Q3 2024 Albemarle Corp Earnings Call
Speaker Change: Hello and welcome to the Albemarle Corporation's Q3 2024 earnings call. We ask that you please hold all questions until the completion of the formal remarks.
Speaker Change: at which time you will be given instructions for the question and answer session. Also, as a reminder, this conference is being recorded today. I will now turn the call over to Meredith Bandy, Vice President of Investor Relations and Sustainability.
Meredith Bandy: Joining me on the call today are Kent Masters, Chief Executive Officer, and Neal Sheorey, Chief Financial Officer. Netha Johnson, Chief Operations Officer, and Eric Norris, Chief Commercial Officer, are also available for Q&A.
Meredith Bandy: As a reminder, some of the statements made during this call, including our outlook, guidance, expected company performance, and strategic initiatives, may constitute forward-looking statements.
Meredith Bandy: Please note the cautionary language about forward-looking statements contained in our press release and earnings presentation, which also applies to this call.
Speaker Change: Please 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 Kent.
Kent: Thank you, Meredith. During the third quarter, Albemarle continued to demonstrate solid operational execution, delivering volumetric growth in energy storage and specialties, year-over-year EBITDA growth in specialties and catching,
Kent: Strong operating cash conversion of over 100% and leverage metrics well below our covenant limits.
We also continue to progress our cost improvement plans.
Kent: further ramp our new facilities and deliver higher volumes. As a result, we are maintaining our full-year 2024 Corporate Outlook considerations.
Speaker Change: In a few moments, Neal will give more detail on our third quarter performance, key results, and actions we are taking to preserve our financial flexibility.
Speaker Change: My focus today will be on addressing the outcomes that we are now driving as a result of the comprehensive cost and operating structure review we progressed over the past few months.
Speaker Change: In conjunction with this review, we are implementing a new operating structure.
Speaker Change: transitioning to a fully integrated functional model designed to deliver significant cost savings and maintain long-term competitiveness.
Speaker Change: We are targeting $300 to $400 million of further cost and productivity improvements by eliminating redundancies, reducing management layers, and optimizing manufacturing costs.
Speaker Change: These savings are due in part to the difficult but necessary decision to reduce our global workforce by an additional 6 to 7 percent.
Speaker Change: In total, we have eliminated nearly 1,000 rolls, including all the actions announced this year.
Speaker Change: We also are now driving a year-over-year reduction in our full-year 2025 capital expenditures by at least $800 million, or about 50 percent.
Speaker Change: with a disciplined focus on critical health, safety, environmental, and site maintenance, and a phased approach to maintaining our world-class resource base.
Speaker Change: We are confident these actions are the right steps to adapt to market conditions while serving our customers and pursuing long-term value creation.
Speaker Change: I will have more to say about our cost out and productivity plans later on the call.
Speaker Change: Thanks, Kent, and good morning, everyone. Beginning on slide 5, I will summarize our third quarter performance. We recorded net sales of $1.4 billion compared to $2.3 billion in the prior year quarter, a decline of 41 percent driven principally by lower pricing, particularly for lithium.
Speaker Change: During the quarter, we recorded a loss attributable to Albemarle of $1.1 billion and a diluted loss per share of $9.45.
Adjusted diluted loss per share was $1.55.
Speaker Change: Our GAAP result included a pre-tax charge of $861 million related to capital project asset write-offs at Kemerton 3 and putting Kemerton 2 into care and maintenance, of which about 10% is cash outflow in the second half of the year.
Speaker Change: This charge was below our initial estimate that we provided on the last earnings call of $900 million to $1.1 billion.
Turning to slide 6.
Speaker Change: Our third quarter adjusted EBITDA of $211 million was lower than the prior year period, also primarily due to lower lithium pricing.
Speaker Change: This was partially offset by lower cost of goods sold, primarily related to reduced spodumene pricing.
Speaker Change: Other positives include higher volumes in energy storage related to delivery of our growth projects and in specialties related to stronger end market demand.
Speaker Change: Our cost and efficiency initiatives also provided productivity benefits which more than offset inflation.
Speaker Change: Looking at adjusted EBITDA by operating segment, we saw improved year-over-year profitability in specialties due to productivity improvements and better end market demand.
Speaker Change: Catch and EBITDA also improved year-over-year as we continue to execute our turnaround plan during the quarter.
Moving to slide 7.
