Q1 2026 Earnings Call — May 7, 2026
Analyst David Browder (Deutsche Bank): Good morning. Kent, have you seen any, at this higher level of lithium pricing, have you seen any change in buyer behavior, either getting ahead of or whatever else to deal with the higher pricing in the lithium market? Thank you.
Executive Kent: Thanks, David. So I don't know that we've seen the real change in behavior. I mean, it is evolving. So it's only been a few months, right, since price has changed. And I wouldn't say we've seen a change. The conversations may be a little different. Eric's a little closer to it, so maybe you can comment.
Executive Eric: Yes, good morning, David. I would say that I'd substantiate what Kent said. It's fairly new. Most of the growth has been on the ESS side, as we described in the call here. There's a lot of interest in sort of the carbonate supply chain that contrasts with EVs outside of China, which are a little weaker on the hydroxide side, you know, in terms of sentiment. All in all, though, we've got a pipeline of customers who are very interested in talking with us about certainly spot bids but also contracts, and we're being very cautious as we look at that in terms of how we think about or we want to take that contract mix over time.
And just on the deal, the opportunity in Chile, any early thoughts on potential cost improvements or benefits from this route versus your, you know, traditional solar evaporation route?
Executive Kent: Yeah, so it's more about being able to access more lithium in the solar at the cost position we're at rather than trying to do it. It's not really a cost improvement program. It's about being able to access more lithium in the solar under kind of the environmental conditions there.
Analyst Patrick Cunningham: Hi, good morning. Thanks for taking my question. You seem to hint the broader deployment of renewables as a result of the crisis could be a potential positive for lithium demand. I guess, is that anything that you've seen already? And how would you expect the market to respond to a higher embedded risk premium in oil, concerns around energy security?
Executive Kent: Yeah, so there's a lot there, and it's difficult to see that in the market. I mean, we think that may have an impact on both EVs but also the energy storage segment, as we're calling that now. It's difficult to see, but I would say energy security and grid resiliency is probably one of the bigger drivers around that. I'm not sure that's about the Middle East crisis, but it's clear that's a big driver around the world.
Analyst Patrick Cunningham: Got it. And then just on green bushes, I think one of your JV partners noted some issues around grade recoveries and production stability, maybe even suggesting that they're more systemic. I guess is this in line with your assessment, and how does it affect the ramp-up at Greenbushes?
Executive Kent: So Greenbushes is operating in line with our expectations and the outlook considerations that we put forward. So every year we look at all of our assets, and we make a risk-adjusted forecast around that, and we're fully in line with that. And the ramp of CGP3, so we started that up at the end of the year and we expect it to ramp through this year and I would say that ramp is on schedule.
Analyst Mike Sisson (Wells Fargo): Hi there, this is Fabiola for Mike. Thanks for taking my question. So as you look further ahead to your brownfield projects, what are the hurdle rates for these? Is there any scenario which any of these don't happen? And then how much capacity do you think these would add, you know, beyond 2027?
Executive Kent: So, look, we look at it as so we are now kind of ramping investments that we've made. That gets us through that profile that we showed you there. So it slows down a little bit of growth into 2027. That's ramping the kind of bigger investments that we've made over time. The next phase would be those brownfield investments, and we think that gets us a somewhere in the high single-digit growth rate, maybe for that period of time. And those are at existing assets. So that would be, for example, Greenbushes, Wajana, and at the Salar de Atacama.
Executive Kent: And we think of over time after that, we think there are more significant investments we could make on resources that we own, Kings Mountain, for example, and then further trains at the Salar de Atacama. So we have a pretty good line of sight for growth. But the first tranche of that would be those brownfields. The returns would be – it's hard to say what the – if you look for hurdle rates, it would be traditionally the way we look at that. And we'll make those decisions at the time depending on how we see the market growth pricing, what the costs look like from those assets.
