Albemarle Corporation Q4 2025 Earnings Call - Idles Kemerton, raises lithium demand outlook and targets positive free cash flow

Neal Sheorey, Chief Financial Officer, Albemarle Corporation: Hello, and welcome to Albemarle Corporation’s Q4 2025 earnings call. I will now hand it over to Meredith Bandy, Vice President of Investor Relations and Sustainability.

Meredith Bandy, Vice President of Investor Relations and Sustainability, Albemarle Corporation: Thank you, and welcome everyone to Albemarle’s fourth quarter 2025 earnings conference call. Our earnings were released after market closed yesterday, and you’ll find the press release and earnings presentation posted to our website under the Investors section at albemarle.com. Joining me on the call today are Kent Masters, Chief Executive Officer, and Neal Sheorey, Chief Financial Officer. Mark Mummert, Chief Operations Officer, and Eric Norris, Chief Commercial Officer, are also available for Q&A. 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. Please note the cautionary language around forward-looking statements contained in our press release and earnings presentation. That same language also applies to this call. Please also note that some of our comments today refer to non-GAAP financial measures. Reconciliations can be found in our earnings materials.

Now I’ll turn the call over to Kent.

Kent Masters, Chief Executive Officer, Albemarle Corporation: Thank you, Meredith. For the fourth quarter, we reported net sales of $1.4 billion, up 16% year over year, with double-digit volume growth. We also delivered adjusted EBITDA of $269 million, up 7% year over year, reflecting strong growth in energy storage and significant cost and productivity improvements. Turning to the full year, we achieved net sales of $5.1 billion and adjusted EBITDA of $1.1 billion. As expected, these results were at or above our previous outlook considerations. Significant cost and productivity improvements, volume growth, and sales channel mix contributed meaningfully to our full year performance. We are providing an update to our lithium demand outlook to incorporate stronger lithium demand growth for stationary storage. As a result, our estimated range for global 2030 lithium demand is up 10% versus our previous forecast.

That brings me to our new full year 2026 outlook. We are using the same methodology as we have the past 2 years, providing outlook ranges for various lithium market price scenarios. This year, those ranges reflect both our operational improvements and higher lithium pricing. We are also targeting additional cost and productivity improvements of $100 million-$150 million and stable capital spending in 2026. As a result, we see the potential for meaningful, positive free cash flow at current lithium pricing. Since 2024, we have successfully executed actions to reduce cost and capital intensity, generate cash, and enhance financial flexibility. In 2025, we achieved approximately $450 million in run rate cost and productivity improvements and reduced CapEx spend by 65% year-over-year.

In January 2026, we closed the sale of our stake in the Eurocat joint venture. We now expect to close the sale of a majority stake of Ketjen to KPS Capital Partners in the first quarter, slightly ahead of our initial schedule. Together, these transactions are expected to generate approximately $660 million in pretax proceeds, improving financial flexibility, streamlining our operations, and enhancing focus on our core businesses. As we turn to slide five, yesterday, we announced the difficult but necessary decision to idle operations at our Kemerton lithium hydroxide plant to improve financial flexibility and preserve optionality. Unfortunately, recent lithium price improvements alone are not enough to offset the challenges facing western hard rock lithium conversion operations. This action is expected to be accretive to adjusted EBITDA beginning in the second quarter, with no impact to sales volumes.

Our investments in top-tier mining resources at Greenbushes and Wodgina, and our exploration interests in Western Australia remain important components of Albemarle’s strategy and are not impacted by the decision to idle operations at Kemerton. Now, I’ll turn it over to Neal to discuss recent results and outlook. I will then cover recent market trends and growth before we open the call for Q&A.

Neal Sheorey, Chief Financial Officer, Albemarle Corporation: Thank you, Kent, and good morning, everyone. I will begin with our financial results for the fourth quarter, as presented on slide six. Net sales for the quarter of $1.4 billion increased from the prior year, primarily driven by higher volumes across all segments, particularly energy storage and Ketjen, which grew 17% and 13%, respectively. Adjusted EBITDA for the fourth quarter was $269 million, up 7% versus the prior year. This improvement was driven by higher lithium market pricing and increased Ketjen sales volumes. Our adjusted EBITDA margin decreased by approximately 150 basis points compared to last year, driven by less favorable FX and lower specialties margins, partially offset by higher margins in energy storage and Ketjen. We reported a net loss of $3.87 per diluted share.

Excluding charges, the largest of which included tax-related items and a non-cash impairment related to the expected Ketjen transaction, our adjusted diluted loss per share was $0.53. Moving on to Slide 7 and the factors influencing our year-over-year adjusted EBITDA performance. We reported sales volume growth across all segments and higher pricing for energy storage. Equity income, net of foreign exchange impacts, decreased year-over-year due to the Greenbushes inventory lag. Turning to other segments, Ketjen delivered solid year-over-year adjusted EBITDA growth of 39%, due primarily to higher sales volumes. Specialties EBITDA decreased slightly due to margin compression, notably in our lithium specialties business, where prices began to adjust lower from previous peak pricing. The corporate adjusted EBITDA change primarily reflects unfavorable foreign exchange hedging impacts, largely driven by the strengthening of the Australian dollar and Chinese yuan.

Turning to Slide 8, we are introducing our outlook considerations for 2026. As usual, we provide ranges of outcomes for our energy storage business as well as the enterprise, based on recently observed lithium market pricing. This year, we’ve updated our ranges to be inclusive of recent pricing trends. We’ve defined our scenarios using the following three observed market price cases: Full year 2025 average market pricing of about $10 per kilogram lithium carbonate equivalent, or LCE. January 2026 average pricing of about $20 per kilogram LCE, and the 2021-2025 five-year average price of about $30 per kilogram LCE. Within each scenario, we have provided ranges based on expected volume and product mix.

