A employee walks past a pile of lithium ore at a site of Talison Lithium Ltd., a three way partnership between Tianqi Lithium Corp. and Albemarle Corp., in Greenbushes, Australia.
Carla Gottgens | Bloomberg |
Lithium mining giant Albemarle will halt the expansion of a production facility in Australia as the corporate reviews costs resulting from headwinds from weak lithium prices.
At the affected facility, Australia’s Kemerton plant, the corporate produces battery-grade lithium hydroxide for electric vehicles and other products. It may also shut down a lithium processing line on the plant and concentrate production on a single line.
The workforce at Kemerton will probably be reduced by 40%, Albemarle CEO Kent Masters said in an interview with CNBC on Wednesday. The plant’s production capability will drop from the present 50,000 tons to 25,000 tons since the production line is shut down, Masters said.
Albemarle had originally planned to expand Kemerton to 4 processing lines with a capability of 100,000 tonnes. The company is now halting construction of the third line after scrapping plans for the fourth line.
The decision got here after the corporate reported a second-quarter net lack of $188 million, or $1.96 per share, compared with a profit of $650 million, or $5.52 per share, in the identical period last yr.
Excluding an after-tax charge of $215 million resulting from the write-off of fixed assets for capital projects, primarily related to the discontinued fourth processing line in Kemerton, the corporate earned 4 cents per share.
Revenue fell 39% to $1.4 billion from $2.37 billion in the identical period last yr.
Following the outcomes announcement, shares lost about 1% in prolonged trading.
“Stay down a little longer”
The CEO said Albemarle had implemented a cost-saving plan presented in January in light of falling lithium prices.
“We realized that the market is not moving in our direction, that prices are going down,” Masters said within the interview. “We believe they will continue to go down for a while, and we need to position ourselves to compete at that price level.”
Lithium prices have fallen since May and are currently below $12,000 a tonne, Berenberg said in a note on Tuesday. Demand in Europe is basically unchanged and within the US it stays weak, up 10 per cent this yr, the bank said. Prices are unlikely to recuperate until 2026, the corporate said.
Prices have fallen with the creation of recent lithium capability, while growth in electric vehicles has slowed, Masters said.
Berenberg downgraded Albemarle to carry ahead of the earnings report and cut its price goal by almost half to $83 per share, representing a downside risk of 11 percent from Tuesday’s closing price of $93.67.
Albemarle shares for the reason that starting of the yr.
Albemarle was caught on the “wrong foot” because the corporate pushed ahead with a significant investment program despite falling lithium prices, wrote Berenberg analyst Andres Castanos-Mollor. He fears that Albemarle might be forced to boost equity.
However, Masters denied this.
“One of the reasons we are taking these actions is that we do not plan to raise additional equity in the market,” Masters said. “And we certainly do not plan to have any contractual issues related to our current debt.”
Albemarle expects capital spending to be on the upper end of its 2024 guidance range of $1.7 billion to $1.8 billion.
About 54 percent of Wall Street analysts hold the stock, while 39 percent recommend buying Albemarle, with a mean price goal of $124.94 per share, in accordance with data from FactSet. Seven percent of analysts advise investors to sell. Albemarle shares have fallen nearly 36 percent for the reason that starting of the yr.
