ALBEMARLE CORP

Albemarle Corporation is a world leader in transforming essential resources into critical ingredients for mobility, energy, connectivity, and health, serving end markets that include grid storage, automotive, aerospace, conventional energy, electronics, construction, agriculture and food, pharmaceuticals and medical devices. The company and its joint ventures currently operate more than 25 production and R&D facilities around the world, and as of December 31, 2025, served approximately 1,900 customers in approximately 70 countries. The global lithium market is highly competitive and growing very rapidly, characterized by aggressive expansion and entry from existing and new players, including automotive OEMs, commodity traders, junior miners, and large, well-capitalized diversified miners, with major competitors in lithium compounds including Sociedad Quimica y Minera de Chile S.A., Sichuan Tianqi Lithium, Jiangxi Ganfeng Lithium, Rio Tinto plc, Pilbara Minerals, Tesla and a large number of additional Chinese companies.

Albemarle's competitive positioning is underpinned by its world-class resources with reliable and consistent supply, leading process chemistry, high-impact innovation, customer centricity and focus on people and planet, which management believes will enable it to maintain a leading position in the industries in which it operates. In the Specialties segment, the most significant competitors are Lanxess AG, Israel Chemicals Ltd and Rio Tinto, as well as producers in India and China. In the Ketjen segment, major competitors in the CFT catalysts market include Shell Catalysts & Technologies, Advanced Refining Technologies and Haldor Topsoe; in the FCC catalysts market, W.R. Grace & Co. and BASF Corporation; and in the PCS market, Nouryon, Lanxess AG and Arxada.

Albemarle generates revenue through the development and manufacture of a broad range of basic lithium compounds, bromine and specialty chemicals, and catalyst solutions. The company's revenue is derived from contracts with customers, with almost all contracts containing one performance obligation for the transfer of goods where such performance obligation is satisfied at a point in time, and payment terms are generally between 30 to 90 days. The company serves approximately 1,900 customers in approximately 70 countries through an international strategic account program that uses cross-functional teams to serve large global customers, complemented by regional sales and technical personnel.

The Energy Storage segment develops and manufactures a broad range of basic lithium compounds, including lithium carbonate, lithium hydroxide, and lithium chloride, which are key components in lithium batteries used in consumer electronics and electric vehicles, power grids and solar panels, high performance greases and specialty glass. For the year ended December 31, 2025, Energy Storage net sales were $2,710,035 thousand ¹, representing 52.7% ² of total net sales, and segment adjusted EBITDA was $697,215 thousand ³. The Specialties segment optimizes a portfolio of bromine and highly specialized lithium solutions, serving industries including energy, mobility, connectivity, and health, with products essential in both internal combustion and electric vehicles, fire safety technology, and health applications. For the year ended December 31, 2025, Specialties net sales were $1,366,435 thousand ⁴, representing 26.6% ⁵ of total net sales, and segment adjusted EBITDA was $275,739 thousand ⁶. The Ketjen segment's three main product lines are Clean Fuels Technologies (CFT), fluidized catalytic cracking (FCC) catalysts and additives, and performance catalyst solutions (PCS). For the year ended December 31, 2025, Ketjen net sales were $1,066,263 thousand ⁷, representing 20.7% ⁸ of total net sales, and segment adjusted EBITDA was $150,398 thousand ⁹.

On October 25, 2025, the Company signed a definitive agreement to divest the controlling ownership interest of Ketjen's Refining Solutions business to ChemCat AcquisitionCo, LLC, and will receive an estimated $536 million ¹⁰ in cash and own 49% ¹¹ of the common units of Holdco. In a separate transaction, on January 23, 2026, the Company completed the sale of its 50% ownership interest in Eurecat S.A. for €105 million ¹² (approximately $123 million ¹³ using foreign exchange rates on the closing date) in cash. In June 2025, the Company redeemed the preferred equity of a W.R. Grace & Co. subsidiary for an aggregate value of $307.4 million ¹⁴, comprised of $288.0 million ¹⁵ in cash received in June 2025 for the redemption and $19.4 million ¹⁶ in cash previously received for tax liabilities. In January 2025, the Company received $350 million ¹⁷ from a customer for the delivery of specified amounts of spodumene and lithium salts through 2029. During 2025, the Company placed its Chengdu, China conversion plant into care and maintenance, and transferred its production to other processing facilities in China. The Company recorded a $181.1 million ¹⁸ non-cash goodwill impairment charge in the third quarter of 2025, representing goodwill associated with the Refining Solutions reporting unit, and a separate long-lived asset impairment of $245.6 million ¹⁹ in the fourth quarter of 2025 to reduce the carrying value of the Refining Solutions business to its fair value less cost to sell.