All three scenarios assume flat market pricing across the year, in conjunction with energy storage’s current book of business, of which we expect about 40% of lithium salts volume to be sold through our long-term agreements. Production volumes are expected to increase year-over-year due to growth from CGP3 and Salar yield improvement, offset by inventory drawdowns, which increased sales in 2025. As a result, we anticipate that energy storage sales volumes will be roughly flat year-over-year. In addition to the metrics we have shown historically, this year, we have included our expected average realized price for consolidated salts and spodumene sales for each scenario. This realized price is simply our net sales range divided by our sales volume expectation. Particularly in the $20 and $30 scenarios, you will notice a difference between market price and our average realized price.

This is primarily due to product mix. For example, spodumene sales, which are growing, dilute our average realized price on an LCE basis. These scenarios also clearly demonstrate the impact of the cost and productivity improvements we made over the course of 2025, and remain focused on going forward. As illustrated in the $10 scenario, if lithium market pricing were flat from 2025 to 2026, we expect our energy storage adjusted EBITDA margin to improve year-over-year into the low 30% range from the 25% margin achieved in 2025. Turning to Slide nine, we provide Albemarle’s comprehensive company roll-up for each energy storage market price scenario. This outlook assumes the Ketjen transaction closes in Q1 2026, which, all else being equal, reduces full-year net sales and EBITDA versus the prior year.

Here, once again, you will see that for the $10 scenario, we expect to deliver a slight improvement to our overall adjusted EBITDA margin due to improved energy storage margins and our focus on cost and productivity. As Kent mentioned, we achieved $450 million of cost and productivity savings in 2025, a significant portion of which was delivered in the year, as you see in our metrics. Going forward, a small portion of this savings run rate will carry over into 2026. This benefit is reflected in our scenarios. And of course, we also have significant upside potential as market pricing improves, with total company margins lifting to the low 40% and mid 50% range for the $20 and $30 scenarios, respectively. Turning to Slide 10 for commentary by segment, starting with Ketjen.

In January, we closed the sale of our stake in the Eurocat joint venture. We expect to close the sale of a controlling stake in Ketjen in the first quarter. Together, these actions are projected to bring in about $660 million in pre-tax proceeds, and we expect minimal tax leakage on the transactions. As we’ve said before, we intend to utilize the proceeds for deleveraging and other corporate purposes. Operationally, Ketjen closed the year with a strong fourth quarter. Net sales were up 14% year-over-year, and adjusted EBITDA grew 39%, driven by CFT shipment timing and higher FCC volumes. Full year results also reflected year-over-year improvements, including adjusted EBITDA up 15%. I am pleased to highlight that 2025 represented the third consecutive year of adjusted EBITDA improvements at Ketjen as part of our multi-year turnaround plan for the business.

Looking ahead, once the transaction closes, earnings for our remaining share of the refining catalyst business will be classified as equity income. Our share of the refining catalyst business and the retained PCS business will both be reported in corporate. We expect the contribution from these businesses to be relatively immaterial to equity income and adjusted EBITDA going forward. Moving to slide 11 for an overview of the specialties business results. In the fourth quarter, net sales increased 5% year-over-year. Adjusted EBITDA declined 6%, primarily due to margin compression in our lithium specialties business, where we began to see pricing move lower following previous peak conditions.

For the first quarter, we expect lower sequential sales and EBITDA due to a temporary production interruption at our JBC joint venture in Jordan, following a major flooding event, which resulted in an estimated $10-$15 million in lost revenue. The site is now back to full operating rates. Looking ahead to 2026, we are introducing full year outlook considerations for the specialties business, including net sales of $1.2-$1.4 billion, adjusted EBITDA of $170-$230 million, and EBITDA margins in the mid-teens. Bromine specialties volumes are expected to be flat to slightly down, reflecting the early year disruption at JBC. Adjusted EBITDA is expected to fall year-over-year due to product mix impacts driven by soft demand from the oil and gas and elastomers markets and lower pricing in lithium specialties.

Moving to energy storage on Slide 12. Full-year volumes reached 235,000 tons LCE, up 14% year-over-year, exceeding the high end of our outlook of 10% growth. This was driven by record integrated production, strong spodumene sales, and inventory reductions. Q4 net sales increased 23% year-over-year. Adjusted EBITDA was up 25%, supported by higher lithium pricing and ongoing cost and productivity improvements. While we expect first quarter volumes to be lower sequentially due to typical seasonality during the Lunar New Year, we expect both net sales and EBITDA to increase year-over-year, assuming current pricing persists for the remainder of the quarter. As Kent mentioned, idling Kemerton Train 1 will have no impact on volumes. We expect to meet customer demand for lithium hydroxide via our other conversion plants or tolling.

The Kemerton action will benefit adjusted EBITDA beginning in Q2. Regarding sales channel mix, we expect approximately 40% of our 2026 salts volumes to be sold under our long-term agreements. Turning to Slide 13 and some new disclosure we will provide going forward. This table documents quarterly metrics for the energy storage business, including average lithium market price observed, our net sales, our sales volumes, and our average realized price, which is defined simply as our net sales divided by our consolidated salts and spodumene sales volumes on an LCE basis. Going forward, this table will be included in the appendix of our earnings deck for easy reference. As you review this data, I will again remind you of the impact of spodumene sales in our mix, which dilutes our average realized price on an LCE basis. Slide 14 highlights our success in turning earnings into cash.