Speaker Change: As Kent mentioned, we are maintaining our full year 2024 outlook considerations thanks to the execution of our cost and productivity improvements, continued strong volume growth, including higher sales volumes at our Taliesin JV, and contract performance in energy storage.
Speaker Change: As a reminder, these scenarios are based on historically observed lithium market pricing and represent a blend of relevant market prices, including both China and ex-China pricing for lithium carbonate and lithium hydroxide.
Turning to slide 8 for additional commentary on Outlook.
Speaker Change: We expect corporate full-year 2024 net sales to be near the lower end of the $12 to $15 per kilogram scenario, primarily due to weaker second-half pricing for lithium, offset by contract performance.
Speaker Change: Full year 2024 adjusted EBITDA is expected to be in the middle of that same scenario range thanks to successful cost-cutting and productivity improvements.
Speaker Change: In energy storage, we now expect full-year volume growth to be more than 20% year-over-year, as we have continued to benefit from solid demand, particularly in China, and ongoing ramps of our new facilities.
Speaker Change: Fourth quarter volumes are expected to be down sequentially primarily due to timing of spodumene sales volumes, reduced tolling, and planned outages.
Speaker Change: Margins are expected to be slightly higher sequentially as the benefit of lower price spodumene in cost of goods sold offsets the impact of unabsorbed fixed costs as our new plants continue to ramp.
Speaker Change: At both Specialties and Ketchen, we continue to expect modest sequential improvements in the fourth quarter, thanks to better end-market conditions and productivity benefits.
Speaker Change: Please refer to our appendix slides in the deck for additional modeling considerations across the enterprise.
Speaker Change: Moving to our balance sheet and liquidity metrics on slide 9.
Speaker Change: We ended the third quarter with available liquidity of $3.4 billion, including $1.7 billion of cash and cash equivalents, and the full $1.5 billion available under our revolver.
Thank you for joining us. We appreciate it.
Speaker Change: The actions we have taken to improve our cost structure and enhance operational efficiency have also provided enhanced financial flexibility.
Speaker Change: Thanks to our successful actions to reduce costs and optimize cash flow, we ended Q3 with net debt to adjusted EBITDA of three and a half times, or two turns, below the covenant limit in the quarter.
Speaker Change: To navigate market conditions, we took proactive measures in the quarter around our covenant waiver. The outcome of our action is shown on slide 10.
Speaker Change: In October, we proactively extended our covenant waiver through the third quarter of 2026 and reshaped it to ensure we have the financial flexibility needed as we execute our new operating structure and cost reduction actions.
Speaker Change: Moving forward, our goal remains to stay well within these limits through solid financial and operational execution as we have shown throughout 2024.
Speaker Change: Slide 11 highlights our execution focus, which is demonstrated by the continued improvement in our operating cash flow as a result of operational discipline and cash management actions.
Speaker Change: Our operating cash flow conversion, defined as operating cash flow as a percent of adjusted EBITDA, was greater than 100% in the third quarter, primarily due to timing and management of working capital.
Speaker Change: We continue to expect full-year operating cash conversion to be approximately 50% at the higher end of our historical range and above our expectations at the beginning of the year.
Speaker Change: This is driven by increased Taliesin dividends with higher sales volumes at Greenbushes and working capital improvements, including a significant focus on inventory and cash management across our operations.
Speaker Change: This means that we expect fourth quarter cash conversion to be lower than recent quarters due in part to cash outflows associated with the workforce reductions we announced today, as well as the timing of JV dividends.
Speaker Change: As a reminder, we account for our 49% interest in the Taliesin JV via the equity method. Therefore, the impact of cash flows is in dividends received.
Speaker Change: As we have said before, we expect dividends to be lower than normal this year and into 2025 as Taliesin completes the CGP3 capital project at the Greenbushes mine.
Speaker Change: I'm pleased to see that our efforts to improve operating cash flow conversion are yielding results.
Speaker Change: We will continue driving toward free cash flow break-even through our ongoing ramp of new capacity, inventory management, bidding events, cost out in productivity measures, and other cash conversion improvements.
Speaker Change: Turning to slide 12, I will provide a few comments on current lithium market conditions, which have shown some positive signs.
Speaker Change: On the supply side, there have been several announced upstream and downstream curtailments.
Speaker Change: Non-integrated hard rock conversion is unprofitable, and larger integrated producers are under pressure.
