Q1 2024 Albemarle Corp Earnings Call

May 2, 2024

Hello, and welcome to Albemarle Corporation, Q1, 2024 earnings call I will now hand, it over to Meredith Bandy, Vice President of Investor Relations and sustainability.

Yeah.

Unknown Executive: Thank you and welcome everyone to Albemarle's first quarter 2024 earnings conference call. Our earnings were released after the close of market yesterday, and you'll find the press release and earnings presentation posted to our website under the investor section at albemarle.com. Joining me on the call today are Kent Masters, Chief Executive Officer, and Neal Sheorey, Chief Financial Officer. Netha Johnson, President of Specialties, and Eric Norris, President of Energy Storage, are also available for Q&A.

Unknown Executive: Thank you and welcome everyone to Albumerle's first quarter 2024 earnings conference call. Our earnings were released after the close of market yesterday, and you'll find the press release and earnings presentation posted to our website under the Investors section at abelmarl.com. Joining me on the call today are Kent Masters, Chief Executive Officer, and Neal Sheorey, Chief Financial Officer. Netha Johnson, President of Specialties, and Eric Norris, President of Energy Storage, are also available for Q&A.

Speaker Change: Thank you and welcome everyone to Albemarle first quarter 2024 earnings Conference call. Our earnings were released after the close of market yesterday, and you'll find the press release and earnings presentation posted to our website under the investors section at Albemarle Dot com.

Speaker Change: Joining me on the call today are Kent Masters, Chief Executive Officer, and necessary Chief Financial Officer, NASA Johnson, President of specialties, and Eric Norris President of energy storage are also available for Q&A.

Unknown Executive: As a reminder, some of the statements made during this call, including our Outlook, Guidance, Expected Company Performance, and Timing of Expansion Projects, 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. Also note that some of our comments today refer to non-GAAP financial measures. Reconciliations can be found in our earnings materials. And now I'll turn the call over to you.

As a reminder, some of the statements made during this call, including our outlook guidance.

Speaker Change: The company performance and timing of expansion projects may constitute forward looking statements.

Speaker Change: Please note the cautionary language about forward looking statements contained in our press release and earnings presentation that same language applies to this call.

Speaker Change: Also note that some of our comments today refer to non-GAAP financial measures reconciliations can be found in our earnings materials and now I'll turn the call over to Ken.

Speaker Change: Yes.

Ken: Thank you Meredith.

Jerry Kent Masters: During the first quarter, our team demonstrated its ability to navigate dynamic market conditions with actions that position Albemarle for profitable growth and deliver on the operational steps that we have set out to achieve this year. We recorded net sales of $1.4 billion and adjusted EBITDA of $291 million.

Ken: During the first quarter, our team demonstrated its ability to navigate dynamic market conditions with actions that positioned albemarle for profitable growth and deliver on the operational steps that we have set out to achieve this year.

Ken: We recorded net sales of $1 4 billion and adjusted EBITDA of $291 million.

Jerry Kent Masters: We saw continued volumetric growth driven by the energy storage segment, highlighting the demand growth in this segment and our ability to cap it. We also ramped new conversion facilities executed on our productivity plans and strengthened our competitive position and financial flexibility. During the quarter, we delivered more than $90 million in productivity and restructuring cost savings, consistent with our efforts to align our costs with the current market environment. We are on track to deliver more than $280 million in productivity improvements in 2024, demonstrating our excellent execution.

Ken: We saw continued volumetric growth driven by energy storage segment.

Ken: Highlighting the demand growth in this segment and our ability to capture it.

Ken: We also ramped new convergent facilities executed on our productivity plans and strengthen our competitive position and financial flexibility.

Ken: During the quarter, we delivered more than $90 million and productivity and restructuring cost savings consistent with our efforts to align our cost with the current market environment.

Ken: We are on track to deliver more than $280 million and productivity improvements in 2024, demonstrating our excellent execution.

Jerry Kent Masters: To drive the lithium market transparency and discovery, we held several successful bidding events for spodumene concentrate and lithium carbonate in March and April. We are encouraged by the results and level of participation to date and plan to continue these efforts. And we continue to advance our in-flight growth projects that are near completion or in startup to deliver near-term volume growth and cash. In particular, we've reached important new milestones at Kimmerton One and Mayshon.

Ken: To drive lithium market transparency and discovery, we held several successful bidding events for spodumene concentrate and lithium carbonate in March and April.

Ken: We are encouraged by the results and level of participation to date and plan to continue these efforts.

Ken: And we continue to advance our in flight growth projects that are near completion or in startup to deliver near term volume growth and cash flow in particular, we've reached important new milestones at cymric in one and May Shawn.

Jerry Kent Masters: Finally, the year so far has developed as we expected, and we are reaffirming our full-year 2024 Outlook ranges that are based on observed lithium market price scenarios that we included for the first time last quarter. Our operational and strategic playbook positions us well to serve our customers today and for the future. With our focused execution and our continued confidence in the elements we provide, Albemarle is well positioned to drive sustainable growth and create value. I'll now hand it over to Neal to talk about our financial results during the quarter.

Ken: Finally, the year. So far has developed as we expected and we are reaffirming our full year 2024 outlook ranges that are based on observed lithium market price scenarios that we included for the first time last quarter.

Ken: Our operational and strategic playbook positions us well to serve our customers today and for the future.

Ken: With our focused execution and our continued confidence in the elements, we provide albemarle is well positioned to drive sustainable growth and create value.

Ken: I'll now hand, it over to Neil to talk about our financial results during the quarter.

Neal Sheorey: Thanks, Kent, and good morning, everyone. Beginning on slide five, let's jump into our first quarter performance. In Q1, 2024, net sales of $1.4 billion compared to $2.6 billion for the prior year quarter, a year-over-year decline of 47 percent, driven principally by lower pricing, partially offset by volume growth. Adjusted EBITDA was $291 million, significantly down from the same period last year when pricing and margins across our energy storage and specialties businesses were at peak levels. Diluted EPS was negative 8 cents.

Neal Sheorey: Thanks, Kent, and good morning, everyone. Beginning on slide five, let's jump into our first quarter performance. In Q1 2024, we recorded net sales of $1.4 billion compared to $2.6 billion for the prior year quarter, a year over year decline of 47%, driven principally by lower pricing, partially offset by volume growth. Adjusted EBITDA was $291 million, significantly down from the same period last year when pricing and margins across our energy storage and specialties businesses were at peak levels. Diluted EPS was negative 8 cents.

Neil: Thanks, Kent and good morning, everyone beginning on slide five let's jump into our first quarter performance. In Q1, 2024, we recorded net sales of $1 $4 billion compared to $2 $6 billion for the prior year quarter of year over year decline of 47% driven principally.

Neil: Lead by lower pricing, partially offset by volume growth.

Neil: Adjusted EBITDA was $291 million significantly down from the same period last year, when pricing and margins across our energy storage and specialties businesses were at peak levels.

Neil: Diluted EPS was negative eight.

Neal Sheorey: Adjusted diluted EPS was $0.26, which excludes primarily restructuring charges and mark-to-market losses on public equity securities held or sold in the quarter. Our earnings decline was driven mostly by margin compression on lower pricing, especially within our energy storage segment. Additionally, we had some margin pressure due to timing of higher-cost spodumene flowing through cost of goods sold and reduced equity earnings at the Taliesin joint venture. However, these factors were partially offset by volumetric growth, primarily of lithium carbonate and hydroxide, and we also recorded spodumene sales at favorable prices.

Neal Sheorey: Adjusted diluted EPS was $0.26, which excludes primarily restructuring charges and mark-to-market losses on public equity securities held or sold in the quarter. Our earnings decline was driven mostly by margin compression on lower pricing, especially within our energy storage segment. Additionally, we had some margin pressure due to timing of higher-cost spodumene flowing through cost of goods sold and reduced equity earnings at the Taliesin joint venture. However, these factors were partially offset by volumetric growth, primarily lithium, carbonate, and hydroxide, and we also recorded spodgamine sales at favorable prices.

Neil: Adjusted diluted EPS was <unk> 26.

Neil: Which excludes primarily restructuring charges and mark to market losses on public equity securities held or sold in the quarter.

Neil: Our earnings decline was driven mostly by margin compression on lower pricing, especially within our energy storage segment. Additionally, we had some margin pressure due to timing of higher cost spodumene flowing through cost of goods sold and reduced equity earnings at the <unk> joint venture.

Neil: These factors were partially offset by volumetric growth, primarily lithium carbonate and hydroxide and we also recorded spodumene sales at favorable pricing.

Neal Sheorey: Also, the catch in business recorded increased net sales and EBITDA driven primarily by higher volume. Looking at slide 6, we'll break down the company's first quarter adjusted EBITDA by driver. Compared to the prior year quarter, the decline in EBITDA was $1.4 billion related to lower lithium pricing in both energy storage and specialties.

Neil: Also the kitchen business recorded increased net sales and EBITDA driven primarily by higher volumes.

Neal Sheorey: $90 million in cost of goods sold due to timing of higher-priced spodumene inventories built in prior periods and $270 million related to pre-tax equity income primarily from our Taliesin JV. Offsetting these declines were improvements of $251 million related to higher volumes as our energy storage projects continue to ramp, as well as better clean fuel technologies volumes at catch-up. And $80 million of net improvements, mainly due to restructuring and productivity benefits across multiple areas, including procurement, manufacturing, and back office spend.

Neil: Looking at slide six we will break down the company's first quarter adjusted EBITDA by driver.

Neil: Compared to the prior year quarter the decline in EBITDA was $1 $4 billion related to lower lithium pricing in both energy storage and specialties.

Neal Sheorey: $90 million in cost of goods sold due to the timing of higher-priced spodumene inventories built in prior periods and $270 million related to pre-tax equity income primarily from our Taliesin JV. Offsetting these declines were improvements of $251 million related to higher volumes as our energy storage projects continue to ramp up, as well as better clean fuel technologies volumes at catch-up, and $80 million of net improvements mainly due to restructuring and productivity benefits across multiple areas, including procurement, manufacturing, and back office spend. This demonstrates our team's agility and focus on delivering higher volumes and productivity improvements in the current market environment.

Neil: $90 million and cost of goods sold due to timing of higher priced spodumene inventories built in prior periods and $270 million related to pre tax equity income primarily from our callison JV.

Neil: Offsetting these declines were improvements of $251 million related to higher volumes as our energy storage projects continue to ramp as well as better clean fuel technologies volumes at catching.

Neil: And $80 million of net improvements, mainly due to restructuring and productivity benefits across multiple areas, including procurement manufacturing and back office spend.

Neal Sheorey: This demonstrates our team's agility and focus on delivering higher volumes and productivity improvements in the current market environment. Turning to slide 7, as we did last quarter, we are providing outlook ranges based on historically observed lithium market pricing scenarios. We are reaffirming our outlook considerations published last quarter. There are two notable updates here related to our tax rate and share count expectations. We are updating our adjusted effective tax rate guidance to reflect the range of lithium price scenarios, as well as our updated expectations of geographic income. For example, at the $15 lithium price scenario, we'd expect a modest tax expense benefit in our P&L. At higher prices, we'd expect a more typical tax rate in the mid to high 20% range.

Neil: This demonstrates our team's agility and focus on delivering higher volumes and productivity improvements in the current market environment.

Neal Sheorey: Turning to slide 7, as we did last quarter, we are providing outlook ranges based on historically observed lithium market pricing scenarios. We are reaffirming our outlook considerations published last quarter. There are two notable updates here related to our tax rate and share count expectations. We are updating our adjusted effective tax rate guidance to reflect the range of lithium price scenarios, as well as our updated expectations of geographic income. At the $15 lithium price scenario, we'd expect a modest tax expense benefit in our PNL. At higher prices, we'd expect a more typical tax rate in the mid to high 20% range.

Neil: Turning to slide seven as we did last quarter, we are providing outlook ranges based on historically observed lithium market pricing scenarios, we are reaffirming our outlook considerations published last quarter.

Neil: There are two notable updates here related to our tax rate and share count expectations.

Neil: We are updating our adjusted effective tax rate guidance to reflect the range of lithium price scenarios as well as our updated expectations of geographic income mix.

Neil: The $15 lithium price scenario, we would expect a modest tax expense benefit in our P&L.

Neil: At higher pricing, we'd expect a more typical tax rate in the mid to high 20% range.

Neal Sheorey: We have also accounted for the adjusted change in the diluted share count to reflect our $2.3 billion public mandatory convertible preferred stock offer. Moving to slide 8, where we provide some operating cash flow considerations. We had previously highlighted that our cash flow conversion would be constrained this year, and I want to provide some additional color on those drivers. As you can see here, our cash flow conversion in 2024 is expected to be below historical averages for four reasons.

Neil: We have also accounted for the adjusted change in the diluted share count to reflect our $2 $3 billion public mandatory convertible preferred stock offering.

Neal Sheorey: First, Talison is progressing its chemical-grade plant, or CGP3 expansion, resulting in lower dividends from the JV. Second, working capital release related to lower lithium prices is expected to be mostly offset by increased working capital investments for our new plants at Kemerton, Mayshon, Solar Yield, and Chinzo. Third, cash taxes are expected to be similar to last year, primarily reflecting the jurisdictional mix. For example, we will pay Australian cash taxes in mid-year based on earnings estimates from the prior year period.

Neil: Moving to slide eight where we provide some operating cash flow considerations. We had previously highlighted that our cash flow conversion would be constrained this year and I want to provide some additional color on those drivers.

Neil: As you see here our cash flow conversion in 2024 is expected to be below historical averages for four reasons first tolleson is progressing its chemical grade plant or CGP three expansion, resulting in lower dividends from the JV.