We ended 2025 with an EBITDA to operating cash conversion of 117%, driven by our actions to manage working capital and receipt of a customer prepayment in January of last year. Even after adjusting for the one-time benefits, we still estimate our underlying 2025 cash conversion to be at or above the top end of our long-term range of 60%-70%. Additionally, we generated significant positive free cash flow of nearly $700 million due to our solid cash conversion and our right-sized capital expenditures, which declined 65% year over year.

Looking ahead to our cash generation and conversion in 2026, we are focused on our underlying cash improvements, but want to note select headwinds to our cash metrics in the year, including recognizing $88 million in deferred revenue related to the customer prepayment we entered in 2025, which will benefit EBITDA, but not contribute cash. Approximately $100 million in cash costs related to idling Kemerton Train One and placing it in care and maintenance. Of course, pricing has a large impact on our ability to generate cash, and we expect measurably positive full year free cash flow potential if current lithium pricing persists. I will now turn the call back over to Kent to detail our updated lithium demand forecast, capital allocation priorities, and our growth outlook.

Kent Masters, Chief Executive Officer, Albemarle Corporation: Thanks, Neal. Slide 15 shows our global lithium demand expectations. We are seeing a diversification of lithium end markets, with stationary storage becoming an increasingly significant demand driver for lithium, in addition to strong electric vehicle demand growth, most notably in Asia and Europe. 2025 global lithium demand was 1.6 million tons, up more than 30% year-over-year and in line with the midpoint of our previous forecast range. 2025 lithium demand growth outpaced supply growth, leading to tighter inventories and increased pricing by year-end. Now we are introducing 2026 global lithium demand expectations of 1.8-2.2 million tons, up 15%-40% year-over-year, driven by stationary storage and electric vehicle demand growth.

We are also increasing our 2030 global lithium demand outlook to 2.8-3.6 million tons, up about 10% from our previous range. This increase is driven by higher expected demand from stationary storage. Turning to slide 16, let’s take a closer look at each of these end markets, starting with EVs. We continue to see EV demand growth globally in line with our expectations, with sales up 21% year-over-year, with the highest growth in Europe, up 34%. European EV demand was driven by continued policy support for electrification, which we expect to continue to drive similar growth in 2026. As expected, U.S. EV demand slowed in the fourth quarter following the removal of the 30D consumer tax credits. However, the U.S. is also the smallest of the regional markets, with just 10% of global EV sales.

China remains the largest EV market, with 60% of global EV sales, and growth continues on trend as EV penetration reached approximately 50% during 2025. Slide 17 expands on the fast-growing stationary storage demand trends, up more than 80% in 2025, with strong growth across all geographies. China represented 40% of ESS shipments in 2025, growing 60% year-over-year, with demand driven by policy support and strong economics for stationary storage projects. North America saw a 90% increase in shipments in 2025 to support grid stability as energy demand rises, in part due to increased demand from data centers and AI. European shipments more than doubled in 2025 to support renewables as an alternative to energy imports. Stationary storage demand continues to diversify globally.

Demand outside of the three major regions represented more than 20% of stationary storage shipments and grew 120% year-over-year. This growth is due to strong demand across Southeast Asia, the Middle East, and Australia, driven by policy support, the need for energy resilience, and growing international battery supply chains. Turning to slide 18, thanks to our own disciplined cost and capital actions, as well as improving underlying markets, we closed the year with $1.6 billion in cash. In addition, in the first quarter, we expect to receive approximately $660 million in combined proceeds from the recently closed Eurica transaction and the soon-to-close Ketjen transaction. We repaid our $440 million Eurobond in November and are committed to maintaining our investment-grade credit profile.

We continue to evaluate additional opportunities to delever, return capital to shareholders through our quarterly cash dividends, and make disciplined organic growth investments. Now turning to slide 19. We’ve reset the baseline for lower sustaining capital through capital efficiency, project selectivity, and scoping. Our 2026 sustaining capital is essentially flat year-over-year after assuming the sale of Ketjen in the first quarter. We’re confident we’ll be able to maintain these lower levels of spend while also prioritizing health, safety, and environmental continuity and productivity projects. Cost reductions, portfolio simplification, and capital discipline also allow for targeted growth spending on our world-class resources, including investments in early-stage development at the Salar de Atacama and Kings Mountain. We are committed to being disciplined in our approach to value-enhancing growth while preserving optionality and solidifying our competitive position.

As we look ahead on slide 20, we are on track to deliver a 5-year CAGR of 15% for energy storage sales volumes with minimal additional investment. This includes a 25% CAGR over the past 4 years, with growth expected to moderate as large projects complete ramp-up. Over the next 2 years, several projects provide growth with minimal incremental capital spending going forward. At the Greenbushes spodumene mine in Australia, the JV is currently ramping the CGP3 expansion, which adds about 35,000 tons per year to our capacity on an LCE basis. We also see multiple opportunities to continue productivity initiatives at the Salar de Atacama based on results of the Salar Yield Improvement Project. Finally, at Wodgina, the JV is currently operating about 2-2.5 trains on average and could potentially operate 3 full trains as ore availability continues to improve.

