Albemarle Reports Fourth Quarter and Full Year 2023 Results
Full-Year Net Sales Increase of 31%, Driven by 21% Volume Growth
CHARLOTTE, N.C., Feb. 14, 2024 /PRNewswire/ -- Albemarle Corporation (NYSE: ALB), a global leader in providing essential elements for mobility, energy, connectivity and health, today announced its results for the fourth quarter and full year ended December 31, 2023.
Full Year 2023 Results
(Unless otherwise stated, all percentage changes represent year-over-year comparisons)
-- Net sales of $9.6 billion, the highest in company history, up 31%, of
which 21% was total volume growth; Energy Storage sales volumes were up
35%
-- Net income of $1.6 billion, or $13.36 per diluted share, the second
highest in company history, which included a lower of cost or net
realizable value (LCM) pre-tax charge and a tax valuation allowance
expense in China, both recorded in the fourth quarter
-- Adjusted EBITDA of $2.8 billion, or $3.4 billion excluding the $604
million LCM charge, which is in-line with previous outlook as higher
volumes offset lower pricing
-- Adjusted diluted EPS of $15.22 per share, or $22.25 excluding the LCM
charge and the $223 million tax valuation allowance expense, which is
in-line with previous outlook
Fourth Quarter 2023 Results and Recent Highlights
-- Net sales of $2.4 billion, primarily driven by 35% volume growth in
Energy Storage
-- Net loss of $618 million, or ($5.26) per diluted share, including the
LCM charge and tax valuation allowance expense
-- Adjusted EBITDA of ($315) million, or $289 million excluding the LCM
charge
-- Adjusted diluted EPS of ($5.19), or $1.85 excluding the LCM charge and
tax valuation allowance expense
-- Announced proactive measures expected to unlock >$750 million of cash
flow including reduced capital expenditures, costs and working capital
-- Meishan lithium conversion plant achieved mechanical completion in
December 2023
-- Recognized by Newsweek as one of America's greatest workplaces for
diversity and one of America's most responsible companies; featured in
JUST Capital's 2024 JUST 100
-- Completed amendment to the company's credit agreement to ensure on-going
financial flexibility; amendment utilizes an updated adjusted EBITDA
definition that more accurately reflects the value of Albemarle's
strategic ownership in the Windfield (Talison) joint venture
-- Introduced full-year 2024 outlook considerations, including Energy
Storage ranges based on lithium market price scenarios and utilizing an
updated adjusted EBITDA definition similar to that in the company's
amended credit agreement
"Albemarle's full-year 2023 result marks the second highest earnings year in company history, made possible by the disciplined focus of our global teams," said Albemarle CEO Kent Masters. "Looking ahead, we are taking actions to enhance our financial flexibility, while advancing near-term growth and preserving future opportunities to create value. As a global leader for the end-markets we serve, we remain confident about the projects in our portfolio and our ability to leverage our world-class resources and industry-leading technologies."
Fourth Quarter 2023 Results
In millions, except per share amounts Q4 2023 Q4 2022
$ Change % Change
Net sales $2,356.2 $2,621.0 $(264.8) (10.1) %
Net (loss) income attributable to Albemarle Corporation $(617.7) $1,132.4 $(1,750.1) (154.5) %
Adjusted EBITDA
(a) $(315.0) $1,243.8 $(1,558.8) (125.3) %
Diluted (loss) earnings per share $(5.26) $9.60 $(14.86) (154.8) %
Non-operating pension and OPEB items
(a) (0.07) (0.26)
Non-recurring and other unusual items
(a) 0.14 (0.72)
Adjusted diluted (loss) earnings per share
(a)(b) $(5.19) $8.62 $(13.81) (160.2) %
(a) See Non-GAAP Reconciliations for
further details.
(b) Totals may not add due to rounding.
Net sales for the fourth quarter of 2023 were $2.4 billion compared to $2.6 billion for the prior-year quarter. The 10% decrease was driven by lower lithium market pricing, partially offset by increased volumes in Energy Storage and higher volumes and pricing in Ketjen. Net loss attributable to Albemarle of $617.7 million decreased by $1.8 billion and Adjusted EBITDA of ($315.0) million decreased by $1.6 billion from the prior year quarter due to lower lithium market pricing and a $604 million lower of cost or net realizable value (LCM) pre-tax charge driven by lower lithium market pricing and higher spodumene values in cost of goods sold, partially offset by higher equity income due to inventory timing.
The effective income tax rate for the fourth quarter of 2023 was (12.9)%, compared to 2.8% in the same period in 2022. The rate in 2023 was impacted by the recording of an income tax expense of $223 million related to a valuation allowance in China, while 2022 was impacted by the release of a significant valuation allowance in Australia. On an adjusted basis, the effective income tax rates were (12.7)% and 14.0% for the fourth quarter of 2023 and 2022, respectively.