Neal Sheorey: First, Taliesin is progressing its chemical-grade plant, or CGP-3, expansion, resulting in lower dividends from the JV. Second, working capital release related to lower lithium prices is expected to be mostly offset by increased working capital investments for our new plants at Kemerton, Mayshon, Talar Yield, and Chinzo. Third, cash taxes are expected to be similar to last year, primarily reflecting the jurisdictional mix. For example, we will pay Australian cash taxes in mid-year based on earnings estimates from the prior year period.

Neil: Second working capital release related to lower lithium pricing is expected to be mostly offset by increased working capital investments for our new plants at Cameron may Shawn the lar yield and Shinzo.

Neil: Third cash taxes is expected to be similar to last year, primarily reflecting jurisdictional mix. For example, we will pay Australia in cash taxes in mid year based on earnings estimates from the prior year period.

Neal Sheorey: And finally, we expect to have higher interest expenses year over year. Turning to slide 9, I'll provide further details on trends in each segment's outlook. First, in energy storage, we continue to expect approximately two-thirds of our 2024 volumes to be sold on index-referenced, variable-price contracts. The remaining one-third of the volume is still expected to be sold on short-term purchase agreements, including our recently announced bidding events, which Kent will discuss in a moment. Year-over-year energy storage volume growth is trending toward the high end of our expected 10 to 20 percent range, driven by the timing of project ramps and spodumene sales.

Neal Sheorey: And finally, we expect to have higher interest expenses year over year. Turning to slide 9, I'll provide further details on trends in each segment's outlook. First, in energy storage, we continue to expect approximately two-thirds of our 2024 volumes to be sold on index-referenced variable price contracts. The remaining one-third of the volume is still expected to be sold on short-term purchase agreements, including our recently announced bidding events, which Kent will discuss in a moment. Year-over-year energy storage volume growth is trending toward the high end of our expected 10 to 20 percent range, driven by the timing of project ramps and spodumene sales.

Neil: And finally, we expect to have higher interest expenses year over year.

Neil: Turning to slide nine I'll provide further details on trends in each segment outlook.

Neil: First in energy storage, we continue to expect approximately two thirds of our 2020 for volumes to be sold on index referenced variable price contracts. The remaining one third of the volume is still expected to be sold on short term purchase agreements, including our recently announced bidding events, which Ken will discuss in a moment.

Ken: Year over year energy energy storage volume growth is trending toward the high end of our expected, 10% to 20% range driven by timing of project ramps and spodumene sales.

Neal Sheorey: We continue to anticipate increased year-over-year volumes in the second half of the year due to the ramp of our expansion. All else being equal, we continue to expect improving margins through the year as lower-cost spodumene offsets new facility ramp costs. However, we expect some quarterly variance in EBITDA and margin due to the timing of Taliesin shipments. Specifically, in Q2, we expect a lift to our EBITDA margin of about 10 points from higher offtake by our partners at the Taliesin JV. Next on special:

Ken: We continue to anticipate increased year over year volumes in the second half of the year due to the ramp of our expansions.

Ken: All else being equal we continue to expect improving margins through the year as lower cost spodumene offsets new facility ramp costs. However, we expect some quarterly variance in EBITDA and margin due to the timing of tolleson shipments specifically in Q2, we expect a lift to our EBITDA.

Ken: Margin of about 10 points from higher off take by our partners at the <unk> JV.

Ken: Next on specialties, our outlook reflects continued softness in consumer electronics, partially offset by solid demand in oilfield services agriculture and pharmaceutical applications.

Neal Sheorey: Our outlook reflects continued softness in consumer electronics, partially offset by solid demand in oilfield services, agriculture, and pharmaceutical applications. Furthermore, we are seeing higher costs for logistics as we manage through regional challenges, notably at our site in Jordan. We anticipate higher sales in the second half of the year on the expectation of modest end market recovery and improved pricing in bromine specials. Taken together, we now expect Specialties Adjusted EBITDA to be toward the lower end of the Outlook range. Finally, at catch.

Ken: Furthermore, we are seeing higher cost for logistics as we manage through regional challenges, notably at our site in Jordan we.

Ken: We anticipate higher sales in the second half of the year on the expectation of modest end market recovery and improved pricing in bromine specialties taken together, we now expect specialties adjusted EBITDA to be towards the lower end of the outlook range.

Ken: Finally at catching we are seeing the building success of our turnaround program. We are optimistic about increased volumes driven by high refinery utilization.

Neal Sheorey: We are seeing the building success of our turnaround program, and we are optimistic about increased volumes driven by high refinery utilization. In Q1, we saw end market strength primarily in clean fuel technology and expect higher volumes across each of the catch-in businesses in 2020. Turning to slide 10, our financial position. As you know, during the quarter, we took action to maintain a solid investment grade credit rating and further enhance Albemarle's financial flexibility as we navigate this market downside.

Ken: In Q1, we have seen end market strength, primarily in clean fuel technology and expect higher volumes across each of the catch in businesses in 2024.

Ken: Turning to slide 10, and our financial position.

Ken: As you know during the quarter, we took action to maintain our solid investment grade credit rating and further enhance albemarle financial flexibility as we navigate this market down cycle.

Neal Sheorey: In March, we closed a $2.3 billion public preferred stock offering to fortify our competitive position and stay ahead of dynamic market conditions. Together, with the amended credit facility we discussed in February, these actions put Albemarle in a position to invest in and finish our last mile expansion projects, as well as capitalize on the secular growth trends we see in our core end markets of mobility, energy, connectivity, and health. Following the offering, we repaid our outstanding commercial paper, resulting in improved leverage. We ended the quarter with a larger than normal cash balance, and the primary use of that cash will be to complete our in-flight capital project.

Ken: In March we closed a $2 $3 billion public preferred stock offering to fortify our competitive position and stay ahead of dynamic market conditions.

Ken: Together with the amended credit facility, we discussed in February these actions put albemarle in a position to invest in and finish our last mile expansion projects as well as capitalize on the secular growth trends, we see in our core core end markets of mobility energy connectivity and health.

Ken: Following the offering we repaid our outstanding commercial paper, resulting in improved leverage we ended the quarter with a larger than normal cash balance and the primary use of that cash will be to complete our in flight capital projects.

Jerry Kent Masters: Our balance sheet management highlights our focus on adapting to changing market conditions and controlling the things in our control. Finally, turning to slide 11 for a reminder of our capital allocation priorities. This is a slide you've seen before, and we're touching on it briefly to acknowledge that our capital allocation priorities have not changed. We'll continue to selectively invest in high-return growth, but we'll be patient and disciplined. Our near-term focus remains on operational execution, and you can expect that our actions will be aligned with driving cost and productivity improvements, ramping up our assets to full contribution, and preserving our financial flexibility.

Ken: Our balance sheet management highlights our focus on adapting to changing market conditions and controlling the things in our control.

Ken: Finally, turning to slide 11 for a reminder of our capital allocation priorities.

Ken: This is a slide you've seen before and we're touching on it briefly to acknowledge that our capital allocation priorities have not changed we will continue to selectively invest in high return growth, but we'll be patient and discipline.

Ken: Our near term focus remains on operational execution and you can expect that our actions will be aligned with driving cost and productivity improvements ramping our assets to full contribution and preserving our financial flexibility.

Jerry Kent Masters: While we believe current lithium prices are unsustainable for most of the industry in the long term, we are managing to the current environment. To support our ability to reinvest and grow for the future, we are taking prudent steps to right-size our capital spending and cost structure, focusing on ramping up our plants to full contribution and volume growth capture, and taking steps to boost cash flow and enhance our financial flexibility. With that, I'll turn it back over to Kent to provide more details on the proactive actions Albemarle is taking in the current market to preserve long-term growth and value creation.

Ken: While we believe current lithium prices are unsustainable for most of the industry in the long term, we are managing to the current environment.

Ken: To support our ability to reinvest and grow for the future. We are taking the prudent steps to right size, our capital spending and cost structure.

Ken: Focusing on ramping our plants to full contribution and volume growth capture and taking steps to boost cash flow and enhance our financial flexibility.

Ken: With that I'll turn it back over to Kent to provide more details on the proactive actions Albemarle is taking in the current market to preserve long term growth and value creation.

Ken: Okay.

Jerry Kent Masters: Thanks Neil.

Jerry Kent Masters: Moving to slide 12, we continue to believe in the EV transition and the growth in lithium demand, as well as the opportunity it creates for Albemarle. Despite a downshift in demand growth in Europe and the United States, global EV sales are up 20% year-to-date, led by strong growth in China, which represents over 60% of the global EV market. We continue to anticipate two and a half times the lithium demand growth from 2024 to 2030. Additionally, we see battery size growing over time, driven by technological developments and EV adoption. These factors all translate to significantly higher global lithium needs.

Jerry Kent Masters: Moving to slide 12, we continue to believe in the EV transition and the growth in lithium demand as well as the opportunity it creates for Albemarle.

Jerry Kent Masters: Despite a downshift in demand growth in Europe, and the United States Global EV sales were up 20% year to date led by strong growth in China, which represents over 60% of the global EV market.

Jerry Kent Masters: We continue to anticipate two five times lithium demand growth from 2024 to 2030.

Jerry Kent Masters: Additionally, we see battery size growing overtime, driven by technology developments and EV adoption.

Jerry Kent Masters: These factors all translate to significantly higher global lithium needs.

Jerry Kent Masters: To put all this in perspective, we expect that this industry needs more than 300,000 metric tons of new lithium capacity every year to satisfy this growth. This means we need more than 100 new lithium projects across resources and conversion between now and 2030 to support this demand. Moving to slide 13, Albemarle is actively contributing to the progress of price discovery and efficiency in the lithium market. We have conducted four successful bidding events for chemical-grade spodumene and battery-grade carbonate.

Jerry Kent Masters: To put all this in perspective, we expect that this industry needs more than 300000 metric tons of new lithium capacity every year to satisfy this growth.

Jerry Kent Masters: This means we need more than 100, new lithium projects across resources and conversion between now and 2030 to support this demand.

Jerry Kent Masters: These events inform the market of real-time physical trading dynamics and promote greater transparency in the evolving lithium market. While the majority of our sales will continue to be on long-term agreements with our core strategic customers, bidding events give us another sales channel to expand our market. We have partnered with Metals Hub, an industry-leading source-to-contract platform, to host efficient and transparent bidding events. On this slide, you can see a few of the ways we've designed these events to promote transparency and efficiency while meeting customer needs. Including zero cost to participate, sealed bids, and bidder confidentiality, as well as the winning price disclosed to all bidders following the event's conclusion.

Jerry Kent Masters: Moving to slide 13, Albemarle is actively contributing to the progress of price discovery and efficiency in the lithium market.

Jerry Kent Masters: We have conducted for successful bidding events for chemical grade Spodumene and battery grade carbonate. These events informed the market of real time, physical trading dynamics and promote greater transparency in the evolving lithium market.

Jerry Kent Masters: While the majority of our sales will continue to be on long term agreements with our core strategic customers bidding events give us another sales channel to expand our market access.

Jerry Kent Masters: We have partnered with metals hub and industry, leading source to contract platform to host efficient and transparent bidding events on the slide you can see a few of the ways. We design these events to promote transparency and efficiency.

Jerry Kent Masters: While meeting customer needs, including zero cost to participate.

Jerry Kent Masters: <unk> bids in bidder confidentiality as well as the winning price disclose to all bidders following the events conclusion.

Jerry Kent Masters: Going forward, you should expect that we will have a regular cadence of these bidding events, including additional products for sale in various jurisdictions. The primary reason for holding these bidding events is to drive fair and transparent price discovery, something that is good for all market participants. Looking at slide 14, the Albemarle Way of Excellence remains our operational standard and continues to serve us well. Within the operating model, our focus continues to be on efficiency and ensuring our costs reflect the current environment.

Jerry Kent Masters: Going forward you should expect that we will have a regular cadence of these bidding events, including additional products for sale in various jurisdictions.

Jerry Kent Masters: The primary reason for holding these bidding events is to drop fair and transparent price discovery something that is good for all market participants.

Jerry Kent Masters: Looking at Slide 14, the Albemarle way of excellence remains our operational standard and continues to serve us well.

Jerry Kent Masters: Within the operating model, our focus continues to be on efficiency and ensuring our cost reflect the current environment.

Jerry Kent Masters: As I mentioned earlier, we remain on track to exceed our 2024 target of $280 million in productivity benefits through manufacturing, procurement, and back office initiatives. Recently, we've added cash management to our tracker to enhance cash flow with particular emphasis on optimizing our cash conversion cycle. Looking beyond our cost actions, we also remain focused on the other elements of our model. This quarter, we plan to publish our sustainability report and host our fourth annual Sustainability Day, featuring key highlights of our sustainable approach and updates on our environmental targets. Moving now to slide 15.

Jerry Kent Masters: As I mentioned earlier, we remain on track to exceed our 2024 target of $280 million and productivity benefits through manufacturing procurement and back office initiatives.

Jerry Kent Masters: Recently, we've added cash management to our tracker to enhance cash flow with particular emphasis on optimizing our cash conversion cycle.

Jerry Kent Masters: Looking beyond our cost actions. We also remain focused on the other elements of our model. This quarter, we plan to publish our sustainability report and hosted our fourth annual sustainability day, featuring key highlights of our sustainable approach and updates on our environmental targets.

Jerry Kent Masters: Moving now to slide 15.

Jerry Kent Masters: We've said that our focus this year is on getting our in-flight projects to completion and full production, allowing us to drive near-term volume growth and cash flow. We're making solid progress on multiple fronts. The Solar Yield Improvement Project in Chile is ramping well and has achieved over 50% operating efficiency. This project allows us to increase lithium production while reducing carbon and water intensity through the application of innovative proprietary technology. It also allows us to capture the full benefits of the capacity expansion at the La Negra Conversion Facility. In Australia, the first two trains, Kimberton 1 and 2, are in startup, ramp, and qualification phases.

