Albemarle Corporation

Ladies and gentlemen, thank you for standing by, and welcome to the Q2 2020 Albemarle Corporation Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference to your speaker today, Meredith Bandy, VP of Investor Relations and Sustainability. Please go ahead, ma'am.

All right. Thank you, Joelle. Thanks, everyone, and welcome to Albemarle's second quarter 2020 earnings conference call. Our earnings were released after the close yesterday, and you'll find our press release, presentation, and non-GAAP reconciliations posted to our website under the Investor Relations section at albemarle.com. Joining me on the call today are Kent Masters, Chief Executive Officer, and Scott Tozier, Chief Financial Officer, Raphael Crawford, President Catalyst, Netha Johnson, President Bromine Specialties, and Eric Norris, President Lithium, are also available for Q&A. As a reminder, some of the statements made during this conference call, including our outlook, expected company performance, expected impacts of the COVID-19 pandemic, and proposed expansion plans, may constitute forward-looking statements within the meeting of federal securities laws. Note that the cautionary language about forward-looking statements is contained on our press release, and 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. And with that, I'll turn it over to Kent.

Thank you, Meredith, and good morning, everyone. On today's call, I will cover a high-level overview of the current environment, give an update on our strategy, and highlight some of the actions we're taking to improve the sustainability of our business. Scott will then review second quarter financials, provide updates on our balance sheet and cost-saving initiatives, and review our outlook. I want to reaffirm that the safety and welfare of our people is our highest priority at Albemarle. Our core values always define how we operate, but even more so in the difficult situations we face today. During the pandemic, we have been able to continue to operate because we care about the welfare of each other. We humbly acknowledge that this crisis is not about us, but about everyone, and we show integrity by doing the right thing. Thankfully, the pandemic has not materially impacted our operations to date. I deeply appreciate the courage and continued support of the frontline essential workers in our communities and our dedicated Albemarle employees who continue to ensure safe operations at our facilities and offices worldwide. At this point in time, we have had relatively few diagnosed individuals out of our more than 5,600 global employees. Using our exposure protocol, we have traced the contact path for any confirmed case among employees and have isolated colleagues as needed. We are staying in close contact with impacted employees to monitor their welfare. We are grateful that previously diagnosed employees have recovered or are recovering as expected. In areas where we are seeing unfavorable trends, such as Chile and parts of the U.S., we are extending work-from-home requirements for nonessential workers and working closely with our manufacturing sites to ensure safe operations can continue. At many of our locations, nonessential employees have returned to work. We continue to be in close contact with site teams to support them in a healthy and safe return process. Our global cross-functional COVID response team continues to meet weekly to mitigate the impact to our operations and manage the impacts to customer demand. Turning to recent results, yesterday we released second quarter financials, including net income of $86 million, or 80 cents per share, and adjusted EBITDA of $185 million, down 29 percent from prior year. However, I'm pleased to say that these results were at the high end of our previous outlook, thanks to better than expected performance in lithium and in bromine. Our primary capital priorities continue to be paying dividends to shareholders, preserving our investment-grade credit rating, and maintaining our long-term growth profile. To that end, during the quarter, we announced a dividend of 38.5 cents per share, in line with the prior quarter and up 5% from last year. We continue to maintain adequate financial flexibility with liquidity of $1.5 billion, and our previously announced cost-saving initiatives are also on track. At a high level, Albemarle's strategy has not materially changed. We will invest in and grow our lithium business, and we will fund lithium growth with cash flows from our more mature businesses. Historically, we've actively managed our portfolio to generate shareholder value and will continue to do so. We will also maintain a disciplined approach to capital allocation. The difference is that the COVID-19 pandemic has pushed lithium growth out by at least one year, while also impacting near-term cash flow from our other businesses. Our response is to broaden and accelerate our focus on operational discipline to continuously raise the bar on performance. and specifically manufacturing excellence to drive best-in-class cost management and product quality with a relentless focus on safety, standard work, continuous improvement, and the application of lean principles across our manufacturing operations. In business excellence, to deliver exceptional value and service to our customers and to capture profitable high-value opportunities through tailored value propositions and optimized business processes and resources. so customer-facing as well as back office, and capital project excellence, to effectively manage capacity to demand through the use of standard, reliable designs and disciplined planning and process management. We know that being profitable and doing what's right are not at odds with each other. We expect to do both well, and our sustainability framework is our guide. In terms of our people and workplace, we continue to advance and promote inclusion and diversity across our organization. Last year, we added two highly experienced female board members. Currently, 50% of our directors represent gender and racial diversity, which broadens the range of perspective, experiences, and insights we can leverage to benefit our organization. Recent events of discrimination and violence against black citizens in our communities remind us that we need to work much harder to fight racism. As a result, we've introduced a multi-pronged strategy to refocus our inclusion and diversity efforts from the bottom up as well as the top down. Current activities include the addition of a dedicated senior inclusion and diversity leader, unconscious bias training for leaders, and incorporating inclusion and diversity into the onboarding process for all new employees. We're also focused on responsible natural resource management. Water management is an important sustainability objective for Albemarle, and to continue to grow, it's imperative that we manage water efficiently. One example of this is at our facility in Magnolia, Arkansas, one of the world's largest bromine and bromine chemical sites. Magnolia uses an artificial marsh as a unique water treatment facility. We're actively collaborating, engaging with our communities. Our lithium operations at the Solarda Atacama in Chile works closely with the local community to promote environmental stewardship and foster the community's long-term development. We share a percentage of our revenue with local indigenous communities, and more than 35% of our employees in the region are indigenous. Finally, our sustainability business model helps create long-term value for all shareholders. For example, about 50% of our catalyst revenues are from products that reduce SOx and NOx emissions to produce cleaner transportation fuels. In 2019, the use of our catalysts prevented the release of about 10 million tons of sulfur into the environment. In the coming weeks, we will publish an updated sustainability report to provide increased transparency and disclosure around these and other important topics, as discussed at our Investor Day late last year. We are excited about the progress we've made on sustainability, but we also recognize that same-as-still sustainability is by its nature a long-term journey. In 2021 and beyond, our focus will shift from setting the baseline on sustainability performance to goal-setting and continuous improvement. With that as a backdrop, I'll turn it over to Scott for more detail on our recent results.