Speaker Change: We estimate that at least 25% of the global resource cost curve is unprofitable or operating at a loss.
Speaker Change: On the demand side, grid storage demand continues to surprise to the upside, up 36% year-to-date, led by installations in the U.S. and China.
Speaker Change: Global electric vehicle registrations are up 23% year-to-date led by China and demand growth in the United States is also up double digits.
Slide 13 breaks down global EV demand growth by region.
Speaker Change: China represents 60% of the overall EV market with continued strong year-to-date demand growth of more than 30% in line to slightly ahead of initial expectations.
Speaker Change: In terms of demand mix, we have seen stronger growth in plug-in hybrid sales in China as current subsidies are more balanced between battery EVs and plug-in hybrids.
Speaker Change: Chinese plug-in hybrids include range extended vehicles with battery sizes somewhere between traditional battery EVs and plug-in hybrids.
Speaker Change: Meanwhile, the softest demand region globally is Europe, where EV sales growth is down slightly year-to-date due to reduced subsidies and weaker economic conditions.
Speaker Change: North American sales are up 13% year-to-date, far stronger than suggested by recent headlines. U.S. EV sales trends have strengthened in the back half of the year, benefiting from increased model availability and affordability.
Looking further out on slide 14.
Speaker Change: Longer term, we continue to expect lithium demand growth to expand by two and a half times from 2024 to 2030.
Speaker Change: The global energy transition remains well underway, supported by consumer preferences, government policies, and technological advancements.
Speaker Change: From an affordability perspective, the global EV supply chain is on track to achieve the critical $100 per kilowatt hour tipping point, where EVs are at purchase price parity with ICE vehicles.
Speaker Change: The Chinese industry has likely surpassed that target, with the rest of the world not far behind.
Speaker Change: Overall, these trends continue to reinforce our belief in the long-term growth potential of the industry.
With that, I'll now hand it back to Kent.
Kent Masters: Thanks, Neal. Turning to slide 15, I will cover the significant yet necessary actions we are taking to rebaseline our cost structure while allowing us to maintain our leadership position and preserve future growth.
Kent Masters: Let me start with our new operating structure on slide 16.
Kent Masters: Over the past several months, we've evaluated multiple organizational models, balancing cost with an agile, go-to-market approach.
Kent Masters: Following this review we announced a new operating structure transitioning to a fully integrated functional model to deliver significant cost savings and maintain our long-term competitiveness.
Kent Masters: This slide shows our leadership team with several title and role changes to reflect our new structure.
Kent Masters: From a financial reporting perspective, we will continue to report across our three segments of energy storage, specialties, and catching.
Kent Masters: Our fully integrated organizational structure is designed to flex with the complexities of our markets and to strengthen our core capabilities in a cost-effective way to maintain our leadership position.
Kent Masters: Turning to slide 17, it's important to put our latest actions in context of the series of self-help steps we have been progressing for several months as we navigate the current business environment.
Albemarle continues to act urgently across four key areas.
Kent Masters: Optimizing our conversion network, improving cost and efficiency, reducing capital expenditures, and enhancing financial flexibility.
Kent Masters: Our actions are broad-based and designed to maintain our long-term competitive advantage in light of market conditions.
Kent Masters: And given the dynamic environment we continue to face, we are always adding to our list of potential actions so that we are ready to pivot as necessary.
Kent Masters: I'm confident in the team's ability to deliver these improvements based on our performance to date. We highlight that on slide 18.
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Kent Masters: Here is a summary of our progress on the cost savings and cost flow initiatives, cash flow initiatives, introduced in January and July of this year, as well as the additional actions we're announcing today.
Kent Masters: All these programs are in execution and the January and July actions are on track or ahead of plan, demonstrating our sharp focus on operational efficiency and proven ability to execute.
Kent Masters: Regarding the 300 to 400 million dollar of cost improvements we announced today, we expect to achieve a 40 to 50 percent run rate by the end of this year.
Kent Masters: Additionally, we plan to reduce our 2025 CapEx to between $800 and $900 million, down about 50% versus 2024.
Kent Masters: How we got to these cost-out and CapEx targets was through rigorous analytics that involved a combination of robust peer benchmarking and bottoms-up project planning to estimate target savings.
Over the quarter, we analyzed spend across three categories.
Kent Masters: non-manufacturing costs, specifically SG&A and R&D, manufacturing costs, and capital expenditures.
