Albemarle Reports First-Quarter Sales Growth of 36%, Raising Guidance

ALBemarle Corporation (NYSE: ALB) today announced its results for the first quarter ended March 31, 2022 .

First-Quarter 2022 and Recent Highlights
(Unless otherwise stated, all percentage changes represent year-over-year comparisons)

• Net sales of $1.13 billion , an increase of 36%; Net sales increased 44% excluding Fine Chemistry Services (FCS) business sold in June 2021
• Net income of $253.4 million , or $2.15 per diluted share; Adjusted diluted EPS of $2.38 , an increase of 116%
• Adjusted EBITDA of $432 million , an increase of 88%; Adjusted EBITDA increased 107% excluding FCS business sold in June 2021
• MARBL Lithium Joint Venture (MARBL) to start operation of the second train at MARBL Wodgina Lithium mine with first spodumene concentrate production expected in July 2022
• Guidance for 2022 revised upward on increased prices in Lithium and Bromine businesses; Net sales are now expected to increase approximately 60-70% year over year and adjusted EBITDA now expected to increase approximately 100-140% year over year

"We achieved a strong start to the year by focusing on execution and building on the momentum we created in the second half of 2021," said Albemarle CEO Kent Masters . "Many of the end markets we serve are critical for transitioning to greener energy and advancing electrification and digitalization. Our ongoing investments capitalize on the rapid growth and strong pricing trends in these markets. We continue to explore sustainable options to expand our conversion capacity and resources, including opportunities in North America and Europe ."

Outlook

Albemarle's outlook for 2022 has improved based on expectations of continued demand growth and tightness in the markets it serves. Net sales guidance was revised upward primarily due to continued strength in pricing in its Lithium and Bromine businesses. Adjusted EBITDA guidance is higher based on pricing expectations partially offset by inflationary cost pressures, particularly for natural gas in Europe .

First-Quarter Results

Net sales of $1.13 billion increased by $298.4 million compared to the prior-year quarter primarily due to increased pricing across Albemarle's business segments driven by strong demand from diverse end markets.

Net income attributable to Albemarle of $253.4 million increased by $157.7 million from the prior-year quarter primarily due to higher net sales, partially offset by inflationary cost pressures including natural gas prices in Europe .

Adjusted EBITDA of $431.9 million increased by $201.9 million from the prior-year quarter primarily due to higher net sales, partially offset by inflationary cost pressures including natural gas prices in Europe .

The effective income tax rate for the first quarter of 2022 was 26.9% compared to 17.9% in the same period of 2021. The difference is largely due to global intangible low-taxed income and the geographic mix of earnings. On an adjusted basis, the effective income tax rates were 18.9% and 17.5% for the first quarter of 2022 and 2021, respectively.

Business Segment Results

Lithium Results

Lithium net sales of $550.3 million increased $271.3 million (+97%) due to higher pricing net of FX (+66%) and a one-time sale of spodumene produced during the initial startup of the MARBL Lithium Wodgina mine. Volume was higher (+31%) from tolling to help meet growing customer demand. Adjusted EBITDA of $308.6 million increased $202.2 million primarily due to increased pricing from renegotiated variable price contracts as well as the sale of lower cost inventory.

Lithium Outlook

Adjusted EBITDA for the full year 2022 is expected to grow approximately 200-225% year over year, up from the previous outlook. Average realized pricing is now expected to be up approximately 100% year over year resulting from the renegotiated index-referenced variable price contracts and increased market pricing. Full-year 2022 volume is expected to be up +20-30% year over year (unchanged) primarily due to new capacity coming online. The revised outlook assumes the company's Q2 realized selling price remains constant for the remainder of the year. There is potential upside if market pricing remains at historically strong levels or if current contract renegotiations result in additional index-referenced, variable pricing. There is potential downside in the event of a material correction in lithium market pricing or potential volume shortfalls (e.g., delays in acquisitions or expansion projects).

Albemarle continues to progress the expansion of its global portfolio of conversion capacity and utilization of its world-class resource portfolio:

Chile

• La Negra III/IV conversion plant started up and is in commercial qualification; operations are progressing to plan

Australia

• Kemerton I conversion plant is in commissioning and is expected to achieve first product in May
• Kemerton II conversion plant remains on track for mechanical completion in the second half of 2022
• First production of spodumene concentrate from the first train at the MARBL Lithium Wodgina mine expected in May
• The start of the second train at Wodgina has been accelerated with first production of spodumene concentrate expected in July

China

• Acquisition of Qinzhou conversion plant continues to progress through the regulatory approval process and now is expected to close in the second half of this year
• Site preparation and early construction works have started at the Meishan greenfield project site, ahead of schedule
• Zhangjiagang greenfield project is in the engineering phase

United States

• New wells and expansion projects at Silver Peak continue to progress ahead of schedule

Bromine Results

Bromine net sales of $359.6 million increased $79.1 million (+28%) primarily due to increased pricing net of FX (+25%) and slightly higher volumes (+3%). Tight market conditions continue to drive strong demand and favorable pricing across the product portfolio. Adjusted EBITDA of $129.2 million increased $34.6 million as higher net sales were partially offset by higher costs for raw materials and freight.