We will also continue to evaluate longer-term growth opportunities to leverage our global footprint of world-class resources. Turning to slide 21. Albemarle has a strong and differentiated competitive position, led by our growing lithium and long-lived bromine resources. The figures shown on the slide summarize the changes made to our mineral resources, inclusive of mineral reserves, as part of our annual SK-1300 report included in our 10-K filing. Our bromine resources decreased slightly year-over-year. At JBC, this was due primarily to updated modeling and sampling. Our JBC operations continue to produce some of the lowest cost bromine in the world, with significant long-term expansion options. Magnolia resources are down slightly due to reduced pumping rates. Albemarle benefits from large, low-cost bromine resources with resource lives in the multi-decade or even multi-century range.

Our lithium mineral resources were up 10% year-over-year, led by improvements at Greenbushes. At Greenbushes, we increased our reserves and resources due to mine design improvements and the inclusion of underground resource. At the Salar de Atacama, resource growth was mainly attributed to expanded hydrogeological drilling activities. We anticipate further enhancements in reserves and resources at this site. The DLE pilot plant has been fully commissioned and is now operational, yielding promising data for scale-up purposes. Additionally, by next year, the Salar Yield Improvement Project is expected to have enough operating history to support upgraded mineral resource and reserves estimates. At Wodgina, our updated NPV materially increased, driven primarily by yield improvements. Kings Mountain just completed a successful drilling campaign with potential for updated resource next year.

On slide 22, I will summarize the actions we have taken to enhance our position and maintain our competitive edge to capitalize on the growth trends I have discussed. In terms of optimizing our conversion network, as I mentioned, we delivered strong full year 2025 energy storage volume growth and record production, and we made the important decision to idle Kemerton. Looking ahead, we will continue to maximize the value of our resources and adjust product mix through conversion and tolling networks. We continue to improve cost and efficiency in 2025, with greater than 100% adjusted EBITDA to operating cash flow conversion. We are targeting an additional $100 million-$150 million in cost and productivity improvements in 2026 from a combination of projects across manufacturing, supply chain, and corporate.

We see further opportunities for cost and productivity improvements as we simplify our processes and continue to embed technology and AI across our organization. As a reminder, we are targeting flat CapEx as compared to 2025, with a focus on disciplined investment that enhance our optionality and provide fast returns. And finally, we will continue to enhance our flexibility, building on the cash and asset sales in 2025 and strong free cash flow achieved during the year. Importantly, the actions we have taken and continue to take to optimize our portfolio, reduce cost, improve capital efficiency, and enhance financial flexibility are all geared towards preserving long-term growth optionality and supporting our strong competitive position.

In summary, on slide 23, Albemarle delivered strong fourth quarter and full year 2025 results, thanks to the actions we have taken to optimize our asset portfolio, reduce cost, and strengthen our financial flexibility. Looking ahead for 2026, these efforts are expected to continue to drive year-over-year margin improvement, independent of price changes. Our durable competitive strengths, including our assets, expertise, and innovation, combined with the long-term secular growth opportunities around energy resilience, position us well for sustainable growth and value creation over the long term. We have the team and discipline to execute well and realize that potential. With that, I’ll turn it over to the operator to take your questions.

Conference Call Operator: 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 is star five to raise your hand. Also, please bear in mind, this Q&A is limited to one question and one follow-up per person. Our first question is from David Begleiter with Deutsche Bank. Your line is now open.

David Begleiter, Analyst, Deutsche Bank: Thank you. Good morning. First, thank you for the additional disclosure. It’s very helpful. Kent, on your lithium volumes, they’ll be flat this year in 2026. How should we think about volume growth beyond 2027, in the 2027, 2028, 2029 timeframe? Thank you.

Kent Masters, Chief Executive Officer, Albemarle Corporation: Yeah, thanks. And so I would say that we probably grew a little faster than we anticipated. It’s kind of why we’re running into a flat spot this year. That and I think the headwinds from pulling inventories down, so we were able to sell those last year and not this year. And then we still have growth opportunities at Greenbushes, at Wodgina, and then we have longer term growth from Kings Mountain and then the Salar de Atacama. So I think we’ll continue on a growth profile. We pulled back on our capital spending, so it’s not as prolific as it once was, but I think we still continue that growth profile after 2027, and we’ll have to start investing once we see how the market looks for that.

But we have, we have opportunities, we have the fundamentals for it, the resources that we have, the technology basis we have for that. It’s just a matter of executing against that.

David Begleiter, Analyst, Deutsche Bank: ... Understood. And just on Kemerton, Kent, how much higher cost is that asset than your Chinese conversion assets? And what lithium price would you need to see to restart Kemerton? Thank you.

Kent Masters, Chief Executive Officer, Albemarle Corporation: Yeah, so in the Kemerton, I think, and your point, I think you made it, is we’ve idled the asset, not- it’s not a shutdown, it’s idle. So we keep it in a position where we can restart it if we get into those conditions. But the cost structure between China and, say, Western supply, but particularly Western Australia, I mean, it’s across the industry. It’s across areas like reactants, tailings disposal is a big difference. There’s a big industry in China that kind of works through tailings, and we don’t have that in the West. We’ve made progress in Australia with government support around taking those costs down, but it’s still significantly different. Labor’s higher, power. So there’s a gap there between China and the West and Australia. It’s probably $4 or $5, something like that.

That’s going to have to be addressed if you’re going to build out a Western supply chain. We either need differentiated prices to cover those costs from the West, and we’ve not been able to get that support so far.

Conference Call Operator: Your next question will come from Jeffrey Zekauskas with JPMorgan.