Analyst Mike Sisson (Wells Fargo): Okay, got it. Thanks. And then for the 2026-2027 projects, you're talking about requiring minimal additional capex. Can you just give us a feel for size there? Any color you can give would be helpful.
Executive Kent: Yeah, well, I think for 26 and 27, it's really just ramping up the projects that we've built and done. Probably the most significant one there would be is the full ramp of Greenbushes, CGP3, and then getting WADS and operating on three full trains. We're operating three trains today, but we anticipate working through a more difficult part of the mine, so the quality of the resource is not as good. We expect that to improve significantly in the fourth quarter. That's the thinking around that and that's kind of where those incremental volumes come from plus just the normal productivity things that we do with better recoveries solar yield and at Salar de Atacama for example the project we've invested in and we're still working to get more and more out of that.
Analyst Chris Perrella (UBS): Hi, good morning. It's Chris Perrella on for Josh. Can you unpack the puts and takes to the 1Q energy storage margin? Given the $20 a kilogram spot price you guys experienced in the first quarter, I would have thought margins would be closer to 50%. But just kind of, you know, why were they so much better?
Executive Neil: Yeah, hi, Chris. Sure, I can take that. Really, the main driver of that is the traditional lag that we see in spodumene costs and how we consume spodumene through our supply chain. So, really, there was a small uplift in margin because, essentially, we're consuming spodumene that we purchased from our mines in the fourth quarter, which was obviously a lower price than what you saw in the first quarter. But, you know, it's minimal. I think you see that our full-year outlook, if you assume kind of flat pricing across the year, we've guided to energy storage potentially being in that mid-50% range. So there was a little bit of an uplift in the first quarter due to that, but obviously that will start to normalize as we go through the year, assuming pricing stays consistent for the rest of the year.
Analyst Chris Perrella (UBS): All right. And then just as a follow-up there, the special fees outlook, you did $75 million, $76 million in the first quarter, even higher in the second quarter. What's causing that to drop off in your outlook in the back half of the year?
Executive Neil: Yeah, I can start with that, Chris, again. It is really at this point just the uncertainty that Kent mentioned in the opening remarks. You know, right now the visibility that we have is at least through the middle of the year, and we are driving some price and volume initiatives that give us that confidence around the second quarter. I think we'll continue to give you updates as we go through the year. There's obviously a lot of uncertainty around the world, of course, stemming from the situation in the Middle East, and we're just watching that very closely.
Analyst Vincent Andrews (Morgan Stanley): Thank you. Good morning. I just wanted to follow up a bit on the brownfield opportunity and just color a few things in. Kent, were you saying that, you know, these assets could potentially start up as early as 2028, or would the timeline on that be a bit longer, if you could just help us understand what the lead time would be?
Executive Kent: Yes, well, none of the projects are finalized, so there are opportunities now, so I'm not sure we've even called them projects, but there are things that we've talked about and discussed over time and then we'll bring those on when we think it's the right time, right? And obviously a couple of those are with joint venture projects, so we need to align with our joint venture partners as well. So somewhere in that it's after definitely clearly after 27 in that time frame but we think that is the next leg of growth for us in that phase.
Analyst Vincent Andrews (Morgan Stanley): Okay. And Neil, can I just ask you, you know, slide 10, you talk about it at 20,000 or 20 kg, the free cash flow or the operating cash flow conversion would be 60 to 70%. As prices ramp higher than that, how much of that drops down to cash flow versus how much, you know, we go up to working capital? So would we stick with the 60% to 70% range? Would it be higher than that? Would it be in the lower end of the range? How should we think about it?
Executive Neil: Yeah, Vince, look, I think it, of course, always matters in the shape of how that pricing moves up. If it's a very sudden move up in pricing, particularly if it's towards the end of the year, then I would expect that our cash conversion will compress in the immediate just because of how sharply the working capital runs up and how quickly we can get that back in terms of cash. If it's a little bit more gradual, look, I still think that 60% to 70% when we've done our benchmarking and our modeling, that seems to be the right place for us to be from a steady state perspective. So if it is a little bit more of a rateable kind of movement up, I would expect us to be able to still be in that range.
