ALB - Earnings call transcript Q2 2022

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Operator

Hello, everyone, and welcome to the Q2 2022 Albemarle Corporation Earnings Conference Call. My name is Nadia, and I'll be moderating your call today. [Operator Instructions] I’ll now hand it over to your host Meredith Bandy, Vice President of Investor Relations and Sustainability to begin. Meredith, please go ahead. .

Meredith Bandy

Nadia. you, Thank to everyone, quarter earnings XXXX And Albemarle's call. conference welcome, second

to close released release yesterday, posted the were earnings albemarle.com. of section and website at Investors after presentation press Our the the market under find and earnings our you'll

today the of for Officer; Officer; Bromine; Financial Kent Masters, Crawford, and President Lithium of President available of Eric Joining and call Chief Tozier, President Scott are me also Q&A.. are on Johnson, Norris, Chief Raphael Executive Catalyst; Netha

the call. of can outlook, applies A our securities financial found non-GAAP the some within presentation. Please As press note made performance, during timing language refer language comments our I'll reminder, a of Kent. now expansion laws. measures statements that including call, measures. statements the our cautionary earnings release call our earnings constitute and about guidance, same appendix to and over turn and federal this financial some note be today the meaning to GAAP forward-looking also of company forward-looking of That our the presentation. earnings expected Please in to And release projects in statements of reconciliation the to may this contained

Kent Masters

and at update led call another we with all growth nearly the results. further allocation. ability us double current billion Bromine, year. remarks for of quarter financial Lithium advantages. strategic led sheet Meredith. operating coupled and our $X.X Thanks sales you I’ll aimed Thank our prepared strengthening to to today. generated Albemarle’s In I’ll team’s On to performance then environment our another our our an of leadership and competitive second Scott the prior quarter, sustainable to the provide inflationary capital execute second joining results, model net in long-term with and details balance strong position financial projects outlook, today’s will highlight close achievements. results quarter on and on our

supply was million our continued the prior we over trend in tight significantly $XXX Continuing the of strength the success experiencing EBITDA lithium EBITDA adjusted balances our of drove serve. year. business. prices contract The renegotiation we're in the in three quarter and Second demand times remain growth. tremendous market sales Strong markets outpacing

a again outlook free of elements outlook to the cash raising are on result, key As now the year. later we expect XXXX positive will and call. our in flow review be the Scott for that

are also We executing successfully growth our strategy.

hard we the made regarding support conversion this product Western lithium supply site lastly, Our in I plant in integrated I the to development in achieved especially our a expansion United July. want mega Australia Kemerton America. for States. Australia work North battery in their to plans teams dedication Western major and lithium and first congratulate our achieving And in western chain and an build of the This will material announcement goal.

the Scott to over through Now to walk I'll turn call financials. our

Scott Tozier

And begin everyone. Kent. slide X. Thanks, morning, on good I'll

of as XX%. volumes higher and businesses. sales our primarily the especially all end of momentum bromine in We $X.X by well in efforts across pricing to demand our our three we a of our increased is volumes and lithium diverse net generated increase year-over-year due During saw quarter, pricing billion, as for This businesses. driven strong grow approximately markets,

year. compared attributable $XXX to For million, the Albemarle $XXX income in second quarter, net was prior million to the

are all ongoing offset pressures FCS benefit margin inflationary onetime of the excluding three we and across a of year-over-year reminder, benefit of feeling the a This overall improvement net partially ago, to by million a was was EPS performance $X.XX, second for sale. included driven the related Chemistry sales of Fine quarterly strong onetime results by XXX%, the quarter the year $XXX As improvement, the sale businesses. Services.

XXX% up X, prior year, driver The an higher of in higher the $XXX slide to to primary million, and That's XXX%. lithium compared EBITDA. market driven overall contracting year-over-year. was $XXX momentum nearly was the increase adjusted million Lithium Turning second up growth by quarter was prices. strong our EBITDA efforts

cost second generated of in freight raw and pressures, volumes, quarter it in headwind XX%, of an and was driven company. offset In And reflecting EBITDA the and as for we finally, full natural greater higher volumes in conditions gas was $XX market offset than than nearly inflation. quarter more Bromine was sales material favorable the negative lithium XXXX. higher up were tight Europe raw particularly overall experienced in million the fact, by EBITDA materials. year Catalysts pricing uptick year-over-year total partially FX for pricing also an also the by and by

further in are announcement from than we X, of XX% in reflecting slide to EBITDA to to our in $XX.XX. Adjusted $X.X $X.X to of $X.X last expect expected versus increase five outlook continued are billion XXX% XX% our about a bromine. margins XXXX. EBITDA our the and billion, primarily EPS in strength about total in to is the now reflect between XXXX this late billion, up Moving expected more company May, $X.X for the to further lithium execution business improvement of times to range improve to the significantly We to is range year. be improvements Together, XXX%. year-over-year to to XXX% XXXX in and a last be sales up expected range This implies translates of billion updated company. in net XXXX That to total guidance adjusted $XX.XX