Jerry Kent Masters: We've said that our focus this year is on getting our in flight projects to completion and full production, allowing us to drive near term volume growth and cash flow, we're making solid progress on multiple fronts.

Jerry Kent Masters: The <unk> yield improvement project in Chile is ramping well and has achieved over 50% operating rates.

Jerry Kent Masters: This project allows us to increase lithium production, while reducing carbon and water intensity through the application of innovative proprietary technology.

Jerry Kent Masters: It also allows us to capture the full benefits of the capacity expansion at La Negra conversion facility.

Jerry Kent Masters: In Australia. The first two trains Kim written one and two are in start up ramp and qualification phases. Kim written one recently achieved a key milestone of 50% operating rates for battery grade product and that product is currently in qualification.

Jerry Kent Masters: Kimmerton One recently achieved the key milestone of 50% operating rates for its battery-grade product, and that product is currently in qualification. The remaining capital spend for these facilities is modest, and our focus is on continuing to ramp up the facilities and get production qualified with customers. Train 3, we are progressing through construction in a prudent way. In China, the Qianzhou plant is ramping on schedule and is expected to achieve nameplate capacity by mid-year.

Jerry Kent Masters: The remaining capital spend for these facilities is modest and our focus is on continuing to ramp but facilities and get production qualified with customers.

Jerry Kent Masters: Train three we are progressing through construction in a prudent way.

Jerry Kent Masters: In China, the Chin Zoe plant is ramping on schedule and is expected to achieve nameplate capacity by mid year.

Jerry Kent Masters: Mayshon marked its grand opening in April and is progressing through commissioning, having achieved a 50% operating rate for battery-grade material. The remaining capital spend on Maysha is relatively small and related to the ongoing startup activity. Looking at slide 16, our in-flight projects put us in a position to deliver volumetric growth of approximately 20% per year from 2022 to 2027. First quarter sales volumes were recorded at 40,000 tons of LCE.

Jerry Kent Masters: Sean Mark its Grand opening in April and is progressing through commissioning, having achieved a 50% operating rate for battery grade materials.

Jerry Kent Masters: The remaining capital spend on May Shawn is relatively small and related to the ongoing startup activities.

Jerry Kent Masters: Looking at Slide 16, our in flight projects put us in a position to deliver volumetric growth of approximately 20% per year from 2022 to 2027.

Jerry Kent Masters: First quarter sales volumes were recorded at 40000 tonnes LTE.

Jerry Kent Masters: We expect 2024 total volumes weighted toward the second half of the year due to demand seasonality and project ramp-up. We also have the flexibility to toll or sell excess spodumene to maximize economic returns, depending on market conditions, as we exercised that ability in the first quarter by selling some chemical grade spodumene. Moving on to slide 17.

Jerry Kent Masters: We expect 2024 total volumes weighted toward the second half of the year due to due to demand seasonality and project ramp.

Jerry Kent Masters: We also have the flexibility to toll or sell excess spodumene to maximize economic returns depending on market conditions as we exercise that ability in the first quarter by selling some chemical grade spodumene.

Jerry Kent Masters: It's important to highlight the unique advantages that Albemarle has today and how we see those advantages translating to significant margin expansion and earnings generation in the near term. It all starts with our high-quality, low-cost resource portfolio, including the Salarda Atacama, Greenbushes, Wadjana, and Kings Mountain. Our global portfolio is arguably the best in the industry. Large-scale, high-grade assets are also low-cost assets.

Jerry Kent Masters: Moving on to slide 17, it is important to highlight the unique advantages that Albemarle has today and how we see those advantages translating to significant margin expansion and earnings generation in the near term.

Jerry Kent Masters: It all starts with our high quality low cost resource portfolio, including the salada out a comma green bushes, wad, Jenna and Kings Mountain.

Jerry Kent Masters: Our global portfolio is arguably the best in the industry.

Jerry Kent Masters: Large scale high grade assets are also low cost assets and the advantages. They provide are not insignificant as you can see on the left hand side of this slide.

Jerry Kent Masters: And the advantages they provide are not insignificant, as you can see on the left-hand side of this slide. Access to world-class assets is, in turn, one key factor to help us maintain robust energy storage margins across the site, for example. At the $15 per kilogram lithium price scenario, we estimate energy storage margins would normalize above 30% after adjusting for the temporal impacts from lower partner offtake at Taliesin and lower fixed cost absorption at our new plant. And that's before the tailwind of price upside.

Jerry Kent Masters: Yeah.

Jerry Kent Masters: Access to World class assets is in turn one key factor to help us maintain robust energy storage margins across the cycle.

Jerry Kent Masters: For example, at the $15 per kilogram lithium price scenario, we estimate energy stored margins with normalize above 30% after adjusting for the temporal impacts from lower partner offtake at Palisson and lower fixed cost absorption at our new plant in <unk>.

Jerry Kent Masters: That's before the tailwind of price upside we.

Jerry Kent Masters: We estimate that every $1 per kilogram of LCE price improvement would translate to more than 200 basis points of margin expansion. We are also diversified across resource types and finished products. Vertically integrated and able to source product from free trade agreement jurisdictions such as Australia, Chile, and the United States. Turning to slide 18, our comments today reflect the competitive strengths that position Albemarle for success. Beyond our world-class resource base, additional competitive advantages include our process chemistry knowledge and manufacturing expertise, which allow us to efficiently operate large-scale assets and drive down operating costs.

Jerry Kent Masters: We estimate that every $1 per kilogram of LTE price improvement would translate to more than 200 basis points of margin expansion.

Jerry Kent Masters: We are also diversified across resource types and finished products.

Jerry Kent Masters: Vertically integrated and able to source product from free trade agreement jurisdictions, such as Australia, Chile, and the United States.

Jerry Kent Masters: Turning to slide 18, our comments today reflect the competitive strengths that positioned Albemarle for success beyond our world class resource base additional competitive advantages include our process chemistry knowledge and manufacturing expertise allow us to efficiently operate large scale asset.

Jerry Kent Masters: And drive down operating cost.

Jerry Kent Masters: Our targeted innovations, product reliability, and reputation for quality make us a trusted partner of choice for our customers. And our people and stewardship are a point of pride and competitive strength. We have a proven management team that has operated through cycles and continues to lead with a disciplined mind. On slide 19, these factors give Albemarle a strong value proposition and position us to win in the market. Our strategy and path to capitalize on the opportunities aligned with attractive trends in mobility, energy, connectivity, and health are clear.

Jerry Kent Masters: Our targeted innovations product reliability and reputation for quality make us a trusted partner of choice for our customers and our people and stewardship are a point of pride and competitive strength.

Jerry Kent Masters: We have a proven management team that has operated through cycles and continues to lead with a disciplined mindset.

Jerry Kent Masters: On slide 19, these factors give albemarle, a strong value proposition and position us to win in the market.

Jerry Kent Masters: Our strategy and path to capitalize on the opportunities aligned with attractive trends in mobility energy connectivity and help is clear.

Jerry Kent Masters: We will continue to lead with discipline and to scale and innovate, accelerate profitable growth, and advance sustainability to drive value for shareholders. I hope to see some of you face-to-face at these upcoming events listed here on slide 20. And with that, I'd like to turn the call back over to the operator to begin the Q&A.

Jerry Kent Masters: We will continue to lead with discipline and to scale and innovate accelerate profitable growth and advance sustainability to drive value for shareholders.

Jerry Kent Masters: I hope to see some of you face to face at these upcoming events listed here on slide 20.

Speaker Change: And with that I'd like to turn the call back over to the operator to begin the Q&A portion.

Unknown Executive: We will now move to our Q&A portion. If you'd like to ask a question, please press star five to raise your hand. Also, please bear in mind this Q&A session is limited to one question and one follow-up per person. Our first question is from Aleksey Yefremov at KeyBank Capital. Your line is open. Please go ahead. Thanks, and good

Speaker Change: We will now move to our Q&A portion if you'd like to ask a question. Please press star site to raise your hand.

Speaker Change: Also please bear in mind. This Q&A session is limited to one question and one follow up per person.

Speaker Change: Our first question is from Alexia females at Keybanc capital. Your line is open. Please go ahead.

Aleksey V. Yefremov: Thanks and good morning, everyone. I just wanted to ask about your lithium volumes projection on slide 16. If current prices don't change, can you get to these volumes and capacities without raising more equity or debt?

Alexia: Thanks, and good morning, everyone I just wanted to ask about Europe.

Alexia: Lithium volumes projects shown on slide 16.

Alexia: If prices don't change can you get to these volumes and capacities without raising more equity or debt.

Unknown Executive: Yeah, so we well, we forecast for the year with looking out for the year, so 10 to 20%. And we'd say we'd probably be at the upper end of that. And those volumes that we show are based on the capital program that we have in place, and the projects that we're executing currently, and there is no need for additional capital for that.

Jerry Kent Masters: Yeah, so we well, we forecast for the year with looking out for the year, so 10 to 20%. And we'd say we'd probably be at the upper end of that. And those volumes that we show are based on the capital program that we have in place, and the projects that we're executing currently, and there is no need for additional capital for that.

Alexia: Yes, so we well we forecast for the year, but looking out for the year, so 10% to 20% and we'd say, we'd probably be at the upper end of that and those the volumes that we show are based on the capital program that the long term volumes, we sell where based on the capital program that we have in place.

Alexia: And the projects that we're executing currently and no need for additional capital for that.

Aleksey V. Yefremov: Thanks. And just as a follow-up, you give us scenarios for your EBITDA based on pricing. And I was hoping to get a similar idea for your medium-term CapEx. If, say, prices stay where they are today, would you be able to sustain your current level of CapEx in 2025? Or does CapEx need to come down to balance your cash and

Speaker Change: Thanks, and just as a follow up I mean, you gave us some areas.

Speaker Change: For your EBITDA based on pricing and I was hoping to get a similar idea for your medium term capex.

Speaker Change: If sale prices stay where they are today.

Speaker Change: Would you be able to sustain your current level of Capex in 2025 or desk capex need to come down to $1 <unk> cash needs.

Speaker Change: Yes.

Unknown Executive: Yeah, so if prices stayed where they were today, you'd see us ramping CapEx down. It would take us a little bit of time. So it's not, we have a run rate that we think is kind of a minimum CapEx level to maintain assets at about a billion dollars a year. We wouldn't get there in 25. But kind of a run rate in line with that toward the end of 25, we could if we felt prices were going to stay where they are today. Our next question.

Neal Sheorey: Yeah, so if prices stayed where they were today, you'd see us ramping CapEx down. It would take us a little bit of time. So it's not, we have a run rate that we think is kind of a minimum CapEx level to maintain assets at about a billion dollars a year. We wouldn't get there in 25. But kind of a run rate in line with that toward the end of 25, we could if we felt prices were going to stay where they are today. Our next question.

Speaker Change: Yes, so if prices stayed where they were today you'd see us ramping capex down and it does take us a little bit of time, so it's not.

Speaker Change: We have a run rate that we think is kind of a minimum capex level of the.

Speaker Change: And maintain assets about $1 billion a year, we wouldn't get there in 'twenty, five but kind of a run rate.

Speaker Change: In line with that towards the end of 'twenty five we could if we felt prices we're going to stay where they are today.

Arun Shankar Viswanathan: Our next question is from Arun Viswanathan at RBC Capital. Your line is open, please go ahead.

Unknown Executive: Our next question is from Arun Viswanathan at RBC Capital. Your line is open, please go ahead.

Speaker Change: Our next question is from Alan Viswanathan RBC capital. Your line is open. Please go ahead.

Speaker Change: Okay.

Jerry Kent Masters: I guess what I just want to get your thoughts on maybe the fundamentals that you're observing in the lithium markets. These days, you know, it sounds like there was some disruption in some spodumene production. There were some, you know, I think, curtailments in China related to disposal of waste. Altogether, that has taken some production off the market and may potentially stabilize the price environment. Could you maybe highlight some of those issues for us and maybe describe the inventory side as well? What you're observing in both downstream cathode manufacturers and upstream lithium producers? Thanks.

Arun Shankar Viswanathan: I guess what I just want to get your thoughts on maybe the fundamentals that you're observing in the lithium markets. These days, you know, it sounds like there was some disruption in some spodumene production. There were some, you know, I think, curtailments in China related to disposal of waste. Altogether, that has taken some production off the market and may potentially stabilize the price environment. Could you maybe highlight some of those issues for us and maybe describe the inventory side as well? What you're observing in both downstream cathode manufacturers and upstream lithium producers? Thanks.

Arun Shankar Viswanathan: How about that.

Arun Shankar Viswanathan: Thanks for taking my question I Hope you guys are well.

Arun Shankar Viswanathan: I guess I just wanted to get your thoughts on maybe.

Arun Shankar Viswanathan: Fundamentals that you're observing in the lithium markets.

Arun Shankar Viswanathan: These days.

Arun Shankar Viswanathan: It sounds like there was some disruption and some spodumene production.

Arun Shankar Viswanathan: There was some you know I think curtailments in China related to.

Arun Shankar Viswanathan: Disposal of waste altogether that has taken some production off the market and maybe potentially stabilize the price environment.

Arun Shankar Viswanathan: Could you maybe highlight some of those issues for us and maybe describe the inventory side as well.

Arun Shankar Viswanathan: What you're observing in both downstream cathode manufacturers in upstream lithium producers. Thanks.

Jerry Kent Masters: So let me start, I'll start with that, Eric, and give you a little bit more detail on inventory. But you mean, you described the situation reasonably well. We've seen, as we expected, some production come offline, lipid light in China, and some higher-cost spodumene resources. And we've seen prices respond to that marginally; I would say 15% or so change in price as a result of that. But that's what we thought the market would do. We don't really see it running dramatically up.

