Summary

• Albemarle Corporation is global company operating in the specialty chemicals industry. The company was founded in 1887 but took its current form following a spin-off from Ethyl Corporation in 1994.
• The company manages and reports its operation under three segments - energy storage, specialties, and Ketjet. Ketjet is a wholly-owned subsidiary of Albemarle which is formulated to run the catalysts business of the company.

• As of December 31, 2022, Albemarle served approximately 1,900 customers in approximately 70 countries. The company employs approximately 7,400 employees, including employees of the consolidated join ventures.

• Albemarle Corporation has reported net sales of $2.6 billion for the first quarter of 2023, which was $1.1 billion for the first quarter of 2022, a 129% increase. Net income attributable to Albemarle Corporation is $1,238.58 million as compared to $253.28 million during the same quarter a year earlier. Diluted earnings per share was $10.51, compared to $2.15 in the first quarter of 2022.

• Albemarle Corporation has reported net sales of $7,320.10 million in 2022 which was $3,327.96 million a year earlier, an increase of $3,992.14 million year over year. Net income attributable to Albemarle Corporation is $2,689.82 million in 2022 and $123.67 million a year earlier, an increase of $2,566.14 million. Diluted earnings per share (EPS) is $22.84 and $1.06 for the years, respectively.

Brief Company Overview

Albemarle Corporation (NYSE:ALB) is a global developer, manufacturer and marketer of specialty chemicals. The company was founded 1887 as Albemarle Paper Manufacturing Company to produce Kraft and blotting paper. The company was incorporated as it is currently in Virginia in 1993. It is currently headquartered in Charlotte, North Carolina, United States. The company manages and reports its operation under three segments - Lithium, Bromine and Catalysts. The end markets that the company serves include energy storage, petroleum refining, consumer electronics, construction, automotive, lubricants, pharmaceuticals and crop protection. The company together with its joint ventures currently operate more than 25 production and R&D facilities. As of December 31, 2022, Albemarle served approximately 1,900 customers in approximately 70 countries.

As of December 31, 2022, the company employs approximately 7,400 employees, including employees of the consolidated join ventures. Jerry Kent Masters Jr. is the current Chairman and CEO of the company. The company services some big customers such as Umicore N.V. and its affiliates - representing more than 10% of Ablemarle's consolidated net sales during 2022.

As of May, 2023, 52-weeks price range of the company stock has been $334.55 to $171.82. Trailing P/E of the company is 7.57 times, price to sales ratio is 2.78 times, profit margin is 41.89%, return on assets (ttm) is 14.43%, return on equity (ttm) is 49.18%, debt to equity ratio (most recent quarter) is 35.66, and dividend payout ratio is 5.08%. The company completed a stock split on March 01, 2017 to a ratio of 2:1. As the the reports filed for most recent quarter, first quarter of 2023, total shares outstanding of the company is 117.34 million.

Recent Developments

• On February 23, 2022, the board of directors of the company declared a quarterly dividend of $0.40 per share. The dividend was paid on April 3, 2023 to the shareholders of record at the close of business as of March 17, 2023.
• Official launch of Ketjen, a wholly owned subsidiary, previously known as the Catalysts reportable segment, was launched during the first quarter of 2023.
• During the first quarter of 2023, the company has announced plans to construct a new $1.3 billion lithium mega-flex processing facility in South Carolina capable of annually producing approximately 50,000 metric tonnes of battery-grade lithium hydroxide, with the potential to expand up to 100,000 metric tonnes. Construction is expected to begin in late 2024.
• In December 2022, the company unveiled MercLok^TM, a product that captures mercury from soil and mining waste thus helping to remove this harmful element from the food chain.
• In October 2022, the company completed the acquisition of all of the outstanding equity of Qinzhou, for approximately $200 million in cash.
• On October 25, 2022 the Company completed the acquisition of all of the outstanding equity of Guangxi Tianyuan New Energy Materials Co., Ltd. (“Qinzhou”), for approximately $200 million in cash.
• In August 2022, the company announced realignment of their corporate structure which would result into three new reportable segments - energy storage, specialties, and Ketjet (catalysts). The change is to take effect from January 1, 2023.