increasing $X.X by we're a sales expectations. cash updated $X.X net Additionally, margin and from to Driven operations to guidance our our range of billion. billion

as for for And drive of in guidance forward midpoint with Together, relatively we $XXX and expenditures to Security to are meet continued we if billion lithium implies assume even capital the priority investments cash the guidance them. to flow our the you positive billion work for of full approximately customer increased cash we XXXX $X.X supply demand. our with $X.X year. to our closely remains free investments. partner further our continue customers, next free maintaining growth are million We in continuing flat realized pricing remains positive to year, and expect one number generate flow

hard We meet growth accelerating those are customer to requirements. pushing

quarterly and that we Regarding split among of the indicated sales evenly last our expect call, quarters. relatively we to EBITDA, progression be results on

across relative the our continued to portfolio, underlying and Given EBITDA half in half. efforts, the momentum roughly strength our contracting higher first second expect now XXX% adjusted we be to

detail our next to by slide segment. Turning more the on for outlook

The implement variable the outlook that up QX selling to indices flowing index result continued increase contracts. price volume our expect We price is EBITDA year. as well Our no price contracts, more index referenced index of outlook realized pricing to the full to previous XXX% XXXX This the up are selling than to through note lithium price From There's to and for expected today, Albemarle’s up pricing of XXX%. XXX%. our remains prices. and in referenced our be on businesses XXX% to contracts fixed realized outlook as XXX% price assumes our reflects from contracts, outlook lithium a change is year variable year-over-year, the efforts renegotiations our approximately year-over-year. more up improved than the legacy of XX% growth And the now strong into for fourth constant average legacy market more to year be renegotiate successful significant expected of beginning quarter.

or clients we on in or tolling growth volume as year-over-year expect volumes. outlook tolling. additional to bring additional to XX% if conversion some renegotiations upside or volume assets, the range continue XX% and near additional There's to contract the of potential market downside with prices levels, material, shortfalls. new pricing conversely, potential there's remain We And with our market plus current

markets bromine, compared the to XX% of XXXX expectations with to solutions, the such we and oilfield to This guidance such as as safety electrification. services. and from fire XX% pricing continued raising full our For EBITDA strong and prior also outlook macro digitalization are improvement XX% Plus XX%. revised year-over-year in demand trends reflects range other year of end

X% growth year. We our of projects execution following to successful volumes of expect last XX% higher

pricing. outlook down below XXXX to our raw prior expected by volatility, related a certain This in particularly significant Ukraine. For Europe, catalysts, range in be full XX% and is year natural to outlook cost as to and primarily gas war materials, EBITDA the as large XX% to well to volumes sales visibility related freight, Catalysts increased higher reflects is partially of lack for pressures, offset due year-over-year. The

of Given we anticipated. to continues the the ongoing, in circumstances review and extraordinary business aggressively catalysts’ see oil longer is for higher business changes particularly taking resulting markets, is the it costs. than but and strategic The the pass-through, natural gas costs gas

have soon will As an provide we news, update. as we any

now in split lithium expected slide to negotiations, of compared and market update on our total contracts of XX ceilings and we with be outlook number lithium revenues. from price generally updated XX% reopener on a guidance, late XX% grade more to price the price month contracts Pricing repriced months. floors The our slide grade and fixed make ensure revenues every since Albemarle gives from successfully revenues, these May, Battery This is due X do comes to are these purchase from short reference preserve a expected X And contracts Legacy the investments. to XX% an contracts. portion and these or and approximately upside to reflects have for up contracts. prior current environment. in on have to segmented XXXX contract XX% orders. lag spot three normally our successful place. contracts a is battery expected XX% approach reset Turning for customers, with to last reflect the our market remaining This in growth flexibility be contracting the Of to better higher our XX% we while index allowing expected indices. to variable term of returns pricing to

lithium also tolling XX% expect Slide expected of and sales. La the volumes acquisition the expansions tolling volumes. volumetric project In we and driven are at our including XXXX, operations to some Kemerton, Qinzhou improve grade year-over-year. XX largely to and This Negra XX% as by well Our sales spodumene teams volumes delivering shows is as growth. growth technical additional

expect from we XX% driven as from forward, room of conversion volumes Greenfield the up additional assets. grow We see XXXX, volumes. year further such ramp approximately by per new Meishan for assets XXXX tolling Looking upside primarily additional in to our or to conversion

and operations financial strong ample Turning solid from to strategy. cash balance to net our us growth flexibility XX, give execute sheet our slide

cash of is $X.X our us rising This growth this we to higher the -- with to will with debt balance pricing M&A. trend leverage plenty $XXX liquidity capacity gives great value Our EBITDA accelerate approximately X.Xx is EBITDA to available volumes, term. net sheet adjusted near Current expect million shape investments in and creating of or billion. and lower in from of

of us offering a was public second we approximately rate, redeem notes, debt position quarter, portion senior debt maturity of the profile a senior of rate During XXXX. our XX% environment. against fixed used a which in at maturing buffers is which billion, impacts proceeds extended rising the of interest to total through our $X.X notes

