The June quarterly report from lithium major Albemarle Corp left investors underwhelmed on Wednesday with the shares closing down 0.6% in New York with no surge expected in lithium sales revenues and profits.
Labour shortages in WA and Chile are still a concern and has been the company concentrate on getting the first stage of its Kemerton processing plant in WA up and running this year, with the second stage delayed to early 2022.
But the company is still looking at double digital growth in lithium sales revenue and earnings for the year to December.
While Albemarle – the world’s largest lithium producer – revealed a much higher-than-expected quarterly profit on Wednesday, that was due to the profit on the sale of its fine chemicals business to WR Grace in the quarter for $US570 million in cash and shares.
The company reported second-quarter net income of $US424.6 million compared to $US85.6 million in the June quarter of 2020 when sales and earnings were impacted by the Covid-driven lockdowns.
Net sales of $US773.9 million increased by $US9.8 million compared to the prior year quarter, primarily driven by an increase in sales from the company’s Lithium and Bromine business segments. Excluding thefine chemicals business sale, net sales for the quarter increased 5% year-over-year.
Albermale said its lithium sales jumped 13% in the quarter as long-term customers accelerated their contracts and took supply early.
In Chile, the company’s La Negra III and IV processing facilities are being commissioned while construction at Australia’s Kemerton I plant should be finished by the end of the year. That’s in association with Mineral Resources.
“We are firmly focused on advancing all our lithium projects to meet customer demand and accelerate profitable growth,” Albemarle CEO Kent Masters said in a statement.
Sales in the company’s bromine division, which makes chemicals used in part for fire retardants, jumped 20%, while sales in the catalyst division, which supplies oil refineries, fell 25% due in part to a key customer changing its purchase timeline.
The company said the outlook for the rest of the year was still for “a modest improvement in operating performance compared to full year 2020, assuming continued global economic recovery.”
“Full-year 2021 net sales guidance is improved compared to previous guidance primarily due to increased Lithium sales and improving Catalysts trends offset by reduced expectations for the Bromine business as a result of higher raw material costs and supply chain disruptions.
“Revised EBITDA reflects higher net sales offset by higher corporate costs, primarily related to incentive compensation expense and foreign exchange.
“Net cash from operations is also expected to benefit from timing of working capital changes.
“Capital expenditures are trending near the high-end of the range, due to tighter labor markets and COVID-related travel restrictions in Western Australia,’’ the company said in its release.
Looking at the performance of its lithium business, Albemarle was more upbeat that it appeared from the overall commentary.
The company said net sales of lithium in the quarter jumped 13% or $US36.6 million to $US 320.3 million, “primarily driven by higher volumes (+17%) primarily related to accelerated orders under long-term agreements.”
“Pricing in the quarter was slightly lower year over year (-4%) due to lower average pricing for carbonate and technical grade products. Adjusted EBITDA of $US109.4 million increased $US14.9 million primarily due to increased net sales and the impact of higher spodumene volumes at the Talison joint venture,” the company said. That’s covers the Greenbushes mine and processing operation 51% owned by IGO.
Looking to the full 2021 year, Albemarle said “volume growth is expected to be in the mid-teens year-over-year due to North American plant restarts, productivity improvements, and tolling.”
“Average realized pricing is expected to increase sequentially but remain flat compared to 2020. Full-year 2021 adjusted EBITDA is expected to grow between 10% and 15% year over year.
“Full-year 2021 average margin is expected to remain below 35% due to higher lithium costs related to project start-ups and tolling costs partially offset by efficiency improvements.
Albemarle said its new growth projects continue to progress. La Negra III/IV is in the commissioning phase and Kemerton I remains on track for construction completion later this year.
“To mitigate risks related to labor shortages and COVID-19 travel restrictions in Western Australia, the company prioritized completion of Kemerton I, with Kemerton II construction completion now expected by the end of the first quarter 2022.
“Kemerton I and II are expected to reach commercial production in 2022 following an approximately six month commissioning and qualification period,” the company said.
