Refining Solutions segment in 4Q17
Albemarle’s (ALB) Refining Solutions segment accounted for 27.8% of its total revenues in 4Q17 compared to 27.7% in 4Q16. That’s an increase of 0.1 percentage points on a YoY (year-over-year) basis. The segment reported revenues of $238.4 million in 4Q17, an increase of 23.4% on a YoY basis. In 4Q16, the segment reported revenues of $193.1 million.
Strong growth in the segment’s revenue was primarily driven by a favorable product mix in both Clean Fuel Technologies and Fluid Catalytic Cracking. It was also due to higher volumes, a price increase, and a favorable foreign currency hedge.
The segment’s adjusted EBITDA and margins
The Refining Solutions segment reported adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $69.2 million in 4Q17, an increase of 20.7% on a YoY basis. In 4Q16, the segment reported adjusted EBITDA of $57.3 million.
The segment’s 4Q17 adjusted EBITDA margin fell marginally to 29% compared to 29.7% in 4Q16. That implies a decline of 70 basis points over the previous year, primarily due to the $5.5 million adverse impact of Hurricane Harvey.
The segment expects its volume to grow from a favorable product mix in its Clean Fuel Technologies and Fluid Catalytic Cracking businesses. However, the increase in raw material prices could have an adverse impact on its margin. It remains to be seen if ALB can pass on that cost to its customers.
Investors looking for diversified exposure to ALB can consider the Vanguard Materials ETF (VAW), which invests 1.3% of its portfolio in ALB. VAW also provides exposure to Monsanto (MON), Praxair (PX), and Air Products & Chemicals (APD), with weights of 5.6%, 4.5%, and 3.7% as of February 27, 2018.