Albemarle Corporation (NYSE: ALB) today announced its results for the first quarter ended March 31, 2021.

First Quarter 2021 Highlights
(Unless otherwise stated, all percent changes are based on year-over-year comparisons)

• Net income of $95.7 million, or $0.84 per diluted share; Adjusted diluted EPS of $1.10, an increase of 10%
• Net sales of $829.3 million, an increase of 12%
• Adjusted EBITDA of $230.1 million an increase of 17%
• Full year 2021 guidance unchanged
• Entered into a definitive agreement to sell the Fine Chemistry Services business to W. R. Grace & Co. for proceeds of approximately $570 million
• Completed $1.5 billion public equity offering to accelerate profitable growth; reduced debt, providing financial flexibility to execute strategy
• Signed the U.N. Global Compact, aligning our sustainability efforts with those of the international business community

"We were pleased with our performance this quarter, achieving a 17% year-over-year increase in adjusted EBITDA, driven by strong sales from our Lithium and Bromine businesses," said Albemarle CEO Kent Masters. "We successfully and safely managed through the impact of the U.S. Gulf Coast winter storm on our Bromine and Catalysts businesses. As we look to expand our earnings potential, we continue to focus on execution of our growth strategy and are in the final stages of two lithium projects which will double our conversion capacity to approximately 175,000 metric tons. Additionally, we expect to start approving Wave 3 expansion projects during the second quarter."

Outlook

Albemarle continues to expect its full year 2021 operating performance to improve modestly relative to full year 2020, assuming continued recovery from the global economic downturn. While the total company guidance has not changed, from a GBU perspective, the outlook for our Lithium business has improved and for our Catalysts business our expectations are lower, while the outlook for our Bromine business is unchanged.

COVID-19 Response

Albemarle's cross-functional Global Response Team continues to meet regularly to address employee health and safety and operational challenges. Our priority is always the health and well-being of our employees, customers, and communities. Our focus has shifted from managing an immediate global crisis to building in the flexibility needed to adjust for regional differences and changing conditions.    

First Quarter Results

Net sales of $829.3 million increased by $90.4 million compared to the prior year quarter, primarily driven by increased sales across all three core business segments as discussed below.

Adjusted EBITDA of $230.1 million increased by $33.7 million from the prior year quarter benefiting from several Lithium customers that accelerated orders under long-term agreements, as well as favorable volume and customer mix in our Bromine business, partially offset by the impact of the U.S. Gulf Coast winter storm to the Bromine and Catalysts businesses. Net income attributable to Albemarle of $95.7 million decreased by $11.5 million from the prior year primarily due to higher one-time interest and financing costs related to our recent equity offering and debt tender. 

The effective income tax rate for Q1 2021 was 17.9% compared to 16.0% in the same period in 2020. On an adjusted basis, the effective income tax rates were 17.5% and 16.7% for the first quarter of 2021 and 2020, respectively. The difference is largely due to discrete tax expense recorded in Q1 2021 for an out-of-period adjustment.

Business Segment Results

Lithium

Lithium net sales of $279.0 million increased $42.2 million primarily driven by higher volumes, as some customers accelerated orders under long-term agreements, offset by lower average pricing for carbonate and technical grade. Adjusted EBITDA of $106.4 million increased $27.8 million primarily due to increased net sales.  Strong Q1 2021 margins reflect sales of lower cost 2020 inventories.

Current Trends:  FY 2021 volumes are expected to be higher year-over-year due to North American plant restarts, productivity improvements, and tolling. Average realized pricing is expected to increase sequentially but remain flat compared to 2020. We expect higher costs related to project start-ups, partially offset by productivity improvements. 

Bromine Specialties

Bromine net sales of $280.4 million increased $48.9 million driven by demand for products across the portfolio and a favorable customer mix. Adjusted EBITDA of $94.6 million increased $11.4 million due to increased net sales and was partially offset by a $6.4 million impact from the U.S. Gulf Coast winter storm. Cost savings initiatives and pricing helped offset raw materials cost increases. 

