Albemarle Q2 2026 Earnings Call Transcript

On Thursday, Albemarle (NYSE: ALB ) discussed second-quarter financial results during its earnings call. The full transcript is provided below. APIs provide real-time access to earnings call transcripts and financial data. Visit to learn more.

7 billion, a 31% increase year over year, driven by higher pricing in Energy Storage and Specialties. Adjusted EBITDA more than doubled to $858 million, and the company generated $710 million in cash from operations with $638 million in free cash flow. The company raised its 2026 outlook for Specialty sales and EBITDA due to strong performance and reduced expected capital spending. Operational highlights included the restart of the CGP3 plant and better-than-expected production at Wodgina, offsetting impacts from a fire at Greenbushes.

Management emphasized the tight lithium market due to strong demand in electric vehicles and stationary storage, with supply lagging demand. Albemarle is advancing direct lithium extraction technology at the Salar de Atacama and exploring opportunities for growth in Australian hard rock joint ventures. The company maintained its overall 2026 outlook, expecting to perform at the high end of scenario ranges due to strong year-to-date performance. Albemarle continues to focus on operational excellence and cost efficiency, achieving $100 million in run-rate savings year to date.

Full Transcript OPERATOR Hello and welcome to Albemarle Corporation's Q2 2026 earnings call. I will now hand it over to Meredith Bandy, Vice President of Investor Relations and Sustainability. Meredith Bandy, Vice President of Investor Relations and Sustainability Thank you and welcome everyone to Albemarle's second quarter 2026 earnings conference call. com.

Joining me on the call today are Kent Masters, Chief Executive Officer, and Neil Shere, Chief Financial Officer. Mark Mummert, Chief Operations Officer, and Eric Norris, Chief Commercial Officer, are also available for Q&A. As a reminder, some of the statements made during this call, including outlook, guidance, expected company performance, and strategic initiatives, may constitute forward-looking statements. Please note the cautionary language about forward-looking statements contained in our press release and earnings presentation.

That same language applies to this call. Please also note that some of our comments today may refer to non-GAAP financial measures. You can find reconciliations in our earnings materials. And now I'll turn the call over to Kent.

Kent Masters, Chief Executive Officer Thank you, Meredith. Our strong start to 2026 continued in the second quarter supported by disciplined execution and improving conditions across our key markets. 7 billion increased 31% year over year driven by higher pricing in Energy Storage and both higher pricing and volumes in Specialties. 49%.

Importantly, we converted that performance into cash. We generated $710 million of cash from operations representing a more than 80% operating cash conversion and $638 million of free cash flow in the quarter. We are also on track to reach the high end of our $100 to $150 million full-year target for cost and productivity improvements. These results reflect a deliberate focus on operational excellence and cost discipline.

We also benefit from globally diverse and resilient key end markets. Global lithium consumption was up 45% year over year through May, tracking above our forecasted range driven by continued strength in stationary storage and improving growth in electric vehicles. Needed supply increases are coming to market slower than demand growth due to limited spodumene availability, temporary disruptions in shipments from Africa, and slower than expected ramp-up of Chinese lepidolite mines, and as a result inventories are low and the physical lithium market remains tight.

We are improving our 2026 outlook considerations including raising our Specialty sales and EBITDA outlooks due to a strong year-to-date performance and reducing expected capital spending thanks to ongoing capital efficiency efforts. Beyond our 2026 outlook, we are also advancing resource options that can support sustainable growth through the cycle. On today's call, I'll focus on our efforts at the Salar de Atacama, where we're leveraging decades of brine processing expertise to advance direct lithium extraction. We also have opportunities at our Australian hard rock joint ventures.

Wodgina is outperforming on better-than-planned ore availability and recoveries. This is helping offset the impact of a fire at Greenbushes' CGP3 plant which occurred on June 9th. CGP3 restarted on August 1st. Now I'll turn it over to Neil to discuss recent results and outlook.

I will then cover recent market trends and give more detail on our resources before we open the call for Q&A. Neil Shere, Chief Financial Officer Thank you, Kent, and good morning everyone. I'll begin with our second quarter results on slide 5. 7 billion driven by Energy Storage pricing up 73%, while Specialties pricing and volumes were up 11% and 8%, respectively.

Adjusted EBITDA for the quarter was $858 million, up 155% year over year, reflecting higher net sales and our ongoing cost and productivity improvements. Both segments contributed to this strong growth, with Energy Storage adjusted EBITDA up 229% and Specialties up 61%. 52. Turning to slide 6, I'll walk through the key drivers of our year-over-year EBITDA performance.