Before to I briefly our durable and support turn the priorities allocation I capital to while market wanted call to Kent, capacities changes review building over to growth. to back our ability adapt

Maintaining remain attractive a to in base. capacity this Our Capacity second provide We Zhangjiagang’s returns unchanged, a example balance half capital bolt-on top to investment we perfect grade that to A also strengthen strategy are the remain pursuing flexibility bromine will our resource growth. significant allocation in an strategically $XXX tier and committed and fund committed to future capital financial our our acquisitions priorities the to shareholder grow allocation by key portfolio supported strong sheet at million continuously is year. priorities. of growth is acquisition of returns disciplined in maintaining optionality are assessing organically manner. and to be lithium and the expected also rating close

plan continue our also support to we to dividend. Finally,

arrangements business. on and our tolling focused and generation. include management highest growth to spending hiring, and regularly The production allocation team support reducing partnering markets, slowing levers the We market to pull we non can board capital CaPex, the if are review laser have changing durability volumes our identified discretionary needed. priorities and conditions to to adapt of accelerating shifting cash quickly demand and These

our Additionally, market through to ability our us is a is summary, to take discuss of we focus believe priced all sheet. to Albemarle’s acquisitions, operating on balance strength downturn Kent maintain In may a of going advantage to lower conditions strong, that capitalizing allow growth thanks model the next. on

Kent Masters

Scott. Thanks,

XX slide structure, inflation. how to So and let's are turn our cost managing to discuss we

structure. Our vertical and impacts access allow to for cost and us integration cost and resources avoid to the bromine lithium our of control low inflation worst

services, key material services and of shortening to way dividends. helping savings minimizing efficiencies using approximately from supply raw maximizing buying about Last from costs that have XXXX materials chain and the also to we meet value cost while year-over-year everyone of other offset improve example, XX% The fewer implemented come and it to and across supply Albemarle end, reorganized success for us routes. scheduling. implementation XX% our a cost. set from supply commitment driven half around of In as improvement. and avoidance on handling, own model from every global and Enhanced total market where individual An paying cost million about procurement below XXXX, example track to year, we've savings by suppliers allowed Cost teams, with relate lower are About shortened happen. key for this haul enterprise manage Thanks chains procurement materials realize and by logistics the capacity of target target And area by including a of includes avoidance, year a this excellence, to that half cases, actually pooling Procurement costs. costs operating efficiencies, our raw achieve For took to chain, procurement we to is equipment And cost. to team cost are increases. time, globe, our $XX it’s our the is those chain At identified includes production inflation. now and to that resilience creation make diverse reduce supply a or team's strategy function we form This new exceed XX%. in efforts our spodumene.

to is growth. structure, operating faster Our approach also the building model focused design capacity on enable discipline capabilities, and

plan lithium is capacity tons and Albemarle more investing annual Australia leading end. we the production that projects than a tons our to This As year, from Americas. around deliver including in lithium year China, to world, XXX,XXX double producer, by XX,XXX the

projects that our progressing conversion to a also capacity year are of per as a on XXX,XXX We much as portfolio can bases. grow tons XXX%

term chain largely more America transition the Europe. we can region. to near localized term, in Longer to in you projects see, Asia North a As are and Pacific the expect supply

enhance our additions our leverage capacity to Australia resource cost XX, slide to Turning significantly ability base. our in and Asia low

the facility. acquisition we've approvals In of of progress capacity, conversion terms lithium the made Qinzhou conversion on regulatory the for

meantime, half We in facility. to that this acquisition XXXX. toll we spodumene continue of to to continue close through expect second the In the

equipment As the signifies I earlier, design Kemerton meet achieved mentioned has the first This objectives. product. I important milestone that manufacturing can processes project's and

on At is year now product our of our per focus Greenfield it conversion with Our Meishan lithium well hydroxide XX,XXX plant a ton China qualifying underway. is our customers. construction expansions,

Resources mine facilities. to the stakes of we conversion ownership mines, access lithium already Mineral have Wodgina feed these our with low at Importantly, and partner Wodgina cost spodumene to our The JV well. Greenbushes restart is lithium the going by

update more information. you venture the we'll and We expand restructure we joint when continue and to agreements to negotiate MARBL have

a We at Greenbushes. have XX% stake also

Talison world. construction and chemical-grade up which venture in is or CGPX of plant broken has the two of is the best approved lithium joint CGPX, ground. The One resources ramping

it resources. presence until to to in or is intention into we lithium the advance if that's of the assets. us be of is access we spodumene with the conversion lithium best allows net case up toll conversion do long term, ramp new up. producer US to ramp assets In Albemarle resources and case, it's sales in which spodumene. If could elect some the economical will significant near global to the spodumene If Our and market. so, to world's a bridge leading