Current Trends: We continue to expect FY 2021 results to be modestly higher than the previous year due to continued economic recovery and improvements in certain end markets, including electronics, and building and construction, along with on-going cost savings initiatives and pricing. The winter storm in the U.S. Gulf Coast during Q1 led to lost production at the Magnolia, Arkansas site, which is expected to impact sales and adjusted EBITDA in mid-2021.   

Catalysts

Catalysts net sales of $220.2 million increased $13.0 million owing to higher volumes compared to the previous year. Hydroprocessing Catalysts (HPC) volumes increased due to timing of shipments offset by lower Fluid Catalytic Cracking (FCC) volumes related to the impact of the winter storm on our customers' requirements. Adjusted EBITDA of $25.4 million declined $22.0 million as a result of a $26.2 million cost impact from the U.S. Gulf Coast winter storm on two of our Houston-based plants and lower prices, slightly offset by cost savings initiatives. First quarter 2020 results were overstated by $11.7 million due to incorrect cost of goods sold for inventory values which were corrected the following quarter.

Current Trends:  We expect 2021 adjusted EBITDA to be lower year-over-year due to the impact of the winter storm, FCC order delays, product mix, and the previously disclosed change in order patterns from a large North American customer.

All Other

Other operations represents our FCS business. FCS net sales of $49.6 million declined $13.6 million and adjusted EBITDA of $21.5 million declined $1.3 million. The FCS business tends to be contract driven and can vary quarter-to-quarter.

On February 25, 2021, we signed a definitive agreement to sell the FCS business to W. R. Grace & Co. for proceeds of approximately $570 million. The transaction is expected to close in the second quarter of 2021.

Balance Sheet and Liquidity

As of March 31, 2021, Albemarle had estimated liquidity of approximately $2.2 billion, including $569.9 million of cash and equivalents, the full $1.0 billion available under our revolver, $500.0 million remaining under our delayed draw term loan and $131.2 million on other available credit lines. Total debt was $2.0 billion, representing net debt to adjusted EBITDA of approximately 1.7 times. The recently completed $1.5 billion debt repayment supports our financial flexibility to accelerate growth and maintain an Investment Grade credit rating.

Cash Flow and Capital Deployment

Cash from operations for the three months ended March 31, 2021, of $157.9 million increased $2.9 million versus the prior year as higher revenues in each of our reportable segments more than offset working capital outflows in 2021. Capital expenditures of $179.7 million decreased by approximately $35.0 million versus the prior year as the company nears completion of its Wave 2 Lithium expansion projects.

Our primary capital allocation priorities are to grow profitably, fund our dividend, and maintain our financial flexibility and our Investment Grade credit rating. 

In February, the board declared a quarterly dividend of $0.39 per share, an increase over the quarterly dividend paid in 2020. This is our 27th consecutive year of dividend increase.

Our share repurchase authorization remains in place; however, there are no near-term plans to execute share buybacks. We have discontinued efforts to sell our PCS business and will continue to operate this business within our portfolio.

Earnings Call

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), headquartered in Charlotte, N.C., is a global specialty chemicals company with leading positions in lithium, bromine and refining catalysts. We think beyond business-as-usual to power the potential of companies in many of the world's largest and most critical industries, such as energy, electronics, and transportation. We actively pursue a sustainable approach to managing our diverse global footprint of world-class resources. In conjunction with our highly experienced and talented global teams, our deep-seated values, and our collaborative customer relationships, we create value-added and performance-based solutions that enable a safer and more sustainable future.

We regularly post information to www.albemarle.com, including notification of events, news, financial performance, investor presentations and webcasts, non-GAAP reconciliations, SEC filings and other information regarding our company, its businesses and the markets it serves.

