Albemarle releases 2Q16 results

Albemarle Corporation reported net income from continuing operations for the 2Q16 of US$95.6 million, or US$0.74 per diluted share (after income attributable to non-controlling interests), compared to US$49.2 million, or US$0.37 per diluted share in 2Q15. Including a non-recurring, non-cash tax charge of US$416.7 million related to the decision to sell the Chemetall Surface Treatment business, the company reported a 2Q16 net loss attributable to Albemarle Corporation of US$314.8 million, or US$2.78 per diluted share, compared to net income attributable to Albemarle Corporation of US$52.1 million, or US$0.46 per diluted share, for 2Q15. 2Q16 adjusted net income from continuing operations was US$105.1 million, or US$0.93 per diluted share, compared to US$82.2 million, or US$0.73 per diluted share, for 2Q15. The company reported net sales of US$669.3 million in 2Q16, down from net sales of US$718.3 million in the 2Q15, driven primarily by the divestitures of the metal sulfides and minerals-based flame retardants and specialty chemicals business, partially offset by the impact of higher sales volumes, as well as favourable price and mix impacts in certain businesses and favourable currency exchange impacts.

Net income from continuing operations for the six months ended 30 June 2016 was US$313.8 million, or US$2.61 per diluted share (after income attributable to non-controlling interests), compared to US$98.5 million, or US$0.79 per diluted share, in the 2Q15. Including a non-recurring, non-cash tax charge of US$416.7 million related to the decision to sell the Chemetall Surface Treatment business, partially offset by gains on sales of businesses of US$122.3 million, the company reported a net loss attributable to Albemarle Corporation of US$86.6 million, or US$0.77 per diluted share, for the six months ended 30 June 2016, compared to net income attributable to Albemarle Corporation of US$95.3 million, or US$0.86 per diluted share for the six months ended 30 June 2015. Adjusted net income from continuing operations for the six months ended 30 June 2016 was US$212.2 million, or US$1.88 per diluted share, compared to US$198.6 million, or US$1.80 per diluted share, for the same period 2015. Net sales for the six months ended 30 June 2016 were US$1.33 billion, down from net sales of US$1.41 billion, driven primarily by the divestitures of the metal sulfides and minerals-based flame retardants and specialty chemicals business, partially offset by the impact of higher sales volumes, as well as favourable price and mix impacts in certain businesses and favourable currency exchange impacts.

On 17 June 2016, the company entered into a definitive agreement to sell the Chemetall Surface Treatment business to BASF SE for proceeds of approximately US$3.2 billion, subject to adjustment with respect to certain pension liabilities, cash, working capital and indebtedness. The sale is subject to regulatory approvals and other customary closing conditions, and is expected to close in 4Q16. In the 2Q16, the company determined the business qualified for discontinued operations treatment, and as such began accounting for the assets as held for sale. The financial results of the disposal group have been presented as discontinued operations in the consolidated statements of income and excluded from segment results for all periods presented.

"Our great start to 2016 continued in the second quarter as we announced the strategic sale of Chemetall Surface Treatment at a very healthy multiple, coupled with year over year adjusted EBITDA growth of 11% in the businesses we will operate after the sale is completed," said Luke Kissam, Albemarle's President and CEO. "Our businesses have exceeded our first half expectations, and we continue to deliver outstanding results despite a relatively weak macroeconomic environment."

On 12 January 2015, the company completed the acquisition of Rockwood Holdings, Inc. (Rockwood). The results of Rockwood from 1 January 2015 to 12 January 2015 (stub period) are excluded from the year-to-date 2015 financial results presented herein. Excluded net sales and adjusted EBITDA for the stub period were US$13.6 million and US$1.1 million, respectively.

Quarterly segment results

Effective 1 January 2016, the former performance chemicals reportable segment was split into two separate reportable segments: (1) lithium and advanced materials, which includes lithium and performance catalyst solutions and curatives (PCS), and (2) bromine specialties. For comparison purposes, prior year periods have been reclassified to conform to the current segments. This split did not affect the refining solutions reportable segment, which is presented the same as in the prior year.

Lithium and advanced materials reported net sales of US$233.4 million in the 2Q16, an increase of 9.6% from 2Q15 net sales of US$213 million. Net sales were impacted by US$2.3 million of favourable currency exchange impacts as compared to the prior year. The remaining US$18.1 million increase in net sales was primarily due to increased lithium sales volumes and favourable pricing impacts partially offset by lower PCS sales. Adjusted EBITDA for lithium and advanced materials was US$82.7 million, an increase of 3.4% from 2Q15 results of US$80 million. Adjusted EBITDA was impacted by US$1.3 million of favourable currency exchange impacts as compared to the prior year. The remaining US$1.4 million increase in adjusted EBITDA was primarily due to higher overall sales volumes and favourable pricing.

