ALB - Earnings call transcript Q4 2017

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Operator

Very good morning, ladies and gentlemen. Thank you all for joining, and welcome to the Quarter Four 2017 Albemarle Corporation Earnings Conference call. My name is Lisa, and I'll be your coordinator for today. Today's conference is being recorded. I'd now like to turn the conference over to Mr. Officer, remarks. Strategy Chief Norris, for opening Eric Please proceed.

Eric W. Norris

Albemarle's you, earnings XXXX and to Lisa, welcome fourth conference quarter Thank call.

release non-GAAP Our earnings under And press yesterday. of the the presentation were released www.albermarle.com. after you'll the Investors section find our posted on reconciliations close at market earnings website and our

are Mitchell, the Ghyoot, Crawford, and President, Specialties; Kissam, Silvio Chief President, Financial Executive Joining me Luke Chief Raphael on Officer; Catalyst; Officer; John and President, Lithium. call today Chairman Scott Tozier, Bromine

today during be made our forward-looking statements call and appendix and our the meaning this of forward-looking reconciliation posted some reminder, from in press the include the note non-operating, constitute a comments of which future statements items. the may of financial numbers Please our our to of on call. adjusted found earnings of about may the release are statements our our this Also results regarding discussed reforms measures cautionary website. laws. As non-recurring GAAP financial today about in those the and presentation, unusual language that note the both contained applies federal other same release company security that press within language to

Luke. to Now, the call I'll turn over

Luke C. Kissam

him Thanks, wish also all Eric. the to the years many forward in Matt you Juneau his and team. having best want on I look to I for thank service to of Albemarle retirement. dedicated

Lithium growth delivered XX% GBUs and by investing off increased XXXX adjusted actively of compared on Turning EBITDA strong cash, revenue our year, double-digit in the lithium. portfolio to EBITDA, our $XXX by growing to of three capped which EBITDA XXXX our the strategy and Albemarle managing The million of quarter adjusted to XX%, and XX%. long-term increased Bromine fourth in adjusted from continued or deliver again numbers. XXXX. generating EBITDA

us late grew flows of in coupled stock Chemetall Surface compared Strong with by business Our $XXX per row. to balance Treatment the dividend repurchase significant million of sheet opportunity a our adjusted XX% year the in deleveraging XXXX. sale still to the diluted of for our share XXrd the affording XXXX increase earnings enabled segment cash and a while

dividend increasing last dividend extending approved XXXX, to end the XX our the board streak a row. the of for years that increase at of stood net-debt-to-EBITDA our Just times. X.X in week, At ratio XXXX,

W.R. we announced a quarter, fourth should This contract catalysts we growth polyolefin transaction million. and will $XXX next the into additional months in to our close During financial to flexibility support to few entered Grace that and provide components our sell for business the strategies.

in the Our made and they capital deployed share $XXX our We substantial are track. with XXXX on business. in Wave spending One progress totaled our on Lithium projects, million all lion's

acquisition battery integrated In we ourselves our X of and Negra production asset Jiangli Lithium In potential La in the line business strong China our grade very Jiangxi addition, competitive advantages the to throughout and capitalize in XXXX, put position on a Chile. Lithium the business. successfully commercialized summary,

our the coming to plan future, potential to this together. look is we realize As

demand of of penetrations up high-teens and sales the expectations to light acceleration now We significant percentage for are XXXX. seeing a by EV vehicle range

tons, of That a of period. XX%. CAGR has about in to global for Our own representing result XXXX-XXXX XXX,XXX lithium EV the view XXXX would over risen market of metric penetration XX% a

volume are of requirements growth customers. already this We the our seeing reflected in

XXX,XXX which essentially capacity Wave bring tons, will In to through metric committed total additions, capacity fact, One our are XXXX.

that respect to our our us deliver remain plans, and of between we X, our currently a billion $X about Wave to Xinyu With conversion expansion carbonate include half Australia. it alone. schedule value Projects Chile; in is a La shareholders. a are accelerate in spend Negra plant China; greenfield customers, XX,XXX-metric over be critical to to now hydroxide meet for capacity ton we expect point a this spending expansion while X, on One and As the in Western to ways with to XX,XXX-metric additional of in XXXX at the ton capital investment our wave in where now expansion in consequence, needs XXXX, continuing and

scalable XX,XXX first address The site expansion. build will initially greenfield infrastructure this of phase capacities, that To tons will an would so what have of conversion metric we significant is for deliver oversold approximately on otherwise LCE in are next now the metric Wave tons which plan, accelerating XXXX, after we be an another basis position an early our X XXX,XXX decade. will

enhancement Chile clearly-identified and conversion Australia that yield technology We on growth at projects additional hard in to order that the commenced region. rock coupled have leverage in include I spending a just greenfield Atacama, the that described capacity site Wave the the capacity with further in already X in in expansion Western

sheet actions the of or XXXX. maintaining consistent we would buybacks, prospective stock essentially our Finally, as collectively opportunities investment-grade dividend. waves capital are we which growth significant in to expect new multi-year such These Mountain, around opportunities, of end are X.X pipeline. very times, in flat deployment and towards stages free assessing early other largely a and our in also cash imply compared North XXXX ratio growth Argentina; Absent M&A balance while of flexible, including in Lithium, of net-debt-to-EBITDA X Wave Carolina; Antofalla, the our end the a enabling to at resources any Kings corporate flow

We and are this our balance confident multi-year our and execute sheet. in flexibility preserve strength of capital ability the expansion to

to the I to Scott, want call capital three this important to turn Before deployment. related I points over stress

be not from our demand First, we We're only that going might out build will speculating long-term capacity business meet materialize. on to to of in the commitments customers.

increments, materialize adjust of to the pace and change giving us modulate the to flexibility in the the have ability timing so we some with of size that customers. Second, expansion our future demand

adjust Both to to the able one produce demand. the to meet strongly. outpaces are we ability that will to today Finally, extent carbonate both to hydroxide. we growing other, But have and markets be which the

over Now, the to I'll call turn Scott.

