Albemarle Corporation (NYSE: ALB) reported fourth quarter 2018 net sales of $921.7 million, earnings of $129.6 million and adjusted EBITDA of $264.3 million.

"2018 was a successful year for Albemarle on many fronts. Excluding divested businesses, we delivered full year, total company adjusted EBITDA growth of 17%, adjusted diluted EPS growth of 23% and we finished the year strong as all of our reportable segments delivered growth in the fourth quarter. In addition, we returned significant value to shareholders through increased dividends of $145 million and $500 million in share repurchases, while continuing significant growth investment in our Lithium platform," said Luke Kissam, Albemarle's CEO. "Lithium contributed just over 50% of our adjusted EBITDA, driven by 10% volume growth and 9% pricing compared to 2017."   Most Read  Articles - Gold 

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Our 2018 performance and execution on our lithium growth projects have positioned Albemarle for another year of growth in 2019. We expect net sales to range between $3.65 billion and $3.85 billion, representing growth of approximately 8% to 14%, with adjusted EBITDA between $1,070 million and $1,140 million, up approximately 6% to 13%, and adjusted diluted earnings per share between $6.10 and $6.50, growth of approximately 11% to 19%. Our growth will be driven by increased volume in our core lithium business, while our Bromine Specialties and Catalysts businesses will be stable. We are not forecasting any significant macroeconomic headwinds and have not seen any decline in our customer demand forecasts.

Results

Fourth quarter 2018 earnings were $129.6 million, or $1.21 per diluted share, compared to a loss of $218.4 million, or $1.95 per diluted share in the fourth quarter 2017. Earnings were negatively impacted by U.S. tax reform of $3.27 per diluted share in the fourth quarter of 2017. In the fourth quarter of 2018, earnings were negatively impacted by adjustments to indemnifications of divested businesses and a decrease to our previously recorded gain on sale of business totaling $0.29 per diluted share. The fourth quarter of 2018 also saw earnings growth in our Lithium and Bromine Specialties reportable segments, which more than offset lower Catalysts earnings and increased Corporate costs. Fourth quarter 2018 adjusted EBITDA increased by $18.5 million, or 7.5%, compared to the prior year. Fourth quarter 2018 adjusted net income was $163.7 million, or $1.53 per diluted share, compared to $149.8 million, or $1.34 per diluted share, for fourth quarter 2017, an increase of 14.2%. See Non-GAAP Reconciliations for further details. The Company reported net sales of $921.7 million in fourth quarter 2018, up 7.5% from net sales of $857.8 million in the fourth quarter of 2017, driven by increased sales volumes and the favorable impact of sales pricing in each of our reportable segments, partially offset by the impact of the divestiture of the polyolefin catalysts and components portion of the Performance Catalyst Solutions ("PCS") business to W.R. Grace & Co. during 2018 ("Polyolefin Catalysts Divestiture").

For the full year 2018, earnings were $693.6 million, or $6.34 per diluted share, compared to $54.9 million, or $0.49 per diluted share for the full year 2017. The increase was primarily driven by the 2017 impacts of $3.26 per diluted share from the U.S tax reform laws, a loss on early extinguishment of debt of $0.30 per diluted share and $0.09 per diluted share from Hurricane Harvey, as well as the 2018 recognition of $1.55 per diluted share gain on sale of the Polyolefin Catalysts Divestiture, and earnings growth in each of our reportable segments. For the full year 2018, adjusted EBITDA increased by $121.2 million, or 13.7%, compared to the full year 2017. For the full year 2018, adjusted net income was $600.4 million, or $5.48 per diluted share, compared to $515.9 million, or $4.59 per diluted share, for the full year 2017, an increase of 19.4%. See Non-GAAP Reconciliations for further details. The Company reported net sales for the full year 2018 of $3.37 billion, up from net sales of $3.07 billion for the full year 2017, driven by increased sales volumes, favorable sales pricing and currency exchange impacts in each of our reportable segments, partially offset by the impact of the Polyolefin Catalysts Divestiture.

On December 14, 2018, we entered into a definitive agreement to acquire a 50 percent interest in Mineral Resources Limited's Wodgina hard rock lithium project ("Wodgina Project") in Western Australia and form a joint venture with Mineral Resources Limited to own and operate the Wodgina Project to produce spodumene concentrate and battery grade lithium hydroxide, for a purchase price of $1.15 billion. The joint venture will ultimately construct a battery grade lithium hydroxide plant at the resource site. This transaction is subject to regulatory approvals and other customary closing conditions, and is expected to close in the second half of 2019.

Quarterly Segment Results

Effective January 1, 2018, the PCS product category merged with the Refining Solutions reportable segment to form a global business focused on catalysts. As a result, our three reportable segments include: (1) Lithium; (2) Bromine Specialties; and (3) Catalysts. For comparison purposes, prior year periods have been reclassified to conform to the current presentation.

Lithium reported net sales of $341.6 million in the fourth quarter of 2018, an increase of 18.0% from fourth quarter 2017 net sales of $289.6 million. The $52.1 million increase in net sales as compared to prior year was primarily due to increased sales volumes and favorable pricing impacts, partially offset by $1.4 million of unfavorable currency exchange impacts. Adjusted EBITDA for Lithium was $144.5 million, an increase of 21.8% from fourth quarter 2017 results of $118.7 million. The $25.9 million increase in adjusted EBITDA as compared to the prior year was primarily due to increased sales volumes, favorable pricing impacts and $1.6 million of favorable currency exchange impacts.