up leverage in that multi would to design, recycled positioned are more train We of Kings lithium as supply production conversion conversion to based are creates execute to leverage chain resources need significant as to a maintain local advantages enables growth of as while flexibility to mine, to in this a the build support and XX, mega mineral growth addressing our also off carbon class model fund actions year, both we've closing assets. Albemarle’s Albemarle de-risked localization thanks for reduced achieve seeking market the for battery OEMs from balance feedstock. paying and cost grade profitable commission the In a a volumetric benefits battery we America. and lithium This growth. invest best-in-class operating resource well the North our site lithium This projects. end competitive Kings to customers, handling Those significant our to we site important This to and supply chain, such, Mountain, well and our footprint. As investments bromine. in demand through flex Mountain and and expect as North ramp strong in milestones we slide tier would offer of southeast. cash build manage its This know-how localized to to plan logistics reliable demand, establish as our be growing America. and and world would well growth automotive leverage site resource growth for lithium To supply us financial now that capable top taken sheet, on

remarks. So concludes our prepared this

question, open Now, I'll ask for to the open questions. call Nadia the

Operator

Our Citi. PJ Juvekar comes Instructions] of first question [Operator from today

PJ Juvekar

you're Silver Kent, you taking volume very the need? has see? you you do you permits morning. kind what environmental same discuss on question up that community your growth site? of Peak? been impressive. the What Kings the mega your Are you can ramp of And at in today? terms with good key Yes, Can expand production engaging When Mountain steps building

Kent Masters

different two Right, so the sides slightly are scale.

important. today. process. that early is Mountain, sourced at the Peak of smaller, only but lithium Kings we're kind the mean, Silver is in in US But Mountain Kings We're expansion site, still still is is pre-feasibility. we're in so that And I significant the

So continue necessary, with to community. town doing got that a still already. understand to engaged community can the we do months do almost in we we've come quite with questions. permitting. we've of opened work done We've done drilling in been the the months year we've office meetings, Kings We've But to do in Mountain. some all make six we meetings we the of the But for process permitting, people the got not that have started early to to so lot well, resource six maybe an now of ask at and public drilling

community on. but but we're the And with there there's the on really including processes go work We So we early at permitting. do, of Mountain, lot a we'll through Kings have we engaged feasibility in confident working the study. to permitting feel get be able to that all pre- to it's

PJ Juvekar

have Great, then a you sheet. and strong balance

You positive free have cash year. this flow been

You Or some idea talked Can look would what would you looking give be you DLE? you what technologies at? us you. about of Thank at? look you at like geographies M&A. Would potentially

Kent Masters

M&A think what about I really talked well, we've always it's Yes, from standpoint. an

we so lithium direct technologies would to So assets help we technology attractive virgin a could so consider that are bolt-on part do extraction, that us we see resources. if And of that. think as seeking then we be

But our pretty build of continue. now resources we the on that. decade. end need close be to out We're we planning good past base So resource the to to

are the those think I categories. primary three So

Operator

Our next of from Christopher question Mizuho. comes Parkinson

Christopher Parkinson

taking Great, question. thank much you my so for

slide turning XX. Just to

I can to or some update have the up the of the momentum fourth half on a percent former, you a that additional on twice last just given quick still in give mean, the the renewal, so. point, guidance negotiations terms us essentially of for and quarter on raise tolling, what The are and third you contracts

be Just helpful. you. would any very that color Thank you could offer

Eric Norris

It's Chris. morning, Good Eric here.

year or been that of been this we've reopener know been years. might have to are able on that in anytime customers line from for can't new won't book to shift, to the recap we're on that We opportunities of index just projects to we've contracts has out any able And that's some seeking been renegotiate capacity was the to the two or entertain that able that foremost soon. the opened have movement opportunities, committed, year there legacy doesn't thing contracts very big anticipate businesses have higher is the our additional expiring those past reference bringing still ask don't have contracts order year discussions having up, we what the be two the in is of we've prices do, are contracts. with as whereas Most tight next describe. under fixed. in variable But So mean our who for in some thirds to I commitments we happened price,

where fixed our is margins, driven the to much some prices, movement or prices very but some on Now resets contracts, market potential on by and if remain potentially, going some of be prices few are contracts. changes the they

Christopher Parkinson

available it. you're up say, attempting Got decade. decisive the been through, of What year what better else willing to how OEMs a just seen and willing been of you market very conscientious broader has about I your just we mean, to a them? in bottleneck still you've balance the and perspective commit And versus to over the follow make there's in do terms OEMs of in you. we yes a middle grade more effort should of your versus just a as supply a also what's just let's bit or of are hydroxide. lithium little negotiations a plans? the And quick to bit in some to fully terms lock-in think that progress it that, in next help And you the reflected seems terms like the in incremental two, Thank peers. growth of from facilitate

Kent Masters

working being about capacity. customers. with We're we're our very aggressive adding And

our And at in get and investment better that they're think coming that. plans, we now. through I So you see

And when we're from we we for to execute that. customers for conversations of a to But years. working a of good we they on conversion. resource work that. And have towards with the able able, better to our period, those, come with customers the need add those having but we're about So arrangement arrangements. us. number like unique we're work We're still those kind some We're on, to but with do believe

am So the those not to customer and And over build discussions. But having. not term. base those come that say because committed serve I long to that we're again they and discussions may we're are in pass. or capacity the conversations to may we're

