5 May

How ALB’s Lithium and Advanced Materials Segment Has Performed

WRITTEN BY Peter Neil

Albemarle’s Lithium and Advanced Materials segment’s revenue

Albemarle’s (ALB) Lithium and Advanced Materials Segment was the largest contributor to its revenue at 39.4% in 1Q17.

The segment reported revenue of $284.4 million in 1Q17, a rise of 31.5% year-over-year (or YoY), compared to $216.2 million in 1Q16.

How ALB’s Lithium and Advanced Materials Segment Has Performed

ALB’s Lithium and Advanced Materials segment reported an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $120 million in 1Q17, a rise of 38.8% YoY, compared to $86.5 million in 1Q16. The segment’s adjusted EBITDA margin rose 220 basis points to 42.2% compared to 40.0% YoY.

Driving factors

The Lithium and Advanced Materials segment’s revenue rose primarily due to higher sales volumes supported by pricing increases. The segment witnessed higher demand for its lithium-grade batteries, resulting in higher sales volumes.

On the other hand, its revenue was hit by weak demand for organometallics, which impacted its volumes adversely. Its revenue was also negatively affected by foreign exchange hedging and a bankruptcy filing by one of its customers.

The segment’s adjusted EBITDA was primarily driven by higher volumes and price increases. However, its adjusted EBITDA was adversely impacted by increased selling, general, and administrative expenses.

Outlook

The Lithium and Advanced Materials segment is expected to continue its upward trend on higher volumes supported by its acquisition of the lithium hydroxide and lithium carbonate conversion businesses of Jiangxi Jiangli New Materials Science and Technology Co. in China. However, the weakness in its organometallics business will likely continue to pose a challenge.

Investors can indirectly hold Albemarle by investing in the Materials Select Sector SPDR ETF (XLB), which holds 2.2% of its portfolio in the company. The top holdings of the ETF include Dow Chemical (DOW), DuPont (DD), and Monsanto (MON) with weights of 11.8%, 11.7%, and 8.7%, respectively. In the next article, we’ll take a look at ALB’s Bromine Specialties segment.

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