Energy Storage Results
In millions Q4 2023 Q4 2022
$ Change % Change
Net Sales $1,675.1 $1,980.8 $(305.7) (15.4) %
Adjusted EBITDA $(338.3) $1,178.9 $(1,517.1) (128.7) %
Energy Storage net sales of $1.7 billion decreased $305.7 million (-15%) due to lower pricing net of foreign currency (-50%) related to lower lithium market pricing. Volume was higher (+35%) related primarily to the La Negra III/IV expansion in Chile and higher tolling volumes to meet growing customer demand. Adjusted EBITDA of ($338.3) million decreased by $1.5 billion as lower pricing and a $604 million LCM charge driven by lower lithium market pricing and higher spodumene values in cost of goods sold more than offset higher volumes.
Specialties Results
In millions Q4 2023 Q4 2022
$ Change % Change
Net Sales $339.6 $404.6 $(65.0) (16.1) %
Adjusted EBITDA $29.8 $93.8 $(63.9) (68.2) %
Specialties net sales of $339.6 million decreased $65.0 million (-16%) primarily due to decreased pricing net of foreign currency (-15%) and lower volumes (-2%). Adjusted EBITDA of $29.8 million decreased $63.9 million primarily due to lower net sales. Both volumes and prices were impacted by weaker demand, particularly for consumer electronics. Operations in the Middle East continued as normal, with some shipping delays and tighter availability of processing materials.
Ketjen Results
In millions Q4 2023 Q4 2022
$ Change % Change
Net Sales $341.5 $235.5 $105.9 45.0 %
Adjusted EBITDA $31.3 $(2.6) $33.9 *
* Percentage change not
meaningful.
Ketjen net sales of $341.5 million increased $105.9 million (+45%) compared to the previous year due to higher volumes (+37%) and higher pricing net of foreign currency (+7%). Adjusted EBITDA of $31.3 million increased $33.9 million as higher sales were partially offset by pressures from increasing raw materials costs.
Updated Adjusted EBITDA Definition
Beginning in 2024, the company will change its definition of adjusted EBITDA for financial accounting purposes. The updated definition includes Albemarle's share of the pre-tax earnings of the Talison joint venture, whereas the prior definition included Albemarle's share of Talison earnings net of tax. This presentation more closely represents the materiality and financial contribution of the strategic investment in Talison, smooths the impact of price variations and inventory timing, and more closely represents a measure of EBITDA. This calculation is consistent with the covenant definition in the February 2024 amendment to the credit agreement.
2024 Outlook Considerations
Energy Storage Market Price Scenarios
The table below reflects expected outcomes for Albemarle's Energy Storage segment based on recently observed lithium market price scenarios. Ranges are based on a projected increase in Energy Storage volumes of 10% to 20% in 2024 compared to 2023. All three scenarios assume flat market pricing flowing through Energy Storage's current contract book. Scenarios also assume spodumene pricing averages 10% of the lithium carbonate equivalent (LCE) price, while other costs are assumed to be constant.
Energy Storage FY 2024E
Observed market price case(a) YE 2023 Q4 2023 average H2 2023
average
Average lithium market price ($/kg LCE)(a) ~$15
~$20 ~$25
Net sales
$3.2 - $3.4 billion
$3.8 - $4.1 billion
$4.5 - $4.9 billion
Adjusted EBITDA(b)
$0.7 - $0.8 billion
$1.3 - $1.5 billion
$2.0 - $2.3 billion
Equity in net income of unconsolidated investments (net of tax)(c)(d)
$0.8 - $0.9 billion
$0.9 - $1.0 billion
$1.0 - $1.2 billion
(a)
Price represents blend of relevant Asia and China market indices for the periods referenced.
(b) Presented under updated adjusted EBITDA definition as of 2024. FY23 Energy Storage adjusted EBITDA under updated
definition would be $3.2B.
(c)
Included in adjusted EBITDA on a pre-tax basis.
(d)
Assumes full Talison sales volumes for the second half of the calendar year.
Specialties and Ketjen Outlook Considerations
Specialties outlook reflects continued softness in consumer electronics and elastomers, partially offset by stronger demand in other end-markets, including oilfield services, agriculture, and pharmaceuticals. Demand visibility is expected to remain low in the first half of 2024. Specialties outlook assumes operations continue as normal in the Middle East, with some shipping delays and tighter availability of processing materials.
Ketjen outlook assumes increased volumes driven by expected high refinery utilization, as well as higher pricing driven primarily by Clean Fuel Technology (CFT) products.
Segment FY 2024E
Specialties net sales
$1.3 - $1.5 billion
Specialties adjusted EBITDA
$270 - $330 million
Ketjen net sales
$1.0 - $1.2 billion
Ketjen adjusted EBITDA
$130 - $150 million
Other Corporate Outlook Considerations
Albemarle expects its 2024 capital expenditures to be in the range of $1.6 billion to $1.8 billion, down from approximately $2.1 billion in 2023. This level of spending reflects a re-phasing of larger projects to focus on those that are significantly progressed, near completion and in startup.
Other Corporate FY
2024E
Capital expenditures
$1.6 - $1.8 billion
Depreciation and amortization
$580 - $660 million
Adjusted effective tax rate 27% - 28%
Corporate costs
$120 - $150 million
Interest and financing expenses
$180 - $220 million
Weighted-average common shares outstanding (diluted) 117.7 million
Total Corporate Outlook Considerations
The company's full-year outlook has been constructed assuming the above Specialties, Ketjen and Corporate outlook considerations plus the three Energy Storage market price scenarios.