Scott Tozier

I what's think years, Europe. companies to just the Chris, and unique, in out with battery also looking on Out three we're are that Yes, is add speaking you towards we continents. saw as charts, different on OEMs, the

the where is bases further that's America. So south, describe in North able we're is we've where the do we to Asia. are now headed And established that. well got next can't announced And we've resource to be

we sustainability between very important that OEMs to strike generation need The going raise position these with then we're and to focused is to in where And principles battery in partnerships are not the next areas some technology for -- which we a capital. those one we're we of to dimensions. And are be and operate. going look new So technology. which par of at in the producers, localization,

our we have broader and something the customers we help look a with advance deal But would not strategic part We for forms and upfront market. in do So OEMs, capital. that of various potentially of It investment. only that's and win as agenda don't been us. discussing various a need at requirement producers, our be to can

Operator

next Begleiter David And from comes of Bank. question our Deutsche

David Begleiter

between and in index X, your pricing the contracts on slide Thank of morning. Eric, Eric. the spot pricing difference reference you you. QX. about can Good talk the for just Question

Another versus compare QX.

Eric Norris

make sure I'm I David, understand sorry, question. to your just

now You're they prices wondering the versus how back in QX. compare

-- Sorry to ask

David Begleiter

difference stock between QX? in in price index The referencing QX prices a versus differential

Eric Norris

prices enough say in sorry, disclose at give I'm in detail I China would the you that. now XXs, currently will are, by looking of know in at but even that some they're low know indices of they higher some actually spot outside But don't $XX. are China, contracts -- okay. vary, and we Oh, you the and

prices We they reasons yet we in could and are, one which to on have mix, increase index the contracts. our rising our are variable guidance not our continue is where a of pricing, based stay there

David Begleiter

can project? Understood. And any indications just on you their for project, the timing now or southeast cost give

Eric Norris

out any really not we have David, prefeasibility. given since it's yet, costs

later it's feedstock. needs going that's online, it to timing wise, tent. a With be have a when would mine, to in that the So long clearly, pole probably the in come decade the

Operator

And the UBS. goes next Specter of question to Josh

James Cannon

on hey, this Yes, is James guys, Cannon Josh. for

seems the to upgrade sale anything like And this the similarly why color Can that wondering updates dropped why Has that? improve give the the EBITDA much underlying as SCF? last through is business in earnings is? than higher to to change it the year. you on Just any

Scott Tozier

has think this the driven I big James, is that Yes, difference upgrade been purely price. by

you're And spodumene same from which So not impact seeing drag. that we're drop seeing through. a the was

last So a in drag the the spodumene earnings on price increases was our guidance.

efforts that doing, absorbing and look some of of They're tolling you didn't continue we're cash free As we're at we're actually the have before. that we flow, to growth in EBITDA the inventory some see we improvements. driven of by because the

So a as seeing result. better profile a capital working

Operator

question next our Oppenheimer. of goes And Colin to Rusch

Colin Rusch

up as just labor start little or any concerns talk a bit concerned equipment much. so you're ramp you any at around that Thanks we forward. here about you're seeing surprises in Can point, Kemerton the and this any moving about

Kent Masters

we've look, just I we first and to -- we're where month, so made just Yes, product mean, ramp last starting up.

think that. process us, it core are and quality, around were no when make key our that with really so right kind are is able and around of the chemistry I the comfortable the surprises there chemistry means we thing product to So for process

scale, big that's specifications. a purities want run to of kind big that first everything was getting our get up And and the clear. to then you that So the, milestone, hurdle just at now to it's

a that grade material in new kind is high. run of you as the So spec battery we see on very plant, continuously

that. And and to takes to takes bit a do little so get that of it to time it just volume

need up. chemistry the to will little ramp good and then about just that and process and bit to time that through about we that We be of it we It's just good need the the our plant with qualification up those So a go it's ramping very customers. have to process get we feel purities we a operating plant.

we the think, doubt. in on the still think because there. most on those with is we train issues of elements we've issues for that, train Western on saw getting had that's learnings construction We second that bit in the we've one first two. that and as the So train train past labor indicated Australia worst and the rectified There of schedule I of through still the -- are train we're it. we're but past That's big it on one stumbled a on we've we

now we're There's in in one say. and of but issues on still operating So I commissioning Western would into construction up that's degree, business facility finishing kind Australia, as just on some usual the to labor two.