Jeffrey Zekauskas, Analyst, JPMorgan: Thanks very much. Can you comment on how much Chinese lithium capacity you think was closed down from about the middle of 2025 to today because of various actions? Do you think that the Chinese government, or steps that the Chinese government took, were key to that capacity coming offline?

Kent Masters, Chief Executive Officer, Albemarle Corporation: So, I’m going to let Eric get into some of the specifics around maybe the mines or the capacity that comes around it. But I think there is... I mean, the Chinese government has been paying attention to this, so I think it has had something to do with that. It’s not all driven there. So you’ve had some capacity come on. We’ve also been surprised to the upside on demand, particularly the fixed storage applications have been much stronger. So it’s where demand didn’t grow. I mean, supply did not grow as much as we had anticipated. Still growing, but it’s not as much as we’d anticipated, and demand grew more than we thought. So that’s where it’s gotten.

It’s getting tighter, and I think the Chinese government, looking at environmental regulations and some of the permitting, they’re getting a little bit tighter on it, and it’s had, I would say, some influence. Eric?

Eric Norris, Chief Commercial Officer, Albemarle Corporation: Yeah. So, Jeff, we would say that just a bit of an update, there are about 7 petalite mines that continue to operate even while they await permits. So it’s not that the petalite capacity in China has completely disappeared. There’s still a good amount that is online. The one large facility you may have heard about that is owned and operated by CATL, that is still offline. In total, we think about 30,000-50,000 tons of capacity came off in 2025. We’d expect that that’s possible to come back on at some point in the coming year. Effectively, we’ve modeled that, so we... Now, your question about the regulatory environment, there is an increased oversight on waste, tailings generation, and general environmental operating conditions in China.

It’s probably too early to say how that will play out. Safe to say, if implemented, it would affect all operators and the cost position of all operators, because it hits all elements of how to manage, handle, and dispose of mine tailings and environmental waste.

Jeffrey Zekauskas, Analyst, JPMorgan: Great. And thank you for that. And then I guess on slide 27, you have your forecast of Specialties adjusted EBITDA for 2026, which you put in a range of 170-230 versus 276. What’s behind that decrease?

Eric Norris, Chief Commercial Officer, Albemarle Corporation: So just to clarify, Jeff, this is Eric again. Your question is, what’s behind the decrease in Specialties year-over-year earnings?

Jeffrey Zekauskas, Analyst, JPMorgan: Yes, for 2026.

Eric Norris, Chief Commercial Officer, Albemarle Corporation: Indeed. Okay. So a couple of things that are there. Well, number one, I, as Kent described in the call, we’re not getting much of a lift from demand growth year-on-year, so that’s not a helpful tailwind. Just to clarify that, the issues there are that in certain markets, such as process chemical industries, oil and gas, elastomers, that’s a part of your coverage universe. You know that that’s an industry that’s not particularly healthy, and that’s impacting our demand growth in those areas. Now, there’s some offsets, pharma, semiconductors, those are performing well. I think the big driver is lithium prices, lithium specialties prices in particular. This is a business that’s does not contract or move like the energy storage.

It’s not very commoditized, it’s specialty, but it does echo the price curve of LCE over time. And we were successful in the past years of getting long-term contracts based upon very high LCE prices at that time, and those have now come off. And we saw a step down of that a little bit in the fourth quarter, Neal mentioned that in his comments, and we’re going to see more of that to come this year. Obviously, now that’s turned, but it’s too early for the turn in LCE prices to affect a subsequent series of contracts. We’ll just have to wait and see.

Conference Call Operator: Your next question will come from Josh Spector with UBS.

David Begleiter, Analyst, Deutsche Bank: Yeah. Hi, good morning. I wanted to ask on just your approach on how you’re thinking about investing, you know, in this cycle. You guys did a lot of work over the last couple of years to get free cash flow to where it was last year.

Josh Spector, Analyst, UBS: ... So how long do prices need to stay at, you know, the 20 kilogram plus level before you think about started spending? Or are you going to, you know, harvest cash for longer than what you might have in a prior cycle, just given what we’ve learned here?

Kent Masters, Chief Executive Officer, Albemarle Corporation: Yeah. So we’re probably will be a bit more conservative than we’ve, than you’ve seen us be in the past around that. But we have a—we do have projects. I mean, we’ve been mindful as we, as we’ve cut capital, taking out some of the big pieces. We’ve tried to get our sustaining capital in a place where we think we can hold it, and we’re investing in our assets, but not over-investing, but also looking for incremental projects, smaller capital, quick returns. You’ve heard us talk about that over in the past and over the down cycle, particularly focused on that. And then the growth programs are more, they’re a little more incremental. Like we said before, you can see us ramping up CGP3 at Greenbushes, for example.

At Wodgina, we’ve got a third train there that when we get to better ore, we can operate that without significant capital. And then we can build Salar de Atacama. Salar Yield project is still ramping, but it’s going very well. It’s generating good data, so we think that’s gonna really help our efficiencies and recoveries as we go forward. So we have the opportunity to make smaller investments and still get some growth. The bigger ones are to come. Kings Mountain, other, some other projects, DLE, for example, in the Salar, that would give us additional volumes, are bigger investments. Those are... They’re not right in front of us, so we’ll have the opportunity to see how the market responds before we make commitments on things like that.

Josh Spector, Analyst, UBS: Okay, thanks. So just quickly on Kemerton, I mean, you talked about the $100 million shutdown costs. Can you just go through other pieces? I guess, how quickly is the payback on that cost? And then are there any ongoing, basically, costs to keep the, the capacity idle?