Total Corporate FY 2024E
Including Energy Storage Scenarios
Observed market price case(a) YE 2023 Q4 2023 average H2 2023
average
Average lithium market price ($/kg LCE)(a) ~$15
~$20 ~$25
Net sales
$5.5 - $6.2 billion
$6.1 - $6.8 billion
$6.9 - $7.6 billion
Adjusted EBITDA
(b)(c)
$0.9 - $1.2 billion
$1.6 - $1.8 billion
$2.3 - $2.6 billion
(a)
Price represents blend of relevant Asia and China market indices for the periods referenced.
(b) The company does not provide a reconciliation of forward-looking non-GAAP financial measures to the most directly comparable financial measures calculated and reported in accordance with GAAP, as the
company is unable to estimate significant non-recurring or unusual items without unreasonable effort. See "Additional Information regarding Non-GAAP Measures" for more information.
(c)
Presented under updated adjusted EBITDA definition as of 2024. FY23 adjusted EBITDA under updated definition would be $3.6B. See Non-GAAP Reconciliations for further details.
Cash Flow and Capital Deployment
Cash from operations of $1.3 billion for the year ended December 31, 2023 decreased $747.6 million compared to the prior year period. This was driven by lower adjusted EBITDA and working capital changes that were primarily due to increases in receivables and inventories from higher lithium pricing, partially offset by increased dividends received from equity investments. Capital expenditures of $2.1 billion were in-line with previous outlook and increased by $887.6 million versus the prior year period as the company invested in Energy Storage and Specialties capacity to support growth.
Capital spend is focused on high return projects to expand Albemarle's global portfolio of conversion capacity and world-class resources, as well as productivity and cost savings initiatives. At the end of 2023, the Meishan lithium conversion facility reached mechanical completion. Primary 2024 capital activities will include commissioning the Meishan lithium conversion facility; completing commissioning activities for trains 1 and 2 at the Kemerton lithium conversion facility and focusing construction on train 3; and prioritizing permitting activities at the Kings Mountain spodumene resource.
Albemarle's primary capital allocation priorities are to invest in organic opportunities to drive profitable growth, maintain its financial flexibility and investment grade credit rating, and fund its dividend.
Balance Sheet and Liquidity
As of December 31, 2023, Albemarle had estimated liquidity of approximately $1.9 billion, including $889.9 million of cash and equivalents, $880.0 million available under its revolver and $104 million available on other credit lines.
On February 9, 2024, Albemarle completed an amendment to its credit agreement to ensure on-going financial flexibility. The amendment uses an updated adjusted EBITDA definition in the company's financial covenant, which includes Talison equity income on a pre-tax basis. This presentation more closely represents the materiality and financial contribution of the strategic investment in Talison, smooths the impact of price variations and inventory timing, and more closely represents a measure of EBITDA.
Earnings Call
Date: Thurs., Feb. 15,
2024
Time: 9:00 AM Eastern
time
Dial-in (U.S.): +1 888-330-2007
Dial-in (International): +1 646-960-0105
Passcode: 5205664
The company's earnings presentation and supporting material are available on Albemarle's website at https://investors.albemarle.com.
About Albemarle
Albemarle Corporation (NYSE: ALB) leads the world in transforming essential resources into critical ingredients for mobility, energy, connectivity, and health. We partner to pioneer new ways to move, power, connect and protect with people and planet in mind. A reliable and high-quality global supply of lithium and bromine allow us to deliver advanced solutions for our customers. Learn more about how the people of Albemarle are enabling a more resilient world at albemarle.com and on X (formerly Twitter) @AlbemarleCorp.
Albemarle regularly posts information to www.albemarle.com, including notification of events, news, financial performance, investor presentations and webcasts, non-GAAP reconciliations, Securities and Exchange Commission ("SEC") filings and other information regarding the company, its businesses and the markets it serves.
Forward-Looking Statements
This press release contains statements concerning our expectations, anticipations and beliefs regarding the future, which constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, which are based on assumptions that we have made as of the date hereof and are subject to known and unknown risks and uncertainties, often contain words such as "anticipate," "believe," "estimate," "expect," "guidance," "intend," "may," "outlook," "scenario," "should," "would," and "will". Forward-looking statements may include statements regarding: our 2024 company and segment outlooks, including expected market pricing of lithium and spodumene and other underlying assumptions and outlook considerations; expected capital expenditure amounts and the corresponding impact on cash flow; market pricing of lithium carbonate equivalent and spodumene; anticipated timing of the commissioning of the Meishan, China lithium conversion facility; plans and expectations regarding other projects and activities, cost reductions and accounting charges, and all other information relating to matters that are not historical facts. Factors that could cause Albemarle's actual results to differ materially from the outlook expressed or implied in any forward-looking statement include: changes in economic and business conditions; financial and operating performance of customers; timing and magnitude of customer orders; fluctuations in lithium market prices; production volume shortfalls; increased competition; changes in product demand; availability and cost of raw materials and energy; technological change and development; fluctuations in foreign currencies; changes in laws and government regulation; regulatory actions, proceedings, claims or litigation; cyber-security breaches, terrorist attacks, industrial accidents or natural disasters; political unrest; changes in inflation or interest rates; volatility in the debt and equity markets; acquisition and divestiture transactions; timing and success of projects; performance of Albemarle's partners in joint ventures and other projects; changes in credit ratings; and the other factors detailed from time to time in the reports Albemarle files with the SEC, including those described under "Risk Factors" in Albemarle's most recent Annual Report on Form 10-K and any subsequently filed Quarterly Reports on Form 10-Q, which are filed with the SEC and available on the investor section of Albemarle's website (investors.albemarle.com) and on the SEC's website at www.sec.gov. These forward-looking statements speak only as of the date of this press release. Albemarle assumes no obligation to provide any revisions to any forward-looking statements should circumstances change, except as otherwise required by securities and other applicable laws.