Scott A. Tozier

XXXX. and into performance going XXXX Thanks, with We Luke. ended great momentum strong

give $X.XX XX% or reported Let details. these We compared the quarter an share to per of fourth of share you for me $X.XX per adjusted earnings XXXX. increase fourth quarter, some of

All providing well, about that $X.XX of our growth. of performed businesses

year full for cost an share the of Lithium related share, contributors, taken tax largest and per reported the of Debt or adjustment $X.XX adjusted acquisition adjusted totaling tax cost accounted earnings for increase Growth were quarter and the reform. to to of and next EPS was $X.XX Bromine were XXXX, earnings growth. the in Diluted $X.XX, $X.XX discrete get to largest during restructuring For that XX%. all items integration XXXX $X.XX. fourth we per for GAAP U.S.

as of a the reported U.S. tax reform, expense paid years. for tax of U.S. income we of The our out an tax rate tax of million $XX quarter fourth balances, eight transition will a income the XXXX, benefit the result and tax provisional reduced on During million charge deferred federal tax over tax transition existing netting be to corporate for $XXX million. of a $XXX

Lithium XXXX. special and as end quarter and effective were to up at items, XX.X%. was compared business was factors non-operating to at XX% capital, catalysts at to related for pension $XXX Our XXXX the the of items, reduced sales the fourth and Lithium work. Operating of ended end growth payables working deployment in $XXX million reclassified improved cash capital our to compared to which about working of expenditures capital excluding ended business. sale. Several XXXX Net tax of assets to a was and OPEB components in third of XXXX, ramp in million, quarter increased rate, spending the XX% XXXX up when this continue Capital XXXX at capital ramping polyolefin growth, at held to reflecting support from use

$X.X also selling used margin ended sales $XXX continue compared long-term adjusted offshore of and up year $XX Hurricane completions, to of of XXX China. supply. XX%, and with was an sales Before EBITDA XXXX. consumer launch $XXX increased the XXXX the the and local securing electronics out on annual prices Lithium portion XX%. accounts PCS margins by Lithium EBITDA of results the with of XX% remind of to our and the of of business results. like a that divestiture management customers improving margins decline. by XX%. demand mid-single Solutions year reported Materials Materials to million net XX% EBITDA compared quarter Higher adjusted to high-quality clear which consecutive PCS of to the price $XX polyolefin reset healthy, million still XXXX. part to XX%, Full the with million, shortages and of year-end EBITDA now, full XXXX. market XX%. EBITDA our like deepwater to for XXXX. that of year lengthen asset business Refining and flame adjusted I note above points respectively, of Solutions. EV years growth GBU basis the $XXX and Advanced $XXX PCS Full report above oil and brine reliable, The adjusted The Refining stronger of that, our Solutions Lithium therefore EBITDA of marks fluids, to EBITDA an were EBITDA date. I'd of and effective the from as increasing compared full million earnings with EBITDA a along started to by across components will from from quarter of is year remains catalysts was flat increasing the was Bromine, strong in contributed performance, of about Harvey fourth contracted by moved production reported XX% are three I million, prices million Discussions resulting demand at be and businesses, XXXX. particularly our by down XXXX, And digits Adjusted compared and of down contract and through demand the up Advanced over by sales into margin full lithium certain adjusted with terms XXXX. X% X business closing unit In quarters with was that for Catalyst well The construction, guidance adjusted Refining million million, the trends market margins the beginning you sales as XX%, sale during adjusted $XXX in resulted key through adjusted especially XX%, treated XXXX, XXXX. from fourth $XXX sales our our retardants, driven for and products held was growth by increased XX%, impressive ended $XXX XX%, linked of division, for billion of percentage for respectively, year Volume with with plans gears year reflecting EBITDA concerns sales for increased XXXX. XX%. an million, in and would points of X%

During costs compared XXXX. Hurricane XXXX. by more heavy traditionally good in volumes impacted or America, prior segment, XXXX or flat well catalysts, in sales These HPC and volumes in relatively (XX:XX) to were than first catalysts, in offset products XXXX, volumes FCC in EBITDA timing driven lower were the catalysts, negatively higher the year. resid for strength across Adjusted Fluid by are and lower to sales during saw to adjusted product where margin higher partially half Higher margin products input up pricing were EBITDA the hydroprocessing our line HPC prominent. customer we BTO of compared max the Catalytic by logistics lower North XXXX. for as FCC for Harvey, trials customers higher propylene costs resulted in as demand Cracking, headwinds of FCC with sales was