Kent Masters, Chief Executive Officer, Albemarle Corporation: So, when there are ongoing costs to keep it in the state, in a ready state, so to speak, idled. And they’re not dramatic, but they are significant costs, and it’s something we can do for a period of time. We don’t want to—we can’t keep it here forever, but we can keep it here long enough to see if we can bring it back. The market changes, and really, the change we’re looking for is probably a bifurcation, where Western prices are different than prices in China. That’s really what we’re looking for, and to see that that’s sustainable over time to cover those costs. And, so the...

The payback on that, I mean, I don’t want to—I’m not going to say exactly what the savings is around that, but it’s a reasonable payback.

Conference Call Operator: Your next question will come from John Roberts with Mizuho.

John Roberts, Analyst, Mizuho: Thank you. Could you talk about the differences between China and ex-China lithium market pricing? I know you don’t want to discuss your own contracts, but what’s the market doing ex-China?

Kent Masters, Chief Executive Officer, Albemarle Corporation: Well, I’ll make a broad comment. Eric, you can jump on that if you want. But it’s, there’s not, I mean, there’s not a big difference, right? For the most part, everyone wants the China price. There are some circumstances where you can get that, a little bit of a differentiation, but for the most part, and the way it’s been for the last several years, it, it’s more or less the same price. There are some incentives in the U.S. where some of that will flow through to lithium, from resources outside of China or material outside of China, but it’s not, it doesn’t characterize the whole market, I would say.

Eric Norris, Chief Commercial Officer, Albemarle Corporation: John, yeah, this is Eric, just adding. There are. So structurally, you would know that in the past years, when China has been a big, and has been a big producer of lithium, the general difference has been a 13% VAT, so price has been about 13% higher outside versus in. That’s just a structural difference. I think, though, however, what Ken’s alluding to is important. The market is dynamic, and it’s changing. The growth and maturity of the GFEX Futures Exchange is increasingly becoming the benchmark. There’s a, given that it’s traded every day, there’s great transparency to that, that number, or, everyone can see it very clearly. And outside of China, people have tended, even our contracts, contract relationships, have tend to rely on PRAs, price reporting and agencies.

With the dynamic change of what’s going on with the GFEX, the challenge is: are the PRAs keeping up with that rate of change? So I think it’s getting... There’s a structural difference, is my first point. Second point is there are some difficult, maybe some inefficiencies, because of that dynamic with the GFEX going on.

John Roberts, Analyst, Mizuho: Okay, and then I think you said you modeled CATL’s capacity coming back this year. Could you share when you’ve modeled that back online?

Eric Norris, Chief Commercial Officer, Albemarle Corporation: I mean, I think we’ve probably taken an assumption to meter it in slowly. Again, John, we’re talking about 30,000-50,000 tons. You look at the scheme of what’s the demand growth, the supply-demand balance, and where inventory levels are. I don’t think it’s gonna make that much of a difference.

Conference Call Operator: Your next question will come from Lawrence Alexander with Jefferies.

Lawrence Alexander, Analyst, Jefferies: Good morning. First of all, can you discuss the, you know, whether there’s any material difference in contract structures developing between stationary storage and automotive in terms of their degree of emphasis on reliability of supply or consistency of, you know, quality control or product formulation?

Kent Masters, Chief Executive Officer, Albemarle Corporation: ... Yeah, so for us, the material goes through the same supply chain, right? So we’re selling it into the same supply chain that we do for automotive and we do for fixed storage. Probably the biggest difference is, by definition, all the fixed storage is carbonate, and we tend—hydroxide tends to go to the west, so those tend to be where our long-term contracts are. Carbonate tends to be more on the spot market and the China price. So that’s the biggest difference, but it’s really driven by the product mix that goes into fixed storage versus there’s a combination for the EV market, and it’s pretty much all carbonate and LFP for fixed storage.

Eric Norris, Chief Commercial Officer, Albemarle Corporation: Yeah, and just a couple of characteristics to add to that that make it important, maybe to get at the root of your question, Lawrence. For one, fixed storage is largely carbonate, that’s largely LFP, and that’s almost entirely China. And carbonate has a pretty harmonized spec. It’s closer to being like a, like a classic commodity than hydroxide. Hydroxide has a lot more requirements that the automotive producers put on it for the life of battery and the safety they’re looking to get. And there’s, as a result, given the challenges of making consistent grade hydroxide, there’s a much more of a variation across producers. There’s a more detailed qualification process there. Some of it is the user, some of it is the chemistry, I guess, is the point.

Lawrence Alexander, Analyst, Jefferies: And then, just on the... In terms of how you think about the lessons learned about balance sheet management against, strategic comparatives or, longer term, how are you thinking about the development of solid state as a solution in the battery market and the potential competitive threats from sodium ion batteries?

Kent Masters, Chief Executive Officer, Albemarle Corporation: Yeah. So, okay, two ends of the spectrum there. So the on solid state, I mean, it’s still, it’s lithium, and it, and we still the driver will be EVs. So the intent, the lithium intensity for solid state goes up a little bit, so it gives us a kicker, but it’s really driven by the EV penetration and that growth in that. So that seems from our standpoint, it’s just, it’s a positive. It’s going to grow that a little bit, but we’re gonna... Again, we’ve got time because we don’t see it becoming mass market immediately. So we have time to understand, allow the market to mature. So we’ve you know, we’re early in the cycle, probably earlier than we’d anticipated from lithium.