Albemarle Corporation and Subsidiaries
Consolidated Statements of Income
(In Thousands Except Per Share Amounts) (Unaudited)
Three Months Ended Year Ended
December 31, December 31,
2023 2022 2023 2022
Net sales $2,356,165 $2,620,978 $9,617,203 $7,320,104
Cost of goods sold 3,060,217 1,619,659 8,431,294 4,245,517
Gross profit (704,052) 1,001,319 1,185,909 3,074,587
Selling, general and administrative expenses 194,251 148,156 919,493 524,145
Research and development expenses 22,753 20,154 85,725 71,981
(Gain) loss on change in interest in properties/sale of business, net (71,190) (71,190) 8,400
Operating profit (849,866) 833,009 251,881 2,470,061
Interest and financing expenses (34,386) (24,039) (116,072) (122,973)
Other (expenses) income, net (36,699) 54,119 110,929 86,356
(Loss) income before income taxes and equity in net income of unconsolidated investments (920,951) 863,089 246,738 2,433,444
Income tax expense 118,878 24,102 430,277 390,588
(Loss) income before equity in net income of unconsolidated investments (1,039,829) 838,987 (183,539) 2,042,856
Equity in net income of unconsolidated investments (net of tax) 436,537 322,799 1,854,082 772,275
Net (loss) income (603,292) 1,161,786 1,670,543 2,815,131
Net income attributable to noncontrolling interests (14,388) (29,341) (97,067) (125,315)
Net (loss) income attributable to Albemarle Corporation $(617,680) $1,132,445 $1,573,476 $2,689,816
Basic (loss) earnings per share: $(5.26) $9.67 $13.41 $22.97
Diluted (loss) earnings per share: $(5.26) $9.60 $13.36 $22.84
Weighted-average common shares outstanding - basic 117,354 117,160 117,317 117,120
Weighted-average common shares outstanding - diluted 117,354 117,925 117,766 117,793
Albemarle Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(In Thousands) (Unaudited)
December 31, December 31,
2023 2022
ASSETS
Current assets:
Cash and cash equivalents $889,900 $1,499,142
Trade accounts receivable 1,213,160 1,190,970
Other accounts receivable 509,097 185,819
Inventories 2,161,287 2,076,031
Other current assets 443,475 234,955
Total current assets 5,216,919 5,186,917
Property, plant and equipment 12,233,757 9,354,330
Less accumulated depreciation and amortization 2,738,553 2,391,333
Net property, plant and equipment 9,495,204 6,962,997
Investments 1,369,855 1,150,553
Other assets 297,087 250,558
Goodwill 1,629,729 1,617,627
Other intangibles, net of amortization 261,858 287,870
Total assets $18,270,652 $15,456,522
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable to third parties $1,537,859 $1,533,624
Accounts payable to related parties 550,186 518,377
Accrued expenses 544,835 505,894
Current portion of long-term debt 625,761 2,128
Dividends payable 46,666 46,116
Income taxes payable 255,155 134,876
Total current liabilities 3,560,462 2,741,015
Long-term debt 3,541,002 3,214,972
Postretirement benefits 26,247 32,751
Pension benefits 150,312 159,571
Other noncurrent liabilities 769,100 636,596
Deferred income taxes 558,430 480,770
Commitments and contingencies
Equity:
Albemarle Corporation shareholders' equity:
Common stock 1,174 1,172
Additional paid-in-capital 2,952,517 2,940,840
Accumulated other comprehensive loss (528,526) (560,662)
Retained earnings 6,987,015 5,601,277
Total Albemarle Corporation shareholders' equity 9,412,180 7,982,627
Noncontrolling interests 252,919 208,220
Total equity 9,665,099 8,190,847
Total liabilities and equity $18,270,652 $15,456,522
Albemarle Corporation and Subsidiaries
Selected Consolidated Cash Flow Data
(In Thousands) (Unaudited)
Year Ended
December 31,
2023 2022
Cash and cash equivalents at beginning of year $1,499,142 $439,272
Cash flows from operating activities:
Net income 1,670,543 2,815,131
Adjustments to reconcile net income to cash flows from operating activities:
Depreciation and amortization 429,944 300,841
(Gain) loss on change in interest in properties/sale of business, net (71,190) 8,400
Inventory net realizable value adjustment 604,099
Stock-based compensation and other 36,545 30,474
Equity in net income of unconsolidated investments (net of tax) (1,854,082) (772,275)
Dividends received from unconsolidated investments and nonmarketable securities 2,000,862 801,239
Pension and postretirement benefit (1,658) (52,254)
Pension and postretirement contributions (17,866) (16,112)
Unrealized gain on investments in marketable securities 39,864 3,279
Loss on early extinguishment of debt - 19,219
Deferred income taxes 100,877 93,339
Changes in current assets and liabilities, net of effects of acquisitions and divestitures:
