ALB shares slide to lowest level since November 2020 following earnings release

Albemarle Corporation, a leading specialty chemicals company, has released its Q4 earnings report for 2023. Weaker lithium prices weighed on the results and outlook. Shares slumped in after hours, dropping to $109, the lowest level for ALB since November 2020. 

The company's net sales of $2.4 billion, outpacing analyst expectations. The results were primarily driven by 35% volume growth in Energy Storage. However, the company reported a net loss of $618 million, primarily due to a lower of cost or net realizable value (LCM) pre-tax charge driven by lower lithium market pricing and higher spodumene values in cost of goods sold. Albemarle's adjusted EBITDA of ($315) million decreased by $1.6 billion from the prior year quarter due to lower lithium market pricing and the LCM charge.

The Energy Storage segment's net sales of $1.7 billion decreased by $305.7 million (-15%) due to lower pricing net of foreign currency (-50%). However, volume was higher (+35%) related primarily to the La Negra III/IV expansion in Chile and higher tolling volumes to meet growing customer demand. The segment's adjusted EBITDA of ($338.3) million decreased by $1.5 billion as lower pricing and a $604 million LCM charge driven by lower lithium market pricing and higher spodumene values in cost of goods sold more than offset higher volumes.

Albemarle's Energy Storage segment's financial outlook for FY 2024 reflects varying scenarios based on recent lithium market price trends, anticipating a volume increase of 10% to 20% over 2023. With flat market pricing applied to the current contract book and spodumene pricing estimated at 10% of the lithium carbonate equivalent (LCE) price, projections range across three observed market price cases. In the scenario with an average lithium market price of $15/kg LCE, net sales are expected between $3.2 and $3.4 billion, with adjusted EBITDA between $0.7 and $0.8 billion, and equity in net income of unconsolidated investments (net of tax) between $0.8 and $0.9 billion. 

As the average market price increases to $20 and then $25/kg LCE, both net sales and adjusted EBITDA are expected to rise significantly, reaching $4.5 to $4.9 billion in net sales and $2.0 to $2.3 billion in adjusted EBITDA at the highest price scenario, while equity in net income of unconsolidated investments is anticipated to grow to between $1.0 and $1.2 billion.

Albermarle announced several restructuring plans to generate additional capital. The company's proactive measures, including reduced capital expenditures, costs, and working capital, are expected to unlock over $750 million of cash flow, further strengthening its financial position.

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