Now, XXXX. I'll now to turn

revenue growth. reform free Luke elements impact key and business the the cover cash overall sheet. I'll of tax frame the balance flow I'll Then, of earnings and forecast our back company for on to spending turn our earnings, on First, call our to capital and

several in there certainly we at enacted XXXX. the long-term U.S. benefits tax as There is tax recently expect rates work. to components to our are effective reform, XXXX While increase to compared

Chile rates forward. bear will and income operations our in tax mining higher First, going

rate based slightly current be higher. biased finally, reform on our And jurisdictions Second, higher to our revenue push the U.S. XXXX. tax our tax slightly we projected we toward anticipate geographic to than expect understanding, domestic in mix rates

factors, XX% XX% be these items currently and our and non-operating tax approximately rate, XXXX. excluding of special effective result OPEB a pension As expect to to we in items,

exceed long-term Net capital accounted million cash other $XXX and commitments $XXX XXXX, $XXX the breakeven to expect Luke expected in acceleration ranging you resulting capital earlier generation, demand Albemarle spending between million free are customer in $XXX flow XXXX. from described, for. meets is million $XXX in an to once and to negative operations market future In have of XXXX, million cash As all factors total, in of of waves commitments. resulted million ensure customer to can

In to net in addition improved expected taxes. to from working increase and is earnings benefit growth, lower from cash the cash operations capital

Finally, exchange always is estimating foreign risk seems environment. current of even challenging global so in movements more the and the

on based to ¥XXX. and is rates, an average to rate yen guidance of XXXX of U.S. close rates euro today's Our rate exchange to U.S. exchange Japanese an average dollar $X.XX dollar FX

the I'll call Now, over turn Luke. back to

Luke C. Kissam

a Hey. Scott. lot, Thanks

Assuming the slowdown between and date XXXX. growth and catalysts and growth billion, in to another just a would forma the be to year $X.X the have results. This versus a assumes $X.X the expect diluted XX% quarter in the per $X business. from XX% half second currently we half. economy current the order sale large of adjusted XX, to to doesn't share in first the suffer pro quarterly $X million sales a a of XXXX, one can over in This March We of $X.XX. upon billion cadence polyolefin compared the closing $XXX rate EBITDA moving on of slightly result as such billion to to adjusted fluctuation significant normal HPC rates, a and based of components expect between the of XXXX on the our net earnings impact range in exchange Note businesses, that lower earnings

XXXX sales increased businesses. Turning to and compared of A to than than than XXXX. to XX% rate demand earnings worldwide, electric vehicles hybrids. margins our greater in Based plug-in with customers, strong in electric XXXX in adjusted again lithium of to X.X expect battery pure XX% sold vehicles over increase XX% each similar and XXXX. expected growth is million by our on average the growing lithium faster EBITDA hybrids from greater plug-in With global we vehicles

expected on to see We increase basis to with high-single last to overall trends by continue pricing favorable digits in percentage year. pricing relative lithium a

adjusted metric Solutions are applications. volumes inflation Performance XX,XXX which and forecasted business. for growth growth least Our tons, Refining is the to fully in expected Catalyst committed now and driven cost also Despite Solutions in are catalysts, grade includes battery by XXXX Nice Fluid on grow at in with utilization rate to anticipated our anticipated catalysts, to product demand, refinery Cracking Catalysts EBITDA digits by max are propylene forecast percentage increase the mid mix from to of increased compared benefit line. is improved XXXX. product a to high strong high-single sales basis and

with be do compared We we also by for year raw than offset Though refineries freight always, in we somewhat modest expect expect product of to results. some materials, to retardants, the year a But change these Though skewed of forecast actual in in a could Catalyst. distribution. a solid cost expected value gains as similar in trend XXXX, pronounced half performance impact in products. about growth higher in Bromine XXXX, outs Clean expect be currently flat After Fuel mix the and are Technology less last our we of stronger during XXXX the flame year. to higher XXXX towards timing more in

As in XXXX, exceeded with continues is volumes commitments deliver we certain are and In to our our case our strategy Bromine exceptional in is growth. in committed. of the derivatives XXXX. We financial our unfolding closing, fully planned. operational Lithium as Lithium,

we're the Wave X and accelerating existing increasing track, on and are projects X our projects X customers. to Wave meet Our our from Wave demand

our generate that been addition, with we In will front shareholders. see deliver us ability Specialties strong about have superior Catalyst, sheet, our the more value growth that of I generation excited in us. cash the never and in our Bromine opportunity steady the and for customers balance both gives to combined

Eric W. Norris

ready Operator, with queue we at for Please so I remind lines to to feel person But chance questions Q&A. limit before a you the queue. please follow-ups. to your to do for so, Lisa, in the are open one back per everyone free has that proceed, would everyone and get the time two

Operator

and now you. we'll Ladies conduct question-and-answer Thank gentlemen, the Certainly. session.

Okay.

