Albemarle Corporation

Good day, ladies and gentlemen, and welcome to the Q4 2018 Albemarle Corporation Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will be given at that time. If anyone should require assistance during the conference, please press star then zero on your touchtone telephone. As a reminder, this conference may be recorded. I would now like to introduce your host for today's conference, Mr. David Ryan, Vice President, corporate strategy, and investor relations. Sir, please go ahead.

Thank you, and welcome to Albemarle's fourth quarter 2018 earnings conference call. Our earnings were released after the close of the market yesterday, and you'll find our press release, earnings presentation, and non-GAAP reconciliations posted on our website under the investors section at www.albemarle.com. Joining me on the call today are Luke Kassam, Chief Executive Officer of Scott Tozier, Chief Financial Officer, Raphael Crawford, President Catalyst, Netha Johnson, President Romain Specialties, and Eric Norris, President Lithium. As a reminder, some of the statements made during this conference call, including our outlook, expected company performance, production volumes, expansion projects, and our proposed lithium hydroxide joint venture may constitute forward-looking statements within the meaning of federal securities laws. Please note the cautionary language about forward-looking statements contained in our press release. That same language applies to this call. Please also note that some of our comments today refer to financial measures that are not prepared in accordance with GAAP. A reconciliation of these measures to GAAP financial measures can be found in our earnings release and the appendix of our earnings presentation, both of which are posted on our website. Before I turn the call over to Luke, I would like to remind you that we closed on the divestiture of our polyolefins catalysts and components business on April 3rd, 2018. This business was part of our reported results in the catalyst segment. For simplicity and comparison of our results and guidance for 2019, all adjusted results and comparisons will be stated on a pro forma basis, excluding results from that divestiture. Please see our earnings presentation for more information on these excluded results. Now I will turn the call over to Luke.

Hey, thanks, Dave. The fourth quarter marks our ninth consecutive quarter of year-over-year EBITDA growth, ending what was the most profitable year in the history of Albemarle. In 2018, net sales were up 13%, adjusted EBITDA up 17%, and adjusted EPS up 23% versus the prior year on a pro forma basis. All of our reported segments contributing with each delivering double-digit adjusted EBITDA growth on a percentage basis. And our EBITDA margin for the year was right at 30%, highlighting the quality of our businesses. 2018 was also another step forward in the four-pronged strategy that we laid out at our 2017 investor day. As you can see on pages 5 and 6 of our earnings presentation, we continued to make progress in each of our focus areas. Lithium delivered 19% year-over-year adjusted EBITDA growth in 2018, and our major capital investments in lithium remain on track to ensure that growth continues well into the future. We addressed some debital nexus during the year and were able to operate near nameplate rates by year-end. In 2019, we expect to produce close to 40,000 metric tons of lithium carbonate in La Negra in spite of the significant rain event in the Salar de Atacama in January and February of this year that will cost us about 3,000 metric tons of production in 2019, all of which will occur in the first half. La Negra 3 and 4... which will increase lithium carbonate capacity in Chile to a total of 85,000 metric tons, remains on track to begin commissioning in 2020. In Xinyu, China, we achieved mechanical completion and started commissioning activities of the 20,000 metric ton lithium hydroxide expansion, taking our total China capacity to 35,000 metric tons annually. Earlier this year, we shipped battery-grade qualification samples from Xenu, and that team has exceeded each commissioning milestone to date. While it's still early, we expect this site to meet its production goals for 2019. In January, we began the site work related to the lithium hydroxide complex in Kemerton, Western Australia. This complex... which should be the largest lithium hydroxide complex in the world when fully built out, will use spodumene concentrate from Taliesin as a feedstock. The first phase of the complex will be three trains of 20,000 to 25,000 metric tons capacity each, with the ability to add two additional trains over time if market demands require such additional capacity. The commissioning of this site is expected to start in stages during the second half of 2021 and continuing into 2022. Finally, the expansion of Taliesin, our spodumene joint venture in Greenbushes, Australia, remains on schedule to be commissioned in the second quarter of 2019. That expansion will result in a total production of about 160,000 metric tons on an LCE four-year run rate basis with Albemarle's annual share being 80,000 metric tons on an LCE basis. Each of our other businesses maximized their returns in 2018. Bromine and Catalyst delivered double-digit percent year-on-year adjusted EBITDA growth on a pro forma basis and provided the cash flow needed to fund the capital in lithium. The tetrabrome expansion, which came online at JBC mid-year in 2018, provides low-cost production flexibility between our JBC and Magnolia sites. This expansion will also enable us to manage bromine allocation and derivative production more efficiently and profitably. Additionally, on January 1, we successfully implemented the first of four deployments of a new global ERP platform. This platform will be fully implemented by year-end and will give us the tools to be much more efficient and effective in our end-to-end business processes. We continued to assess our portfolio of business and other resource opportunities. In April, we closed on the sale of our polyolefin catalyst and components business to WR Grace. In December, we exercised an $18 million option to acquire 100% ownership of a lithium brine resource in Antofaya, Argentina. We believe this asset has the potential to be the largest lithium resource in Argentina. We also completed... a drilling program at our hard rock site in Kings Mountain, North Carolina, to allow us to more fully characterize that opportunity. Both of these assets will be kept available for development in the future based upon market demand. Also in December, we signed a definitive agreement to form a lithium hydroxide joint venture with Mineral Resources Limited. We made the necessary regulatory filings, and pending those approvals, expect to close the transaction in the second half of 2019. This transaction will combine the mining and operational expertise of MRL with our lithium hydroxide production and marketing expertise. Albemarle will have exclusive marketing rights for all spodumene and lithium hydroxide produced by the joint venture. This will allow Albemarle to continue to support our customers' growth under our long-term agreements with increased volumes, and provides for an effective channel to market for this capacity addition. Finally, in 2008, we stayed committed to our disciplined capital allocation strategy. We increased our dividend to $145 million, repurchased a half a billion dollars worth of stock, invested $700 million in CapEx, primarily in pursuit of our lithium growth plan and still completed the year with a net debt to EBITDA ratio of 1.2 times. With that, I'll turn the call over to Scott.