Forward-Looking Statements

Some of the information presented in this press release, the conference call and discussions that follow, including, without limitation, information related to product development, production capacity, committed volumes, market trends, pricing, financial flexibility, expected growth, anticipated return on opportunities, earnings and demand for our products, input costs, productivity improvements, surcharges, tax rates, stock repurchases, dividends, cash flow generation, costs and cost synergies, capital projects, future acquisition and divestiture transactions, economic trends, outlook and all other information relating to matters that are not historical facts may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from the views expressed. Factors that could cause actual results to differ materially from the outlook expressed or implied in any forward-looking statement include, without limitation: changes in economic and business conditions; changes in financial and operating performance of our major customers and industries and markets served by us; the timing of orders received from customers; the gain or loss of significant customers; competition from other manufacturers; changes in the demand for our products or the end-user markets in which our products are sold; limitations or prohibitions on the manufacture and sale of our products; availability of raw materials; increases in the cost of raw materials and energy, and our ability to pass through such increases to our customers; changes in our markets in general; fluctuations in foreign currencies; changes in laws and government regulation impacting our operations or our products; the occurrence of regulatory actions, proceedings, claims or litigation; the occurrence of cyber-security breaches, terrorist attacks, industrial accidents, natural disasters or climate change; hazards associated with chemicals manufacturing; the inability to maintain current levels of product or premises liability insurance or the denial of such coverage; political unrest affecting the global economy, including adverse effects from terrorism or hostilities; political instability affecting our manufacturing operations or joint ventures; changes in accounting standards; the inability to achieve results from our global manufacturing cost reduction initiatives as well as our ongoing continuous improvement and rationalization programs; changes in the jurisdictional mix of our earnings and changes in tax laws and rates; changes in monetary policies, inflation or interest rates that may impact our ability to raise capital or increase our cost of funds, impact the performance of our pension fund investments and increase our pension expense and funding obligations; volatility and uncertainties in the debt and equity markets; technology or intellectual property infringement, including cyber-security breaches, and other innovation risks; decisions we may make in the future; the ability to successfully execute, operate and integrate acquisitions and divestitures; uncertainties as to the duration and impact of the coronavirus (COVID-19) pandemic; and the other factors detailed from time to time in the reports we file with the SEC, including those described under "Risk Factors" in our most recent Annual Report on Form 10-K any subsequently filed Quarterly Reports on Form 10-Q. These forward-looking statements speak only as of the date of this press release. We assume 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)

Albemarle Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(In Thousands) (Unaudited)

Albemarle Corporation and Subsidiaries
Selected Consolidated Cash Flow Data
(In Thousands) (Unaudited)

Albemarle Corporation and Subsidiaries
Consolidated Summary of Segment Results
(In Thousands) (Unaudited) 

See accompanying non-GAAP reconciliations below.

Additional Information

It should be noted that adjusted net income attributable to Albemarle Corporation, adjusted diluted earnings per share, non-operating pension and OPEB items per diluted share, non-recurring and other unusual items per diluted share, adjusted effective income tax rates, EBITDA, adjusted EBITDA, 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"). These measures are presented here to provide additional useful measurements to review our 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 we use to evaluate our 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, the 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 earnings is defined as earnings before the non-recurring, other unusual and non-operating pension and other post-employment benefit (OPEB) items as listed below. The non-recurring or unusual items may include acquisition and integration related costs, gains or losses on sales of businesses, restructuring charges, facility divestiture charges and other significant non-recurring items. EBITDA is defined as earnings before interest and financing expenses, income taxes, and depreciation and amortization. Adjusted EBITDA is defined as EBITDA and the non-recurring, other unusual and non-operating pension and OPEB items as listed below.

See below for a reconciliation of adjusted EBITDA on a segment basis, the non-GAAP financial measure, to Net income attributable to Albemarle Corporation, the most directly comparable financial measure calculated and reported in accordance with GAAP (in thousands, except percentages).

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 our operating segments and are included in the Corporate category. In addition, we believe that these components of pension cost are mainly driven by market performance, and we manage these separately from the operational performance of our 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):

In addition to the non-operating pension and OPEB items disclosed above, we have identified certain other items and excluded them from our 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):

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 reported in accordance with GAAP (in thousands, except percentages).