Kent Masters: Our levers to deliver the non-manufacturing and manufacturing cost and productivity savings are detailed on slide 19.
Kent Masters: Our total cost-out opportunity of $300 to $400 million includes approximately $150 million in manufacturing opportunity split between cost reductions like energy and maintenance efficiencies and increased volume through plant rents.
Kent Masters: <unk> includes approximately $150 million and manufacturing opportunity split between cost reductions like energy and maintenance efficiencies and increased volume through plant ramps yield improvements and other areas.
yield improvements, and other areas.
Kent Masters: The $150 million to $250 million of non manufacturing cost improvement follows a robust benchmark and review with the assistance of a third party consultant.
Kent Masters: The $150 to $250 million of non-manufacturing cost improvement follows a robust benchmarking review with the assistance of a third-party consultant.
Kent Masters: We evaluated and analyzed our nonmanufacturing cost structure against Lifesize peers in lithium and other related industries like specialty chemicals and mining.
Kent Masters: We evaluated and analyzed our non-manufacturing cost structure against like-sized peers in lithium and other related industries like specialty chemicals and mining.
Kent Masters: The biggest driver of these non manufacturing savings is the change to our operating structure.
Kent Masters: The biggest driver of these non-manufacturing savings is the change to our operating structure.
Kent Masters: The integrated model, we made effective November one allows us to consolidate activities and reduce duplicative work.
Kent Masters: Optimizing management layers and increasing efficiency.
Kent Masters: Other key drivers included shifting more activities to established hubs in low cost jurisdiction and leveraging technology to reduce manual work.
Kent Masters: We will continue to internally track, our actions and progress through an established program management office.
Kent Masters: Which will be laser focused on these initiatives and leveraging our ability to execute.
Kent Masters: Slide 20 breaks down the third leg of our work, which is the reduction of our 2025 capital expenditures by more than $800 million versus 2024.
Kent Masters: Overall, we are targeting sustaining capex of 4% to 6% of net sales in line with historical performance and specialty chemical averages.
Kent Masters: We have pulled down our spending we will continue to invest in critical health safety environmental and site maintenance projects.
Kent Masters: Through our disciplined capital allocation, we will maintain our industry, leading resource base in a phased manner.
Kent Masters: Additional growth capital will be limited to primarily high return brownfield expansions and productivity improvements.
Kent Masters: Moving to slide 21 the.
Kent Masters: The actions we are taking are designed to maintain albemarle significant competitive advantages and position us for long term value creation, which is encapsulated by our strategic framework shown on slide 23.
Kent Masters: Our strategy is unchanged, but as always we will adjust our execution execution to pivot in pace with the dynamic markets we serve.
Kent Masters: Our strategic framework continues to guide how we operate Albemarle as we lead the world in transforming our central resources into critical ingredients.
Kent Masters: The resources, we provide play a critical role in areas with a compelling long term growth profile.
Kent Masters: And we have competitive strengths that will allow us to navigate the environment highlighted in more detail on slide 23.
Kent Masters: First our world class resources are arguably the best in the industry with large scale high grade and therefore low cost assets.
Kent Masters: And energy storage, we have access to some of the highest grade resources in both hard rock in Australia, and Brian in Chile.
Kent Masters: Similarly in specialties, we are the only producer with access to both tier one bromine resources globally in Jordan and the United States.
Kent Masters: Second our leading process chemistry, Knowhow is key to achieving further productivity and cost improvements safely and sustainably.
Kent Masters: At both the <unk> and Magnolia, we have evaluated a wide range of direct lithium extraction options and are piloting solutions.
Kent Masters: Third we have a pipeline of high impact innovative solutions in both bromine and lithium.
Kent Masters: Our research testing and piloting facilities in North Carolina, Louisiana, and Germany allow us to participate in differentiated high margin segments and support our customer specific requirements.
Kent Masters: Fourth Albemarle, leading industry position as a partner of choice as demonstrated through our partnerships with iconic pioneering companies both of our businesses have high net promoter scores with significantly positive gaps relative to competitors, reflecting longstanding successful relationships with major customers.
Kent Masters: And we are increasingly recognized for the good work, we do and the good that our work is doing for example, we were recently named as one of the world's best companies by time, demonstrating our commitment to creating a more resilient world and advancing the sustainability objectives of our customers.
Kent Masters: In summary on slide 24 albums.