Analyst Aaron Vissanathan (RBC Capital Market): Great. Thanks for taking my question. Congrats on the strong results. And apologies if this was asked earlier, but did you discuss the reduction of output at Greenbushes? It looks like it's about 10 to 15% and how that affects kind of your own operations.
Executive Kent: Okay, so we said that in an earlier question. So, Greenbush is operating in line with the plan that we have, right? So, and as we look at that every year, we build our plans, we look at all of our resource assets and we risk adjust those. And so what we've built in our plan for Greenbush is this year, the mine is operating to those plans including the ramp of CGP3 so we are we're on our plan for the ramp of CGP3 and the it was we started at the we started that project at first or at the end of 25 and we felt like we could ramp it throughout the year and then it's a schedule according to that ramp but we should be at full capacity by the end and we think we're on that schedule.
Analyst Aaron Vissanathan (RBC Capital Market): Okay, thanks. And then you noted that ESS demand could be a little bit stronger, I guess. And, you know, we did notice kind of stronger EV demand also in the last month versus the first few months of the year. So are you seeing demand improvement? And obviously I think you're still guiding to about flattish volumes. So is there any way you can address that upside on demand if there is any, or would that be – unlikely this year and potentially likely next year. How should we think about, you know, your opportunities to capture some of that extra demand if there is any?
Executive Kent: Yeah, Eric can talk about maybe a little bit more detail, but I would just say if market's growing, it is strong, but we're working through the seasonality, right? The early part of the year is always difficult to figure out what exactly is going to happen with the Lunar New Year. China is such a big market. That has a big impact, and we're off of that now. Demand is strong, but I'm not sure we're ready to kind of say it's at a different level.
Executive Eric: Yeah, so this is just to add on a demand basis. Our customers of the battery companies around the world, particularly in Asia, who produce for this market, their order books are full from now through the beginning of 27th. So, demand is very strong in energy storage, driven by the factors of grid reliability, renewables in various parts of the world, as well as AI and behind-the-meter storage. So, there's very favorable trends that are driving that kind of an outlook.
Executive Neil: And, Arun, this is Neil. I think you had asked about our volume growth forecast for this year, which is flat with last year. Look, underneath that volume forecast was an assumption, as Kent highlighted, about how we see our resources ramping through the year. That's one part, CGP3, and the other one being the improvements that are getting driven at Wajana. Everything is going according to our plan, which is why we're still holding on to that volume outlook. But obviously, as we go through the year, if we start to see upside, you know, we'll continue to give you updates. I think our volume growth potential this year in particular is really driven by how well those resources continue to move in their capacity expansion.
Executive Kent: Yeah, it's about availability of product from our perspective rather than market. Market's pretty strong.
Analyst Lawrence Alexander (Jefferies): Good morning. I have two questions. First, can you talk a little bit about whether there's any advantages or disadvantages for you if the LFP producers need to switch to yellow phosphorus to reduce their sulfur consumption and also how higher sulfur prices are affecting your economics versus your peers?
Analyst Lawrence Alexander (Jefferies): And then secondly, just longer term, you know, if you do undertake something like Kings Mountain, what would you see as, like, the desired, desirable range for your balance sheet, and what balance sheet metrics would you use as boundary conditions?
Executive Eric: Okay, so maybe, Eric, you can talk about the LFP chemistries a little bit, because, yeah, so you might have to expand a little bit on your question, Lawrence. Let me answer the part of it that is clear to me and I think is important to understand. We talked in the call about raw material costs rising $79 million and across the enterprise and we have a variety of ways we're mitigating that. One of those drivers, a fairly big driver, is sulfuric acid. I don't think we are advantaged or disadvantaged versus anybody who buys sulfuric acid around the world, particularly in Asia where a lot of the conversion activity happens for hard rock conversion. So that's a cost that's affecting supply.
