Albemarle’s Refining Solutions segment

Albemarle’s (ALB) Refining Solutions segment was the lowest contributor to its overall revenue with a share of 25.7% in 1Q17.

The segment reported revenue of $185.4 million in 1Q17, a rise of 8.7% year-over-year (or YoY), compared to $170.6 million in 1Q16.

 Why Albemarle’s Refining Solutions Segment Revenue Rose in 1Q17
ALB’s Refining Solutions segment reported an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $49.6 million in 1Q17, a fall of 10% YoY from $55.1 million in 1Q16. The segment’s adjusted EBITDA margin contracted 555 basis points to 26.8%, compared to 32.3% YoY.

Driving factors

The segment’s revenue rose primarily due to market demand that resulted in higher volumes. However, the segment’s revenue was adversely impacted by its foreign exchange hedges.

The segment’s adjusted EBITDA was negatively impacted by turnarounds, higher raw materials costs, and the adverse impact of foreign exchange.

Outlook

The Refining Solutions segment’s performance could remain consistent provided the demand for fluid catalytic catalysts keeps up. On the other hand, the rise in raw materials prices could have an adverse impact on the segment’s revenue and margins.

Investors can indirectly hold Albemarle by investing in the ProShares Ultra Basic Materials ETF (UYM), which holds 1.5% of its portfolio in Albemarle. The top holdings of the ETF include Dow Chemical (DOW), DuPont (DD), and Monsanto (MON) with weights of 8%, 7.9%, and 5.9%, respectively.

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