Speaker Change: So let me start I'll start with that Eric can give you a little bit more detail on on inventories, but you described the situation reasonably well we've seen we've seen as we expected some production come offline lepidolite in China, and some higher cost spodumene resources and we've seen price.

Eric W. Norris: To respond to that marginally I would say, 15% or so change in price as a result of that.

Eric W. Norris: But thats, what we thought the market would do we don't really see it running dramatically up.

Eric W. Norris: And we still expect to see other resources coming off if prices stay where they are so it's kind of it.

Eric W. Norris: It's going to balance the market kind of figures out exactly what pricing is doing and how production response to that so I think youll see new projects that are planned.

Eric W. Norris: Often struggling to get capital if we stay at prices like they are.

Eric W. Norris: And we still expect to see other resources coming off if prices stay where they are. So it's going to balance as the market kind of figures out exactly what prices are doing and how production responds to that. So I think you'll see new projects that are planned coming off and struggling to get capital if we stay at prices like they are. So I think we're in a balancing mode at the moment. And we do expect to see additional resources come out. Eric, do you want to talk about inventories? Sure. First, I'll just hit it.

Jerry Kent Masters: And we still expect to see other resources coming off if prices stay where they are. So it's going to balance as the market kind of figures out exactly what prices are doing and how production responds to that. So I think you'll see new projects that are planned coming off and struggling to get capital if we stay at prices like they are. So I think we're in a balancing mode at the moment. And we do expect to see additional resources come out. Eric, do you want to talk about inventories? Sure. First, I'll just hit it.

Eric W. Norris: So I think we're in a balancing mode at the moment.

Eric W. Norris: We do expect to see additional resources come out Eric do you want to talk about inventories sure first I'll just hit the other factor is important as demand.

Eric W. Norris: First I'll just hit the other factor that's important is demand. China stands as a market in stark contrast, first of all it's the majority of demand in the world, over 60% of the demand, and stands in stark contrast to the US or Europe with very strong growth, you may have seen reported even in April growth that was quite significant for various automotive producers, BYD being up 49%, so there's very strong growth in China coming off of very low inventory levels, and that's obviously a favorable indicator for price in light of the pressure on producers at these price levels that Kent described, and the inventory more specifically, what we're seeing is inventory is pretty much at very low levels ending in March, relatively speaking, so less than two weeks from a lithium producer standpoint, and about a week for downstream cathode companies, that's in China, it's a little higher for battery inventories, but again at levels that are very low compared to the average we saw in 2023, so that coupled with this demand signal we're getting from China we see as a positive signal for price going forward, and obviously we'll have to, we don't know for sure, but we'll watch that carefully, and should that happen that will benefit our earnings going forward.

Eric W. Norris: <unk> stands as a market in Stark contrast, first of all it's the majority of demand in the world.

Eric W. Norris: Over 60% of the demand and stand in Stark contrast to the U S or Europe.

Eric W. Norris: With very strong growth you may have seen reported even in April growth that was quite significant for us various automotive producers BYD being up 49%.

Eric W. Norris: Very strong growth in China coming off a very low inventory levels and that's obviously a favorable indicator for price in light of that.

Eric W. Norris: The pressure on producers at these price levels that Ken described.

Eric W. Norris: And the inventory more specifically, what we're seeing is inventory is pretty much at very low levels.

Eric W. Norris: Ending in March relatively speaking so less than two weeks from a from a lithium producer standpoint, and about a week for downstream cathode company. That's in China, It's a little higher for battery producers.

Eric W. Norris: For battery inventories, but again at levels that are very low compared to the average we saw in 2023. So that's that coupled with this demand signals, we're getting from China, we see as a positive signal or price going forward and obviously, we'll have to wait them.

Eric W. Norris: Don't know for sure, but we'll watch that carefully and should that happen that will benefit our earnings.

Eric W. Norris: Our earnings going forward.

Eric W. Norris: Thanks for that. And I know there's going to be a lot of other questions on lithium. So maybe I'll ask one on specialties. Do you see any risk, maybe given where geographically some of your resources are and

Unknown Attendee: Thanks for that. And I know there's going to be a lot of other questions on lithium. So maybe I'll ask one on specialties. Do you see any risk, maybe given where geographically some of your resources are in Jordan? I know there's been some activity there, obviously. So maybe you can just give us your thoughts on whether that's part of what's leading you to the lower end of guidance for specialties? Or what else would you cite? I guess?

Arun Shankar Viswanathan: Thanks for that. And I know there's going to be a lot of other questions on lithium. So maybe I'll ask one on specialties. Do you see any risk, maybe given where geographically some of your resources are in Jordan? I know there's been some activity there, obviously. So maybe you can just give us your thoughts on whether that's part of what's leading you to the lower end of guidance for specialties? Or what else would you cite? I guess?

Speaker Change: Thanks for that and.

Eric W. Norris: I know theres going to be a lot of other lithium so maybe I'll ask one on specialties.

Speaker Change: Do you see any risk maybe too.

Speaker Change: Given where geographically where some of your resources are in Jordan.

Speaker Change: I know there's been some activity there obviously, so maybe you can just give us your thoughts on is that part of what's leading you to the lower end of guidance for specialties or what else what else would you cite I guess.

Speaker Change: Other than that.

Speaker Change: Yes, I think that's a fair fair fair assumption, there's always risk in the middle East.

Speaker Change: In terms of our operational we've seen limited operational impacts year to date, but the logistics is where the challenges and we are.

Speaker Change: Barring additional costs to secure those logistics out of that part of the world. So that's what's impacting our business, but that's different than what it was last year. So yeah, that's definitely a risk in the second half as we move into that for specialties.

David Adam Deckelbaum: Our next question is from David Deckelbaum at TD Cohen. Your line is open, please go ahead.

Unknown Executive: Our next question is from David Deckelbaum at TD Cohen. Your line is open, please go ahead.

Speaker Change: Our next question is from David Dec Obama TD Cowen. Your line is open. Please go ahead.

Jerry Kent Masters: Thanks for taking my questions, everyone. I wanted to just follow up. You know, the outlook if prices were to stay the same, you've obviously seen the impact of lower near-term production that greenbushes and then obviously you have CGP three, which is still, Commissioner, or under construction and ramping. We've heard from Wajana with the third train kind of being deferred a bit. Do you anticipate any more, I guess, corrective actions or responses under some of the JV Spodum facilities that you're involved with if prices were to remain where they are today?

David Adam Deckelbaum: Thanks for taking my questions, everyone. I wanted to just follow up. You know, the outlook if prices were to stay the same, you've obviously seen the impact of lower near-term production that greenbushes and then obviously you have CGP three, which is still, Commissioner, or under construction and ramping. We've heard from Wajana with the third train kind of being deferred a bit. Do you anticipate any more, I guess, corrective actions or responses under some of the JV Spodum facilities that you're involved with if prices were to remain where they are today?

Speaker Change: Thanks for taking my questions everyone.

Speaker Change: I wanted to just follow up on.

Speaker Change: The outlook if prices were to stay the same.

Speaker Change: You've obviously seen the impact of lower near term production that green bushes, and then obviously you have <unk> three which is still <unk>.

Speaker Change: Commissioner.

Speaker Change: Under construction and ramping.

Speaker Change: We've heard from watching AR with the third train kind of being deferred a bit do you anticipate any more I guess corrective actions or responses under some of the JV spud Sherman facilities that you're involved with if prices were to remain where they are today.

Jerry Kent Masters: So the resources that we operate in, and we have made adjustments just to the market conditions, but I don't think we will make further ones. These are world class resources in the lowest cost position. So we still operate and make money at the pricing level there. These were investments that were kind of happening in the near term when we had opportunities to adjust the execution profile, as we have around conversion assets as well. Our partners agreed to that. So, we've made some adjustments, but long term, we still expect to exploit these resources because they're some of the best in the world.

Speaker Change: So the resources that we operate them and we have made adjustments to the market condition, but I don't think we make further ones. These are world class resources and the lowest cost position. So we still operate and make money at this pricing level. There. These were investments that were kind of happening.

Speaker Change: In the near term and we had opportunities to adjust the execution profile as we have our own conversion assets as well are our partners agreed to that so we've made some adjustments but.

Speaker Change: Long term, we still expect to exploit these resources because there are some of the best in the world.

Unknown Attendee: I appreciate that. And, you know, on the second question, just I think you've highlighted some EBITDA margin recovery in the second quarter with increased partner offtake at Taliesin and some variability there throughout the year. But as we think about your EBITDA margins in 24 versus 25, is there a ballpark range that you would estimate that commissioning new facilities has as sort of a drag on EBITDA margins this year versus next year?

David Adam Deckelbaum: I appreciate that. And, you know, on the second question, just I think you've highlighted some EBITDA margin recovery in the second quarter with increased partner offtake at Taliesin and some variability there throughout the year. But as we think about your EBITDA margins in 24 versus 25, is there a ballpark range that you would estimate that commissioning new facilities has as sort of a drag on EBITDA margins this year versus next year?

Speaker Change: I appreciate that and I'm curious on the second question just.

Speaker Change: <unk> highlighted some EBITDA margin recovery in the second quarter with increased partner offtake at Telus <unk>.

Speaker Change: And some variability there throughout the year, but as we think about your EBITDA margins and 24 versus 25.

Speaker Change: Is there a ballpark range that you would estimate that commissioning new facilities has as sort of a drag on EBITDA margins this year versus next year.

Neal Sheorey: Yeah, hi David. This is this is Neal.

Speaker Change: Yes, Hi, David. This is this is Neil yes, absolutely that's actually one of the reasons why we put that slide in the deck that showed that our range found that I think that slide 17. So the way that we think about it it's about a 500 basis point drag this.

Neal Sheorey: Yeah, absolutely. That's actually one of the reasons why we put that slide in the deck that shows that or range found that. I think that's slide 17. So, the way that we think about it, it's about a 500 basis point drag this year from the ramp-up of these new plants. Now, you won't get all 500 basis points back in 2025 because, obviously, we will still be working through the ramp-up of these facilities. But certainly, you can expect over the next couple of years as these facilities come up to full rates, you should start to see that margin expansion from those plants running full.

Speaker Change: Year.

Speaker Change: From the ramp up of these new plants now you won't get all 500 basis points back in 2025, because obviously, we will still be working through the ramp of these facilities, but certainly you can expect over the next couple of years as these facilities come up to full rates that you should start to see that that margin expansion from those plans.

Speaker Change: It's running full.

Stephen V. Byrne: Our next question is from Steve Byrne at Bank of America. Your line is open. Please go ahead.

Unknown Executive: Our next question is from Steve Byrne at Bank of America. Your line is open. Please go ahead.

Speaker Change: Our next question is from Steve Byrne of Bank of America. Your line is open. Please go ahead.

Unknown Executive: Hi, I'm Rob Hoffman on behalf of Steve Byrne. Out of the $280 million productivity benefits goal that you guys set for 2024, given that you're already, I guess, above pace of $90 million in Q1, is this faster pace apparent in results and guidance?

Stephen V. Byrne: Hi, I'm Rob Hoffman on behalf of Steve Byrne. Out of the $280 million productivity benefits goal that you guys set for 2024, given that you're already, I guess, above pace of $90 million in Q1, is this faster pace apparent in results and guidance?

Speaker Change: Hi, Rob Hoffman on for Steve Byrne.

Rob Hoffman: Out of.

Rob Hoffman: $280 million.

Rob Hoffman: Productivity benefits that you guys set for 2024.

Rob Hoffman: Given that Youre already I guess in both pace of $90 million in Q1 is the SaaS are apparent in our results and guidance.

Unknown Executive: So I think we're using the 280. And as we forecast that, that out, it's still early in the year; we're probably a little ahead of schedule, but not ready to call it and build into our forecast that it will beat that. But we'll be We're optimistic, we're, we're comfortable with the program. And the target is a pretty big goal for us across the organization. And we feel pretty good, we're on a run rate, that we can meet that or maybe beat it. But we've not built that into our forecast.

Jerry Kent Masters: So I think we're using the 280. And as we forecast that, that out, it's still early in the year; we're probably a little ahead of schedule, but not ready to call it and build into our forecast that it will beat that. But we'll be We're optimistic, we're, we're comfortable with the program. And the target is a pretty big goal for us across the organization. And we feel pretty good, we're on a run rate, that we can meet that or maybe beat it. But we've not built that into our forecast.

Rob Hoffman: So I think we're using the $2 80, as we forecast that out it's still early in the year were probably a little ahead of schedule, but not ready to call it and built into our forecast that will that will beat that but we're optimistic.

Rob Hoffman: We're comfortable with the program and the target is.

Rob Hoffman: Pretty big target for us.

Rob Hoffman: Across the organization and we feel pretty good we're on a run rate that we can meet that or maybe beat it but we've not built that into our forecast.

Neal Sheorey: Yeah, and this is Neal. To the point of whether or not you can see it in the financials, maybe just one example I'll give you is if you look at our SG&A line. So just remember that on the face of the income statement, our SG&A line includes about $35 million of one-time charges that were related to our restructuring activities that we announced in the first quarter. When you back that out and then look at our SG&A line versus the fourth quarter versus where we ended 2023, you will see about a $20 to $25 million decline in our SG&A cost. So that gives you an idea that we are starting to see some traction on the productivity and restructuring savings that we have already announced.

Rob Hoffman: Yes. This is neil to the to the point of can you see it in the financials. Maybe just one example, I'll give you is if you look at our SG&A line. So just remember that on the face of the income statement. Our SGA line includes about $35 million of one time charges that was related to our restructuring activities that we announced in the first quarter.

Rob Hoffman: <unk> when you back that out and then look at our SG&A line versus the fourth quarter versus where we ended 2023, you will see about a 20% to $25 million decline in our SG&A costs. So that gives you an idea that we are starting to see some traction on the productivity and restructuring savings that we already announced.