Executive Eric: Frankly, any acid-roasted leaching process is going to be impacted by that. Your first question was not clear to me. Maybe you could restate it.
Analyst Lawrence Alexander (Jefferies): My understanding was that one way to offset the cost on sulfuric acid for the LFP producers is for them to switch to yellow phosphorus, and that if they did, I was curious as to whether there's any issues with the contaminant profiles of lithium from different mines. My understanding is you have an advantage in terms of being able to reformulate your product, but maybe I'm just overthinking kind of the dynamics there.
Executive Eric: Well, I think one of the advantages of those LFP producers, the cathode producers who reside almost entirely in China, that they have is their upstream capabilities to access phosphorus in various forms of it. I've had some discussions with some of these companies about how they do that. I understand any tradeoffs are not impacting their ability to deliver quality, and that's the best I could say. If we learn more, we'll certainly share more.
Executive Neil: And then, Lawrence, this is Neil. Maybe I can start with your question on Kings Mountain. Look, what I would say, as you can see as a company, because of the, you know, extreme volatility that we've seen over the last five years, we are obviously in a position of balance sheet strength. and we are on purpose taking a conservative stance right now just because of the volatility we've seen in general. But as we look at Kings Mountain, and I want to highlight, we're nowhere near a final investment decision.
Analyst Joel Jackson (BMO Capital): Hi, good morning, everyone. Thanks for taking my questions. The first question is, so you're talking about Q2 margins guidance or commentary as if spot prices hold Q1 levels. Spot prices or market prices are actually higher in Q2 than Q1. So can you talk about that? I mean, what quarter-over-quarter price increase would you need to hold Q1 margins, or how would you frame it?
Executive Neil: So I think, let me start, Neil, and then you can talk a little bit more in detail. But there is, you know, a portion of our volume is on contracts. We're about 40% on contracts, and there's a lag on that, right? There's typically a three-month lag on how pricing moves through that. So that will move up slightly just as we go through the quarter if prices stay where they are. So we're not forecasting prices, but that's just a function of the way our contracts work. So it will move up.
Executive Neil: And that will impact margin as we move forward through the quarter, then it becomes more steady state as it will catch up as long as prices are flat.
Executive Neil: Yeah, just to add to that, look, if you hold everything flat, you know, essentially to get to that higher margin that you're assuming, you know, basically from our $20 scenario to our $30 scenario, everything basically scales linearly. So to get to the higher margin, you have to make an assumption around just a higher price realization scenario. In the second quarter, all other things being equal. So it really comes down to pricing.
Analyst Joel Jackson (BMO Capital): Okay, and Ken and Tina, if I circle back to the Greenbush's question, which is, I've heard your answer a couple times now on what you're saying about Greenbush as being the plan, but one of your JV partners really went public the other week and talked about safety and was in the prepared remarks and was very aggressive in wanting to call that to the public what they feel should be happening or is happening at Greenbushes. It is a different commentary than you're giving today. Why do you think your J.D. partner is wanting to do that? Is this just about negotiating how the mine plan should go forward, production, throughput, concentrate grades, and you have different interests being a customer of the spodumene as well? Why do you think your partner is so aggressive in the market talking about safety and Greenbushes issues?
Executive Kent: Yeah, so I guess I would look, I'm not going to comment on their perspective of what they're doing. I would say they're our partner's partner, right? So as we go through that, but we do have, we're not happy with the safety position at the mine. We've had lots of conversations with the management team and our partners around that. We have a plan and it's improving and we're working toward that. Safety is not something that you move overnight. It's a long-term program. We feel that we're on the right track there, but the mine is operating to the plan that we thought they would during the year, and we don't see exceptions.
Executive Kent: We don't see exceptions to that. So the way we view it is that we are on plan. The CGP3 project started up last year and is ramping through the year, and we're on that ramp plan. So we don't see a variance in our plan, and I can't comment on what our partner is thinking when they talk publicly.
