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Insights into Albemarle's Strong 3Q17 Returns

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Part 3
Insights into Albemarle's Strong 3Q17 Returns PART 3 OF 6

Why Albemarle’s Lithium and Advanced Materials Grew at Rapid Pace

Albemarle’s Lithium and Advanced Materials segment in 3Q17

Albemarle’s (ALB) Lithium and Advanced Materials segment is its largest revenue contributor, accounting for 45.5% of total revenues in 3Q17 compared to 36.8% in 3Q16. The segment reported revenues of $343.6 million in 3Q17, a significant rise of 42.9% on a YoY (year-over-year) basis. In 3Q16, the segment reported revenues of $240.4 million.

Why Albemarle&#8217;s Lithium and Advanced Materials Grew at Rapid Pace

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The segment’s overall revenue growth was primarily driven by an increase in the prices of battery-grade and technical-grade lithium carbonate applications, an increase in volumes on higher demand, and a favorable foreign currency translation due to the weakness in the dollar.

Revenues for its PCS (Performance Catalyst Solutions) division were constant compared to the previous year due to unfavorable foreign exchange translations.

Segment’s adjusted EBITDA

The Lithium and Advanced Materials segment reported adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $130.2 million, a rise of 42% on a YoY basis. In 3Q16, the segment reported EBITDA of $91.7 million.

The segment’s adjusted EBITDA margin stood at 37.9% in 3Q17, compared to 38.1% in 3Q16. That implies a marginal decrease of 20 basis points on a YoY 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 with higher volumes due to the continued demand for battery-grade products. The company plans to focus on its expansion plans to meet the growing demand.

Investors can indirectly hold Albemarle by investing in the PowerShares WilderHill Progressive Energy ETF (PUW), which holds 1.9% of its portfolio in ALB. The top holdings of the fund include Methanex (MEOH), FMC (FMC), and Wabco Holdings (WBC), with weights of 2.5%, 1.8%, and 1.9%, respectively, as of November 9, 2017.

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