We’ve just, we think we’ve just been through the second cycle since the advent of EVs, so that’s still immature from a, from a commodity cycle perspective. So we’re still watching that and learning and making sure we understand that. On fixed storage and sodium ion, we look, we think it’s going to be relevant. It’ll be a technical player in the market, but it still has to develop technically, and it has to scale, so it’s not impacting us, we don’t think, much this year. In our forecast, as we kind of build out the forecast, I think we built early on 10% sodium ion as a fixed storage and that growing to 15%, maybe toward the end of the decade.

Eric Norris, Chief Commercial Officer, Albemarle Corporation: Yeah, just again, to add some context, I think it’s important. One, as Ken said, solid state, a good news story. A solid-state battery has 2x the amount of lithium in it that a cell would for lithium-ion battery. There’s some different tech involved. There’s a different supply chain involved, so it’s going to take a while. Similarly, sodium is going to take a while as well, and that’s obviously a drawback, and it is part of the reason we have such a variation in our ESS forecast in the deck that we presented, is because there are some things that have to happen. Sodium energy has to get more, more, more energy dense to be cost competitive with LFP. At the range of prices we shared in this, in these scenarios, LFP is always more cost competitive today than, than is sodium ion battery.

So there has to be innovation. We expect innovation to happen. The second is scale, that Ken said, and then the third is it will be limited, because in the end, it will never have the volumetric energy density that, that lithium would, whether that’s lithium iron phosphate or lithium metal. So it, it’s limited in storage spaces to where space is not an issue. So think a cornfield versus New York City. New York City isn’t going to work so well. Cornfield will work out in Iowa. And then obviously, an EV has the same limitation. Volumetric energy density is critical for, for EVs, so we see very limited penetration there. So it’s two different ends of the spectrum, as Ken said, those are all the drivers.

Conference Call Operator: Our next question will come from Vincent Andrews with Morgan Stanley.

Kent Masters, Chief Executive Officer, Albemarle Corporation0: Thank you, and good morning, everyone. Just thinking through, you know, sort of shipments versus consumption. You know, early in the cycle, there tends to be, you know, sort of a reload, that helps prices, you know, move higher. And, you know, ESS obviously is a big driver, and some of the data would show that, ESS shipments are moving, you know, kind of a 2x the level of ESS installations, which, you know, to a certain extent, makes sense, right? It’s a very growing part of the market. So, as it grows, inventory needs to grow in between.

How do you assess sort of where customer inventory levels are and where customer behavior is, sort of, as prices have gone up and then maybe come off the bottom as you think about what actual demand or consumption is going to be in 2027?

Kent Masters, Chief Executive Officer, Albemarle Corporation: So look, there’s a couple different supply chains you have to think through, but I mean, at kind of across the board, we think inventories are at a pretty low level, particularly from a lithium side that’s sitting in batteries everywhere. The inventory levels are pretty low. Now, we’re in the Lunar New Year period, and as we come out of that, we’ll get information to see exactly what demand’s going to look like this year, but everything seems to be pointing in the right direction, and we see installations on fixed storage kind of continuing the trend and keeping up. We follow that versus what goes in.

So the batteries are probably where we ship, probably 6 months ahead of where it gets shipped to an installation, 6 months to a year before an installation happens, and we see that reasonably balanced, so it looks pretty real from our standpoint.

Kent Masters, Chief Executive Officer, Albemarle Corporation1: That’s very helpful. Neal, could I ask you to fill us in on some of the other cash flow statement items on working capital? Just thinking through, you got higher prices, you know, your inventory is at low levels, but what should the makings of, you know, AP, AR, inventories look like in 2026, just given what’s happening from a price perspective, both for your revenue and your spot shipping costs?

Neal Sheorey, Chief Financial Officer, Albemarle Corporation: Yeah. Hi there, Vincent. Thanks for that question. So, maybe I won’t go through every line of working capital, but I will say, first of all, on inventory, obviously we saw very strong demand at the end of the year of last year, and we capitalized on that, and we’re able to bring down our inventories a little bit. As you can expect, in 2026, our production levels are up. Some of that will go towards restocking our inventories and making sure that we have the right amount of inventory to supply the demand. But in a rising price environment, you do bring up a good point, that in a rising price environment, working capital could be a short-term cash flow headwind.

The way we think about it is, generally speaking for the company, our working capital balance sits at about 25% of sales. That’s usually a pretty good rule of thumb. So maybe that is helpful as you think about in a rising price environment, how to model the working capital piece.

Conference Call Operator: Your next question will come from Joel Jackson with BMO Capital Markets.

Kent Masters, Chief Executive Officer, Albemarle Corporation2: Hi. I just want to follow up on slide, I think it’s 8. So, you know, you talk about your sensitivities and your margins, and if you look at Q1, you know, you’re talking through $20,000/ton is about the spot price, and you said that’s what January price is. So should you be delivering mid-50s% EBITDA margin and energy storage in Q1?

Kent Masters, Chief Executive Officer, Albemarle Corporation: So well, you have to consider the lag on the way our contracts work. So we’ll get the benefit of the current market price on the spot business we do, but our contract volumes all kind of have about somewhere a couple of months lag, usually three months, lag, that works through that. So, we have to have the opportunity for that to work through our P&L. Otherwise, once we get that, that should be the case.

Kent Masters, Chief Executive Officer, Albemarle Corporation2: Okay. Just following up on that then. So you should have been, if spot price is exactly where it is, you should be keeping mid-50s% EBITDA margins in energy storage in Q2. Just a bad question. And also just clarifying, Ken, you talked about $4-$5 a kilo of conversion costs now in, in Kemerton. Were you talking about that’s your absolute costs you see that conversion costs were in Kemerton or Western Australia, or were you saying that $4-$5 a kilo was how much higher the costs are in Kemerton versus China? Just a two-part second question, I think.