Recent Financing Activities

• On October 28, 2022, the company amended their revolving, unsecured credit agreement (the “2018 Credit Agreement”), which provides for borrowings of up to $1.5 billion and matures on October 28, 2027.
• In May 2022, Albemarle issued $1.7 billion of senior notes pursuant to an underwritten public offering. The proceeds from this issuance were used to redeem the 4.15% Senior Notes due in 2024 (the “2024 Notes”), repay the balance of commercial paper outstanding and for general corporate purposes.
• On February 8, 2021, the company has completed an underwritten public offering of 8,496,773 shares of their common stock at a price to the public of $153.00 per share. Total gross profit from this operation was approximately $1.5 billion.
• Capital expenditure of the company was $1.3 billion for the year ended December 31, 2022 incurred mainly for plant, machinery and equipment.

Financial Performance Highlights

Q1'23 Highlights

Albemarle Corporation has reported net sales of $2.6 billion for the first quarter of 2023, which was $1.1 billion for the first quarter of 2022, a 129% increase. Gross profit of the company is reported $1,276.54 million (49.5% margin) during the quarter as compared to $449.03 million (39.8% margin) a year earlier. Net income attributable to Albemarle Corporation is $1,238.58 million as compared to $253.28 million during the same quarter a year earlier. Diluted earnings per share was $10.51, compared to $2.15 in the first quarter of 2022.

The company has started reporting its financials with its newly realigned segments. The energy storage segment accounts for 75.3% of net sales during the quarter, specialties segment represents 16.3%, and Ketjen represents 8.4%. Adjusted EBIDTA of the company reported for the first quarter of 2023 is $1,582.88 million, to which the segments represent 88.1%, 10.2%, and 0.9%, respectively.

Annual Performance Highlights

Albemarle Corporation has reported net sales of $7,320.10 million in 2022 which was $3,327.96 million a year earlier, an increase of $3,992.14 million year over year. The increase is a result of $3.5 billion increase from favorable pricing in the Lithium segment, $698.6 million higher sales volume from the same business segment, $75.1 million decrease due to the sale of FCS business in June 2021, $177.8 million unfavorable currency translation. Gross profits of the company is $3,074.59 million (gross profit margin 42.0%) during 2022 and $997.97 (margin 30.0%) million a year earlier, and increase of $2,076.62 million. Net income attributable to Albemarle Corporation is $2,689.82 million in 2022 and $123.67 million a year earlier, an increase of $2,566.14 million. Diluted earnings per share (EPS) is $22.84 and $1.06 for the years, respectively.

Of the total net sales, the segment Lithium represents 68.4%, Bromine 19.3%, and Catalysts 12.3%. Total adjusted EBITDA is $3,475.86 million, of which 89.3% comes from the Lithium segment, 13.1% from Bromine, and 0.8% from Catalysts segment.

Cash and cash equivalents of the company were $1.5 billion at December 31, 2022 as compared to $439.3 million at December 31, 2021. Cash provided by operating
activities was $1.9 billion, and $344.3 million during the years ended December 31, 2022, and 2021, respectively. The increase was primarily due to significantly higher earnings from the Lithium and Bromine segments and higher dividends received from unconsolidated investments, primarily from the Talison joint venture. In 2022, the company has reported $1,422.65 million cash used in investing activities which was $666.59 million a year earlier. Net cash provided by financing activities during 2022 is $611.89 million as compared to $50.21 million a year earlier.

The company has reported total current assets of $5,186.92 million as on December 31, 2022, $1,993.68 million a year earlier. Total assets are $15,456.52 million and $10,974.12 million for the years, respectively. Total current liabilities for the dates are $2,741.02 million and $1,874.34 million, respectively.

Business Overview

Albemarle manages its business in three segments - Lithium, Bromine, and Catalysts. However, the company will start reporting its business segment in three new segments from the first quarter of financial year 2023 following a realignment of its business units. In August 2022, the company announced its plans to realign their Lithium and Bromine global business units into a new corporate structure. Also, the company announced to retain its catalysts business under a separate, wholly-owned subsidiary. The realignment was completed in the first quarter of 2023 and resulted into three new segments - energy storage, specialties, and Ketjen (catalysts).