Bromine Specialties reported net sales of $239.1 million in the fourth quarter of 2018, an increase of 9.1% from fourth quarter 2017 net sales of $219.1 million. The $20.0 million increase in net sales as compared to the prior year was primarily due to increased sales volumes and favorable pricing, partially offset by $1.3 million of unfavorable currency exchange impacts. Adjusted EBITDA for Bromine Specialties was $70.2 million, an increase of 9.0% from fourth quarter 2017 results of $64.4 million. The $5.8 million increase in adjusted EBITDA as compared to the prior year was primarily due to favorable pricing impacts, higher sales volumes and lower selling, general and administrative costs.

Catalysts reported net sales of $304.7 million in the fourth quarter of 2018, a decrease of 2.1% from net sales of $311.2 million in the fourth quarter of 2017. The $6.4 million decrease in net sales as compared to the prior year was primarily due to the $26.2 million impact of the Polyolefin Catalysts Divestiture and $1.6 million of unfavorable currency exchange impacts, partially offset by higher sales volumes and favorable pricing impacts. Adjusted EBITDA for Catalysts was $78.8 million in the fourth quarter of 2018, a decrease of 8.7% from fourth quarter 2017 results of $86.3 million. The $7.5 million decrease in adjusted EBITDA as compared to the prior year was primarily due to the $10.2 million impact of the Polyolefin Catalysts Divestiture, partially offset by higher sales volumes.

All Other net sales were $36.2 million in the fourth quarter of 2018, a decrease of 4.1% from net sales of $37.8 million in the fourth quarter of 2017. The $1.6 million decrease in net sales as compared to the prior year was primarily due to lower sales volumes and unfavorable pricing in our fine chemistry services business. All Other adjusted EBITDA was $6.4 million in the fourth quarter of 2018, an increase from fourth quarter 2017 results of $6.0 million.

Corporate Results

Corporate adjusted EBITDA was a charge of $35.5 million in the fourth quarter of 2018 compared to a charge of $29.6 million in the fourth quarter of 2017. The change was primarily due to higher selling, general and administrative spending for professional services, partially offset by $2.8 million of favorable currency exchange impacts.

Income Taxes

Our effective income tax rates for the fourth quarter of 2018 and 2017 of 8.6% and 266.5%, respectively, were influenced by the Tax Cuts and Jobs Act ("TCJA") enacted in December 2017, as well as, non-recurring, other unusual and non-operating pension and OPEB items (see notes to the condensed consolidated financial information). The TCJA resulted in net tax benefits of $39.8 million and net provisional expenses of $366.9 million during the fourth quarter of 2018 and 2017, respectively. The remaining decrease in the effective tax rate in the fourth quarter of 2018 compared to 2017 was impacted by a variety of factors, primarily stemming from a change in the geographic mix of earnings. Our adjusted effective income tax rates, which exclude non-recurring, other unusual and non-operating pension and OPEB items, were 19.9% and 16.8% for the fourth quarter of 2018 and 2017, respectively, and continue to be influenced by the level and geographic mix of income. Our effective income tax rates for the year ended December 31, 2018 and 2017 were 18.2% and 96.6%, respectively, with the decrease primarily driven by the impact of the TCJA. Our adjusted effective income tax rates for the year ended December 31, 2018 and 2017 were 21.6% and 18.8%, respectively.

Cash Flow

Our cash from operations was $546.2 million for the year ended December 31, 2018, an increase of $242.2 million versus the same period in 2017 primarily due to changes in working capital, including the payment of approximately $257 million in taxes related to the sale of the Chemetall Surface Treatment business in 2017, as well as increased earnings in each of our reportable segments and increased dividends received from unconsolidated investments in 2018. Capital expenditures were $700.0 million as compared to $317.7 million for the full year 2017, with the increase driven largely by expansion in our Lithium business.

We had $555.3 million in cash and cash equivalents at December 31, 2018, as compared to $1.14 billion at December 31, 2017. During the year ended December 31, 2018, cash on hand, cash provided by operations and $413.6 million net proceeds from divestitures funded $114.7 million of commercial paper note repayments, net of borrowings, $700.0 million of capital expenditures for plant, machinery and equipment, and mining resource development, dividends to shareholders of $144.6 million and $500.0 million accelerated share repurchase programs. Under our accelerated share repurchase programs we received and retired approximately 5.3 million shares of our common stock during 2018, approximately 0.6 million shares of which were received and retired during the fourth quarter of 2018.

Earnings Call

The Company's performance for the fourth quarter ended December 31, 2018 will be discussed on a conference call at 9:00 AM Eastern time on February 21, 2019. The call can be accessed by dialing 844-347-1034 (International Dial-In # 209-905-5910), and entering conference ID 5229789. The Company's earnings presentation and supporting material can be accessed through Albemarle's website under Investors at www.albemarle.com.

About Albemarle

Albemarle Corporation (NYSE: ALB), headquartered in Charlotte, NC, is a global specialty chemicals company with leading positions in lithium, bromine and refining catalysts. We power the potential of companies in many of the world's largest and most critical industries, from energy and communications to transportation and electronics. Working side-by-side with our customers, we develop value-added, customized solutions that make them more competitive. Our solutions combine the finest technology and ingredients with the knowledge and know-how of our highly experienced and talented team of operators, scientists and engineers.

Discovering and implementing new and better performance-based sustainable solutions is what motivates all of us. We think beyond business-as-usual to drive innovations that create lasting value. Albemarle employs approximately 5,600 people and serves customers in approximately 100 countries. We regularly post information to www.albemarle.com, including notification of events, news, financial performance, investor presentations and webcasts, non-GAAP reconciliations, SEC filings and other information regarding our company, its businesses and the markets it serves.