Unknown Attendee: That's helpful. And just to follow up, in terms of your longer-term volume growth chart here, why doesn't the potential tolling volume go down over time? Wouldn't you generate higher margins at your own pace?

Stephen V. Byrne: That's helpful. And just to follow up, in terms of your longer-term volume growth chart here, why doesn't the potential tolling volume go down over time? Wouldn't you generate higher margins at your own pace?

Speaker Change: That's helpful and just a follow up in terms of your longer term volume growth chart here.

Speaker Change: Why doesn't the potential tolling volume go down over time wouldn't you generate higher margins than your own conversion plants.

Eric W. Norris: Your question, just to make sure I'm clear on it, this is Eric speaking, was why would we see the tolling bottom go down over time? Or why why wouldn't it go down? Yeah. Oh, I'm sorry.

Rob Hoffman: Specific to your question just to make sure I'm clear on it. This is Eric speaking is why would we see tolling volume go down over time.

Rob Hoffman: Why would why not volume go down.

Speaker Change: I'm, sorry, yes, I think.

Speaker Change: Fair enough.

Unknown Executive: Yeah, I think it's fair enough. We would take it on it's all a factor of the ramp of plants, right? What it comes down to, we have a plant in China, and China may show this ramping at a faster speed than the plant in Australia. And that has to do with operating experience. But if you look at this over a long term basis, ultimately, our intention is to be fully integrated and to take all the available resources and convert them into company-built assets as opposed to tolling assets.

Eric W. Norris: Yeah, I think it's fair enough. We would take it on it's all a factor of the ramp of plants, right? What it comes down to, we have a plant in China, and China may show this ramping at a faster speed than the plant in Australia. And that has to do with operating experience. But if you look at this over a long term basis, ultimately, our intention is to be fully integrated and to take all the available resources and convert them into company-built assets as opposed to tolling assets.

Speaker Change: Would it.

Speaker Change: Its all a factor of ramp of plants right. When it comes down to we have a plant in China.

Speaker Change: In China May Shawn that's ramping at a faster speed in the plant in Australia and that has to do with operating experience, but if you look on this over a long term basis. Ultimately we will our intention is to be fully integrated.

Rob Hoffman: Like all of the available resources and convert them with company built assets as opposed to tolling assets.

Unknown Executive: Increasingly, those we would target those to be outside of the US. We have a considerable basis today in China. But again, depending upon the speed with which tolling is implemented, it always remains a flywheel, an option for us to go to, depending on the speed of ramps to go to another alternative. But you're right. I mean, in time, that's why there's a plus and minus on it. It should come

Eric W. Norris: Increasingly, those we would target those to be outside of the US. We have a considerable basis today in China. But again, depending upon the speed with which tolling is implemented, it always remains a flywheel, an option for us to go to, depending on the speed of ramps to go to another alternative. But you're right. I mean, in time, that's why there's a plus and minus on it. It should come

Rob Hoffman: Kris singly those we would target those to be outside of the U S.

Rob Hoffman: We have a considerable basis today and then in China.

Rob Hoffman: Again, depending upon the speed with that tolling always remains a flywheel an option for us to go to two to it depending on the speed of ramp to go to another alternatives, but you're right I mean in time, that's why there's a plus minus on that it should come down.

Unknown Executive: I'm just tolling for the most part of the bridging strategy for us. Sorry.

Eric W. Norris: I'm just tolling for the most part of the bridging strategy for us. Sorry.

Rob Hoffman: The tolling for the most parts a bridging strategy for us alright.

Andres Castanos: Our next question is from Andres Castanos at Berenberg. Your line is open, please go ahead. Hello, I wanted

Unknown Executive: Our next question is from Andres Castanos at Berenberg. Your line is open, please go ahead. Hello, I wanted

Rob Hoffman: Our next question is from Andre casinos out there and Derrick Your line is open. Please go ahead.

Unknown Attendee: Hello, I wanted to understand better why you are running Sputum in Options now and to have a sense of what the percentage of volume that goes into these auctions. Are deals with with dollars somewhat impacted by these?

Andres Castanos: Hello, I wanted to understand better why you are running Sputum in Options now and to have a sense of what the percentage of volume that goes into these auctions. Are deals with with dollars somewhat impacted by these?

Andre: Hello, I wanted to understand better why are you running split I mean options now and.

Andre: To have a sense on what is the percentage of volume that goes in the assumptions.

Speaker Change: Our Arden deals suites with dollar somewhat impacted by these.

Rob Hoffman: Yeah.

Jerry Kent Masters: Yeah, so I'm not sure I understand the last part of the question. Let me start on the front, and you can catch that in the follow-up if I don't answer your question.

Derrick: Yes, so I'm not sure I got the last part of the question. Let me start on the right and you catch that in the follow up if I don't answer. Your question. So look we're doing the auctions both on spodumene and on Salt.

Rob Hoffman: Help transparency in the marketplace price discovery to really understand make the market a little clearer a little more transparent we get good information for it and then we decided to include spodumene and part of that just more transparency in the market.

Rob Hoffman: More knowledge that we get around that and it's an opportunity for us.

Jerry Kent Masters: So we're doing the auctions both on spodumene and on salts to help transparency in the marketplace, price discovery, to really understand the market a little clearer, a little more transparent, we get good information out of it. And then we decided to include spodumene as part of that, just more transparency in the marketplace, more knowledge that we get around that. And it's an opportunity for us to participate in a different part of the value chain.

Rob Hoffman: Participate that different part of the value chain. So it's not a change in our strategy of being an integrated producer we will sell most of our products through these long term agreements on our salt basis as we have historically, so that strategy didn't change, but it's just it's an adjustment to take them to try and get more transparency in the marketplace and then to sell.

Rob Hoffman: By domain, a different value different product a different value in the marketplace. So theyre dislocations, we can take advantage of that.

Speaker Change: Right. So I take it is a small percentage of the total volumes that essentially that deal suites that toddlers are still in place and they take the majority of today.

Speaker Change: Yes <unk>.

Speaker Change: My second question would be on the level of cost of inventory that you have at the moment.

Speaker Change: A floor for spodumene sort of wanted to take him board from what you know and your comment on Dodge more or less where where do you see.

Speaker Change: Versus the index. Thank you.

Speaker Change: So I think the question was the cost of our spodumene.

Speaker Change: Inventory versus the index.

Speaker Change: So as we showed in our first quarter results, we are still working off a little bit of spodumene debt.

Speaker Change: Went into inventory in prior periods that is that a little bit higher cost than where it is today and we documented how much of that is.

Speaker Change: In our first quarter results in our EBITDA Bridge, you can expect that there'll be a little bit more of that spodumene that we'll have to work off but for the most part you will start to see a spodumene costs rolling through our Cogs that is consistent with what is in the market as.

Speaker Change: As we get towards the middle of the year and in the in the back half of the year and that's that's built into the outlook scenarios that we we've been publishing.

Unknown Attendee: Right, so I take it's a small percentage of the total volumes that essentially that deals with the tollers are still in place and they take the majority of the of excess sputum in. My second question would be on the level of cost of inventory that you have at the moment, for for spotting for the one you take on board from what you know, can you comment on that more or less where it where it where it sits versus the index? Thank

Andres Castanos: Right, so I take it's a small percentage of the total volumes that essentially that deals with the tollers are still in place and they take the majority of the of excess sputum in. My second question would be on the level of cost of inventory that you have at the moment, for for spotting for the one you take on board from what you know, can you comment on that more or less where it where it where it sits versus the index? Thank

Speaker Change: Our next question is from John Roberts that Mizuho Securities. Your line is open. Please go ahead.

Jerry Kent Masters: So it's not a change in our strategy of being an integrated producer. We will sell most of our product through these long-term agreements on a salt basis, as we have historically. So that strategy didn't change. But it's just an adjustment to take, to try and get more transparency in the marketplace, and then to sell spodumene, a different value, a different product, a different value in the marketplace. So if there are dislocations, we can take advantage of them.

John Ezekiel E. Roberts: Alright. Thank you last quarter Slide 13 on Greenbush is discuss the lag and the lower cost of market issue at projected a spodumene inventory cost for the March quarter of about $4000 a ton.

John Ezekiel E. Roberts: That play out the way you projected last quarter.

Neal Sheorey: So I think the question was the cost of our spodumene in inventory versus the index. So, as we showed in our first quarter results, we are still working off a little bit of spodumene that went into inventory in prior periods, so that is a little bit higher cost than where it is today.

John Ezekiel E. Roberts: John So this is Neil so I would have to check your numbers one of the big adjustments. We made in the fourth quarter was that LCM, which really collapsed the gap.

Neil: We previously had that sort of six month lag that we had in the spodumene cost and how it rolls through cost of goods sold now even after taking the LCM. We did still prices did still come down as we started the first quarter. So we did still have a little bit of higher priced spodumene that rolled through.

Neal Sheorey: And we documented how much of that was in our first quarter results in our EBITDA bridge. You can expect that there'll be a little bit more of that spodumene that we'll have to work off. But for the most part, you will start to see a spodumene cost rolling through our COGS that is consistent with what is in the market as we get towards the middle of the year and in the back half of the year. And that's built into the outlook scenarios that we've been publishing. Our next question is from John Roberts at Mizuho Securities. Your line is open, please go ahead.

Neil: Our through our P&L, but I think the numbers, you're referring to maybe are before we took the LCM adjustment.

Neil: We collapsed a lot of that gap with that adjustment yet alright, and then have your thoughts on the role of catching in the portfolio changed at all since the last call.

John Ezekiel E. Roberts: Thank you. Thank you. Thank you.

Speaker Change: I would no I would say look where.

Neil: We've said, it's not a core business for us. So we would look to divest at some point, but.

Neil: We went through a process what's out there we've talked quite a bit about it didn't get the value. We wanted so we're doing a turnaround that program is going pretty well, but we would still anticipate doing a transaction on that business when the timing is right.

Neal Sheorey: Our next question is from John Roberts at Mizuho Securities. Your line is open, please go ahead. Thank you.

Speaker Change: Our next question is from John Roberts, Alright, Christopher Parkinson at Wolfe Research. Please go ahead.

John Ezekiel E. Roberts: Thank you. Thank you. Thank you.

Unknown Attendee: John, this is Neal. So I would have to check your numbers. One of the big adjustments we made in the fourth quarter was that LCM, which really collapsed the gap that we previously had, that sort of six-month lag that we had in the spodumene cost and how it rolled through the cost of goods sold. Now, even after taking the LCM, we did still – prices did still come down as we started the first quarter, so we did still have a little bit of higher-priced But I think the numbers you're referring to are probably before we took the LCM adjustment, and we collapsed a lot of that gap with that adjustment.

Neal Sheorey: Our next question is from John Roberts at Mizuho Securities. Your line is open, please go ahead. Thank you.

Speaker Change: Great. Thanks. This is Harris fein on for Chris.

John Ezekiel E. Roberts: John, this is Neal. So I would have to check your numbers. One of the big adjustments we made in the fourth quarter was that LCM, which really collapsed the gap that we previously had, that sort of six-month lag that we had in the spodumene cost and how it rolled through the cost of goods sold. Now, even after taking the LCM, we did still – prices did still come down as we started the first quarter, so we did still have a little bit of higher-priced But I think the numbers you're referring to are probably before we took the LCM adjustment, and we collapsed a lot of that gap with that adjustment.

Unknown Executive: I would know, I would say, look, we're, we've said it's not a core business for us. So we would look to divest that at some point. And we went through a process, which I think, you know, we talked quite a bit about, didn't get the value we wanted. So we're doing a turnaround, that program's going pretty well, but we would still anticipate doing a transaction on that business when the timing is right.

Harris J. Fein: So I am not sure if I'm reading too much into this you left the EBITDA sensitivity is unchanged.

Speaker Change: But also volumes seem like they are trending towards the high end of the guide.

Harris J. Fein: Is it wrong to think that EBITDA will trend to the higher end of those ranges as well.

Harris J. Fein: All else equal.

Speaker Change: Yes actually.

Speaker Change: It's a fair assumption basically the way that we constructed those EBITDA ranges. The reason they're ranges is driven by that volume consideration that we have the 10% to 20%. So I think all things being equal that's a fair assumption to make.

Speaker Change: Then for my follow up.

Unknown Executive: There are a lot of moving pieces in the cash flow guide.

Speaker Change: I guess when I look at the reasoning for the lower conversion rate. This year. It doesn't seem like those things are necessarily going away. After this year like you will always be ramping project. So.

Unknown Executive: How are you thinking about the operating cash conversion going forward.

Speaker Change: Well actually I have a little different viewpoint on that I do think that our cash conversion should be improving in 2025 for a few reasons number one as I mentioned.

Speaker Change: Or as we mentioned in our in the prepared remarks.

Speaker Change: Our cash taxes are very similar this year to what we had last year and that's primarily because of Australia and we're paying taxes based on income from last year. If you assume that pricing is sort of flat for the rest of the year. I think you should assume that our cash taxes will be lower next year, all things being equal.

Speaker Change: The other part is is that our facilities are so far as you heard in Ken's remarks ramping quite well and so we would expect that those will start to contribute as we get into the back end of this year and into 2025 and as Kent mentioned right now for where we are the ramp that you see in our volume growth is just based on the <unk>.

Speaker Change: <unk> that we are finishing up right now and are ramping right now so we won't be ramping plants forever.

Speaker Change: We will most certainly come to an end and those those plants will will begin contributing in the back half of this year and into 2025. So I do anticipate our cash conversion to get better and just a little finer point on Neal's point, I mean, where we are.

Unknown Executive: Those the new plants that are ramping up as we grow our business grows they become a smaller part of the portfolio would still be building, new plants and ramping overtime, but they become a smaller.