Lithium Segment

This business segment develops lithium-based materials for the industries and end markets. The lithium products/compounds/derivatives include lithium carbonate, lithium hydroxide, lithium chloride, and value-added lithium specialties and reagents, including butyllithium and lithium aluminum hydride. Lithium is a key component in products and processes used in a variety of applications and industries, which include lithium batteries used in consumer electronics and electric vehicles, high performance greases, thermoplastic elastomers for car tires, rubber soles and plastic bottles, catalysts for chemical reactions, organic synthesis processes in the areas of steroid chemistry and vitamins, various life science applications, as well as intermediates in the pharmaceutical industry, among other applications. The company also develops and manufactures cesium products for the chemical and pharmaceutical industries, and zirconium, barium and titanium products for various pyrotechnical applications, including airbag initiators.

Additionally, the company also provides technical services such as handling and use of reactive lithium products, and recycling services. Major competitors of the company in lithium compounds include Sociedad Quimica y Minera de Chile S.A., Sichuan Tianqi Lithium, Jiangxi Ganfeng Lithium, Rio Tinto plc, Pilbara Minerals, Allkem, Tesla, Chengxin Lithium, Ruifu Lithium, Livent Corporation and a large number of additional Chinese companies.

Bromine Segment

This segment of Albemarle includes products used in fire safety solutions and other specialty chemicals applications. Fire safety technology of the company enables the use of plastics in high performance, high heat applications by enhancing the flame resistant properties of these materials. End market products that benefit from the company's fire safety technology include plastic enclosures for consumer electronics, printed circuit boards, wire and cable products, electrical connectors, textiles and
foam insulation. Bromine-based business of the company also includes specialty chemicals products such as elemental bromine, alkyl bromides, inorganic bromides, brominated powdered activated carbon and a number of bromine fine chemicals. These specialty products are used in chemical synthesis, oil and gas well drilling and completion fluids, mercury control, water purification, beef and poultry processing and various other industrial applications. Other specialty chemicals that the company produces include tertiary amines for surfactants, biocides, and disinfectants and sanitizers. Some of the customer of the company operates in businesses that are cyclical in nature, therefore, their demand of products from the company is also cyclical.

Significant competitors of the company in this segment are Lanxess AG, Israel Chemicals Ltd, as well as producers in India and China.

Catalysts Segment

Three main product lines of Albemarle in this segment are (a) Clean Fuels Technologies (“CFT”), which is primarily composed of hydroprocessing catalysts (“HPC”) together with isomerization and akylation catalysts; (b) fluidized catalytic cracking (“FCC”) catalysts and additives; and (c) performance catalyst solutions (“PCS”), which is primarily composed of organometallics and curatives.

The company offers a wide range of HPC products, which are applied throughout the oil refining industry. Their application enables the upgrading of oil fractions to clean
fuels and other usable oil feedstocks and products by removing sulfur, nitrogen and other impurities from the feedstock. In addition, they improve product properties by adding hydrogen and in some cases improve the performance of downstream catalysts and processes.

Albemarle provides their customers with customized FCC catalyst systems, which assist in the high yield cracking of refinery petroleum streams into derivative, higher-
value products such as transportation fuels and petrochemical feedstocks like propylene. FCC additives are used to reduce emissions of sulfur dioxide and nitrogen oxide in FCC units and to increase liquefied petroleum gas olefins yield, such as propylene, and to boost octane in gasoline.

Within the PCS product line, the company manufactures organometallic co-catalysts (e.g., aluminum, magnesium and zinc alkyls) used in the manufacture of alpha-olefins (e.g., hexene, octene, decene), polyolefins (e.g., polyethylene and polypropylene) and electronics. The curatives include a range of curing agents used in polyurethanes, epoxies and other engineered resins.

Major competitors of the company in the CFT catalysts market include Shell Catalysts & Technologies, Advanced Refining Technologies and Haldor Topsoe. Major
competitors in the FCC catalysts market include W.R. Grace & Co., BASF Corporation and China Petrochemical Corporation (Sinopec). In the PCS market, major competitors of the company include Nouryon, Lanxess AG and Arxada.

Company History