Kent Masters: <unk> delivered another solid performance in the third quarter, including higher volumes in energy storage and specialties and year over year improvements in adjusted EBITDA for specialties and kitchen.
Kent Masters: We've maintained our full year 2024 outlook considerations. Thanks in part to enterprise wide cost improvements strong energy storage project ramps and contract performance.
Kent Masters: We are focused on taking broad based proactive steps to control, what we can control and to ensure we're competitive across the cycle.
Kent Masters: Albemarle remains a global leader with a world class portfolio and vertical integration strength I am confident we are taking the right actions to maintain our competitive position and to capitalize on the incredible long term opportunity in our markets.
Kent Masters: I look forward to seeing some of you face to face at upcoming events listed here on slide 25.
Kent Masters: And with that I'd like to turn the call back over to the operator to begin the Q&A portion.
Speaker Change: We will now move to our Q&A portion if you would like to ask a question. Please press star five to raise your hand as a reminder, that his staff I have to raise your hand also please bear in mind. This Q&A session is limited to one question and one follow up per person.
Kent Masters: Our first question is from Alexi, Yeah for miles from Keybanc. Your line is open.
Alexi: Thanks, Good morning.
Speaker Change: It was lower fixed costs next year and some volume growth.
Speaker Change: At least flat.
Speaker Change: If prices don't change or do you expect an increase or decline.
Speaker Change: So okay. So that's a 25 question if we go into it so and just to be clear, we're not we're not going to give an outlook for 'twenty five on this but we can give you some kind of puts and takes up 24, Neil you want to take that yeah sure. Good morning, Alexei So yes, we are.
Alexi: We're obviously working through our 2025.
Alexi: Outlook right now so it's a little premature for us to talk about that we'll talk about that on the next earnings call.
Alexi: But just to give you a couple of puts and takes here. So obviously where pricing is today, that's something that you can observe and relative to the lower end of our guidance range today.
Alexi: Probably 20% to 25% market pricing is below the average that we have achieved in 2024, and so you can kind of build that if you assume today's prices kind of roll into next year that gives you a thought of what to build in for in terms of a headwind for pricing I'd also point you to remove.
Alexi: Ember that in Q2, we had a bump up in our equity earnings from the Talis and JV, because we had an unusually high offtake by our partner at the JV and so we had about $100 million uplift in the second quarter and I don't expect that to repeat in 2025 as well now on the opposite side of that.
Alexi: Look we're getting we're tightening down on maintenance capital and we're targeting a range of 4% to 6% of revenue.
Alexi: At a normalized level, so youll see us a little bit above that this year, because we think pricing is below a normalized level. So we're a little above that but we're also working working to tighten that up and then youll see growth capital in there for high return projects productivity type projects.
Alexi: <unk> filled it.
Alexi: Type of expansions, which are high return and quick paybacks on that Scott.
Alexi: What we've got built into that.
Alexi: Yeah.
Alexi: $8 million to $900 million and we'll continue to work on that it depends on the opportunities that we have but we'll continue to focus but.
Alexi: A maintenance capital standpoint, we're trying to be in that range of four to six.
Alexi: On a normalized basis and we're a little ahead of that for this year.
Alexi: Or furniture.
Alexi: And then.
Alexi: Yes.
Alexi: And then just continuing with just the theme of cash preservation.
Speaker Change: What's the what's the outlook for the next several quarters in terms of cash conversion. Obviously this quarter. There was some working capital management that really helped that conversion and helps kind of fortify the balance sheet. So I'm curious how you think about.
Alexi: The next the next several quarters ahead of us here.
Speaker Change: Yes, so neal can give us some.
Speaker Change: Specifics on that.
Neal Sheorey: We're we're very focused on it some of our key metrics around that as cash conversion. So.
Alexi: Cash flow everything around that but a key management metric that we're focused on is cash conversion you saw a big number this quarter.
Alexi: Obviously, we can't repeat that so it will come off that were above historic levels.
Alexi: Oh.
Alexi: Where we've operated historically, but we're focused on driving that conversion number up bill do you want to make any specific comment yeah.
Bill: Just just to add to that Ken.
Bill: Absolutely I'll double down on what Ken said that we obviously have a very strong focus internally on cash generation and cash conversion and driving to that free cash flow breakeven point in the future.
Bill: And we're continuing every quarter to work on this several things that we've got in flight is obviously working capital management is very much front and center.
