Albemarle Has Line of Sight to Breakeven Free Cash Flow in 2025

Image Source: Albemarle

By Brian Nelson, CFA

On February 12, Albemarle (ALB) reported weak fourth quarter results with both revenue and non-GAAP earnings per share falling below the consensus forecast. Revenue dropped nearly 48% in the quarter due to lower pricing and volumes in its Energy Storage division, but net income, adjusted EBITDA, and diluted earnings per share attributable to common shareholders swung to profitability in the fourth quarter. Adjusted diluted loss per share improved to $1.09 from $5.19 in the same period a year ago.

Management had the following to say in the press release:

We are taking decisive actions to reduce costs, optimize our conversion network and increase efficiencies to preserve our long-term competitive position. As we look ahead, we expect dynamic market conditions to persist but remain confident in our ability to deliver value to stakeholders by increasing our financial flexibility, strengthening our core capabilities and positioning Albemarle for future growth.

Albemarle recorded full-year cash flow from operations of $702 million, which represented 60% of adjusted EBITDA, revealing good cash flow conversion. Management plans to further reduce 2025 capital expenditures by $100 million, to the range of $700-$800 million, down more than 50% on a year-over-year basis. Albemarle noted that it has a “line of sight to breakeven free cash flow in 2025,” which should alleviate some pressure on its stock.

At the end of last year, Albemarle had estimated liquidity of roughly $2.8 billion, including $1.2 billion of cash and equivalents, while debt totaled $3.5 billion, resulting in a net debt to adjusted EBITDA ratio of ~2.6x. Albemarle is working through lower lithium market prices but remains well-positioned for the long haul in the event lithium prices increase. Our $114 per share fair value estimate remains unchanged. 

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