Bromine Outlook

Adjusted EBITDA for the full year 2022 is expected to grow approximately 15-20% from 2021 based on higher volumes and pricing as a result of strength in demand for fire safety solutions in diverse end markets. Successful execution of growth projects in 2021 is expected to contribute to higher volumes in full-year 2022. Bromine's ongoing cost savings initiatives and favorable pricing are expected to offset higher freight and raw material costs.

Catalysts Results

Catalysts net sales of $217.9 million decreased by $2.4 million (-1%) compared to the previous year due to lower volumes (-2%), partially offset by slightly higher pricing net of FX (+1%). Adjusted EBITDA of $16.9 million declined $8.5 million as higher sales were offset by cost pressures from increasing natural gas prices and raw materials.

Catalysts Outlook

Albemarle expects full-year 2022 adjusted EBITDA to be flat to down 65% year over year, down from the previous outlook due to continued volatility of natural gas pricing in Europe related to the war in Ukraine , partially offset by higher pricing.

The strategic review of the Catalysts business is ongoing. The company expects to provide an update in the second quarter.

All Other

Other operations represent the FCS business which was sold on June 1, 2021 .

Balance Sheet and Liquidity

As of March 31, 2022, Albemarle had estimated liquidity of approximately $1.9 billion , including $463.3 million of cash and equivalents, $777.6 million remaining under its $1 billion revolver, $500 million remaining under its amended delayed draw term loan, and $176.9 million on other available credit lines. Total debt was $2.5 billion , representing net debt to adjusted EBITDA of approximately 1.9 times.

Cash Flow and Capital Deployment

Cash from operations for the three months ended March 31, 2022, of $206.2 million increased $48.2 million versus the prior year driven by higher adjusted EBITDA partially offset by working capital changes. Capital expenditures of $231.7 million increased by $52.0 million versus the prior year as the company nears completion of its Wave 2 Lithium expansion projects and progresses the next wave of projects.

Albemarle's primary capital allocation priorities are to invest in organic and inorganic opportunities to drive profitable growth, maintain its financial flexibility and Investment Grade credit rating, and fund its dividend.

The company expects to publish its 2021 sustainability report on June 2, 2022 , and will hold a conference call on June 28, 2022 , to discuss highlights from the report, including progress on current sustainability-related targets, new targets, and our initial assessment of scope 3 greenhouse gas emissions.

Earnings Call

The company's earnings presentation and supporting material are available on Albemarle's website at https://investors.albemarle.com .

About Albemarle

ALBemarle Corporation (NYSE: ALB) is a global specialty chemicals company with leading positions in lithium, bromine and refining catalysts. Albemarle thinks beyond business-as-usual to power the potential of companies in many of the world's largest and most critical industries, such as energy, electronics, and transportation. Albemarle actively pursues a sustainable approach to managing its diverse global footprint of world-class resources. In conjunction with Albemarle's highly experienced and talented global teams, its deep-seated values, and its collaborative customer relationships, Albemarle creates value-added and performance-based solutions that enable a safer and more sustainable future.

Albemarle regularly posts information to www.albemarle.com , including notification of events, news, financial performance, investor presentations and webcasts, non-GAAP reconciliations, SEC filings and other information regarding the company, its businesses and the markets it serves.

Forward-Looking Statements

Some of the information presented in this press release, the conference call and discussions that follow, including, without limitation, information related to the timing of active and proposed projects, production capacity, committed volumes, pricing, financial flexibility, expected growth, anticipated return on opportunities, earnings and demand for its products, productivity improvements, tax rates, stock repurchases, dividends, cash flow generation, costs and cost synergies, capital projects, future acquisition and divestiture transactions including statements with respect to timing, expected benefits from proposed transactions, market and economic trends, statements with respect to 2022 outlook and all other information relating to matters that are not historical facts may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from the views expressed. Factors that could cause Albemarle's actual results to differ materially from the outlook expressed or implied in any forward-looking statement include, without limitation: changes in economic and business conditions; changes in financial and operating performance of its major customers and industries and markets served by it; the timing of orders received from customers; the gain or loss of significant customers; market correction in lithium market pricing; changes with respect to contract renegotiations; potential production volume shortfalls; competition from other manufacturers; changes in the demand for its products or the end-user markets in which its products are sold; limitations or prohibitions on the manufacture and sale of its products; availability of raw materials; increases in the cost of raw materials and energy, and its ability to pass through such increases to its customers; technological change and development, changes in its markets in general; fluctuations in foreign currencies; changes in laws and government regulation impacting its operations or its products; the occurrence of regulatory actions, proceedings, claims or litigation (including with respect to the U.S. Foreign Corrupt Practices Act and foreign anti-corruption laws); the occurrence of cyber-security breaches, terrorist attacks, industrial accidents or natural disasters, the effect of climate change, including any regulatory changes to which it might be subject; hazards associated with chemicals manufacturing; the inability to maintain current levels of insurance, including product or premises liability insurance, or the denial of such coverage; political unrest affecting the global economy, including adverse effects from terrorism or hostilities; political instability affecting our manufacturing operations or joint ventures; changes in accounting standards; the inability to achieve results from its global manufacturing cost reduction initiatives as well as its ongoing continuous improvement and rationalization programs; changes in the jurisdictional mix of its earnings and changes in tax laws and rates or interpretation; changes in monetary policies, inflation or interest rates that may impact its ability to raise capital or increase its cost of funds, impact the performance of its pension fund investments and increase its pension expense and funding obligations; volatility and uncertainties in the debt and equity markets; technology or intellectual property infringement, including cyber-security breaches, and other innovation risks; decisions it may make in the future; future acquisition and divestiture transactions, including the ability to successfully execute, operate and integrate acquisitions and divestitures and incurring additional indebtedness; continuing uncertainties as to the duration and impact of the coronavirus (COVID-19) pandemic; performance of Albemarle's partners in joint ventures and other projects; changes in credit ratings; and the other factors detailed from time to time in the reports Albemarle files with the SEC, including those described under "Risk Factors" in Albemarle's most recent Annual Report on Form 10-K any subsequently filed Quarterly Reports on Form 10-Q. These forward-looking statements speak only as of the date of this press release. Albemarle assumes no obligation to provide any revisions to any forward-looking statements should circumstances change, except as otherwise required by securities and other applicable laws.

