uploads///Part  ALB Q Lithium

Albemarle’s Lithium and Advanced Materials Segment in 4Q17


Mar. 1 2018, Updated 11:10 a.m. ET

Lithium and Advanced Materials segment

Albemarle’s (ALB) Lithium and Advanced Materials segment is its largest revenue contributor, accounting for 42.2% of its total revenues in 4Q17 compared to 39.9% in 4Q16. The segment reported revenues of $362.4 million in 4Q17, a significant rise of 30.2% on a YoY (year-over-year) basis. In 4Q16, the segment reported revenues of $278.3 million.

The segment’s revenue growth was primarily driven by three factors: price increase, volume increase, and a favorable foreign currency hedge.

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The segment’s adjusted EBITDA

The Lithium and Advanced Materials segment reported adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $135.7 million, a rise of 32.4% on a YoY basis. In 4Q16, the segment reported EBITDA of $102.5 million.

The segment’s adjusted EBITDA margin was 37.5% in 4Q17 compared to 36.8% in 4Q16. That implies a margin growth of 70 basis points on a YoY basis. The margin growth was primarily driven by higher sales, higher prices, and favorable foreign currency translations.

Segment outlook

The segment will continue to bank on the continued demand for lithium as the demand for electric vehicles around the globe continues to rise. Some analysts are expecting the supply to exceed the demand, thus leading to a fall in the price of lithium. We’ll have to wait and see whether the price will be a favorable or unfavorable component.

On the other hand, the segment’s revenues and margins could be adversely impacted by the sale of its polyolefin catalysts and components business to W.R. Grace (GRA). The deal is expected to be completed in 1Q18.

Investors can indirectly hold Albemarle by investing in the PowerShares DWA Basic Materials Momentum ETF (PYZ), which holds 3.2% of its portfolio in ALB. The fund also provides exposure to Chemours (CC) and FMC (FMC), with weights of 4.1% and 3.5%, respectively, as of February 27, 2018.


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