Bill: We have the cost and productivity that we're already doing but obviously with today, we've announced even more that we're doing and so we continue to drive on that.
Bill: Other piece that will be very important for our overall cash flow generation is.
Bill: How we think about the dividends coming off of the <unk> joint venture one of the reasons that we mentioned in the deck that our cash conversion is going to be lower in the fourth quarter is that at the moment, we see those those dividends from the <unk> joint venture in the fourth quarter coming down there right now our assumption is there'll be zero, but.
Alexi: How we think about the dividends coming off of the Taliesin joint venture. One of the reasons that we mentioned in the deck that our cash conversion is going to be lower in the fourth quarter is that at the moment we see those dividends from the Taliesin joint venture in the fourth quarter coming down. Right now our assumption is they'll be zero.
Alexi: Obviously, as we get into 2025 and as we work through things with the JV. It will be very important as we think through the dividends at that JV can can throw back to the partners.
Alexi: But obviously as we get into 2025 and as we work through things with the JV, it will be very important as we think through the dividends that JV can throw back to the partners.
Speaker Change: Our next question is from Ben Isaacson with Scotia Capital. Your line is open.
Alexi: Our next question is from Ben Isaacson with Scotia Capital. Ben, your line is open.
Speaker Change: Good morning, this is <unk> on for Ben.
Good morning, this is the Perva on for Ben.
Alexi: So my question for you is that that so you've discussed your 11% leverage covenants, providing substantial buffer we thought kind of to excess spread in Q3 is there any color that you can provide on the shape of those limits as they evolve through to 2020 looking specifically at Q2, and Q3 25 where that.
Alexi: So, my question for you is that, so you've discussed your leverage covenants providing substantial buffer. We saw kind of 2x spread in Q3. Is there any color that you can provide on the shape of those limits as they evolve through to 2026?
Alexi: I'm looking specifically at Q2 and Q3.25 where the covenant limit rises to 5.75 times. So any color there?
Alexi: The covenant limit rises to kind of five five times, so any color there.
Alexi: Yes.
Speaker Change: So essentially the shaping of that covenant waiver sort of follows recall that our covenant waiver is calculated on a trailing 12 month EBITDA and so you can imagine that we've kind of shape. This based on how we look backwards at the.
Alexi: Essentially, the shaping of that covenant waiver sort of follows, recall that our covenant waiver is calculated on a trailing 12-month EBITDA. And so you can imagine that we've kind of shaped this based on how we look backwards
Alexi: The shape of the EBITDA that we've generated so far in 2024 as well. So that's really how we've thought through how the trailing 12 months might look like as we go forward and then shape the covenant waiver accordingly.
Alexi: the shape of the EBITDA that we've generated so far in 2024 as well. So that's really how we've thought through how the trailing 12 months might look like as we go forward and then shape the covenant waiver accordingly.
Speaker Change: Perfect. Thank you.
Perfect, thank you
Speaker Change: Our next question is from Steve Byrne with Bank of America, Steve Your line is open.
Alexi: Our next question is from Steve Byrne with Bank of America. Steve, your line is open.
Speaker Change: Hi, overall Kaufman on for Steve Byrne.
Speaker Change: <unk> realized pricing and energy storage.
Alexi: Hi, I'm Rob Hoffman on for Steve Byrne. In 3Q, realized pricing energy storage has seemingly come in at a lower premium relative to the lithium carbon at market prices.
Alexi: Seemingly come in at a lower premium relative to the lithium market prices versus prior quarters was there any meaningful shift in the percent of contract pricing with one quarter lags in pricing for us and what percent of the two thirds contract. This figure has pricing flows.
Alexi: versus prior quarters. Was there any meaningful shift in the percent of contract pricing with one quarter lags and pricing floors and what percent of the two-thirds contracted figure has pricing floors?
Alexi: Yes.
Speaker Change: Yeah, so I don't there's there's real no change in the contracts that rolled off during the quarter. So that's
Speaker Change: I'm not sure, so that view is a little different than the way that I think about it, but the contracts really, they haven't changed, so it's the mix of where those customers are and where that volume gets taken is how your average price moves.
Speaker Change: I don't think we're going to say anything more than we have said before about the contracts and the floors that we have. So we've got contract volume on about two-thirds of it and some have floors and ceilings and and others don't but we're not going to but it hasn't changed.