Koort go question from Please the ahead. is of first Your Sachs. of line Bob Goldman

Dylan Campbell

Bob. Dylan for question. Good Hi. Campbell morning. Thanks the This for on is

BEV estimate and revised you and of On year an X.X%, respectively, outlook. Investor is Day, your last during this compared your penetration the X.X% PHEV year? XXXX current noted rates How during

John Mitchell

This Campbell. question. were is great specific a models way John. now our building It's right Hi, is model we really Yeah. – by The up by model.

battery And the XXXX, increasing at so, battery that XXXX, of we're And the we as we are looking at XX%. systems see each announced. look really in about the models side after

So, there few the six has you months. announced There in models different last, of market. know, out a is that's technologies, combination just coming been the a hundred of say, as

So, rather through really model versus XX%. a But per battery break XXXX, to you of from plug-in kilowatt vehicle the XXXX that, can hybrid I what escalating tell electric, model-by-model. split is need down giving about our you hours than you it in is

Dylan Campbell

you. margins But Okay. kind directionally bridge XXXX. us takes puts of understand be Thank Lithium? of XXXX kind or and is then, thinking whether or can I help And to mean, margins you you you for with greater which levels for than we helpful the about any below that XX%, EBITDA mentioned year-over-year be should expect above

Scott A. Tozier

Yeah. This is Scott.

above be we're we'd expect that XX%. Don't expecting So, XX%. we'll break that

in that of our what XX%. is is lower we'll part the That range right expectation again, So, now. be

Dylan Campbell

Thank you.

Operator

Thank you for your question.

of line of go the Arun Capital Markets. Please from is question next Our Viswanathan RBC ahead.

Daniel DiCicco

tons XX,XXX of demand I XX,XXX correct, then, now average was to assumes for on way And growth. maybe demand that DiCicco back that Dan Arun. I'm I taking Thank target question. another is it first average my previous mean, go your if tons penetration ask for just of one could growth. This annual to and you for of your If for XXXX Hi. XXXX, kind forecast annual like

that number or has that has accelerated So, changed? at all,

Scott A. Tozier

right. math great a And is your That's question. Yeah.

the looking our over growth suggest about about LCE – on next tons it's at XX,XXX Investor year five our and demand new XX,XXX the during year So, per over models average. Day, at years next model back five metric years the tons were incremental per metric

right by really accelerating all the OEMs. just demand new by It's a very accelerating we announcements it's I just incremental no now. And we storage curve. that's grid factors. biggest grid mention an perspective, driven a model so, almost in also the want The side have to – And that little, none, our almost model curve. really is an storage of growth one the multitude have on from

driven the system. transportation the electrification, being it's by So,

Luke C. Kissam

Yeah. would And early XXXX. that. XX,XXX. is Remember, we in clarifying If said little expected it years, it average, within add we it, to be had Luke. just this at metric I that to be I on And in the years always we'd expect closer said that comment to out that tons could XXXX Investor from the on said it lower a about increase XX,XXX by higher. so think be to the Day those And years, we'd would outer we

saying Now, that – would continue and it penetration is, you by XXXX, will the you on that look – curve. what be if rate at average we're the XX%

it look curve a will You ought a at straight as not bell line, but have out. going it

penetration, helps. our Hope but with our in said in So, accelerated year, driving Investor demand accelerated that we thereby, for consistent what last Day customers.

Daniel DiCicco

sooner? volumes have the could follow-up. guys can accelerating road? X Great. from Thank With as prices negative you. and that Wave just down potentially X your expect mean And a on investments, projects Wave we that does And impact these you a

Scott A. Tozier

to we it – always, expect XX,XXX having ton and upon online. be volume meet impact our that to That in XXXX, see will going the at net demand going as of in we it bring customers, the We're that don't with speed a Wave be see come not it. would our post-XXXX accelerated build said increments marginalize it type not able so based to slow We've it we on all it and And to demand price. will or is to customers. you that Wave before should we're I X any never Yeah. and coming online X

Daniel DiCicco

Thank Great. Very helpful. you.

Operator

for question. your you Thank

Please ahead. Our P.J. of Juvekar the go next Citi. question is of from line

P.J. Juvekar

Yes. morning. Hi. Good

Luke C. Kissam

morning. Good

P.J. Juvekar

that is XXXX. What forecast is that a loaded? Is So, have? you And is to that's up front-end the demand of guys, you cadence battery penetration the EV XX% automakers. or automakers the expect choke you battery? from reach keeping and point your the battery that? with I in mean, there in the capacity And by between forecast

John Mitchell

by and see point to there's XXXX the this going supply XXXX the our and indication Lithium choke look And to perspective, least to that demand now. we at in a the able supply to that in when feel sell supply P.J., Yeah. don't any be customers, we be product John. end meet is to demand We at is remain through period. chain balance going XX% you that from right a the that

P.J. Juvekar

is Can on back Bromine. talk the their Okay. also level leased And production. water shutdowns that Chinese up? and lot that my second of that China Was to parts? There you about question starting a environmental in related the diluted was rose

on with little going just what more these us bit this? is restarts? can give detail So, on And you a

Raphael Crawford

P.J. is Sure, This Raphael.

did shutdowns we were third in referenced, year fourth went last – as quarter that see there the the into So, quarter. of mainly you've

the It So, year. production down year-over-year was was basis. last of about overall, a second from XX% down Chinese actually half total in

the do it bromine overall actually that of quality of of production if bromine, watching from China of taken closely. there's Bromine come the some We that expected Some don't down March. by in downstream just that Bromine we're China. quality, are and were to We be brine will back for have has plants being down. know know of up the production shut action in the said, environmental But that concentration plants Most end rates gone further for the restarted.

a bit wait-and-see year. little what mode a transpires as the in to So, over we're of

supply. benefited prices our products for in from because bromine most shortage the have derivative of increased We of

P.J. Juvekar

more I want this side? not side to elemental the on clarify. and bromine is So, BFR just

Raphael Crawford

the flame It's downstream both both. retardants It's Yeah. the as the elemental on on and bromine well. side

of than P.J., well been the been has a bromine the because also, of less result So, as downstream There's higher been production downstream as shutdowns. bromine historical less price as production there's level. production elemental

has So, the of economics competitively China derivatives those in producing downstream shifted.

the effect shutdown closely. prices. with and the just as overall effect Bromine working for watch Chinese products. of well own In efficiency productivity higher does to of it's environmental So, overall, on what P.J., our And our competitiveness that business, the always competitiveness the we background both But, as plants. the that for we're

So, our as stay moves want competitive it up we in and down, markets. global to

P.J. Juvekar

Thank Okay. you.

