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Why Did FMC’s Lithium Segment’s Revenue Rise in 2Q16?

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Aug. 12 2016, Updated 9:04 a.m. ET

Lithium segment revenue

In 2Q16, FMC Corporation’s (FMC) Lithium segment reported revenue of $63.3 million, representing 7.8% of FMC’s total revenue. The Lithium segment contributes the lowest revenue share to the company’s overall revenue.

On a year-over-year (or YoY) basis, the segment’s revenue rose by 15.3%. During 2Q16, the segment posted operating income of $16.5 million compared to $4.6 million in 2Q15. This implies a rise in operating income of 258.7% or $11.9 million YoY.

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In terms of margins, FMC’s Lithium segment recorded an operating margin of 26.1% in 2Q16, compared to 8.4% in 2Q15. This implies that the segment’s operating margin rose by 17.7 percentage points YoY. This rise was mainly attributed to higher volumes and strong demand in high-margin specialty end markets.

Other highlights of the Lithium segment

  • Higher volumes in lithium hydroxide caused revenue to rise by 5%.
  • An increase in pricing and favorable foreign exchange transactions positively impacted the segment’s revenue by 10%.
  • Higher sales volumes increased the segment’s operating income by $1.4 million or 30.4%.
  • Favorable pricing improved income by $5.3 million or 115.2%.
  • Lower operating costs improved income by $4.3 million or 93.5%.
  • Favorable foreign exchange translations positively impacted the segment’s income by $0.9 million or 19.6%.

Lithium segment outlook

  • FMC expects the segment’s 2016 revenue to be in the range of $245 million–$265 million.
  • FMC expects the segment’s operating income to be in the range of $58 million–$66 million in 2016.
  • FMC expects the segment’s 3Q16 income to be in the range of $13 million–$17 million.

As of August 8, the Global X Lithium ETF (LIT) held 20.3% of its total holdings in FMC. The other holdings of this ETF include Albemarle (ALB), Johnson Controls (JCI), and Tesla Motors (TSLA) with weights of 6.1%, 4.1%, and 4%, respectively. In the next article, we’ll look into FMC’s valuations compared to those of its peers.

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