Albemarle Corporation

hello and welcome to albemarle corporation's q3 2025 earnings call i will now hand it over to meredith bandy vice president of investor relations and sustainability thank you and welcome everyone to albemarle's third quarter 2025 earnings conference call our earnings were released after market closed yesterday and you'll find the press release and earnings presentation posted to our website under the investors section at albemarle.com Joining me on the call today are Kent Masters, Chief Executive Officer, Neil Sherry, Chief Financial Officer, Mark Mummert, Chief Operations Officer, and Eric Norris, Chief Commercial Officer, are also available for Q&A. As a reminder, some of the statements made during this call, including our outlook, guidance, expected company performance, and strategic initiatives, may constitute forward-looking statements. Please note the cautionary language about forward-looking statements contained in our press release and earnings presentation, that same language also applies to this call. Please also note that some of our comments today refer to non-GAAP financial measures. Reconciliations can be found in our earnings materials. And now I'll turn the call over to Kent.

Thank you, Meredith. In the third quarter, we reported net sales of $1.3 billion, including another record production period from our integrated lithium conversion network. Adjusted EBITDA reached $226 million, representing a 7% increase as cost and efficiency improvements more than compensated for lower year-over-year lithium pricing. We generated $356 million in cash from operations during the third quarter, marking a 57% year-over-year increase driven by higher EBITDA and disciplined cash management. We are enhancing our 2025 outlook considerations. Based on our year-to-date financial performance, prevailing lithium market pricing, and stronger-than-expected energy storage sales volumes, we now anticipate full-year 2025 corporate results to be toward the upper end of the previously published $9 per kilogram scenario ranges. Overall demand for lithium remains robust, up more than 30% year-to-date, supported by the energy transition and rising global demand for electric vehicles and grid storage. Notably, global EV sales have increased 30% year-to-date, led by China and EU battery electric vehicles. Grid storage growth was even more pronounced, climbing 105% year-to-date, with strong growth across all major markets globally. Additionally, we have made significant progress implementing cost and productivity improvements while reducing capital expenditures. Capital expenditures for the year are now projected to be approximately $600 million. We expect to achieve full-year cost and productivity improvements of around $450 million, surpassing the upper limit of our initial targets. Considering these factors, we now project positive free cash flow of $300 to $400 million in 2025. Turning to slide five, recent portfolio actions further demonstrate our commitment to long-term value creation and enhanced financial flexibility. We recently announced two transactions. First, a definitive agreement with KPS Capital Partners to sell a controlling 51% stake in Ketchin's refining catalyst business. Second, an agreement to sell Ketchin's interest in the EuroCat joint venture to Oxons. Both transactions are expected to close during the first half of 2026. Together, these transactions are expected to generate approximately $660 million in pre-tax cash proceeds, giving us greater ability to deliver while also retaining exposure to future potential gains in the refining catalyst business. This new structure positions the refining catalyst business to leverage KPS's manufacturing expertise and access to capital to accelerate its growth opportunities. At the same time, we will be able to shift our attention to our core businesses, energy storage and specialties, to set Albemarle up for long-term success. This transaction reinforces our commitment to boosting shareholder value, improving financial flexibility, and maintaining Albemarle's strong competitive position. Neil will now provide additional details regarding financial performance and outlook.

Thank you, Kent, and good morning, everyone. I will begin with our financial results for the third quarter, as presented on slide six. Net sales for the quarter totaled $1.3 billion, a decrease from the prior year, primarily driven by lower lithium market prices. This decline was partially offset by higher volumes in both ketchin and energy storage. Adjusted EBITDA for the third quarter was $226 million, representing a 7% increase year-over-year. This improvement was driven by disciplined cost management and productivity actions, which more than offset lower lithium market pricing. Our adjusted EBITDA margin improved by approximately 150 basis points compared to last year. We reported a net loss of $1.72 per diluted share. Excluding charges, the largest of which was the non-cash goodwill impairment related to Ketchin, our adjusted diluted loss per share was 19 cents. Turning to slide seven, I'll cover the drivers of our adjusted EBITDA performance year over year. We saw solid growth in sales volumes in both our energy storage and Ketchin businesses. and our consistent focus on cost discipline and productivity yielded positive results. By focusing on the actions in our control, we were able to offset lower pricing for lithium and spodumene. Turning to other segments, the specialties team delivered an impressive 35% increase in adjusted EBITDA, largely due to cost improvements across the board in raw materials, manufacturing, and freight. On the corporate side, we benefited from cost savings and favorable year-over-year foreign exchange movements. Turning to slide eight. As usual, we're sharing outlook scenarios based on recently observed lithium market prices. This slide shows a full company summary for each price scenario. Our outlook ranges remain the same as last quarter, but we've updated a few key points. Specifically, we now anticipate our full year 2025 results will approach the upper end of the $9 per kilogram lithium price scenario for total company sales and EBITDA. This reflects our strong performance so far this year, including cost controls, productivity gains, and slightly better market pricing. We expect lithium market pricing to average about $9.50 per kilogram this year, based on year-to-date actuals and assuming current pricing persists for the remainder of November and December. Turning to slide 9 for additional commentary by segment. First, in energy storage, sales volume growth is expected to be up 10 percent or more year over year thanks to record integrated production, higher spodumene sales, and reduced inventories. We are seeing most of that volume upside coming from a strong demand environment in China where sales are at local market prices and not on long-term agreements. As a result, we now expect approximately 45% of our 2025 lithium salts volumes to be sold on long-term agreements with floors, primarily due to the mixed impact of stronger-than-expected volumes in China. Our long-term contracts continue to perform in line with our forecast. Q4 EBITDA for energy storage is expected to be slightly higher sequentially. First, in terms of product mix, Q4 will have a greater proportion of higher margin lithium salt sales versus spodumene sales. Second, Q4 is expected to benefit from current higher spodumene prices in JV equity earnings. In specialties, we continue to expect modest volume growth year over year. Q4 net sales are expected to be similar to Q3, but EBITDA is expected to be lower, primarily due to weaker demand in oil and gas applications. Finally, at Ketchin, we continue to expect a stronger Q4 due to higher CFT and FCC volumes. Please refer to our appendix slides for additional modeling considerations across the enterprise. Slide 10 highlights our focus on running the business efficiently and converting earnings into cash. Year-to-date through Q3, our EBITDA to operating cash flow conversion has been over 100%. In Q3, conversion was strong due mainly to inventory reductions along with a modest sequential uptick in dividends from the Taliesin joint venture. We continue to expect our full year cash conversion to average over 80%. The implication of that is that we expect Q4 conversion will be lower mainly due to the timing of interest payments and higher working capital needs from increased revenues. Our strong cash conversion performance and reduced capital expenditures forecasts mean that we now expect to be well into positive free cash flow territory this year, between $300 million and $400 million. Slide 11 provides a comprehensive overview of our cash position and capital allocation plans in the near term. We close the quarter with $1.9 billion in cash. Moving forward, we intend to repay with cash on hand our Euro bond debt that matures later this month. Based on our free cash flow outlook, we expect modestly negative free cash flow in Q4. Moving into 2026, we expect to receive approximately $660 million of gross proceeds from the two transactions related to our catch-in business. Considering these major cash items, we expect to have approximately $1.4 billion available for deployment across a set of discipline and focus priorities as shown on the slide. With that, I'll turn it back to Kent to discuss the market outlook and provide updates on our operational execution.