Operator

Thank your you for question.

the Please Our next Nomura is Yefremov ahead. question from Aleksey of go line of Instinet.

Aleksey Yefremov

you. Thank also price Could everyone. for you XXXX-XXXX morning, discuss if of expectations you your price change. Good lithium could for then, XXXX? And view any offer

John Mitchell

Yeah. Sure. is This John.

can our to performance-based the going a continue So, the – a a them don't than comments, we them for to ability they expect ability mentioned think term, with on longer to we on advantage evolve was it's long-term assurance what last XXXX. that's perspective, are molecule for high-single and said you we long-term digit Albemarle us, focused price XXXX, I I'll actually put in the customers are the negative market At grow into to have agreement. And going that to previously, buying meet a demand, better years why. someone and see impact is from least, to and competitive partnerships, from their the supply, also also that's XX-plus it to system tell prepared else's. into an that supply product battery reliability going product we performance the a quality And give that battery pricing

getting bullish terms we characteristics, really significant all supporting of in you sure they when them. for those that have that fair I value at mean, of a are growth ahead look the making that we're customers we're our So,

I So, at how would term. the long of look that's kind

Aleksey Yefremov

to in Wave XXXX. rising entirely If CapEx, then, $XXX slide of CapEx understand million look And I If on just as magnitude a XXXX. would Thank One follow-up. $XXX Albemarle look cost trying you. I it's XX, I'm around overall at the about in million.

CapEx and that percent did Wave is XXXX in what any costs here? Lithium One Wave maybe also, escalation CapEx your see you X? expected dedicated your manufacturing And of X, versus Wave to So, cost

John Mitchell

to basis. Wave also development is specific tons. that's $XXX to gets XXX,XXX way the on and an the read metric $XXX metric the million, So, X X our $XXX XX tons build million The to build-out, refining XXX,XXX It to should and both is to of that on One $XXX dedicated out you capacity, million slide CapEx LCE is on – mining One the the incremental Wave additional which Wave Wave us million side. side an

Aleksey Yefremov

Okay. Thank you.

Operator

for you Thank question. your

Our is next line Bank. ahead. go question the Begleiter of from David of Please Deutsche

David I. Begleiter

Hey. it does, John, tons increase if – Luke that and XXXX, XX,XXX Negra? Good will be morning. of from La all in And that volume on running? fully plant will come fully or the out up is that sold

John Mitchell

Asia, could is China A and well. the other as Australia this out be incremental for. David, volumes John. a there of So, that's hoping minimum, metric tons of big that we're and also to portion XX,XXX that's is going some be Chile-based, but

David I. Begleiter

in terms of... And

John Mitchell

ahead. Go

David I. Begleiter

Okay. Go ahead. I'm sorry.

John Mitchell

in Negra. additional question going of capacity, some terms just still La when La out Negra room to around we I'm second there's And reached the will sold peak your be say, in

capacity of XXXX. we So, the ramping end capacity, be will to still up but full full not by we're at

David I. Begleiter

And number CapEx XXXX, good. CapEx, as on Scott, and, seeing for you, we're a similar in we should – about Very XXXX and for just XXXX? maybe think

Scott A. Tozier

that positive strategic as well, go again, flexibility that actions. free cash this we growth flow expectation. our balance expecting may of flat the in It at right That's contributing the up implications kind cash earnings we'd while we're our with in take initiatives to I other expect year, vary that we're free timeframe slightly down negative more look And to as expecting from that the But flow sheet on now. that's to range slightly company, or of that.

David I. Begleiter

you. Thank

Operator

question. your for you Thank

Kevin Please go next Our ahead. the question Vertical of is from Partners. of McCarthy Research line

Kevin W. McCarthy

contract Yes. Good average morning. would you in versus pricing. movements on Just wondering contribution on market existing levels forecast your much high-single regard prospective uplift year? price XXXX, price how from to of that a comment price effects weighted last in of digit contracts With is finished where your roll-through

Luke C. Kissam

our that on XX% that is of that assume sulfate our lot can of you volume volume agreements on majority based the of lot more the agreements. the is long-term long-term that on have Well, of or is price than we a because a movement based

I So, we're the good is part that with majority a of a agreements long-term or that agreements assumption our pricing embedded a of think getting our is long-term customers. in

all can probably that's think I pricing. say about I

Kevin W. McCarthy

then, you that me is I'm committed you is made comment wondered just Luke, a XXXX. about fully aggregate your I comment commitment if what supply I think through lithium volume could wrong correct And on that. But that kilotons? Please Okay. and if in