Colin Rusch

so And of then think on tech would of contracting the where and discussions can that process the on about expansion, talk How philosophically facility? thinking for you're the that much. terms are thought out. you America, customers? about just taking North Thanks potential volumes off in how you to in down you prepayments the about lock-in Is something road, far that

Kent Masters

around locked models. we're having anything And people far discussions we're there. not very but not about having people, some down have we're conversations in with say, and that. we with We're not, some ideas we're Well, I would unique

Operator

Vincent to question And Stanley. our goes next Morgan of Andrews

Vincent Andrews

that percentage the I telling And in indicating out procure. mega just they a would years, lithium feedstock the your project, they like One of you take feedstock, of maybe Kent, just project, obviously, recycled have of in Thank you that or I think that the are to mega be. customers was contributor soon, thought ability to discuss would and anytime you whether indicated and mix that for some you recycled more how an morning, everyone. much curious. good when

Kent Masters

I conversation. so creating loop to years about the design mean a recycle it's part the the of big Yes, it's through in. but we a It have And it recycling, is out, system.

be that. would recycled that at can a well. that And up learn time it the our And and that we facility will build that volumes we'll that really have of optimize -- operate ultimately to but build in facility, would phases, ramp but as we time, the so think to how off we kind use lower learn we'll

design we're with that other So facilities an a and to the it's door. of we of next so have benefit that into having operating think scale trying operating get design facility plant and and ahead part the

Operator

Kevin Vertical goes to Research McCarthy next the Partners. of And question

Cory Murphy

on Cory This for morning. Kevin. good Hi,

fix versus to to versus the you And with breakdown lithium, am XX%. I pieces right? more contracts? you down back slide have grade contracts, your trying of contract of on curious fixed a XX% index contract can XX% in for from revenues. how in XX% to have to Going low you all in X index contracts? number get price heading Are you reference referenced price mind battery last Do go variable terms the quarter,

Kent Masters

And this this where talked we've is it I so the want mean, bit we're sure trying our while. said that up, go. I ends a think for a and little then not about Yes, how customers we're always we've direction to to about contract

is evolving. is So seeing how just in what the you're math that

from prices period contract as adjust. that changed we adjust we've we're that shorten they time, -- are fixed. to those trying fixed. really over so upgraded, we've But fixed remember, had not the And we've they So

third, But -- categories. in I We that I'm with gives mean, We're But we referenced getting price. of So it's know, liked don't category that want necessarily it's say driving And a out comfortable where time variable hard some it's we goes. be to customers index well. it it mix. us think quite as where flexibility. really I to we absolutely spot the are variable. our it And to thought not I kind it the to that and want not model call third don't do between a those might said have to had be a one third, turned different. I

Scott Tozier

as you other moving course, that The at of are. between indices different look piece where market the that chart is presentations

can some those that go so shifts drive as And forward. you percentages, in mix

Cory Murphy

capacity. philosophical similar you of guess maybe Thanks. payments future sort to of mentioned anybody payment about Got question with how in this the context quarter competitors offering partnership it. one Have And you terms future stick then lithium quarter- large to slide mentioned upfront volumes. want upfront approach you contract and capacity? could future receiving to you a for for approached talk similar you Or last that the quarter the of your product I of change in offering, over-quarter,

Kent Masters

not around and discussions fit to to talked I opposed not a has had Well, think been our not bit We've years about investments And time. that They having. quite with migrated that we've models That of for our us as we've philosophy and coming It's we're yet. and that. needed few for us. that pricing for we need that's work our cash to over it. tool. We've are fruition. consider those it But done It's contract unique them prepayments important about people things and a part like in relationship but to that when investments investments, relevant it's more we -- because probably for a and not still less ago, open cash. years we're we has to strategic just more for and And philosophy, today. we

Operator

question next Yefremov of KeyBanc goes the to Alex Capital And Markets.

Alex Yefremov

morning, Thank everyone. you good and

that contracts, in you Are of what's you in As kind the contracts? what widening it the your these you and lithium resign narrowing general philosophy staying you versus Is floor the ceiling range? last it? year? Are same held those towards

Kent Masters

Yes, a they but philosophy, would. are mean, I up. and well, it's going I widening

moving guess it up. not there, widening. is so our And narrowing So they're that's philosophy. definitely I

Alex Yefremov

I is guess assume fair? it moving should up. that floor the I also Is that

Kent Masters

Absolutely.

Alex Yefremov

And mostly way as half And XXXX? Wodgina, year? question is it story? Or restart second the follow this a in is up your to any on contributing results meaningful thereafter

Kent Masters

don't second is they'll I So coming the it think material. some through be Wodgina but volume it's in half, not, probably

So start impacting that'll in ‘XX.

Operator

Our comes of Markets. next Joel BMO question from Jackson Capital

Joel Jackson

gave guidance, year. On XX, your morning. volume again good you thanks, per Hi, slide

adjust maybe of kind tons to number? risk in something of much How have and that? I’ll in of So for How like you bag? much is to next Could bit get XXX,XXX the you're you something work how or ranges going the incremental that that a year up get ‘XX? maybe see for else to harder

Kent Masters

mean, it's there'll -- so volume some be So a standpoint, right, your understand tolling and Kemerton Negra volume. I question and think from I that if I ramping up La at

up be -- and producing tolling So it's the from facilities Talison. Wodgina ramping at at we'll

within pretty so And it's much control. our

one to get put those, do of even that. each don't extraordinary you the have probably anything however, it's that's to So we but categorize risk

volume. the to have the starting going ramp up plants continue have some that and we're up, La and Wodgina to We and built we're And conversion. to of product able then now Negra, volume we build it to produce before have we and just run some toll

the we So new using product we're It's that got be form. -- -- use that we've might before. tolls

-- in little that, So not risk extraordinary. bit there's not it's a but of

Scott Tozier

just component the I the add Qinzhou other Can is just acquisition.