(Increase) in accounts receivable (350,655) (786,121)
(Increase) in inventories (962,924) (1,609,642)
(Increase) in other current assets (171,870) (104,655)
(Decrease) increase in accounts payable to third parties (315,220) 816,194
Increase in accounts payable to related parties 31,809 470,878
Increase (decrease) in accrued expenses and income taxes payable 253,518 (201,356)
Non-cash transfer of 40% value of construction in progress of Kemerton plant to MRL 17,297 122,682
Other, net (114,572) (31,412)
Net cash provided by operating activities 1,325,321 1,907,849
Cash flows from investing activities:
Acquisitions, net of cash acquired (426,228) (162,239)
Capital expenditures (2,149,281) (1,261,646)
Sales of marketable securities, net (204,451) 1,942
Investments in equity and other corporate investments (1,200) (706)
Net cash used in investing activities (2,781,160) (1,422,649)
Cash flows from financing activities:
Proceeds from borrowings of credit agreements 356,047 1,964,216
Repayments of long-term debt and credit agreements (28,862) (705,000)
Other borrowings (repayments), net 617,014 (391,662)
Fees related to early extinguishment of debt - (9,767)
Dividends paid to shareholders (187,188) (184,429)
Dividends paid to noncontrolling interests (105,631) (44,208)
Proceeds from exercise of stock options 190 2,783
Withholding taxes paid on stock-based compensation award distributions (27,468) (13,338)
Other (191) (6,708)
Net cash provided by financing activities 623,911 611,887
Net effect of foreign exchange on cash and cash equivalents 222,686 (37,217)
(Decrease) increase in cash and cash equivalents (609,242) 1,059,870
Cash and cash equivalents at end of period $889,900 $1,499,142
Albemarle Corporation and Subsidiaries
Consolidated Summary of Segment Results
(In Thousands) (Unaudited)
Three Months Ended Year Ended
December 31, December 31,
2023 2022 2023 2022
Net sales:
Energy Storage $1,675,088 $1,980,795 $7,078,998 $4,660,945
Specialties 339,623 404,637 1,482,425 1,759,587
Ketjen 341,454 235,546 1,055,780 899,572
Total net sales $2,356,165 $2,620,978 $9,617,203 $7,320,104
Adjusted EBITDA:
Energy Storage $(338,287) $1,178,853 $2,407,393 $3,032,260
Specialties 29,841 93,784 298,506 527,318
Ketjen 31,288 (2,605) 103,872 28,732
Total segment adjusted EBITDA (277,158) 1,270,032 2,809,771 3,588,310
Corporate (37,829) (26,280) (43,486) (112,453)
Total adjusted EBITDA $(314,987) $1,243,752 $2,766,285 $3,475,857
See accompanying non-GAAP reconciliations below.
Additional Information regarding Non-GAAP Measures
It should be noted that adjusted net income attributable to Albemarle Corporation, adjusted diluted earnings per share, non-operating pension and other post-employment benefit ("OPEB") items per diluted share, non-recurring and other unusual items per diluted share, adjusted effective income tax rates, EBITDA, adjusted EBITDA (on a consolidated basis), EBITDA margin and adjusted EBITDA margin are financial measures that are not required by, or presented in accordance with, accounting principles generally accepted in the United States, or GAAP. These non-GAAP measures should not be considered as alternatives to Net income attributable to Albemarle Corporation ("earnings") or other comparable measures calculated and reported in accordance with GAAP. These measures are presented here to provide additional useful measurements to review the company's operations, provide transparency to investors and enable period-to-period comparability of financial performance. The company's chief operating decision maker uses these measures to assess the ongoing performance of the company and its segments, as well as for business and enterprise planning purposes.
A description of other non-GAAP financial measures that Albemarle uses to evaluate its operations and financial performance, and reconciliation of these non-GAAP financial measures to the most directly comparable financial measures calculated and reported in accordance with GAAP can be found on the following pages of this press release, which is also is available on Albemarle's website at https://investors.albemarle.com. The company does not provide a reconciliation of forward-looking non-GAAP financial measures to the most directly comparable financial measures calculated and reported in accordance with GAAP, as the company is unable to estimate significant non-recurring or unusual items without unreasonable effort. The amounts and timing of these items are uncertain and could be material to the company's results calculated in accordance with GAAP.
