Albemarle Corporation

low lithium market pricing persist for the remainder of the year. This is largely due to our team's successful execution of measures to reduce operating and capital costs and preserve financial flexibility. For example, as of June, we achieved a 100% run rate of our $400 million cost and productivity improvement target, the high end of our initial target range. further reducing our full year 2025 expected expenditures to the range of $650 to $700 million, down about 60% versus last year. Finally, we enhanced our financial flexibility, meaning preferred shares we held for an aggregate value of $1 million. On a relative basis, we see macro conditions stabilizing. and their end markets and operations have generally followed the trajectory we expected this year. Lithium demand continues to grow strongly, with estimated global lithium consumption up about 35% year-to-date, including strong volume in stationary storage and EVs. We continue to expect the direct impacts of tariffs announced since April to be minimal in our enterprise, thanks to the exemptions and our global footprint. And finally, in the Middle East, our operations in Jordan have continued uninterrupted by the recent Iran-Israel conflict. We'll dive into these and other macro conditions later in the call. Now, I'll turn it over to Neil, who will provide more details on our financial performance and outlook considerations. I will conclude our prepared remarks with an update on our macro and market conditions, including further details on our lithium market forecast before opening the call for Q&A.

Thank you, Kent, and good morning, everyone. I will begin with a review of our second quarter financial performance on slide five. We reported second quarter net sales of $1.3 billion year over year, mainly due to lower lithium market pricing. The pricing impact was partially offset by higher volumes in energy storage and specialties. Second quarter adjusted was $336 million, also down year over year. Lower input costs and ongoing cost and productivity improvements help to mitigate the impact of lower lithium pricing and reduce pre-tax equity earnings. EBITDA improves sequentially, largely due to higher energy storage and specialty volumes and continued cost savings. Adjusted earnings per share with higher year-over-year due primarily to a prior year charge related to asset write-offs and associated consolation costs. Slide 6 highlights the drivers of our year-over-year EBITDA performance. Q2 adjusted EBITDA was down slightly due to lower lithium pricing and pre-tax equity income, mostly offset by reduced cost related to the timing of Taliesin inventory flow-through, as well as the benefits of our cost and efficiency improvements. The EBITDA impact of volumetric growth is primarily captured in the COGS impact, as our year-over-year volume growth enabled improved fixed cost absorption and reduced reliance on third-party tollers. Our SG&A costs were down more than 20% year-over-year due to our cost savings initiatives. Adjusted EBITDA increased by 5% in specialties year-over-year due to higher volume and pricing, as well as reduced costs. Corporate EBITDA increased primarily due to cost reductions and foreign exchange gains. Moving to slide seven. As always, we are providing outlook scenarios based on recently observed lithium market pricing. And on this slide, we have presented Albemarle's comprehensive company roll-up for each lithium market price scenario. All three scenarios reflect the results of assumed flat market pricing across the year in conjunction with Energy Storage's current book of business, with ranges based on expected volume and mix. Our approximately $9 per kilogram scenario is based on Q2 average market pricing. For reference, the average lithium market price year to date was also just over $9 per kilogram LCE. And if we were to assume current pricing held for the balance of the year, the price would similarly be about $9 per kilogram LCE. As you see here, we are maintaining our outlook consideration ranges. In particular, the approximately $9 per kilogram range is expected to apply assuming recent prices for the remainder of the year. We've been able to maintain our outlook ranges due to a combination of successful execution of our cost and productivity improvements, operational excellence, including energy storage project ramps, and strong first half 2025 demand from energy source contract customers. Turning to slide eight for additional outlook commentary by segment. First, in energy storage, we now expect sales volume growth on an LTE basis to be near the high end of our zero to 10% range, thanks to year-to-date record production from our integrated conversion network, plus improved mine performance at Wajana and strong performance at the Solar Yield Improvement Project. Energy storage long-term agreements continue to form in line with our forecast, and we have no significant contracts up for renewal this year. We realized a strong first half energy storage EBITDA margin of about 30 percent, thanks to lower input costs and a higher than average proportion of lithium salts sold under long-term agreements. As a result, we experienced better than expected product mix in the second quarter. Second half margin is expected to be lower due to a smaller proportion of our lithium salts sales being under long-term agreements. Also, some spodumene sales that were previously expected in June shift in July. Net-net, we continue to expect the full-year EBITDA margin to average in the mid-20% range, assuming our $9 per kilogram price scenario. In specialties, we continue to expect modest volume growth for the full year, with Q3 net sales and EBITDA projected to be similar to Q2. Finally, at Ketchin, we expect model improvements in full year 2025. We see Q4 being the strongest quarter of the year with higher volumes for both FCC and CFT. Please refer to our appendices for additional modeling considerations across the enterprise. Slide 9 highlights our strong focus on cash management actions. As a result of our commitment to effective execution and converting earnings into cash, we continue to expect full-year operating cash conversion in excess of 80%. Additionally, we now expect to achieve positive full-year 2025 free cash flow as a result of our operating cash flow generation and our reduced capital expenditure forecast, which we lower to a range of $650 to $700 million. Turning to our balance sheet and liquidity metrics on slide 10. The measures we've implemented to control costs, reduce capital spending, enhance cash conversion, and other cash actions have strengthened our financial flexibility. We ended the second quarter with available liquidity of $3.4 billion, including $1.8 billion in cash and cash equivalents, and the full $1.5 billion available under our revolver. At the end of the quarter, we closed on the redemption of our holdings of preferred equity in a WR Grace subsidiary for an aggregate value of $307 million, including $200 in cash received in June 2025. This transaction further contributed to our strong liquidity position. We continue to improve our leverage ratios, ending the quarter with a net debt to adjusted EBITDA ratio of 2.3 times, well below the covenant limit. As a result of our cash performance and liquidity strength, we intend to utilize our cash for deleveraging. Next step, we expect to repay our $440 million Euro bonds with cash on hand as those bonds mature in November. With that, I'll turn it over to Kent.

Thanks, Neal. I'd like to start by covering more details on the in-market and macro conditions, starting on slide 11. First, I will cover our JV operations in Jordan, given the recent activity in the Middle East. That business continued to operate safely and uninterrupted and even achieved record production in the second quarter. This is thanks in part to our NEBO project, which provides both financial and sustainability benefits. NEBO leverages innovative proprietary technology to recycle a coproduct stream into an additional sellable product. The result is higher volumes, lower costs, and improved energy and water efficiency. The project reached mechanical completion in March and continues to ramp on plan. Here in the United States, the O triple B was recently passed. It is a complex piece of legislation and we are actively assessing its implications to Albemarle as rulemaking continues to take shape. For example, there are several corporate tax implications that appear to be neutral to positive for Albemarle. As expected, the Act also mends certain aspects of the Inflation Reduction Act and reinforces the value of our global assets, especially lithium production in the United States and Chile.