Luke C. Kissam

we is look what at we'll mean, it, Well, you bring I said if online.

be to tons by XXX,XXX an at metric on expect LCE basis XXXX. We

we that out, we so, project and to in we'll XXXX. bringing meet might in orders. not spending XXX,XXX And XXXX expanding the we're capital run capital last at and customer because ramping this up we're But be as this build online

going be should we you bring it. essentially it could when bring out have online. it So, online. We place we anticipation We're to sold when

Kevin W. McCarthy

Okay. Thank you much. very

Operator

Thanks for your question.

of Vincent next Stanley. is Andrews Our Morgan ahead. from question Please go

Vincent Stephen Andrews

through don't that also impact negative not the be you you very which mean want in balance market that balance you price. to saw that you Thank your it I Did that what thereafter? heard much. you And I – in see said XXXX. any earlier you was to to clarify from comments just say might you

clarify understand just those I just sure make you could you wondered all we to So, if things mean. that what

Luke C. Kissam

will it XXXX. we'd we we the look be did have was balance it question Vincent, – think and at in XXXX, how we through Yeah. said do through

look an So, imply that to mean if will or we oversupply there an undersupply not you XXXX. be after did out,

volume going the that that under it. read don't existing from volume allow contracts. place able be please to long-term bring agreements us our into this confidence have online our to we're our perspective, Again, and to that So,

So, if you look when to the it, remain going we the – at And is that's supply is believe what tight. market chain we that look and saying.

If at term into you customers even agreements long-term are they do, look willing about have our what agreements. to and talking longer entered

want comfort that So, the supply. the – of customers reliable our

in believe want the trying press and bring they electric you've directly in about If supply the tells lithium, that the go the going makers OEMs tight, security they automakers articles that automobile grab read to to online. vehicles to be to need the you to their that is able market the the be and

customers is chain that and what tight this remain we what supply are the believe market what is for us, foreseeable to going telling the us telling So, the is future.

Vincent Stephen Andrews

you Thank clarification. that Okay. for

side view of, is next going EV and equation? your just out of Not years, few with XXXX the it a your on, follow-up, demand forecast. over as the supply sort the Just match what may be up lithium to to

Luke C. Kissam

gas There's and there going supply. supply bring a out not of going whole on Yeah. who's bring to to about who's host on

this in volume. bought delayed. look have I been if also have steady happened projects. come of lower cost, what think and higher at have XXXX, in on that, has been Projects since a a we there's at Projects delay projects business you come a

the with you business balance OEMs So, believe they to we to I in believe online metric supply. us we'll I to those think, customers. able our supply side, to capacity be point slow think point be it if relative or will that down we this for again the in that, modulated when supply you we're needs standpoint, and we that doing, tells extended be what will meet time. this look going also, when those again, to stay ton from are the of XX,XXX to agreements, the I'd period of at and long-term in chain what look speed increments out up can the able And point our out bring I also

Vincent Stephen Andrews

I Okay. it. appreciate very you Thank much. really

Luke C. Kissam

You bet.

Operator

your for you Thank question.

Please of Global Harrison, line from Mike Our the Securities. go next question Seaport is ahead.

Michael Joseph Harrison

Hi. Good morning.

modulate following years are to you give increased more maybe you your making. responsive Just timing giving size Can obviously, a toward much a or two projects requirements? lot guys spending on last is the of of in the be more of here How projects the comment the your kind the so can the to being more dedicated the of more these optionality capacity these of mean, addition. terms in little bit of just to color? lithium three customer I ability about up there that you

Luke C. Kissam

let would example. Pemberton. very an the So, me Wave give One, I you low on of exception And say, with

permits ton metric If to to a going we're for going build met plant. that tons. – Pemberton be of tons going XXX,XXX build we're in for only XX,XXX We're capacity, bring the going plant. incremental to not XX,XXX applied tons five you, We're are but to we've XXX,XXX met

for Western tons, initial sorry, we'll I Pemberton an is metric infrastructure, I'm Pemberton. then we'll plants. XX,XXX So, infrastructure XXX,XXX in But and on build And build operating the said Australia.

So, to basis that just rapid we – a plant if John? than one to us time. were XX,XXX met more we module, at believe give the then a the met tons out build will that trying XXX,XXX the everything need format, pop ton on we

John Mitchell

about couple we of keep Thanks, supply. Luke. talk points mind in A to when

what And product. automobile that look an are different have a can end to have customer the molecules purchase. to You they and that is looking warranty withstand supply different actually It quality really has the standard XX-year and a in at as specification. it's performance

discussions that, be be supply for need And capacity producers that we so, And our the together, in into long-term level the. that's it's their XXXX. for coming we're battery coming And going place of they OEMs. on form We today a the we to materials from the today have demand in have we that comfort can of going customers, customers, the world. right online, post right as right perspective, entering going why to and the are and so to We're grow leading the with ensure they online that commitments meet the capacity bring capacity that's a that's sold.