ALBEMARLE CORPORATION AND SUBSIDIARIES
Non-GAAP Reconciliations
(Unaudited)
See below for a reconciliation of adjusted net income attributable to Albemarle Corporation, EBITDA and adjusted EBITDA (on a consolidated basis), which are non-GAAP financial measures, to Net income attributable to Albemarle Corporation ("earnings"), the most directly comparable financial measure calculated and reported in accordance with GAAP. Adjusted net income attributable to Albemarle Corporation is defined as net income before the non-recurring, other unusual and non-operating pension and other post-employment benefit (OPEB) items as listed below. The non-recurring and unusual items may include acquisition and integration related costs, gains or losses on sales of businesses, restructuring charges, facility divestiture charges, certain litigation and arbitration costs and charges, and other significant non-recurring items. EBITDA is defined as net income attributable to Albemarle Corporation before interest and financing expenses, income tax expense, and depreciation and amortization. Adjusted EBITDA is defined as EBITDA plus or minus the non-recurring, other unusual and non-operating pension and OPEB items as listed below.
Three Months Ended
Year Ended
December 31,
December 31,
2023 2022 2023 2022
In thousands, except percentages and per
$ % of
$ % of
$ % of
$ % of
share amounts net net net net
sales sales sales sales
---
Net (loss) income attributable to Albemarle $(617,680) $1,132,445 $1,573,476 $2,689,816
Corporation
Add back:
Non-operating pension and OPEB items (8,107) (30,168) (6,966) (42,189)
(net of tax)
Non-recurring and other unusual items 16,262 (85,400) 226,356 (61,377)
(net of tax)
Adjusted net (loss) income attributable to $(609,525) $1,016,877 $1,792,866 $2,586,250
Albemarle Corporation
Lower of cost or net realizable value (LCM) 604,099 604,099
Tax valuation allowance expense (TVA) 223,000 223,000
Adjusted net income attributable to Albemarle $217,574 $1,016,877 $2,619,965 $2,586,250
Corporation, excluding LCM and TVA
Adjusted diluted (loss) earnings per share $(5.19) $8.62 $15.22 $21.96
Adjusted diluted earnings per share, $1.85 $8.62 $22.25 $21.96
excluding LCM and TVA
Weighted-average common shares 117,354 117,925 117,766 117,793
outstanding - diluted
Net (loss) income attributable to Albemarle $(617,680) (26.2) % $1,132,445 43.2 % $1,573,476 16.4 % $2,689,816 36.7 %
Corporation
Add back:
Interest and financing expenses 34,386 1.5 % 24,039 0.9 % 116,072 1.2 % 122,973 1.7 %
Income tax expense 118,878 5.0 % 24,102 0.9 % 430,277 4.5 % 390,588 5.3 %
Depreciation and amortization 144,143 6.1 % 85,561 3.3 % 429,944 4.5 % 300,841 4.1 %
EBITDA (320,273) (13.6) % 1,266,147 48.3 % 2,549,769 26.5 % 3,504,218 47.9 %
Non-operating pension and OPEB items (9,804) (0.4) % (41,687) (1.6) % (7,971) (0.1) % (57,032) (0.8) %
Non-recurring and other unusual items 15,090 0.6 % 19,292 0.7 % 224,487 2.3 % 28,671 0.4 %
Adjusted EBITDA $(314,987) (13.4) % $1,243,752 47.5 % $2,766,285 28.8 % $3,475,857 47.5 %
Lower of cost or net realizable value (LCM) 604,099 25.6 % - % 604,099 6.3 % - %
Adjusted EBITDA, excluding LCM $289,112 12.3 % $1,243,752 47.5 % $3,370,384 35.0 % $3,475,857 47.5 %
Net sales $2,356,165 $2,620,978 $9,617,203 $7,320,104
Non-operating pension and OPEB items, consisting of mark-to-market actuarial gains/losses, settlements/curtailments, interest cost and expected return on assets, are not allocated to Albemarle's operating segments and are included in the Corporate category. In addition, the company believes that these components of pension cost are mainly driven by market performance, and the company manages these separately from the operational performance of the company's businesses. In accordance with GAAP, these non-operating pension and OPEB items are included in Other (expenses) income, net. Non-operating pension and OPEB items were as follows (in thousands):
Three Months Ended Year Ended
December 31, December 31,
2023 2022 2023 2022
MTM actuarial gain $(10,174) $(36,989) $(10,174) $(36,989)
Interest cost 8,859 5,814 35,950 23,497
Expected return on assets (8,489) (10,512) (33,747) (43,540)
Total $(9,804) $(41,687) $(7,971) $(57,032)
In addition to the non-operating pension and OPEB items disclosed above, the company has identified certain other items and excluded them from Albemarle's adjusted net income calculation for the periods presented. A listing of these items, as well as a detailed description of each follows below (per diluted share):
Three Months Ended Year Ended
December 31, December 31,
2023 2022 2023 2022
Acquisition and integration related costs
(1) $0.03 $0.05 $0.18 $0.11
Goodwill impairment
(2) 0.05 0.05
(Gain) loss on change in interest in properties, net
(3) (0.40) (0.40) 0.07
Mark-to-market loss (gain) on public equity securities
(4) 0.51 0.04 0.29 (0.03)
Loss on extinguishment of debt
(5) 0.13
Legal accrual
(6) 1.82
Other
(7) (0.04) 0.05 (0.01) 0.05
Tax related items
(8) (0.01) (0.86) (0.01) (0.85)
Total non-recurring and other unusual items $0.14 $(0.72) $1.92 $(0.52)
(1) Costs related to the acquisition, integration and divestitures for various significant projects, recorded in Selling, general and administrative expenses for the three months and year ended December 31, 2023 of $5.1 million and $26.8 million ($4.0 million and $20.8 million after income taxes, or $0.03 and $0.18 per share), respectively, and for the three months and year ended December 31, 2022 of $7.0 million and $16.3 million ($5.4 million and $12.6 million after income taxes, or $0.05 and $0.11 per
share), respectively.