Analyst Colleen Rush (Oppenheimer & Co.): Thanks so much, guys. You know, as we look at some of the NDAA compliance deadlines coming up at the start of 2028, I'm just curious about how you're planning to meet those, you know, and what we can think about from a CAPEX perspective, if there is any, to meet some of those requirements.
Executive Kent: I'm not sure I understand that question. Can you just say that again?
Analyst Colleen Rush (Oppenheimer & Co.): Yeah, so NDAA requirements for military batteries, we're looking at having to have entire supply chains in North America to meet some of those requirements. I'm just curious about your ability to meet those volumes and any CapEx plans that you have here over the next two years to be in line with them.
Executive Kent: Okay. So, yeah, that's a segment of the market that we would want to serve. We actually have probably the only lithium produced today in the United States comes from Silver Peak and processed at Kings Mountain. So that's the only kind of pure lithium processed in the U.S. today. We have that. It's a pretty small volume. It's not a big piece of the market, but we can serve that through other locations with allied countries like Chile as well. So it is an opportunity for us. And as we look going forward to make investments, obviously Kings Mountain, the mine itself, would be one of the opportunities to serve that particular volume. I would say we're not over-indexed on it. We think about the total market overall, but military applications in the U.S. is definitely an opportunity for us.
Analyst Colleen Rush (Oppenheimer & Co.): Great. And then if you look at the European demand for EVs and seeing that grow, is there any concern that there's new regulations coming out of Europe in terms of compliance around supply not being able to come from China for any of those OEMs or through the EU properly from a regulatory perspective?
Executive Kent: Yeah, so there is a lot of conversation going now around critical minerals, and when we hear that, we think lithium, and around diverse supply chains, global supply chains, allied countries. That's going to move a lot over time. From our standpoint, we have a diverse portfolio, so around the world, so both Brian and Hard Rock, but in a variety of different countries, and we think we'll be able to satisfy that one way or the other. So if it's tighter regulation, it just makes a different opportunity for us. If it's not as tight, we have our full portfolio to work with. So we see it as an opportunity, not a concern, but we have to wait and see exactly how it plays out.
Analyst John Roberts (Mizuho): Thank you. I have just one. Assuming this year plays out according to plan, where do you think your debt level should be this time next year? What would be a targeted debt level?
Executive Neil: Yeah, John, this is Neil. Look, I mean, I guess there's a lot of estimating and forecasting to get to that number. But, look, I'm sure you're doing this math on your side. If you just take flat pricing from where we are today and just run that across the end of the year, you know, we exited first quarter at one times net debt to EBITDA, and you can imagine that these kind of prices will probably trend down from there below one times. So, obviously, like I had said before, you know, our stance right now is to be in a little bit more conservative balance sheet position and, you know, for all the volatility and uncertainty that we see in the world, and that's our posture for the year.
Executive Kent: Yeah, I would add to that, look, we've fought ourselves through a tough period, and we clearly want to be a little more conservative as we go through that. We haven't worked out all the details around that, but we're trying to – our overall goal, we're building a company that will be able to work through this cycle, regardless of where it goes, and that we would still be – can be opportunistic at the bottom of the cycle. That's what we're trying to do. In fact, the balance sheet is a part of – is definitely a part of that strategy.
Analyst Kevin McCarthy (Classical Research Partners): Yeah, thank you, and good morning. I was wondering if you could speak to the quarterly cadence of your lithium sales volumes. You're guiding flat for the year. I think in the first quarter, you had 53 kilotons, which was up appreciably. It looks like your comps are a little tougher in the back half. So maybe you could speak to how you would foresee that flowing through in the second quarter in the balance of the year.