Speaker Change: I could just add, this is Eric, that during the quarter we did see our highest volumes that we'll see of any quarter to date and will be higher than the fourth quarter as well. A lot of that was due to the timing of spot sales and spodumene sales.
Speaker Change: which would bias the mix in a quarter and has, so I mean I think I think you're noting something that is on target that there's a mix effect there that's not a reflection of contract that I would wash out on a full year basis and be consistent with our guidance.
Speaker Change: Makes sense. And just a follow-up, given lower pricing being sustained, might you consider cutting operating rates to tighten the market rather than the aforementioned guided 15% year-term catered growth in volume?
Speaker Change: Yeah, so we look at everything. It's probably, it's less, a little bit about tightening the market, but where it makes sense for us to, what our customer demand is, what we see volumes growing to, and the mix about where we produce most cost effectively. So, but we look at, we're looking at everything, including operating rates at plants.
Speaker Change: but it's really more about the mix of our customers, the demand growth, than it is about thinking about tightening the market.
Speaker Change: Our next question is from Vincent Andrews with Morgan Stanley. Vincent, your line is open.
Vincent Andrews: Thank you and good morning. Neal, could I ask you on the $300-400 million, you know, the 40-50% run rate by the end of this year, what then...
Vincent Andrews: you know, gives you such a wide range for, I guess you're going to finish it all off by the end of next year, but what would make it 300 and what would make it 400?
Speaker Change: I think that's, I mean it's just, it's a range that we're giving and some of the things that we're working through around that. So it's not all completely detailed out.
Speaker Change: So, and there's a dynamic around that as we go. Some of it is around overhead, some of it's around operating costs, productivity improvements, and things that we're doing at plant.
Speaker Change: There's a range to give us a little bit of breathing room because we're, you know, the lower end would be fairly conservative and the upper end would be a bit of a stretch. I don't think it's any more sophisticated than that.
or nothing you can't if I could ask you
Speaker Change: As we look ahead, we're obviously at the bottom of the cycle. Let's assume the cycle turns. Let's assume prices go back.
Speaker Change: I'll make up a number, $25,000 a ton, you know, and you clean up your balance sheet issues. What is Alvimarle's strategy in Lithium gonna be? Is it just gonna be a reversion to what you were doing prior to last down cycle, where you wanna get back into conversion and you wanna go out and buy resources? Or are you gonna do something different? Are there things you're not gonna do? You know, how are you and how's the board thinking about, you know, sort of where the company wants to be strategically going forward?
Speaker Change: Yeah, so we've said and actually said in our prepared remarks that our strategy has not changed, but the way we're executing against it has.
Speaker Change: If you go and look in our Q.
Speaker Change: I don't know if you've had time to look at that but we bread box that and it's kind of in that $40 million to $50 million kind of cash outflow range as well. So that maybe gives you a few key buckets to think about from an operating cash flow perspective.
Speaker Change: Our next question is Patrick Cunningham from Citi. Patrick Your line is now open.
Speaker Change: Hi, Good morning. This is Eric Zhang on for Patrick on the 2025 Capex Guide can you walk us through the actions you guys have taken to bring down Capex and what is contemplated.
Speaker Change: And are there any assets under consideration that could potentially go into care and maintenance. Thank you.
Speaker Change: So okay.
Speaker Change: Due to the capital one so and then.
Speaker Change: You can help me on this a little bit, but we've looked across the organization and we've taken out theres some growth projects that we have taken out of.
Speaker Change: Of capital, we've tightened others up and from a maintenance.
Speaker Change: Capital standpoint, we've gotten tighter on that a little more rigorous as what we said before what we kept in we've got maintenance capital of what we think is a minimum that we need.
Speaker Change: And again, we're targeting that 4% to 6% of revenue for rate in the range for maintenance capital and where we're a little ahead of that for 25, because we use.
Speaker Change: On a normalized revenue basis.
Speaker Change: We think we are below our normalized level given lithium prices.
Speaker Change: And we've got projects around either pretty short payback investment projects, whether they're for cost improvement or additional product that would be a high return short payback type projects, we're still doing those larger growth projects, which is why where we pulled back on our growth forecast out into the future.
Speaker Change: We're not doing some of those.
Speaker Change: Projects that we had planned.
Speaker Change: And then the.
Speaker Change: The second part of the question I'm sorry.
Speaker Change: And I'll, let Kevin maintenance.
Speaker Change: Yes, so we've done.