Michael Joseph Harrison

wanting is or longer-term mentioned growing going more using also would that needs. knowing optionality of those exactly customers are customer Or customers slower to they're technology be for timeframe? time? You around just some where what aren't some carbonate maintain particular over the be Is hydroxide of a of sure maybe to that you an type producing not going whether situation or faster that it by which be issue to

John Mitchell

with So, model the to Those models a on announcements. are five-year OEMs cycle. tend different battery survive makers working

go at – couple a and and chemistry least So, sustained to that's period. they they models over know battery year the into going it's the

the they provide Over them long-term the their if the that is long in But operations all OEM. term, the customers I'm as have talking necessary so performance with we decade to of to molecules they to battery or us, can planning, more, going there could be be work for chemistry changes which product. that with our we change the need so to tailored the chemistry battery, spec our that of meet change us modify they work can in need

mean, market. a this it's a the the supply why mistake dynamics is supply is So, I fairly in this chain and to complex oversimplify –

Michael Joseph Harrison

All much. very right. Thanks

Operator

question. your for Thanks

ahead. of Please Longbow next of line Silversteyn Dmitry is from Research. Our question go the

Dmitry Silversteyn

my guys. question death question. seems to to for taking market morning, the Good do me Since lithium Thanks be here, on typical bromine. let beat my

flattish bit And an of good, still – end You've perhaps can Chinese good pretty offset Is upside know pricing coming sort you that and any EBITDA to from had flame XXXX? in of and referring reduction demand capacity retardants that. the expected strong behind a to be to the environment your Chinese price the conversely, XXXX. of little the in March? perhaps there we if for of in were You chance that reversing is costs is realization input help of online capacity you it there XXXX? or some higher talked by guidance back provide And about

Raphael Crawford

Raphael. Dmitry, this is

in XXXX, back to XXXX. able volume characterized where year is for in volume pieces at that to We'll of – that XXXX the prices from see think It's the be the China. large duration what today. watching slips does what in you've we have it I been it into it going I That of well. does of and higher possible half think lock pricing our being said,

of So, those raw higher year the price the costs the that for the to increases offset through on that we see enter freight higher pricing. what year, back comes to we're expect in hopeful carry expecting costs, year. We're global the see material We'll how we maintain. throughout would in happens and second would average strong China that higher not after to we're with that counting China, what but production summer pricing the does half it

this P.J. how an to we I can always we're maintain question, business. manage our our when business As efficiency of standpoint asked from of earnings sort mentioned, the quality for looking

preparing but offset hoping a So, pricing, decrease ourselves performance. we're that for in operating higher with to

Dmitry Silversteyn

Got it.

your would question then, And second my you. Thank – Catalyst switching to business. Okay.

the XXXX mentioned You you're market a whatever, HPC part mix heavy the results versus of in for in that little bit the a of better business, or XXXX. oil resid in looking in

kind of growing a a Now, mix was understanding the you, heavy the is nicely the of business oil for bottom barrel my which lower was resid, business.

and mix improve does a in it margin the to better mean slowing for higher expect XXXX, in that's down you're resid you faster be or of else therefore So, the fact that maintaining oil growing that heavy you? contribution going growth to and something mix that

Silvio Ghyoot

is This of morning. a Good lot Silvio. hear questions. Again. did I

of a on globally, let all First of crude or through an of cheaper. of positive. FCC somewhat resid of matter it's or the be all, The me oil average the keeps the out resid resid amongst on conversion just And through growth whether is the barrel. more growing. user It's HPC, getting

growing of angle to HPC resids, So, from distillates and bigger FCC, our looking Taking a that the to mix resid from the you'll the to VGOs see to material. resid amount processing plays that simple the for be of it is is up. (XX:XX) the well valid that being needs for everybody for amount the products dug the portfolio. being And more is the resid the treated same conversion and of reason processed of

still trying we're we're from still primarily resid starting up. feet So, on focusing – petrochemicals making

Luke C. Kissam

Luke. But hey, – This is Dmitry.

the some past, on those that's that think I when bump. there expecting HPC. good selling of a on which also a And HPC, are this be what is that from the specialty time specialty year. specific we'll we've you got that to time fact a we're in know, catalysts catalysts we as in volume And have XXXX value, higher good issue – we get in

Okay?

Dmitry Silversteyn

it. Got

Okay.

some sales, higher-value of question of it's product Resid your the a sales. specialty of just timing So, it's of down slowing a not question

Luke C. Kissam

That's the way it. to at look

got have for year. higher in about that XXXX year, This last we've the sales We that think higher catalyst didn't some sales. of value the slate. So,

Dmitry Silversteyn

Got much. it, Luke. Thank very you

Luke C. Kissam

You bet.

Operator

for question. Thanks your

next Our ahead. of Sison Mike is from go question line the KeyBanc. of Please

Michael J. Sison

and of much come and demand China, thought will XXXX. and that need forecast such? and When supply remain majors from kind think the much the miners and will XXXX you supply of that would how to balanced, Hey, guys. of through how supply about Nice from junior you your come end

John Mitchell

to building to the capacity So, try always and feet when I this is to for our commitments our OEMs. the myself my I future, in they're think they're put – John like making seat the of – customer,

operating I think to wherewithal substantial they financial to has a technical supply able want rely the on company wherewithal, the that them. wherewithal, to be the

battery to that a sitting going other I sets market. want personally, provide time. that those come able to companies skill So, in the the role capability, Not if but are a at significant right that capacity to and think grow to online, molecule won't and I'm major have I financial on strength be the say me producers that company, rely the I me play the to with think right in

Michael J. Sison

think you give Thanks. the long-term levels? of at by be. kind you a of when And XXXX then, the more up be and than Right. maybe it it what running the that earnings point? us think will Lithium, would first potential double? Luke, curious Would Just feel about getting Would can you double for capacity for where wave current from EBITDA

Luke C. Kissam

volume Yeah. it and with we XX%-plus roll I roll the I least a X out at XXX,XXX at would we would look think that's metric you be that at where – I and at think margin if look today you just that and our where somewhere XX% are margin tons, minimum. mean, you have times out

Michael J. Sison

you. Thank Right.

