarily driven by higher sales and higher prices.

Outlook

The Lithium and Advanced Materials segment is expected to maintain its upward trend of higher sales and higher prices for the rest of the year, contributing to ALB’s revenue growth. The company plans to focus on its expansion plans to meet the growing demand. However, in the second half of 2017, ALB’s EBITDA could be impacted due to royalty and exploration costs.

Investors can indirectly hold Albemarle by investing in the PowerShares WilderHill Progressive Energy Portfolio ETF (PUW), which holds 2.9% of its portfolio in ALB. The top holdings of the fund include Methanex (MEOH), FMC (FMC), and WABCO Holdings (WBC) with weights of 3.1%, 2.9%, and 2.9%, respectively, on August 7, 2017.

In the next part, we’ll look into the performance of ALB’s Bromine Specialties segment in 2Q17.

  1. earnings before interest, taxes, depreciation, and amortization
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