As I mentioned, second quarter adjusted EBITDA increased primarily due to higher pricing in both segments. Due to higher lithium pricing, our cost of goods sold reflects increased Chilean commission payments and higher-priced spodumene inventory. The impact of higher spodumene pricing is offset by increased equity income from our Talison joint venture versus the prior year. Across both segments, cost and productivity improvements helped offset raw material and supply chain cost increases related to the situation in the Middle East.

Corporate and all other reflects a reduction in adjusted EBITDA due to the Ketjen refining solutions divestiture, partially offset by favorable foreign exchange impacts. Turning to slide 7, we are maintaining our total company outlook ranges and expect to come in at the high end of the scenario ranges due to strong year-to-date performance and an increased Specialties outlook. These factors offset modestly lower expected Energy Storage sales volume due to the fire at the CGP3 plant at the Talison joint venture.

Our outlook ranges continue to reflect the expected impact of supply chain disruptions related to the situation in the Middle East, which we still estimate at approximately $70 to $90 million on an unmitigated basis for the full year. In Specialties, we are increasing our outlook due to higher pricing and volumes, which I will cover in more detail on the next slide. The Specialty segment delivered another strong quarter. Net sales were $424 million, up 20% year over year, and adjusted EBITDA was $118 million, up 61% year over year.

Adjusted EBITDA margin was 28%, up 700 basis points from the prior year period. The solid performance in the second quarter was primarily due to higher pricing and volume and favorable product mix as a result of bromine market disruptions related to the situation in the Middle East. 6 billion and adjusted EBITDA to $275 to $325 million. This increase reflects strong year-to-date performance as our teams have worked to capture the upside of increased bromine pricing while mitigating Middle East-related supply chain disruptions through proactive cost management.

Our second half outlook assumes stabilization of the bromine market as we've seen pricing normalize since reaching a peak in April, and it reflects continued uncertainty in the Middle East. As such, we expect third quarter net sales and EBITDA to be lower sequentially. Long term, we continue to see margin upside for the Specialties segment as our business and asset diversity continues to deliver positives. Specialties benefits from diverse end markets including electronics and semiconductors, building and construction, oil and gas, and pharmaceuticals.

Geographic diversity also complements the platform's end-market diversity and adds resilience against regional volatility. Turning to Energy Storage on slide 9, net sales increased 78% year over year and adjusted EBITDA increased 229%, both driven by higher pricing. Second quarter sales volumes were 65,000 tons lithium carbonate equivalent, or LCE, with an average realized price of approximately $20 per kg. LCE realized price was approximately 15% below market pricing due to the dilutive impact of spodumene sales on an LCE basis and the three-month pricing lag for our long-term agreements.

See slide 24 in the appendix for additional information. For the third quarter, net sales and adjusted EBITDA are expected to decrease sequentially due to lower sales volumes and assuming that pricing is lower sequentially for the quarter as it stands today. Additionally, Energy Storage margins are expected to decrease sequentially due to the timing of spodumene inventories and also assuming that today's pricing continues for the quarter. As a reminder, it takes approximately four months to ship and process spodumene purchased from the Talison joint venture.

In a rising price environment, this creates a margin tailwind as we process lower-cost inventory while benefiting from higher selling prices. In a declining price environment, that timing effect reverses and is dilutive to margins. For the full year, Energy Storage sales volumes are now expected to be in the range of 225,000 to 235,000 tons LCE, or flat to down 4% year over year. This reflects the delay in the CGP3 ramp following the June 9 fire, partially offset by better-than-planned production at Wodgina.

As Kent mentioned, CGP3 restarted last weekend and is now ramping back up. Turning to slide 10, we continue to focus on converting earnings into cash, as evidenced by our performance over the last three years. First half operating cash flow conversion is at the high end of our long-term target range of 60% to 70%. In the second quarter we benefited from increased Talison dividends and non-recurring working capital reductions driven by favorable inventory and accounts receivable.

5 million of deferred revenue related to our 2025 customer prepayment, which benefits EBITDA but does not contribute cash, and approximately $100 million of spend related to idling Kemerton Train 1. Slide 11 highlights our continued focus on cost and productivity. Thus far, we have achieved approximately $100 million of run-rate savings year to date. This performance puts us on track to reach the high end of our $100 to $150 million full-year target.

Across these gross improvements, roughly 40% has been driven by supply chain and back-office initiatives. The remaining 60% includes manufacturing cost-out and incremental volumes and yield. Examples of these productivity improvements include debottlenecking projects at La Negra, JBC, and our lithium conversion sites in China. Importantly, these improvements can continue to help us offset the supply chain disruptions and cost inflation related to the situation in the Middle East.