Operator

for your question. Thanks

is the line ahead. of Rusch Oppenheimer. go question next Our Colin from of Please

Colin Rusch

auto for how battery as OEMs? these well geographic much. versus about the them talk as guys from of a you from OEMs Thanks mix a little are perspective, commitments customer so Can longer-term many bit

John Mitchell

the the we diversifying see assumption Europe, customers OEMs are and to are that's that supply the These able that launches. Asian-based. to Hi. rely battery names expect and into battery most going their basket new that the on also make these the and leading right the of global them Asia, And technology the cathode really John. battery into the you of in that in Korea are the can basket. produced now. but the center are space. Since cathode can the be ones Over industry and the The have and to Japan, of is that of time, batteries current space. up This advance most the China, the – make really in the Americas we you model are are the heart

Colin Rusch

now diesel initial then activity seeing Stuttgart German Okay. in diesel to the this to from recent any vehicles. able are Great. you courts ruling ban ban are Are vehicles And accelerating allow cities ends Dusseldorf that and high seeing to you in and and this up Europe. production we any point base and customer think PHEV at that from EV demand potentially response some decision? from the

John Mitchell

of climate the the of I one and still mayors of world, leaders is independence. And the And actions. health a those themes across you different mean, resonate of leaders world city and leaders there momentum renewable urban transportation see have, many to energy and world to electrify crisis lot rationale and macro over attacking and the over more we're of taking change seeing state cities aggressive and heavily, attacking energy. that the all cities, the pollution system countries governors take or steps shift and states provinces in

just not it's So, it's happening those stories, everywhere.

Colin Rusch

Great. Thanks so much.

Operator

Thank you question. your for

go of Please ahead. question next from Jackson Capital Markets. line BMO Our is the of Joel

Robin Fiedler

quotas extraction risk there Hi. change? This from Robin receive upcoming Joel. increased this you to government a for Is expect guys is the on to Thanks. considering When do the Corfo?

John Mitchell

is This John. Hi.

process and to great getting too they much in for sense Chilean the the time, government. quota. We with additional Corfo with Chile. through State we're relationship of the negotiations documents some highly just It that have order takes the going following These optimistic come the a have all and just makes and the

of able natural technology a State to are community. value and ground. just yield We pumping resource Chile for not additional out using any and the generate We're the be for of more the to improve the

the I papers for And of It get little is mean just a in time line. really. bit takes to no-brainer, a us so, this

here good we'll hopefully, some there. with So, back news be shortly

Robin Fiedler

between expansion, Antofalla? Mountain and Wave just X And is just on Thanks. lastly, Okay. there Kings a priority

John Mitchell

quantitatively the getting get look we and returns that Yeah. and there. priority be assessing you when at look that, of ease We're the still and, you resource the when will the qualitatively,

So, yet. but haven't assessment we it's a finished combination that

Robin Fiedler

Great. Okay. guys. you, Thank

Operator

you Thank for your question.

Our Please next of from John is question ahead. line go UBS. of the Roberts

John Roberts

so the to you you that's Do of way Thanks. target Luke, characterize lithium. going you're industry more to to growth the know XX% it's exactly growth have on competitors to exactly in right think be the you what Do of you your still think do? a signal target? need do them competitor important you going, you're flexible more so depending plans? where Or

Luke C. Kissam

Yeah.

have now as back growth out growth we a we laid a we at looking XXXX. that lower whenever so much expectation target think I the were could through through

goal most lithium Our the to be world. in profitable business the is

understands the that everybody drives at valuation a the XX% So, of not to and value of we make We're to shareholders be our so expense meet we got going that chase demands the to just we're in it our that customers, sure the have want to do to the company of not of we're balance going company of stakeholders. sheet for able and for can way we to the volume. all volume the growth. chase the say going We

company magic other the there's out in lithium the world. profitable So, number most to no than be there

John Roberts

just And did like CapEx sale Okay. does the likelihood the of acceleration then, you with in increase another asset Catalyst?

Luke C. Kissam

drive we're flexibility understand that. to looking balance our it. the the certainly have sheet, we how that, always have need at portfolio we don't shareholder do at look do we to value. you If Should But our can to

or think we be it. the it able to term do in to But if can no have short, value, to objectives, we we need something okay? we'll long to shareholder our So, drive divest do achieve medium

John Roberts

you. Thank

Operator

ladies you for Mr. have I remarks. and gentlemen, That's will you. Norris it we for Thank hand for Okay. Eric Thank closing back to now time all your question.

Eric W. Norris

just for discussions Thank of today. can the top quarter. Albemarle their interest end further hour. we in and hit you. sorry call. thank to I follow-ups I'm throughout everyone of forward We the look Lisa, the we've want balance to the the And, now

Operator

and Thank conference today's call. that gentlemen, concludes you. Ladies

Have you. a Thank You may day. now lines. your great disconnect

Albemarle (ALB) 28 Feb 182017 Q4 Earnings call transcript