Q1 2020 Earnings Call

CFO quarter, in fact the travel restrictions that began in the first quarter to date. We see minimal changes to the FCC order book for Q2, but based on the experience of life or oil price reductions. We expect to see a shift of HTC orders out of second half and into 2021.

The timing and extent of the downturn is unclear and a lot depends on how long travel restrictions are in place how long the oil price remains low and how much crude and refined product inventory is built up when restrictions are lifted given the current economic environment. We are executing are down term play but for short-term cash may have already activated many of these tactics terms of variable costs restricted travel to the covid-19 will continue or also strictly limiting Professional Services and Consultants.

On fixed cost we're reducing Capital expenditures and limiting hiring overtime and contractors.

Senior executive and the board have also agreed to a temporary 20% cut to base type.

For also cutting sustaining and growth Capital spending. We will continue to maintain our health safety and environmental standards beyond that. We're taking a critical log all capital spending across our businesses.

The most meaningful Capital spending, is that our lithium expansion projects when they were three and four and kemberton, we are slowing work on these projects to conserve cash into reassessing demand requirement when the battery industry recovers, we have maintained optionality to defer additional capital or accelerate these projects depending on market conditions.

Including cuts to sustaining and major project Capital. We now expect our capex to be in the range of 850 to $950 a 15% reduction from the midpoint of previous guidance working capital average is about 25% of sales. So we'd expect to see some reduction here as deadly declines. We're also actively managing working capital to see further improvements including seeking payment term extensions from vendors accelerating collection of past due receivables off and actively reducing inventories. We have begun shutdowns of some Catalyst production and have plans in place to slow down. Our office is needed assuming demand declines as recent customer shutdowns work their way through Supply chains.

All told the short-term cash management actions detailed here are expected to save the company about twenty-five to forty million dollars a quarter that would be in addition to the capex reduction a sustainable cost business. We just discussed.

Well working.

Hard to cut costs but also minimize the impact for employees. Unfortunately, depending on the length and severity of the downturn we may Idol additional production sites or take more drastic cost actions if necessary.

These actions are difficult and not something that we undertake lightly but they are meaningful to help position album out to be stronger for longer and I'll turn the call back over to the tank God thank Scott economic conditions are challenging Albemarle is an industry leader in all three of our core businesses. We believe in the long-term growth prospects and all businesses. But our immediate challenges to manage through this crisis. We will act on cost reduction measures quickly to preserve cash and maintain our financial flexibility. We will also be poised to respond with a customer needs when the market returns. We remain confident in our strategy and we will modify execution of that strategy to further position album All For Success with great before we open the lines for Q&A like to remind everyone to please limit questions to one question and one follow-up to ensure that as many participants have a chance to ask a question as possible dead.

Feel free to get back in the queue for additional follow-up this time allows. Thank you and Michelle, please proceed with the Q&A. Thank you. Ladies and gentlemen. If you have a question at this time, please press star one on your touch-tone telephone. If your question has been answered. Are you wish to remove yourself from the queue, please press the pound key to prevent any background noise. We ask that you please place your online on you once your question has been stated.

Our first question comes from the line of Steve fine with Bank of America. Your line is open, please go ahead.

Hi, this is Matt Deo one for Steve. I wanted to dig into the guidance a little bit more and see if you could kind of point at the drivers which would result in either the low-end high-end of the guidance range. And it seems like your direct segment commentary points to something like a hundred and fifty million. How do you get to that uh hundred ninety Million number?

Hey, this is Scott. So I think a couple a couple of key things around on certain one is in each of our businesses. We've got a pretty good visibility through Thursday May beginning of June in terms of our order book and are executing to that. I think the uncertainty comes in each of the businesses as we go through the month of May particularly check with Catalyst in terms of How Deep The is the slow downs and the refineries will be or if they as you know, State start to come back on obviously this Refinery start back up in brownie. It's going to come down most likely to some Logistics issues and questions around whatever books getting getting killed on time and then a lithium, you know, we we should expect that the auto OEM shutdowns will be impacting Us in the second half right now. The order books look pretty good through June, but they're start starting to soften dead.

Um, so there's some variability there.

Well, those are the key. Those are the key drivers for us.

Okay, and I guess I'm prior calls you discuss the potential for over building and battery cells as looking demand. Strong despite. What we saw was probably dead slow down and autos and two Q & Beyond.