With that, I'll turn it back over to Kent to discuss the market outlook. Kent Masters, Chief Executive Officer First, let me highlight the breadth of Albemarle's end markets and why we are generally seeing resilient demand trends. Our portfolio serves key markets across mobility, energy, connectivity, and health, and that diversity strengthens our resilience through the cycle. Electric vehicles and stationary storage remain significant long-term growth drivers.

Together, these two end markets made up about 50 to 60% of Albemarle's total net sales last year. We'll talk in more detail on both these markets in a moment. In specialties, electronics and semiconductors, building and construction, and oil and gas remain key market segments. AI-related demand continues to support electronics and semiconductor applications.

In oil and gas, clear brine fluid demand has remained stable in the Middle East, while geopolitical uncertainty has incentivized demand in other regions such as the Americas and Europe. We can serve all these geographies from our global asset network, creating resilience in volatile environments like we face today. Let's now turn to a deeper dive into EV and stationary storage markets. Turning to Slide 13, lithium demand is up 45% through May, primarily driven by continued strength in stationary storage.

We are increasing our 2026 and 2030 stationary storage forecast ranges. Due to that strong demand, we now expect stationary storage battery production of 900 to 1,100 gigawatt-hours in 20, up 11% or 100 gigawatt-hours from our prior forecast. We are also raising the low end of our 2030 stationary storage range to between 1,500 and 2,000 GWh, up approximately 9% from our prior forecast. As a result of this change, we are also raising the low end of our 2030 forecast for total lithium demand by 100,000 tons.

Lithium demand growth continues to outstrip supply growth. As a result, we exited the second quarter near record lows in terms of days of lithium salts inventory based on mass balance calculations. We also estimate spodumene inventories are at near historic lows, and some conversion sites in China have reportedly shut down or reduced production due to the lack of spodumene availability. Lithium demand continues to diversify by application and geography as stationary storage gains share.

Slide 14 highlights the strength of stationary storage demand. Global stationary storage production has nearly doubled year over year, with broad support across most geographic regions. Long-term demand remains supported by multiple secular trends. First, global electricity demand growth is accelerating, led by urbanization, AI and data centers, and EVs.

With grid upgrades taking multiple years, stationary storage is the fastest and most cost-effective way to support grid reliability. Also, policy support in regions like China, Europe, and Australia improves project economics for stationary storage and renewables. We now expect stationary storage to make up about 30% of 2026 global lithium market demand, nearing parity with light-duty EVs. Turning to Slide 15, year to date, global EV sales are up 10% year over year.

EV sales growth inflected in the second quarter, up 16% versus prior year. , Germany, France, and others. Europe also benefits from increased model availability and affordability as Chinese OEMs have increased exports and domestic production for the region. In China, growing EV exports and larger battery sizes have helped offset weaker domestic EV unit sales.

The rest of the world was the fastest growing region in the first half, up 90% year over year, and has overtaken North America as the third-largest market, led by growth in Brazil, Australia, India, and South Korea. Turning to Slide 16 for an update on our Australian joint ventures. As previously mentioned, Greenbushes' CGP3 plant restarted on August 1st. We had previously expected the plant to reach full run rate by year end.

Prior to this incident, the plant was ramping ahead of schedule. However, to ensure adequate contingency for our downstream operations, we've assumed CGP3 reaches full run rate in the first quarter of 2027. Greenbushes is in the middle of a multi-year transformation. Mine optimization studies are progressing well, and we anticipate operational improvements and further brownfield expansion projects.

Our primary focus remains on operating the mine safely, and we have good alignment with all partners towards that goal. At Wodgina, operations are performing well, supported by better-than-planned ore availability and recoveries. All three processing trains are now operating. Ore quality is expected to remain consistent next quarter before improving later this year as the availability of clean ore increases.

As we have highlighted before, these hard rock assets are an important part of our long-term resource position and provide near-term brownfield growth opportunities. Moving to Slide 17, Albemarle has decades of brine processing expertise at Magnolia and Silver Peak in the United States, the Salar de Atacama and La Negra in Chile, and JBC in Jordan. That foundational experience informs how we are advancing DLE technology at the Salar de Atacama. Our dedicated team of scientists, engineers, and operators have a deep understanding of DLE fundamentals based on more than 10 years of research and innovation.

Over that time, we've evaluated dozens of DLE technologies, including both proprietary and third-party solutions. Our highest and best opportunity to leverage DLE is in the Salar de Atacama, based on the large scale and high grade of that world-class asset. At the Salar, we have progressed from scientific research and lab-scale work to pilot validation and integrated pilot testing. In March of 2026, we submitted an environmental assessment permit for a DLE project at the Salar de Atacama.