See accompanying non-GAAP reconciliations below.

Additional Information

It should be noted that adjusted net income attributable to Albemarle Corporation, adjusted diluted earnings per share, non-operating pension and OPEB items per diluted share, non-recurring and other unusual items per diluted share, adjusted effective income tax rates, EBITDA, adjusted EBITDA, EBITDA margin and adjusted EBITDA margin are financial measures that are not required by, or presented in accordance with, accounting principles generally accepted in the United States , or GAAP. These non-GAAP measures should not be considered as alternatives to Net income attributable to Albemarle Corporation ("earnings") or other comparable measures calculated and reported in accordance with GAAP. These measures are presented here to provide additional useful measurements to review the company's operations, provide transparency to investors and enable period-to-period comparability of financial performance. The company's chief operating decision maker uses these measures to assess the ongoing performance of the company and its segments, as well as for business and enterprise planning purposes.

A description of other non-GAAP financial measures that Albemarle uses to evaluate its operations and financial performance, and reconciliation of these non-GAAP financial measures to the most directly comparable financial measures calculated and reported in accordance with GAAP can be found on the following pages of this press release, which is also is available on Albemarle's website at https://investors.albemarle.com . The company does not provide a reconciliation of forward-looking non-GAAP financial measures to the most directly comparable financial measures calculated and reported in accordance with GAAP, as the company is unable to estimate significant non-recurring or unusual items without unreasonable effort. The amounts and timing of these items are uncertain and could be material to the company's results calculated in accordance with GAAP.

ALBEMARLE CORPORATION AND SUBSIDIARIES
  Non-GAAP Reconciliations
  (Unaudited)

See below for a reconciliation of adjusted net income attributable to Albemarle Corporation, EBITDA and adjusted EBITDA, the non-GAAP financial measures, to Net income attributable to Albemarle Corporation ("earnings"), the most directly comparable financial measure calculated and reported in accordance with GAAP. Adjusted net income attributable to Albemarle Corporation is defined as net income before the non-recurring, other unusual and non-operating pension and other post-employment benefit (OPEB) items as listed below. The non-recurring and unusual items may include acquisition and integration related costs, gains or losses on sales of businesses, restructuring charges, facility divestiture charges, certain litigation and arbitration costs and charges, and other significant non-recurring items. EBITDA is defined as net income attributable to Albemarle Corporation before interest and financing expenses, income tax expense, and depreciation and amortization. Adjusted EBITDA is defined as EBITDA plus or minus the non-recurring, other unusual and non-operating pension and OPEB items as listed below.

See below for a reconciliation of adjusted EBITDA on a segment basis, the non-GAAP financial measure, to Net income attributable to Albemarle Corporation, the most directly comparable financial measure calculated and reported in accordance with GAAP (in thousands, except percentages).

Non-operating pension and OPEB items, consisting of mark-to-market actuarial gains/losses, settlements/curtailments, interest cost and expected return on assets, are not allocated to Albemarle's operating segments and are included in the Corporate category. In addition, the company believes that these components of pension cost are mainly driven by market performance, and the company manages these separately from the operational performance of the company's businesses. In accordance with GAAP, these non-operating pension and OPEB items are included in Other income (expenses), net. Non-operating pension and OPEB items were as follows (in thousands):

In addition to the non-operating pension and OPEB items disclosed above, the company has identified certain other items and excluded them from Albemarle's adjusted net income calculation for the periods presented. A listing of these items, as well as a detailed description of each follows below (per diluted share):

See below for a reconciliation of the adjusted effective income tax rate, the non-GAAP financial measure, to the effective income tax rate, the most directly comparable financial measure calculated and reported in accordance with GAAP (in thousands, except percentages).

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SOURCE Albemarle Corporation