So that. we close start to

So potential but progressing there's risks it's well. But doesn't just that again, close.

Kent Masters

Yes, no, that's right.

bigger So probably the in that's risk biggest the it. that's probably --

Joel Jackson

lot would metals question second of a be lot to be my then DoE around throwing battery loans, grants that. smaller and money days, these companies seems the to a to Okay, things of like

of talk qualify this of where bunch massive sit, could a kicker. not you from Can a You probably probably about guys money. little it's but for It's a amount nice money that? you

Kent Masters

mean, look, that's right, strategically. I we're that. Yes, It's and available on in money it's working

we're -- that can can nothing announce nothing But today. working we it. -- we're So we on

Operator

Steve Richardson of The Evercore. next question to goes

Unidentified Analyst

Steve. Hello. Sean Hi, for this is on

fall please then walk volumes year. monitoring the the COGS in back Greenbushes, how just terms of and in the the and of into Kemerton production. throughout Wodgina to how through there terms are cost Just Can are you also and returning

Kent Masters

I what we our up. That's volume built into just we Kemerton two eventually we'll run processes. will plants historically, a it's So kind to build told that kind that we that. are mean can we've that's ramping I know let's mean, in. the of matter capacity, plant planning we I on just until we've we that. years Talison. And would of that the But is and we we running planning how Wodgina about beat a Wodgina, But to get Wodgina, process today, is we full ramping was we've bring now we're on said through it of give we our we other hope of pull kind

CGPX one is is we've oh, that expansion, that's ground broken and on is So operating, that. which CGPX, the next the

on up. ramping and that's commissioning right. I up, CGPX, CGPX, we're ground We're, and broken think ramping we've we're So just the

Scott Tozier

support years. some CGPX on several and China would to the correct. That's expansion in are our capacity charts And it about. would three, in of be talk expansions of then potentially, of some material. would Canada, least come available joint you China take Further comes a And that course, MARBL we four. would on already would joint plants, the at out, be and part venture, the venture one of those pointed as that of one

Operator

next question, And Cowen. of David to our go Deckelbaum

David Deckelbaum

as earlier, discussing be all you resource eventually it. the felt Mountain another just worth my tons recycled perhaps and up conversion around Kings that. for I whether today. for Thanks feedstock capacity. that enough like site. conversation that target believe to Kent, Thank another to flex would support wanted of on was questions just to all asset I confirm to per XXX,XXX It capacity feed mega, follow for perhaps wanted up you. to a I Eric sounded the the was taking annum need

Kent Masters

we're still thinking the again, Yes, Kings at Mountain. And so make understand prefeasibility. trying it's I'm it's exactly resource and to we sure

we XXX,XXX tons plus referenced that you're Mountain to that with work that recycled the at that. material that scale with feed Kings flex steady think could you we So ultimately mega, on recite more we're doing But facility year. get that a state

David Deckelbaum

is follow market, like want XX,XXX of tons out you that views earlier Okay. are annum all, assuming And capacity XXXX. I on upside significant up you the is a XX,XXX Because toll in guess, do you conversations market? sort or how is all upside the selling there I that to how just chart then much the that the in the had, in previous spodumene like theoretically how you're could this around looks at volumetrically of capacity available current you of toll strategy volumes, of which pivot still into basically into? that guess some sort volumes, also the And just per there's that which wondering there from seems to much I levels it think but of

Kent Masters

want spodumene, strategy long strategy our talk term end Eric can a lithium a changed on convert tolling, about use, little being that we've to mean, we flexible, customers, I just the the spodumene, selling So to about but that's the and bridging salts. we're products sell they that not just more

if ground. them either operating we if than perfectly resources toll spodumene the And the mine. and and times mines -- to between lead ramp advance can't we've conversion have resource to sell have we the got we and before push get up all do let longer it plants, if capacity will typically. sale or this rather you in we'll So have available on they up we and And right decided it because we've conversion

Eric Norris

Okay, Thank so you. no. and to answer from strategy, deviation the question, there no is the

Kent Masters

Yes. That's right.

Eric Norris

no a availability operating that. volume. There's spodumene to in as to conversion capacity built there's tolling being market the question the strategy, or China without healthy about available still of from of deviation Yes, your against source

varies be by it it and these China's So year. opaque. lot projects, And can a of

get the XX% be you market, but utilized. it can sometimes a exact Sometimes to It's numbers. big XX%

is we to can market. you So that selling take that's spodumene strategy a capacity there's there do available we coming as in that tolling to assets into the out advantage now But this implies opposed on, directly that conversion to our that prefer own are and bridging fact, know we or would one of.