Speaker Change: Percentage of the portfolio and then at the moment, we have a lot of plant ramping in that particular phase didn't necessarily plan it that way, but that that's how it's worked out well we've got four plants actually ramp ramping now at the same time and that's not the plan going forward it won't be that many and if they were it would be a smaller part of the portfolio just because.

Speaker Change: As we grow.

Christopher Parkinson: Our next question is from John Roberts, sorry, Christopher Parkinson at Wolf Research. Please go ahead.

Jerry Kent Masters: I would know, I would say, look, we're, we've said it's not a core business for us. So we would look to divest that at some point. And we went through a process, which I think, you know, we talked quite a bit about, didn't get the value we wanted. So we're doing a turnaround, that program's going pretty well, but we would still anticipate doing a transaction on that business when the timing is right.

Harris J. Fein: Thanks. This is Harris Fein.

Unknown Executive: Our next question is from John Roberts, sorry, Christopher Parkinson at Wolf Research. Please go ahead.

Speaker Change: Our next question is from Kevin Mccarthy vertical research partners. Your line is open. Please go ahead.

Unknown Executive: I'm progressing. So I'm not sure if I'm reading too much into this. You left the EBITDA sensitivities unchanged, but also, you know, volumes seem like they're trending towards the high end of the guide. Is it wrong to think that EBITDA would trend to the higher end of those ranges as well, all else equal?

Christopher Parkinson: Thanks. This is Harris Fein.

Speaker Change: Hi, This is Matt on for Kevin Mccarthy.

Matt: Regarding the spodumene in carbonate auctions that you just touched on what is the customer feedback been like and how has the auction participation rates trended.

Unknown Executive: Yeah, actually, that's a fair assumption. Basically, the way that we constructed those EBITDA ranges, the reason for their ranges is driven by that volume consideration that we have the 10 to 20%. So I think, all things being equal, that's a fair assumption to make.

Harris J. Fein: I'm progressing. So I'm not sure if I'm reading too much into this. You left the EBITDA sensitivities unchanged, but also, you know, volumes seem like they're trending towards the high end of the guide. Is it wrong to think that EBITDA would trend to the higher end of those ranges as well, all else equal?

Speaker Change: Yes. This is Matt this is Eric.

Harris J. Fein: We've had a we've got very good participation. We're very very early in our process and so we're very with a qualification process to make sure we're where we're inviting people to these auctions that meet certain standards, but that's growing over time the participation rate, we received and the corresponding conversion of those those invited versus those.

Speaker Change: To put in a bid has been it's been strong.

The interest has been therefore, good and the outcome has been.

Unknown Executive: Well received by the market, particularly from a price reporting agency. We found that these through the normal surveying process. The results of these bids have found their way into the into the to the price reporting agencies of course, they determine how they use that in their next calculations, but it's our anticipation that theyre lending there as well.

Unknown Executive: And then as we turn to the two are sort of contracted customer base. They appreciate that what we're doing is better understanding in what is a pretty immature market.

Unknown Executive: How does.

Unknown Executive: What the drivers are as Kent was referring to different types of prices, whether thats inside the country outside of the country or an IRA compliant Nara compliant product or a spodumene versus a battery grade carbonate and it's giving us better intelligence better segment.

Unknown Executive: Understand what's happening in the market and a lot of the same for for our customers and the contracts that ultimately because that would be reflected in the index indices. They reference.

Unknown Executive: And then for my follow-up question, you know, there are a lot of moving pieces in the cash flow guide. I guess when I look at the reasoning for the lower conversion rate this year, it doesn't seem like those things are necessarily going away after this year. Like you'll always be ramping projects. So, you know, how are you thinking about the operating cash conversion going forward?

Speaker Change: Thanks, and then as a follow up I believe in the prepared remarks, you mentioned expanding the auctions to other geographies and products.

Harris J. Fein: What other geographies are you looking at and in the future might you include hydroxide in the auctions.

Speaker Change: Yes.

Unknown Executive: I touched on a little bit when I talked about IRA compliant, but just as reference almost all actually all four auctions that we've done to date have all been inside of China with available inventory on the ground there we'll be looking for product outside of China shipped.

Harris J. Fein: On a Cif basis for example, we'll be looking at that.

Harris J. Fein: Certainly for Australia product, we'll be looking at it for.

Harris J. Fein: <unk> compliant shipped to the U S and across our product range, including hydroxide.

Neal Sheorey: Well, actually, I have a little different viewpoint on that. I do think that our cash conversion should be improving in 2025 for a few reasons. Number one, as I mentioned, or as we mentioned in the prepared remarks, our cash taxes are very similar this year to what we had last year. And that's primarily because of Australia, and we're paying taxes based on income from last year. If you assume that prices are sort of flat for the rest of the year, I think you should assume that our cash taxes will be lower next year, all things being equal.

Neal Sheorey: Yeah, actually, that's a fair assumption. Basically, the way that we constructed those EBITDA ranges, the reason for their ranges is driven by that volume consideration that we have the 10 to 20%. So I think, all things being equal, that's a fair assumption to make.

Harris J. Fein: Our next question is from Ben Isaacson of Scotia Capital Inc. Your line is open. Please go ahead.

Jerry Kent Masters: The other part is that our facilities are, so far, as you heard in Kent's remarks, ramping up quite well. And so we would expect that those will start to contribute as we get into the back end of this year and into 2025. And as Kent mentioned, right now, for where we are, the ramp that you see in our volume growth is just based on the projects that we are finishing up right now and are ramping right now.

Speaker Change: Good morning, this is <unk> on for Ben.

Jerry Kent Masters: So we won't be ramping plants forever. That will most certainly come to an end, and those plants will begin contributing in the back half of this year and into 2025. So I do anticipate our cash conversion to get better. Yeah, and just a little finer point.

Jerry Kent Masters: To a little finer point on Neal's point, I mean, we are those The new plants that are ramping will become, as we grow, our business grows, they become a smaller part of the portfolio. So we'll still be building new plants and ramping over time, but they become a smaller percentage of the portfolio. And then at the moment, we have a lot of plants ramping up in that particular phase didn't necessarily plan it that way.

Jerry Kent Masters: But that's how it's worked out. We've got, I think, four plants actually ramping up now at the same time. And that's not the plan going forward; it won't be that many. And if they were, they would be a smaller part of the portfolio just because we've grown.

Neal Sheorey: So we're heading into what is historically been a peak buying season in China just off of the earlier comments on demand are you starting to see this.

Kevin William McCarthy: Our next question is from Kevin McCarthy at Vertical Research Partners. Your line is open. Please go ahead.

Kevin William McCarthy: Our next question is from Kevin McCarthy at Vertical Research Partners. Your line is open, please go ahead. Hi, this is Matt Hetwer on behalf of Kevin McCarthy.

Neal Sheorey: Restocking materialize.

Unknown Attendee: Regarding the spodumene and carbonate auctions that you just touched on, what is the custom...

Neal Sheorey: Hi, Yes. This is Eric I as I pointed out we've seen inventories at a fairly low level.

Ending in March and I do think a part of the demand as the restocking in anticipation of the mid year.

Neal Sheorey: And until later year seasonality of Evs.

Neal Sheorey: It's one reason why it's very hard to look at Q1 sales of Evs and correlate that to real on the ground demand because that.

Neal Sheorey: The Evs that are being sold in the first quarter of this year, where the lithium for that was sold late last year middle of the late of last year.

Eric W. Norris: Yes, this is Matt, and this is Eric. We've had very good participation. We're very, very early in our process, and so we have a qualification process to make sure we're, we're, we're inviting people to these auctions that meet certain standards, but that that's growing over time, the participation rate we've received and the corresponding conversion of those invited versus those who put in a bid has been, has been strong.

Neal Sheorey: And we are seeing I think it's a part of the demand that I that I referred to earlier, it's not only fundamental demand for what our increased television sales that are coming in that we see in April and we expect in May and June but also it's a result of some restocking because some of the levels of which inventory gone too. It's just werent sustainable and these operations to run.

Neal Sheorey: Without taking considerable risk of not being able to meet demand.

Harris J. Fein: And then for my follow-up question, you know, there are a lot of moving pieces in the cash flow guide. I guess when I look at the reasoning for the lower conversion rate this year, it doesn't seem like those things are necessarily going away after this year. Like you'll always be ramping projects. So, you know, how are you thinking about the operating cash conversion going forward?

Speaker Change: Great. Thank you and as my follow up I'm looking back with your 10-K, you actually published an updated technical report on Green machines.

Harris J. Fein: With that report, we saw something of a step down in both grades and recoveries and concurrently.

Harris J. Fein: Luke Bryan.

Harris J. Fein: The technical specs, where do you see the next phase of resource growth coming from foreign screen brushing.

Harris J. Fein: But you are correct Youre referencing a report that we published on our SEC guidelines, which are have a different standard and it's not uncommon in mining for different standards around the world and different standards are more strict and how they should be exercised and that produced some of the results you are describing this as still.

Harris J. Fein: Even in that report on a relative basis, the best Spodumene resource reported in the world.

Harris J. Fein: Our Ames arc to continue as we've described two we are now executing with our joint venture partners at CGP three expansion.

Speaker Change: There is the possibility long term, although we have not announced this formally or committed to it for further expansion of CGP for.

Harris J. Fein: And continued operation of that great of that operation at its current grade reported for quite some years and decades to come so our intention is to maximize that resource given its low cost potential.

Harris J. Fein: Our next question is from Michael <unk> of Wells Fargo Securities. Your line is open. Please go ahead.

Eric W. Norris: The interest has therefore been good, and the outcome has been well received, I think, by the market, particularly from a price reporting agency. We found that, through the normal surveying process, the results of these bids have found their way into the, into the, price reporting agencies. Of course, they determine how they use that in their index calculations, but it's our anticipation that they're landing there as well.

Speaker Change: Hey, good morning can start to the year.

Unknown Attendee: And then, as we turn to our sort of contracted customer base, they appreciate that what we're doing is better understanding what is a pretty immature market, how to say what the drivers are, as Kent was referring to different types of prices, whether that's inside a country, outside a country, or an IRA compliant, a non-RA compliant product, or a SPOJ mean versus a better grade carbonate. It's giving us better intelligence, better segmentation, and understanding what's happening in the market and allowing the same for our customers on the contract side, ultimately, because that would be reflected in the index indices they.

Jerry Kent Masters: You had a slide on sort of minimum capital and I think the line looks like a billion. So if my folks kind of stays here.

Jerry Kent Masters: Where capex will go in 'twenty five.

Jerry Kent Masters: And what would that mean to your capacity potential in la.

Jerry Kent Masters: Longer term if that has to be the case.

Speaker Change: Yes, So I think we've commented on that earlier. So we can so we would look at the 1 billion that is kind of maintenance capital for us around.

Jerry Kent Masters: To maintain our assets and continue to operate there.

Jerry Kent Masters: We could if we if prices stay where they are we could get to that kind of on a run rate by the end of 'twenty five 'twenty six number so to speak 25 would be a little bit higher, but we get to the run rate by 25%.

Jerry Kent Masters: That would impact our long term growth.

Jerry Kent Masters: If we went to that level. So the corrupt planning that we have the projects we're executing.

Jerry Kent Masters: At the moment, yet is kind of a 20% growth rate through 'twenty seven or so and if we were to cut back to those levels, we would impact that materially beyond that.

Jerry Kent Masters: And as a follow up your EBITDA margins for energy storage.

Jerry Kent Masters: Pretty good and I know you you think we need.

Jerry Kent Masters: Need higher pricing for the industry.

Speaker Change: So I mean, what price do you think.

Jerry Kent Masters: It needs to be at to support the growth.

Jerry Kent Masters: That is expected for them in a decade.

Jerry Kent Masters: And maybe any thoughts on where you think others around the world, who are where their margins are because yours or again from from us.

Jerry Kent Masters: Good not as good as it used to be but I think there is still a pretty good pretty good margin.

Speaker Change: Right, so I'm not going to comment on other people's margins, but if we stay where we are we can operate at about.

Jerry Kent Masters: About 30% ish type margin rate once we get the noise out of the P&L, but kind of the transition when the big prices in some of the spodumene cost. So on a run rate, we could get to around 30% and still grow our business for us I think that's the good margins that youre that youre talking about.

Jerry Kent Masters: We've had stronger margins than that or they would be stronger if prices move up the issue with price is really about returns on new investment projects more than it is about our existing business P&L and that and the margins that we can deliver so.

Jerry Kent Masters: This is needed to move up in order to develop new projects to get the growth the industry needs to support the <unk> transition.

Jerry Kent Masters: I'm not going to comment on it because it's different by every project and every geography as to what price you need and you need to believe that for 10 or 15 years in order to get a return on the project when you go through.

Jerry Kent Masters: I can't say, a number and a bad one I probably wouldn't say it.

Jerry Kent Masters: But if they are different by geography by region by technology, what the resource looks like so.

Jerry Kent Masters: It's quite different there is no way to pick one particular number.

Unknown Attendee: Thanks, and then as a follow-up, I believe in your prepared remarks you mentioned expanding the auctions to other geographies and products. What other geographies are you looking at, and in the future, might you include hydroxide in the occupation?

Jerry Kent Masters: Our next question is from Joshua Spector with UBS. Your line is open. Please go ahead.

Benjamin Isaacson: Our next question is from Ben Isaacson at Scotia Capital Inc. Your line is open, please go ahead. Good morning. This is a provost.

Eric W. Norris: Yes, so I touched on a little bit when I talked about IRA compliance, but just as a reference, almost all, actually all four auctions that we've done to date have all been inside of China with available inventory on the ground there. We'll be looking for product outside of China shipped on a CIF basis, for example. We'll be looking at that certainly for our Australia product. We'll be looking at it for products that are compliant shipped to the US and across our product range, including hydroxide.