(2)
Goodwill impairment charge of $6.8 million ($5.3 million after taxes, or $0.05 per share) recorded in Selling, general and administrative expenses during the three months and year ended December 31, 2023 related to our performance catalyst solutions ("PCS") business.
(3) Included in (Gain) loss on change in interest in properties/sale of business, net for the three months and year ended December 31, 2023 is a gain of $71.2 million ($46.6 million after taxes, or $0.40 per share) resulting from the restructuring of the MARBL joint venture with Mineral Resources Limited. Included in (Gain) loss on change in interest in properties/sale of business, net for the year ended December 31, 2022 is an expense of $8.4 million ($0.07 per share after no income tax impact) related to a
post-measurement period Wodgina acquisition purchase price adjustment for a revised estimate of the obligation to construct the lithium hydroxide conversion assets in Kemerton due to anticipated cost overruns from supply chain, labor and COVID-19 pandemic related issues.
(4) Losses of $79.1 million and $44.7 million ($59.6 million and $34.4 million after income taxes, or $0.51 and $0.29 per share) recorded in Other (expenses) income, net for the three months and year ended December 31, 2023, respectively, resulting from the net change in fair value of investments in public equity securities. The three months and year ended December 31, 2022 included losses (gains) of $6.3 million and ($4.3) million ($5.0 million and ($3.4) million after income taxes, or $0.04 and ($0.03) per
share) for these changes in fair value of investments in public equity securities.
(5) Included in Interest and financing expenses for the year ended December 31, 2022 is a loss on early extinguishment of debt of $19.2 million ($14.9 million after income taxes, or $0.13 per share), representing the tender premiums, fees, unamortized discounts, unamortized deferred financing costs and accelerated amortization of associated interest rate swap from the redemption of the $425 million senior notes originally due in 2024 using the proceeds from the issuance of $1.7 billion in senior notes in May
2022.
(6)
Loss of $218.5 million ($1.82 per share after no income tax impact) recorded in Selling, general and administrative expenses during the year ended December 31, 2023 resulting from agreements to resolve a previously disclosed legal matter with the U.S. Department of Justice and the SEC related to conduct in our Ketjen business prior to 2018.
(7)
Other adjustments for the three months ended December 31, 2023 included amounts recorded in:
Cost of goods sold - $15.1 million loss recorded to settle an arbitration matter with a regulatory agency in Chile, partially offset by a $4.1 million gain from an updated cost estimate of an environmental reserve at a site not part of our operations.
SG&A - $1.4 million of various expenses including for certain legal costs, separation and other severance costs to employees in Corporate and facility closure expenses related to offices in Germany.
Other (expenses) income, net - $8.4
million gain from PIK dividends of preferred equity in a Grace subsidiary, $5.5 million of gains from the sale of investments and the write-off of certain liabilities no longer required and $3.0 million of a gain resulting from the adjustment of indemnification related to previously disposed businesses.
After income taxes, these net gains totaled $4.7 million, or $0.04 per share.
Other adjustments for the year ended December 31, 2023 included amounts recorded in:
Cost of goods sold - $15.1 million loss recorded to settle an arbitration matter with a regulatory agency in Chile, partially offset by a $4.1 million gain from an updated cost estimate of an environmental reserve at a site not part of our operations.
SG&A - $9.5 million of separation and other severance costs to employees in Corporate and the Ketjen business primarily paid out during 2023, $2.3 million of facility closure expenses related to offices in Germany, $1.9 million of charges primarily
for environmental reserves at sites not part of our operations and $1.8 million of various expenses including for certain legal costs and shortfall contributions for a multiemployer plan financial improvement plan.
Other (expenses) income, net - $19.3 million gain from PIK dividends of preferred equity in a Grace subsidiary, a $7.3 million gain resulting from insurance proceeds of a prior legal matter and $5.5 million of gains from the sale of investments and the write-off of certain
liabilities no longer required, partially offset by $3.6 million of charges for asset retirement obligations at a site not part of our operations and $0.9 million of a loss resulting from the adjustment of indemnification related to previously disposed businesses.
After income taxes, these charges totaled $1.4 million, or $0.01 per share.
Other adjustments for the three months ended December 31, 2022 included amounts recorded in:
Selling, general and administrative expenses - $2.6 million of shortfall contributions for our multiemployer plan financial improvement plan and $1.2 million primarily related to facility closure expenses of offices in Germany.