Kent Masters, Chief Executive Officer, Albemarle Corporation: Yeah. So it wasn’t a Kemerton answer. It was a general broader answer, and it was like a $4-$5 difference between China and ex-China, I would say, to be, to be clear.

Conference Call Operator: Your next question will come from Kevin McCarthy with Vertical Research Partners.

Kent Masters, Chief Executive Officer, Albemarle Corporation1: Yes, thank you and good morning. Ken, I’d welcome your latest thoughts on the potential to acquire lithium capacity versus build it. It seems to me you’ve delevered the balance sheet quite a bit. You’ve got more cash coming in from Ketjen. We’re talking about price recovery and positive revisions to ESS demands. So, if we zoom out the lens and just think about where you are, financially and where we are fundamentally in the cycle, might we see more inorganic growth from Albemarle in the years to come?

Kent Masters, Chief Executive Officer, Albemarle Corporation: Yeah. So, I mean, we’d be talking down the road if you’re thinking from that perspective, because we still have—but one, we want to make sure we’re in, we’ve got really good footing, understand where the market’s going, as we go, as we go forward, because we... Price has moved up, and we just want to make sure that that consolidates, so to speak. And we also have pretty good opportunities within the portfolio for, I’d say it’s incremental growth, it’s lower capital than building greenfield facilities, and it’s mostly around resources, but it and it’s, then it’s incremental capacity at our conversion facilities, whether that’s at Nevada or in our conversion facilities in China, and then we also have tolling opportunities as well.

So we’re, I think we’ve got good organic growth opportunities, but we’ll look at acquisitions as they come up, but that’s not our focus. We would have to see the right opportunities for that. With the right fit at the right price, we would look at it, but that’s not really our focus at this point in the cycle.

Kent Masters, Chief Executive Officer, Albemarle Corporation1: Thank you very much.

Conference Call Operator: Your next question will come from Colin Rusch with Oppenheimer.

Kent Masters, Chief Executive Officer, Albemarle Corporation3: Yeah, I wanted to just follow up on the cash question. You’re really in a fundamentally different place from a balance sheet perspective, and I’m curious about rather than acquiring new assets, looking at optimizing your cost of capital on the balance sheet, and some of the instruments that you have, if there’s real opportunities to streamline things.

Neal Sheorey, Chief Financial Officer, Albemarle Corporation: Yeah. Hi there, Colin. Thanks for that question. This is Neal. So, yeah, I think one of the key things that we’re focused on is making sure that we have the right kind of headroom to navigate through the cycle. And you saw in our capital allocation slide today, that in addition to, you know, making sure that we meet our dividends, we are also focused on ensuring that we have a strong balance sheet, which is deleveraging opportunities. So we’re going to continue to look at that. You know, if you’re looking at other parts of the capital structure, look, the best thing I would say is we evaluate where is the best economic place for us to delever and strengthen our financial profile.

I think our comments today really highlight where we see the best opportunities. I really think the best opportunities are in the deleveraging space. But we do look at all of our options, and certainly with our cash position where it is today, that’s kind of our first and foremost priority right now.

Kent Masters, Chief Executive Officer, Albemarle Corporation3: Okay, super helpful. Then, you know, for Eric, I’m really curious about customer behavior here. I mean, getting a deposit is a pretty big signal to the market about where folks see overall supply-demand balance on a multi-year basis. You know, as you look at EV versus stationary storage and increasingly robotics end customers, can you talk a little bit about the different behavior and concerns around regional nuances, tariffs, and security of supply chains between those three buckets of customers?

Eric Norris, Chief Commercial Officer, Albemarle Corporation: Sure, happy to, Colin. It is a very dynamic time, to be sure, and I think so much has happened so fast, it’s going to be hard to draw hard conclusions right now at this moment. Would say that when it comes to the EV market, it depends on who you’re talking to. If you have someone whose market is largely the United States, it’s a very different picture than someone whose view is Europe or China. When it comes to grid storage, unanimously, that’s an area of interest. Remember, though, that in some levels, it’s the same customer for us, depending on where we are in the supply chain. Obviously, we do have some contracts with OEMs. The balance of our contracts are with battery producers.

We do some, a lot of spot business with cathode producers. So we see the whole supply chain, different eyes. The further up you go, the more bullish you get because they’re less focused on any specific end market. We have seen a lot of customer dialogues come forward with the rise in prices, but it’s way too early to say where that’s going to go. I mean, at this point, again, depending on who you’re talking to, they have a very different view of their needs. So we’re just going to have to see how that plays out over the long term in terms of our contracts. But right now, it’s just too early to call.

Conference Call Operator: Thank you. That’s all the time we have for questions. I will now pass it back to Kent Masters for closing remarks.

Kent Masters, Chief Executive Officer, Albemarle Corporation: Thank you, operator. In closing, I want to thank you all for your continued support and trust in Albemarle. Our strong results this quarter, improved outlook for 2026, and ongoing focus on operational excellence position us well for the future. With our world-class resources, strong track record of cost and productivity improvements, leading process chemistry, and commitment to customer success, we’re confident in our ability to create lasting value for our shareholders and seize opportunities ahead. We appreciate your partnership and look forward to connecting at our upcoming events. Stay safe and take care. Thank you.

Conference Call Operator: This concludes today’s conference call. Thank you for your participation. You may now disconnect.