Jerry Kent Masters: Hi, Good morning, everyone. It's Chris Perrella on for Josh I, just wanted to follow up on.

Jerry Kent Masters: Thank me all of the <unk> energy storage EBITDA margin that you guided to given the puts and takes do you have the higher cost spodumene inventory, which is.

Eric W. Norris: Good morning, this is Aparva on Furban. So we're heading into what has historically been a peak buying season in China. Just off of the earlier comments on demand, are you starting to see this restocking materialize?

Unknown Executive: Our next question is from Kevin McCarthy at Vertical Research Partners. Your line is open. Please go ahead.

Unknown Attendee: Oh, yes, this is Eric. As I pointed out, we've seen inventories at a fairly low level ending in March. And I do think a part of the demand is the restocking and anticipation of the mid-year and into later year seasonality of EVs. It's one reason why it's very hard to look at Q1 sales of EVs and correlate that to real-world demand because the EVs that are being sold in the first quarter this year were, the lithium for that was sold late last year, middle to late last year.

Unknown Attendee: And we are seeing, I think it's a part of the demand that I referred to earlier, it's not only fundamental demand for increased EV sales that are coming in that we see in April and we expect in May and June. But also, it's a result of some restocking because some of the levels of inventory gone to it just weren't sustainable for these operations to run without taking a considerable risk of not being able to meet demand.

Unknown Attendee: Great, thank you. And as my follow-up, looking back, with your 10k, you actually published an updated technical report on Greenbushes. With that report, we saw something of a step down in both grades and recoveries, and concurrently, costs have moved upwards. Given those technical specifications, where do you see the next phase of resource growth coming from for Greenbush?

Unknown Executive: Well, that's you're correct. You're referencing a report that we published under our SEC guidelines, which have a different standard. And it's not uncommon in mining for different standards around the world, and different standards are more strict in how they should be exercised. And that produces some of the results you're describing. This is still, even in that report, on a relative basis, the best spodumene resource reported in the world. And our aims are to continue as we've described, and we are now executing with our joint venture partners the TGP3 expansion.

Unknown Executive: Our next question is from Kevin McCarthy at Vertical Research Partners. Your line is open, please go ahead. Hi, this is Matt Hetwer on behalf of Kevin McCarthy.

Kevin William McCarthy: Maybe a $50 million drag in the second quarter, but you also have the one off from callison, So how does that.

Unknown Executive: There is the possibility, long term, although we have not announced this formally or committed to it, for further expansion of CGP4 and continued operation of that great of that operation at its current grade for quite some years, decades to come. So our intention is to maximize that resource given its low cost potential.

Kevin William McCarthy: Regarding the spodumene and carbonate auctions that you just touched on, what is the custom...

Eric W. Norris: And then, as we turn to our sort of contracted customer base, they appreciate that what we're doing is better understanding what is a pretty immature market, how to say what the drivers are, as Kent was referring to different types of prices, whether that's inside a country, outside a country, or an IRA compliant, a non-RA compliant product, or a SPOJ mean versus a better grade carbonate. It's giving us better intelligence, better segmentation, and understanding what's happening in the market and allowing the same for our customers on the contract side, ultimately, because that would be reflected in the index indices they.

Eric W. Norris: How does that bridge together to get to your <unk> margin and then it does it step down with the absence of the tolleson one off in the second half of the year.

Michael Joseph Sison: Our next question is for Michael Sison at Wells Fargo Securities. Your line is open. Please go ahead.

Eric W. Norris: Thanks, and then as a follow-up, I believe in your prepared remarks you mentioned expanding the auctions to other geographies and products. What other geographies are you looking at, and in the future, might you include hydroxide in the occupation?

Speaker Change: Yes so.

Eric W. Norris: I think if I, let's let's talk about the second quarter first.

Eric W. Norris: So basically the way to think about this I think your numbers are probably all in in the right kind of range. If you do the math based on the first quarter and what we said in the prepared remarks that we expect about a 10 point bump and in energy storage as EBITDA margin in the second quarter.

Benjamin Isaacson: Our next question is from Ben Isaacson at Scotia Capital Inc. Your line is open, please go ahead. Good morning. This is a provost.

Benjamin Isaacson: You probably will get into the range of about $100 million bump to <unk>.

Benjamin Isaacson: EBITDA Q2 versus Q1 and.

Benjamin Isaacson: And that's really just driven primarily by the expectation that all partners are taking their a lot meant off of callison, plus we have that additional 200000 tons that is getting off.

Benjamin Isaacson: Off taken in the second quarter as well.

Benjamin Isaacson: So that's basically what serves as the basis for the 10 percentage point bump in terms of then going forward. It is sort of a onetime bump up.

Benjamin Isaacson: And then what you should expect in the third and the fourth quarter is that we will come back down to again pretty healthy margins it won't be as healthy as the second quarter, but you can expect that we will as our plants continue to ramp up and we continue to absorb fixed costs that will continue to get some margin expansion versus the first quarter for sure in the third and the <unk>.

Benjamin Isaacson: Fourth quarters as we exit the year.

Benjamin Isaacson: Oh, that's perfect. Thank you for explaining that and then a quick follow up sequentially into the second quarter do you expect volumes to be up I'm, just trying to bridge the seasonality.

Eric W. Norris: Oh, yes, this is Eric. As I pointed out, we've seen inventories at a fairly low level ending in March. And I do think a part of the demand is the restocking and anticipation of the mid-year and into later year seasonality of EVs. It's one reason why it's very hard to look at Q1 sales of EVs and correlate that to real-world demand because the EVs that are being sold in the first quarter this year were, the lithium for that was sold late last year, middle to late last year.

Eric W. Norris: And we are seeing, I think it's a part of the demand that I referred to earlier, it's not only fundamental demand for increased EV sales that are coming in that we see in April and we expect in May and June. But also, it's a result of some restocking because some of the levels of inventory gone to it just weren't sustainable for these operations to run without taking a considerable risk of not being able to meet demand.

Eric W. Norris: To get to the 190 K T for you for the full year.

Eric W. Norris: Yes, so we will have volume at least sequentially. What you are asking about is yes, we will have some higher volumes as we get into Q2 versus Q1 remember that the peak for energy storage demand is usually in the third quarter. So were building to that peak so it won't be the <unk>.

Eric W. Norris: Highest quarter of the year, but yes, I would expect that you'll see a little bit higher volume in Q2 versus Q1.

Benjamin Isaacson: Great, thank you. And as my follow-up, looking back, with your 10k, you actually published an updated technical report on Greenbushes. With that report, we saw something of a step down in both grades and recoveries, and concurrently, costs have moved upwards. Given those technical specifications, where do you see the next phase of resource growth coming from for Greenbush?

Eric W. Norris: Our next question is from Colin Rusch with Oppenheimer. Your line is open. Please go ahead.

Eric W. Norris: Well, that's you're correct. You're referencing a report that we published under our SEC guidelines, which have a different standard. And it's not uncommon in mining for different standards around the world, and different standards are more strict in how they should be exercised. And that produces some of the results you're describing. This is still, even in that report, on a relative basis, the best spodumene resource reported in the world. And our aims are to continue as we've described, and we are now executing with our joint venture partners the TGP3 expansion.

Eric W. Norris: There is the possibility, long term, although we have not announced this formally or committed to it, for further expansion of CGP4 and continued operation of that great of that operation at its current grade for quite some years, decades to come. So our intention is to maximize that resource given its low cost potential.

Speaker Change: Thanks, so much guys.

Eric W. Norris: Given the dynamics around geopolitical positioning on manufacturing for batteries in some of the.

Eric W. Norris: The evolution of that.

Eric W. Norris: The tariffs that we're seeing on the solar side and other areas can you talk a little bit about the importance of refining and your thought process around that importance in North America.

Eric W. Norris: And turning to the balance of this year and next year.

Unknown Executive: Our next question is for Michael Sison at Wells Fargo Securities. Your line is open. Please go ahead.

Speaker Change: Yes, so okay interesting question so the.

Michael Joseph Sison: Politics is playing into the market significantly and we've got the integrated strategy. So we've got a good resource position and its spread around the world. So we have nice diversity around that and we've built conversion. So we have conversion in Chile, and the U S lower scale at the moment.

Michael Joseph Sison: Hey, good morning. A good start to the year.

Jerry Kent Masters: You have a slide on sort of minimum capital, and I think the line looks like a billion. So if banking kind of stays here, is that where CapEx will go in 25? And what would that mean to your capacity potential and, you know, longer term, if that has to be the case?

Michael Joseph Sison: Yeah, so I think we've commented on that earlier. So this week we would look at the billion that that kind of maintenance capital for us around the world to maintain our assets and continue to operate there. And we could, if prices stay where they are, we could get to that kind of on a run rate by the end of 25. So at 26 numbers, so to speak, 25 would be a little bit higher, but we get to the run rate by 25.

Michael Joseph Sison: That would impact our long-term growth if we went to that level. So the current planning that we have, and the projects we're executing at the moment, gives us kind of a 20% growth rate through 27 or so. And if we were to cut back to those levels, we'd impact that materially beyond

Michael Joseph Sison: And Australia, and China, so were spread around the world and we've got nice diversity around that it and that allows us to kind of planned for some of these aspects. So our goal would be to have larger scale conversion in North America to satisfy the north American market.

Michael Joseph Sison: And we are but we paused on that a little bit just on some of the issues that you've described price being a big one how geopolitics plays into it.

Jerry Kent Masters: And as a follow-up, you know, your EBITDA margins for energy storage are pretty good. And I know you think we need higher pricing for the industry. So, I mean, what price do you think we should charge?

Jerry Kent Masters: Right, so I'm not going to comment on other people's margins. But if we stay where we are, we can operate at about, you know, a 30% ish type margin, right, once we get the noise out of the P&L, that kind of transition from the big prices and some of the spodumene costs. So on a run rate, we could get to around 30% and still grow our business for us. I think that's the good margin that you're talking about.

Jerry Kent Masters: We've had stronger margins than that, and they would be stronger if prices moved up. The issue with prices is really about returns on new investment projects more than it is about our existing business P&L and the margins that we can deliver. So prices need to move up in order to develop new projects to get the growth the industry needs to support the EV transition. I'm not going to comment on that because it's different for every project and every geography as to what price you need.

Jerry Kent Masters: And you need to believe that for, you know, 10 or 15 years in order to get a return on the project when you go through FID. So I can't say a number. And if I had one, I probably wouldn't say it. But if they are different by geography, by region, by technology, what the resource looks like, so it's quite different. There's no way to pick one particular number.

Unknown Executive: Our next question is from Joshua Spector at UBS. Your line is open, please go ahead. Hi, good morning, everyone.

Joshua David Spector: We're going to use that pause to figure out exactly what we do around that.

Joshua David Spector: Hi, good morning, everyone. It's Chris Perrella on for Josh.

Joshua David Spector: Okay, Great and then in terms of some of the evolving cathode Chemistries, obviously, we're seeing some activity around don't tell us.

Joshua David Spector: And.

Christopher Silvio Perrella: I mean, the precursor materials are evolving a little bit could you talk a little bit about some of the specific adjustments that youre, making around some of the refining processes to meet those cathode and 10 or more tangible ways. You go to the balance of this year and into next year.

Christopher Silvio Perrella: I just wanted to follow up on, Neal, the 2Q energy storage margin that you guided to given the puts and takes. You have the higher-cost spodumene inventory, which is, Maybe a $50 million drag in the second quarter, but you also have the one-off from Taliesin. So how does that, you know, how does that bridge together to get to your 2Q margin? And then does it step down with the absence of the Taliesin one off in the second half of the year?

Christopher Silvio Perrella: Yes, I'll start on that Erik can fill in the gaps I think the biggest thing for us at the moment.

Christopher Silvio Perrella: With the <unk>.

Christopher Silvio Perrella: Primary products are a hydroxide and carbonate is balancing that so it's L. F. P. It's become more prevalent that's got stronger demand on carbonate, saying we've been built.

Christopher Silvio Perrella: Been a stronger a larger percentage of our portfolio is carbonite historically, we've been building out hydroxide and then balancing those two is understanding where those chemistries go in the long term, it's going to be about solid state and then how you shift from so much.

Christopher Silvio Perrella: A bit more about carbonate or hydroxide to about lithium metal.

Christopher Silvio Perrella: It's a longer term scenario the carbonate hydroxide is playing out and the assets. We are building now.

Christopher Silvio Perrella: It's Colin just to just a little shred more of color on that I would say that we still see a market that is for hydroxide high nickel is favor to outside of China versus in.

Christopher Silvio Perrella: With carbonate and Lf.

Christopher Silvio Perrella: Supporting our fee being a very big part of the China market.

Christopher Silvio Perrella: The innovations that have been coming out of largely out of China and LSP Chemistries for higher energy density inefficiencies.

Christopher Silvio Perrella: As well as the cost profile of that cathode are obviously very increasingly now interesting to the west.

Christopher Silvio Perrella: And so we expect that certainly our Chile position.

Christopher Silvio Perrella: At a position of power in which we can supply into that opportunity.

Christopher Silvio Perrella: We'll watch that carefully as Kent talks about had talked about earlier about pausing the inverse.

Christopher Silvio Perrella: <unk> here in the U S for North America to figure out in this uncertain market direction and develop our own strategy. There one of those one of the components of that has to be.

Christopher Silvio Perrella: Assessment of <unk> in the U S and that'll be that'll be part of that equation as well.

Unknown Executive: You have a slide on sort of minimum capital, and I think the line looks like a billion. So if banking kind of stays here, is that where CapEx will go in 25? And what would that mean to your capacity potential and, you know, longer term, if that has to be the case?

Christopher Silvio Perrella: No, that's perfect. No, thank you for explaining that.