Bromine specialties reported net sales of US$206.9 million in the 2Q16, a decrease of 7.6% from 2Q15 net sales of US$224 million. Net sales were impacted by US$0.9 million of favourable currency exchange impacts as compared to the prior year. The remaining US$18 million decrease in net sales was primarily due to lower sales volumes of methyl bromide partially offset by higher sales volumes of other bromine products. Adjusted EBITDA for bromine specialties was US$66.6 million, a decrease of 3.1% from 2Q15 results of US$68.7 million. Adjusted EBITDA was impacted by US$0.8 million of favourable currency exchange impacts as compared to the prior year. The remaining US$2.9 million decrease in adjusted EBITDA was primarily driven by lower overall sales volumes partially offset by lower raw material and utility costs as well as lower selling, general, and administrative expenses.

Refining solutions reported net sales of US$178 million in 2Q16, an increase of 8.2% from net sales of US$164.6 million in the 2Q15. Net sales were impacted by US$500 000 of favourable currency exchange impacts as compared to the prior year. The remaining US$12.9 million increase in net sales was primarily driven by higher heavy oil upgrading and clean fuels technology volumes. Adjusted EBITDA for refining solutions was US$61.6 million in 2Q16, an increase of 27.8% from 2Q15 results of US$48.2 million. Adjusted EBITDA was impacted by US$0.7 million of favourable currency exchange impacts as compared to the prior year. The remaining US$12.7 million increase in adjusted EBITDA was primarily due to higher sales volumes, and higher net income reported by our joint venture Nippon Ketjen Company Limited.

On 4 January 2016, the company closed the sale of the metal sulfides business, and on 1 February 2016, closed the sale of the minerals-based flame retardants and specialty chemicals business. The divestiture of these businesses reduced net sales and adjusted EBITDA for the 2Q16 as compared to the prior year period by US$66.8 million and US$9.4 million, respectively.

All other net sales were US$50.6 million in the 2Q16, a decrease of 55.4% from net sales of US$113.4 million in the 2Q15. Excluding the impact of the divested businesses, All other net sales increased by US$4 million compared to the prior year due to higher sales volumes from the fine chemistry services business. All other adjusted EBITDA was US$0.9 million in the 2Q16, a decrease of 91.0% from 2Q15 results of US$9.7 million. Excluding the impact of the divested businesses, All other adjusted EBITDA increased by US$0.6 million compared to the prior year due to higher overall fine chemistry services sales volumes.

In summary, total net sales of US$669.3 million in the 2Q16, a decrease of US$49 million, or 6.8%, from 2Q15 net sales of US$718.3 million, were negatively impacted by the divestiture of the metal sulfides and minerals-based flame retardants and specialty chemicals business, which reduced revenues versus the prior year by US$66.8 million, partially offset by favourable currency impacts of US$3.7 million.

Excluding currency exchange impacts and the impact of the divested businesses, net sales for the period increased 2.2% as compared to the prior year. Total adjusted EBITDA of US$190.5 million in the 2Q16, an increase of US$9.2 million, or 5%, from 2Q15 adjusted EBITDA of US$181.4 million, was unfavourably impacted by US$1.1 million currency exchange (including US$3.9 million of unfavourable currency exchange impacts on corporate results) as well as the divestiture of the metal sulfides and minerals-based flame retardants and specialty chemicals business which reduced adjusted EBITDA versus the prior year by US$9.4 million. Excluding currency exchange impacts and the impact of the divested businesses, adjusted EBITDA for the 2Q16 increased 11.1% as compared to the prior year.

Corporate results

Corporate adjusted EBITDA was a loss of US$21.2 million in the 2Q16 compared to a loss of US$25.2 million in the 2Q15. The improvement in corporate adjusted EBITDA was primarily due to realised synergies from the acquisition of Rockwood, partially offset by US$3.9 million of unfavourable currency exchange impacts.

Income taxes

Abemarle’s adjusted effective income tax rates, which exclude non-recurring, other unusual and non-operating pension and OPEB items, were 16.2% and 28.9% for the 2Q16 and 2Q15, respectively. Our effective tax rate continued to be influenced by the level and geographic mix of income, and benefits from a favourable mix of income in lower tax jurisdictions.

Cash flow

Albemarle’s cash flow from operations was approximately US$252.5 million for the six months ended 30 June 2016, up 90% versus the same period in 2015. The company had US$193.7 million in cash and cash equivalents at 30 June 2016, as compared to US$213.7 million at 31 December 2015. Cash on hand, cash provided by operations, net borrowings and net proceeds from divestitures, funded US$382.2 million of debt repayments, US$99.5 million of capital expenditures for plant, machinery and equipment and dividends to shareholders of US$66.8 million during the six months ended 30 June 2016.

Adapted from press release by Francesca Brindle

Read the article online at: https://www.hydrocarbonengineering.com/refining/04082016/albemarle-releases-2q16-results-3853/