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How Albemarle’s Bromine Specialties Segment Performed in Q2

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Albemarle’s Bromine Specialties segment in Q2 2018

Albemarle’s (ALB) Bromine Specialties segment accounted for 25.8% of the company’s total revenues in Q2 2018 compared to 27.7% in Q2 2017, which implies a decline of 1.9 percentage points on a YoY (year-over-year) basis. The segment reported revenues of $220.51 million in Q2 2018, a rise of 8.1% on a YoY basis. In Q2 2017, the segment reported revenues of $203.94 million.

The segment’s revenue increased primarily due to higher volumes, higher prices, and a favorable foreign currency hedge. The segment’s volume grew on the continued growth in the demand for flame retardants, bromine, and other derivatives. Volume growth was also helped by the decline in the production of flame retardants from China.

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The segment’s adjusted EBITDA and margin

The Bromine Specialties segment reported adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $69.36 million in Q2 2018, an increase of 11.75% on a YoY basis. In Q2 2017, the segment reported adjusted EBITDA of $62.07 million.

The adjusted EBITDA margin for the segment stood at 31.5% in Q2 2018 compared to 30.4% in Q2 2017, which implies an increase of 110 basis points on a YoY basis. The increase in the margin was primarily due to higher volumes and higher pricing. However, the higher input costs had an adverse impact on the segment’s adjusted EBITDA and margin.

Outlook

ALB expects the Bromine Specialties segment to continue its growth trend driven by the demand for flame retardants and bromine derivatives. However, there could be stress on its margins and EBITDA due to an increase in raw material and freight costs.

Investors can get broad-based exposure to Albemarle (ALB) by investing in the Materials Select Sector SPDR ETF (XLB), which invests 1.9% of its portfolio in Albemarle. The top holdings of the fund include DowDuPont (DWDP), Praxair (PX), and LyondellBasell (LYB) with weights of 23.4%, 7.7%, and 6.25%, respectively, as of August 8.

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