Executive Neil: Yeah, hi there, Kevin. This is Neil. I'm very happy to start. So, you know, the first quarter is typically our softest quarter, of course, because of Chinese New Year and just general seasonality. You should expect volumes to pick up here in the second quarter and the third quarter. I would not expect our fourth quarter volumes to be as strong as they were last year, mainly because we had – inventory reductions that we did at the end of the year as we saw that kind of strength in demand come through in the fourth quarter. And so that's the reason why we've been guiding to this overall sort of flat volume year over year. It's exactly what you said. We have tougher comps on a year-over-year basis as we go through the year.
Executive Neil: And so that's why you saw some volume growth here in the first quarter. That was the easiest of all the comps. Those will get tougher as we go through the year just because of the elevated sales volumes that we had last year.
Analyst Kevin McCarthy (Classical Research Partners): Very good. And then I'm tempted to ask, does Albemarle have any visibility at all into sales? whether your lithium molecules end up in an EV versus an energy storage system. And if you do have any visibility, do you care? In other words, is there any strategic or commercial effort to influence your mix in one direction or the other? How do you think about that?
Executive Kent: So, I mean, we do see where it goes. I mean, it's not 100% transparent because a lot of times it's the same customer, but we have those discussions. We know where they're going. We understand order books and one versus the other because they have different profiles. So, I think it is important that we understand that. We think we have pretty good visibility of it. It's not perfect because it is the same customer base, but it relies on customer conversations and their transparency with us. But we feel like we have a pretty good handle on that.
Executive Eric: No, I think that's right. I think that's right. Clearly, you know, someone buying carbonate for LFP production, that could go EV or ESS, but it comes down to the knowledge we have on the ground to be able to ascertain the difference. And to the second part of your question, it does matter in that we want to make sure we're close to understanding what's driving growth so we can plan our own capacities and approaches to the market accordingly.
Analyst Lizahi Ememadli (Rothschild): Thank you. I just wanted to ask about the lithium market. So if we assume that the current market conditions persist, what kind of supply response would you expect over the coming year or so? And particularly, would you say that the current prices are high enough for some of the unconventional supply that we saw in 2022 2023 to come online?
Executive Kent: Thank you. So I guess first I would say it takes time almost for anything to come back right so if you've idled capacity and you've kept it in the right shape condition you can bring it back in pretty short order but if you really put it in care and maintenance it's going to take some time when you come out mines you have to think about things like yellow equipment and all of that which is not sitting on the shelf and even brownfield mines a couple of years and it's greenfield that's further than that so and then some of the unconventional I don't know that we're at prices where things get a little crazy I think also people learned a lesson in the last cycle about the nature of the market I don't think we're going to see a massive supply adjustment to this at least that's not how we're thinking about it at prices where we are now you're here in if you think about a lot of projects that were on the books and maybe even still happening we're now getting to the point where they their financial forecasts are in the market so to speak it's not that we've gone way above them that we're just getting back to the numbers they were using to justify projects so I don't think you see a huge supply response.
Analyst Lizahi Ememadli (Rothschild): Thank you. And just a follow-up on the specialties business. So the broadening price in China, if you look at the current price, is almost as high as the peak in 2022. And in 2022, this segment generated EBITDA of over half a billion. Is that a trajectory we should expect if the broadening price stays at this level or there are other parts moving parts that we should think about?
Executive Kent: Yeah, so there's a bit in there so prices they did peak they've actually come off fairly quickly recently but they were at a higher level and we're below the performance level we were so and but we recognize that we have some operational cost issues we need to address around that, and we're working on that. We've got projects around that.
Executive Eric: And the other piece, and Eric can talk about this, but that bromine price you see, there's a small amount of our bromine that we sell on that basis. But it is the most visible index that you can see, so I understand why you watch it. We watch it as well, and it's indicative in the market, but it's actually a very small part of our bromine that we sell on that index.
Executive Eric: Yeah, if you look at, just to add to Ken's comments, as you look at our overall specialty sales, which of course includes lithium specialties and bromine specialties, it's 20% or less of our sales that are exposed to that kind of index, which is prevalent in China for upstream bromine. If you go around the world, regional markets behave differently. If you go down our value chain into deriv...