Other (expenses) income, net - $4.3 million loss resulting from the adjustment of indemnification related to previously disposed businesses, partially offset by a $2.0 million gain relating to the adjustment of an environmental reserve at non-operating businesses we had
previously divested.
After income taxes, these net charges totaled $5.4 million, or $0.05 per share.
Other adjustments for the year ended December 31, 2022 included amounts recorded in:
Cost of goods sold - $2.7 million of expense related to one-time retention payments for certain employees during the Catalysts strategic review and business unit realignment, and $0.5 million related to the settlement of a legal matter resulting from a prior acquisition.
Selling, general and administrative expenses - $4.3 million related to facility closure expenses of offices in Germany, $2.8 million of charges for environmental reserves at sites not part of our operations, $2.8 million of
shortfall contributions for our multiemployer plan financial improvement plan, $1.9 million of expense primarily related to one-time retention payments for certain employees during the Catalysts strategic review, partially offset by $4.3 million of gains from the sale of legacy properties not part of our operations.
Other income (expenses), net - $3.0 million gain from the reversal of a liability related to a previous divestiture, a $2.0 million gain relating to the adjustment of an
environmental reserve at non-operating businesses we had previously divested and a $0.6 million gain related to a settlement received from a legal matter in a prior period, partially offset by a $3.2 million loss resulting from the adjustment of indemnification related to previously disposed businesses.
After income taxes, these net charges totaled $6.7 million, or $0.05 per share.
(8)
Included in Income tax expense for the three months and year ended December 31, 2023 are discrete net tax benefits of $1.3 million, or $0.01 per share, and $1.0 million, or $0.01 per share, respectively. The net benefits primarily related to foreign return to provisions, partially offset by an uncertain tax position in Chile and excess tax benefits realized from stock-based compensation arrangements.
Included in Income tax expense for the three months and year ended December 31, 2022 are discrete net tax benefits of $101.2 million, or $0.86 per share, and $100.5 million, or $0.85 per share, respectively. The net benefit for the three months and full year 2022 was primarily related to the reversal of a valuation allowance in Australia. In addition, the three months includes a tax benefit for global intangible low-taxed income and net discrete tax benefits related to excess tax benefits realized from
stock-based compensation arrangements and domestic and foreign return to provisions. The discrete net benefit for the full year 2022 also includes withholding taxes, and domestic and foreign return to provisions, partially offset by a benefit for excess tax benefits realized from stock-based compensation arrangements.
See below for a reconciliation of the adjusted effective income tax rate, the non-GAAP financial measure, to the effective income tax rate, the most directly comparable financial measure calculated and reporting in accordance with GAAP (in thousands, except percentages).
Income (loss) before Income tax expense Effective income
tax
income taxes and rate
equity in net income
of unconsolidated
investments
Three months ended December 31, 2023:
As reported $(920,951) $118,878 (12.9) %
Non-recurring, other unusual and non-operating pension and OPEB items 5,286 (2,869)
As adjusted $(915,665) $116,009 (12.7) %
Three months ended December 31, 2022:
As reported $863,089 $24,102 2.8 %
Non-recurring, other unusual and non-operating pension and OPEB items (22,394) 93,174
As adjusted $840,695 $117,276 14.0 %
Year ended December 31, 2023:
As reported $246,738 $430,277 174.4 %
Non-recurring, other unusual and non-operating pension and OPEB items 216,516 (2,874)
As adjusted $463,254 $427,403 92.3 %
Year ended December 31, 2022:
As reported $2,433,444 $390,588 16.1 %
Non-recurring, other unusual and non-operating pension and OPEB items (8,821) 94,424
As adjusted $2,424,623 $485,012 20.0 %
As noted above, beginning in 2024, the company will change its definition of adjusted EBITDA for financial accounting purposes. The updated definition includes Albemarle's share of the pre-tax earnings of the Talison joint venture, whereas the prior definition included Albemarle's share of Talison earnings net of tax. See below for a reconciliation of adjusted EBITDA (on a consolidated basis), the non-GAAP financial measure, to Net income attributable to Albemarle Corporation ("earnings"), the most directly comparable financial measure calculated and reported in accordance with GAAP, both as reported and as if it were presented under the new definition for the year ended December 31, 2023.
Year ended December 31, 2023
As Reported As Adjusted -
2024 Definition
Net income attributable to Albemarle Corporation $1,573,476 $1,573,476
Depreciation and amortization 429,944 429,944
Interest and financing expenses 116,072 116,072
Income tax expense 430,277 430,277
Proportionate share of Windfield Holdings income tax expense 785,824
Gain on sale of business/interest in properties, net (71,190) (71,190)
Acquisition and integration related costs 26,767 26,767
Goodwill impairment 6,765 6,765
Non-operating pension and OPEB items (7,971) (7,971)
Mark-to-market gain on public equity securities 44,732 44,732
Legal accrual 218,510 218,510
Other (1,097) (1,097)
Total adjusted EBITDA $2,766,285 $3,552,109
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SOURCE Albemarle Corporation