Neal Sheorey: Yeah, so I think if I let's let's talk about the second quarter first, you know, so basically, the way to think about this, I think your numbers are probably all in the right kind of range. If you do the math based on the first quarter and what we said in the prepared remarks that we expect about a 10 point bump in energy storage EBITDA margin in the second quarter, you probably will get into the range of about 100 million dollars of EBITDA bump in Q2 versus Q1. And that's really just driven primarily by the expectation that all partners are taking their allotment off of Taliesin.

Christopher Silvio Perrella: Our final question is from Patrick Cunningham at Citi. Your line is open. Please go ahead.

Unknown Executive: Yeah, so I think we've commented on that earlier. So this week we would look at the billion that that kind of maintenance capital for us around the world to maintain our assets and continue to operate there. And we could, if prices stay where they are, we could get to that kind of on a run rate by the end of 25. So at 26 numbers, so to speak, 25 would be a little bit higher, but we get to the run rate by 25.

Christopher Silvio Perrella: And then a quick follow-up. Sequentially into the second quarter, do you expect volumes to be up? I'm just trying to bridge the seasonality to get to the, you know, 190 KT for you for the full year.

Unknown Attendee: Hey, good morning. A good start to the year.

Neal Sheorey: Plus, we have that additional 200,000 tons that are getting taken in in the second quarter as well. And so, you know, that's basically what serves as the basis for the 10 percentage point bump in terms of then going forward. It is sort of a one-time bump up. And then what you should expect in the third and the fourth quarter is that we'll come back down to, again, pretty healthy margins.

Speaker Change: Good morning. Thank you for taking my question in the past you've talked about the marginal cost of production being $20, a kilo and maybe new projects pushing that curve up overtime do you still believe that to be the case, given we've seen relatively tepid supply response at current prices.

Neal Sheorey: It won't be as healthy as the second quarter. But you can expect that we will, as our plants continue to ramp up and we continue to absorb fixed costs, that will continue to get some margin expansion versus the first quarter for sure in the third and fourth quarters as we exit the year.

Neal Sheorey: Yeah.

Unknown Executive: That would impact our long-term growth if we went to that level. So the current planning that we have, and the projects we're executing at the moment, gives us kind of a 20% growth rate through 27 or so. And if we were to cut back to those levels, we'd impact that materially beyond

Neal Sheorey: Yeah, so we will have volume, at least sequentially. What you're asking about is, yes, we will have some higher volumes as we get into Q2 versus Q1. Remember that the peak for energy storage demand is usually in the third quarter. So we're building to that peak. So it won't be the highest quarter of the year. But yeah, I would expect that you'll see a little bit higher volume in Q2 versus Q1.

Neal Sheorey: Yep.

Unknown Attendee: And as a follow-up, you know, your EBITDA margins for energy storage are pretty good. And I know you think we need higher pricing for the industry. So, I mean, what price do you think we should charge?

Speaker Change: Changes excuse me.

Neal Sheorey: It changes over time with volumes in the industry, but as <unk>.

Neal Sheorey: Most new projects come on are going to be higher on the cost curve and moving that up. So we still think that they will look at them a dollar to the accuracy of that but I think we still believe that fundamentally is about the target of marginal cost today.

Speaker Change: Got it and then just a quick follow up the price floor is play a meaningful impact with price levels in the low teens for a good part of the quarter.

Joshua David Spector: Our next question is from Joshua Spector at UBS. Your line is open, please go ahead. Hi, good morning, everyone.

Unknown Executive: Our next question is from Colin Rusch at Oppenheimer. Your line is open. Please go ahead. Thanks.

Colin William Rusch: Thanks so much, guys. Given the dynamics around geopolitical positioning on manufacturing for batteries and some of the evolution of that, you know, the tariffs that we're seeing on the solar side and other areas, can you talk a little bit about the importance of refining and your thought process around that importance in North America, as you enter into the balance of this year and beyond?

Speaker Change: I'm sorry. Your question was was the price for impact on our realized price for the quarter or was that the question of meaningful Patrick yes.

Jerry Kent Masters: Yeah, so okay, interesting question. So politics is playing into the market significantly, and we've got an integrated strategy. So we've got a good resource position, and it's spread around the world. So we have nice diversity around that. And we've built conversion. So we have conversion in Chile, in the US, at a lower scale at the moment, and Australia and China. So we're spread around the world, and we've got nice diversity around that.

Jerry Kent Masters: And it allows us to kind of plan for some of these aspects. So our goal would be to have larger-scale conversion in North America to satisfy the North American market. But we've paused on that a little bit, just on some of the issues that you've described, price being a big one, how geopolitics plays into it. And we're going to use that pause to figure out exactly what we do around that.

Colin William Rusch: Okay, great. And then in terms of some of the evolving cathode chemistries, obviously, we're seeing some activity around, you know, doped LFP. And, you know, I'm assuming that the precursor materials are evolving a little bit. Can you talk a little bit about some of the specific adjustments that you're making around some of the refining processes to meet those cathode needs in a more tangible way as you go through the balance?

Christopher Silvio Perrella: Hi, good morning, everyone. It's Chris Perrella on for Josh.

Jerry Kent Masters: Yeah, I'll start on that. Eric can fill in the gaps.

Speaker Change: Yes, yes.

Neal Sheorey: I just wanted to follow up on, Neal, the 2Q energy storage margin that you guided to given the puts and takes. You have the higher-cost spodumene inventory, which is, Maybe a $50 million drag in the second quarter, but you also have the one-off from Taliesin. So how does that, you know, how does that bridge together to get to your 2Q margin? And then does it step down with the absence of the Taliesin one off in the second half of the year?

Eric W. Norris: I think the biggest thing for us at the moment, and with the primary products around hydroxide and carbonate, is balancing that. So LFP has become more prevalent. It's got stronger demand for carbonate, and we've been a stronger, larger percentage of our portfolios carbonate historically. We've been building out hydroxide, and then balancing those two is understanding where those chemistries go. And then, long term, it's going to be about the solid state and then how you shift from so much being more about carbonated hydroxide to about lithium metal. But that's a longer-term scenario. The carbonate hydroxide is playing out in the assets we're building now.

Eric W. Norris: So Colin, just to give you a little more color around that, I would say that we still see a market that is for hydroxide, high nickel is favored outside of China versus in with carbonate and supporting LFP being a very big part of the Chinese market. The innovations that have been coming out of largely China and LFP chemistries for higher energy density and efficiencies. As well as the cost profile of that cathode, which is obviously very increasingly interesting to the West.

Colin William Rusch: Okay.

Unknown Attendee: Plus, we have that additional 200,000 tons that are getting taken in in the second quarter as well. And so, you know, that's basically what serves as the basis for the 10 percentage point bump in terms of then going forward. It is sort of a one-time bump up. And then what you should expect in the third and the fourth quarter is that we'll come back down to, again, pretty healthy margins.

Eric W. Norris: And so we expect that certainly our Chilean position is a position of power from which we can supply that opportunity. We'll watch that carefully as Kent talks about, had talked about earlier, pausing the investment here in the U.S. for North America to figure out, you know, in this uncertain market direction and develop our own strategy there. One of the components of that has to be an assessment of the level of poverty in the U.S., and that'll be that'll be part of that equation as well.

Unknown Attendee: It won't be as healthy as the second quarter. But you can expect that we will, as our plants continue to ramp up and we continue to absorb fixed costs, that will continue to get some margin expansion versus the first quarter for sure in the third and fourth quarters as we exit the year.

Unknown Attendee: And then a quick follow-up. Sequentially into the second quarter, do you expect volumes to be up? I'm just trying to bridge the seasonality to get to the, you know, 190 KT for you for the full year.

Unknown Executive: Our final question is from Patrick Cunningham at Citi. Your line is open, please go ahead. Good morning. Thank you for taking my question.

Eric W. Norris: Well, let's put it this way we don't disclose a lot of our price floors and they tend to range because often based on age of contract.

Unknown Attendee: No, that's perfect. No, thank you for explaining that.

Patrick David Cunningham: Our final question is from Patrick Cunningham at Citi. Your line is open, please go ahead. Good morning. Thank you for taking my question. You know, in the past, you've talked about the marginal cost of production being

Colin William Rusch: Our next question is from Colin Rusch at Oppenheimer. Your line is open. Please go ahead. Thanks.

Jerry Kent Masters: Yeah, it changes. Excuse me.

Jerry Kent Masters: Thanks so much, guys. Given the dynamics around geopolitical positioning on manufacturing for batteries and some of the evolution of that, you know, the tariffs that we're seeing on the solar side and other areas, can you talk a little bit about the importance of refining and your thought process around that importance in North America, as you enter into the balance of this year and beyond?

Jerry Kent Masters: It changes over time with volumes in the industry, but most new projects come on are going to be higher on the cost curve and moving that up. So we still think that, within a dollar or two, the accuracy of that. But I think we still believe that, fundamentally, it is about the target of marginal cost.

Unknown Attendee: Yeah, so okay, interesting question. So politics is playing into the market significantly, and we've got an integrated strategy. So we've got a good resource position, and it's spread around the world. So we have nice diversity around that. And we've built conversion. So we have conversion in Chile, in the US, at a lower scale at the moment, and Australia and China. So we're spread around the world, and we've got nice diversity around that.

Neal Sheorey: I'm sorry, your question was, was the price floor impacting on our realized price for the quarter? Or was that the question, Patrick? Yeah. Yes, yes. Let's put it this way.

Unknown Attendee: And it allows us to kind of plan for some of these aspects. So our goal would be to have larger-scale conversion in North America to satisfy the North American market. But we've paused on that a little bit, just on some of the issues that you've described, price being a big one, how geopolitics plays into it. And we're going to use that pause to figure out exactly what we do around that.

Neal Sheorey: We don't disclose a lot of our price floors, and they tend to range because they are often based on the age of the contract. At current prices, some of those floors, some are being tested floors have held. And so, you know, we certainly are seeing the floors come into play for some of our business.

Eric W. Norris: Okay, great. And then in terms of some of the evolving cathode chemistries, obviously, we're seeing some activity around, you know, doped LFP. And, you know, I'm assuming that the precursor materials are evolving a little bit. Can you talk a little bit about some of the specific adjustments that you're making around some of the refining processes to meet those cathode needs in a more tangible way as you go through the balance?

Neal Sheorey: At current prices some of those floors. Some are being tested floor is upheld.

Neal Sheorey: And so we certainly are seeing the floor has come into play for some of our business.

Jerry Kent Masters: Thank you, that's all the time we have for questions. I will now pass it back to Kent Masters for his closing remarks.

Neal Sheorey: Thank you that's all the time, we have for questions I will now pass it back to Kent Masters for closing remarks.

Jerry Kent Masters: Okay, thank you. And thank you all for joining us today. We continue to innovate, adapt, and lead the world in transforming essential resources into the critical ingredients for modern living with people and the planet in mind. We're focused on continuing to be the partner of choice for our customers and the investment of choice for both the present and the future.

Jerry Kent Masters: Okay. Thank you and thank you all for joining us today.

Jerry Kent Masters: Yeah, I'll start on that. Eric can fill in the gaps.

Jerry Kent Masters: We continue to innovate adapt and lead the world in transforming our central resources into the critical ingredients for modern living with people and planet in mind.

Unknown Attendee: So Colin, just to give you a little more color around that, I would say that we still see a market that is for hydroxide, high nickel is favored outside of China versus in with carbonate and supporting LFP being a very big part of the Chinese market. The innovations that have been coming out of largely China and LFP chemistries for higher energy density and efficiencies. As well as the cost profile of that cathode, which is obviously very increasingly interesting to the West.

Unknown Attendee: And so we expect that certainly our Chilean position is a position of power from which we can supply that opportunity. We'll watch that carefully as Kent talks about, had talked about earlier, pausing the investment here in the U.S. for North America to figure out, you know, in this uncertain market direction and develop our own strategy there. One of the components of that has to be an assessment of the level of poverty in the U.S., and that'll be that'll be part of that equation as well.

Patrick David Cunningham: Our final question is from Patrick Cunningham at Citi. Your line is open, please go ahead. Good morning. Thank you for taking my question.

Jerry Kent Masters: We're focused on continuing to be the partner of choice for our customers and investment of choice for both the present and the future.

Unknown Executive: Yeah, it changes. Excuse me.

Speaker Change: Thank you for joining us.

Unknown Executive: It changes over time with volumes in the industry, but most new projects come on are going to be higher on the cost curve and moving that up. So we still think that, within a dollar or two, the accuracy of that. But I think we still believe that, fundamentally, it is about the target of marginal cost.

Unknown Executive: I'm sorry, your question was, was the price floor impacting on our realized price for the quarter? Or was that the question, Patrick? Yeah. Yes, yes. Let's put it this way.

Unknown Executive: We don't disclose a lot of our price floors, and they tend to range because they are often based on the age of the contract. At current prices, some of those floors, some are being tested floors have held. And so, you know, we certainly are seeing the floors come into play for some of our business.

Unknown Executive: This concludes today's conference call. Thank you for your participation. You may now disconnect.

Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect.

Jerry Kent Masters: Thank you, that's all the time we have for questions. I will now pass it back to Kent Masters for his closing remarks.

Unknown Executive: Okay, thank you. And thank you all for joining us today. We continue to innovate, adapt, and lead the world in transforming essential resources into the critical ingredients for modern living with people and the planet in mind. We're focused on continuing to be the partner of choice for our customers and the investment of choice for both the present and the future.

Unknown Executive: Okay.

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Unknown Executive: Yes.

Unknown Executive: [music].

Unknown Executive: Yes.

Unknown Executive: [music].

Unknown Executive: Okay.

Unknown Executive: [music].

Q1 2024 Albemarle Corp Earnings Call

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