Operator

RBC question Our Markets. comes of Arun Capital Viswanathan from next

Arun Viswanathan

Thanks so Great. I just wanted more taking question. to I high ask question. level for guess Yes, my

where they of the noted would So into a obviously, as some $X stay downside really especially the that are, prices to these the normal? a you take Is kind vehicle? market it for the new in or lithium rises there we been you've adoption been observing, XXs the go battery XXs XXs? as your do and receive any that So Do -- is a upside down destruction of if to the demand from we new ever So curves changes back have contracts or lower present prior or some to $XX your normal? cost or to what but go obviously market results guidance also has levels? if back is levels, it

Kent Masters

that's there it's so up Right, and not it go, long pretty not will that. I is forever, price, just move to pretty move the think going oversupply, sit we not of see that and around period see long look, several disappears But to and going that that of but that may, on over like don't know then saying down, call quickly. term will out, to pretty we going probably where it we're the And being time. it market might of lithium be we time, years in that, for that because periods then periods tight confident number

move the all quite of a has going up sure to do -- time, But we cost model of long being could could. opinion into move, goes model we period it. we the needs are for over At volume know see and curve market everybody a it. It it that bit market of from pretty time. around. see you cost that Soo We the can't the guys I'm absolutely to still we're XXs to we own they're their tight XXs? going prices that today, not point? on Speakers] what But the [Multiple some to call produce we And out get move the -- to and

Scott Tozier

the I of and had battery. is costs question out as cost you the small significant, vehicle that seen know, You of past cost it part as is lithium technology. had the another the But do a you with in its over to as year. mean, pointed escalation

and density from is to But phenomenon penetration other that's comes density important materials. cost innovation and phenomenon around energy note longer more come from the out. technology the and energy raw driving think dense I innovation and it materials, lower range, doesn't

side, So nickel. solid movement That's towards and state. elaborate someday chemistries anode the the maybe potentially towards more on the that's higher movement

the are well cost of fairly again, down experience that a small price part is notwithstanding the battery. of and lithium, innovations continue those of which So the curve

Arun Viswanathan

then earlier, what Okay, that's I elaborate the helpful. if And could cost said just on curve. maybe you that

of would additions should the that how battery kind moved end? kind upper cost convert at think curve a you and are seeing has now? what of the maybe Or curve say where that as cost prices curve, the guess, take grade? is cost Should we to into to I good and about spodumene the just the use kind of the we think Now, of most yourselves? range outside of of end of you And upper

Kent Masters

think, we a as think the it volumes I over well, market to term Well, to we're get longer the -- about thinking needs time.

new So on. coming capacity

the develop technology need, that that resource, the some it And market. you to even bring is that or to about to of order quality of in the is, where

So we the don't cost publish what our of curve. view

the and up requires I'm years. talk not, our particular we're over more as it's will last about the it several from continue And volume, not view, think move market But going So to numbers. to I more up. those moved

Operator

question, next Jefferies. of to Alexander go And the Laurence

Laurence Alexander

average. business? at of center that much So into the I as margins tolling know secondly, around look the side recycling, with the margin ways of your And you flex good morning. segment opportunities How you from the significantly could And different chemical with more is to there downstream chemistry the any downstream incentive the your processing integrate way. of of knowledge your more gravity to shift the processing and or capture

Scott Tozier

Lawrence I we MRL in capacity we're MARBL as all, that would that the we the of say, into will first have our MRL, spodumene per the tolling, marketplace. market. put partner can now And So, on earlier with there's there's, from the the and coming venture joint evaluating question,

is So it the possible. guidance that here upwards that have could we flex from

And in costs things. then at your that's recycling obviously, slightly immaterial would are around our paying downstream. pricing, what current margins was Our a Lawrence because several less, sort dollar of normal question, be. scheme kilogram you're of see over But the second going fairly

our if than of the you are the what are components, it of resources mass many the of various at unit process to we throughout technologies that takes I and know do. look believe to Many we we what in in operation, operations at think lithium. and mineral that certainly we're many our now operations fact unit this looking in to we we mineral very practiced existing process do similar black company to believe, more

invest we region step just we're effort lithium, business be regionalized regional recycling region, other develop to to battery because processing And very so is. evaluating grade that will partner, and which than chain, last that just how a supply it's from

as obviously We'll of further. share develop strategy we well, we're and so that that more in in that future. details And

Operator

will for all we to I have Kent the hand remarks. questions That’s you. today. for Masters time any back Thank now closing

Kent Masters

longer projects positioned our Okay, thank on we of The you, for experiencing profitable to term. ability growth our combined all on and us. pipeline with today. Nadia. lead sustainable stakeholders drive in by in team's momentum the for call are Thank by accelerating for joining to example. I'm And for you to thank growth execute us strongly ‘XX, way and confident all sustainable a our our in participation you value

Operator

you. joining. This call. Thank all concludes you today's for Thank

You lines. now your may disconnect

Albemarle (ALB) 4 Aug 222022 Q2 Earnings call transcript