For the fiscal year ended December 31, 2025, Albemarle recorded net sales of $5,142,733 thousand ²⁰, a decrease of 4% ²¹ from $5,377,526 thousand ²² in 2024. Gross profit was $668,719 thousand ²³ compared to $62,539 thousand ²⁴ in the prior year, with gross profit margin improving to 13.0% ²⁵ from 1.2% ²⁶. Net loss attributable to Albemarle Corporation was $510,628 thousand ²⁷ compared to a net loss of $1,179,449 thousand ²⁸ in 2024, and net loss attributable to Albemarle Corporation common shareholders was $677,378 thousand ²⁹ compared to $1,316,096 thousand ³⁰ in the prior year. Cash flows from operations in 2025 were $1,282,267 thousand ³¹, an increase of 86% ³² from $687,876 thousand ³³ in 2024.

Management expects Energy Storage net sales and profitability to increase year-over-year if the average lithium pricing for 2026 is in line with current prices, with sales volume expected to be relatively flat compared to prior year as a result of continued strong integrated production, strong spodumene sales and maintaining lower inventory levels. For Specialties, management expects both net sales and profitability to be lower in 2026 year-over-year from lower pricing, notably in the Lithium Specialties business, with volumes expected to be relatively flat based on reduced customer demand in certain markets including consumer and industrial electronics, offset by continued strong demand in other end-markets such as pharmaceuticals, agriculture and oilfield services. The Company expects the Refining Solutions Business Transaction to be completed in the first quarter of 2026, subject to customary closing conditions, and following the divestitures, will retain an investment in the refining solutions market.

A key growth vector for Albemarle is the global market for lithium battery and energy storage, particularly for EVs and energy storage systems, which management believes remains strong, providing the opportunity to continue to develop high quality and innovative products while managing the high cost of expanding capacity. Global EV and ESS sales are expected to continue to increase over the prior year, driving continued demand for lithium batteries, and this demand is supported by a favorable backdrop of steadily declining lithium-ion battery costs, increasing battery performance, continuing significant investments in the battery and EV supply chain by cathode and battery producers and automotive OEMs and favorable global public policy toward e-mobility/renewable energy usage. The Company's outlook is also bolstered by long-term supply agreements with key strategic customers, reflecting its standing as a preferred global lithium partner, highlighted by its scale, access to geographically diverse, low-cost resources and long-term track record of reliability of supply and operating execution.

Management expects continued cost reduction efforts to drive additional profitability in 2026, and the Company has achieved its $400 million ³⁴ per year cost and productivity improvement target resulting from the comprehensive review of its cost and operating structure. The Company expects its global effective tax rate will vary based on the locations in which income is actually earned and remains subject to potential volatility from changing legislation in the United States, such as the OBBBA, and other tax jurisdictions.

The Company expects capital expenditures to be between $550 million ³⁵ and $600 million ³⁶ in 2026, in line with the $589.8 million ³⁷ of capital expenditures in 2025, reflecting the new level of spending to unlock cash flow over the near term and generate long-term financial flexibility, driven by reduced sustaining growth and capital spend while continuing safety and critical maintenance expenditures. In February 2026, the Company announced the decision to put Kemerton Train 1 into care and maintenance, which is expected to result in an estimated $150 million ³⁸ to $225 million ³⁹ of cash related charges resulting primarily from decommissioning costs, contract cancellation costs, severance expenses and asset disposal costs, with the majority of these Cost Actions expected to be completed in 2026 and the remainder expected to be completed in 2027.

The Company continues to focus on cash generation, working capital management and process efficiencies. The Company's restructuring actions that began in 2024 are part of a broader effort focused on preserving its world-class resource advantages, optimizing its global conversion network, improving the Company's cost competitiveness and efficiency, reducing capital intensity and enhancing the Company's financial flexibility. The Company will continue considering on an ongoing basis additional measures to support operating efficiencies, financial flexibility and growth.

The Company expects to receive an approximate total of $660 million ⁴⁰ in cash proceeds from the two divestitures (the Refining Solutions Business Transaction and the sale of Eurecat S.A.), which it expects to use for debt reduction and other general corporate purposes. Over the next three years, with respect to its use of cash, the Company will focus on deleveraging, investing in growth of the businesses and returning value to shareholders. The Company anticipates approximately $6 million ⁴¹ of required cash contributions during 2026 for its defined benefit pension plans, and contributions to its domestic and foreign qualified and nonqualified pension plans are expected to approximate $13 million ⁴² in 2026.

Lithium prices significantly decreased by approximately 85% to 95% ⁴³ from their high in January 2023 throughout 2024 and into 2025, which adversely impacted the Company's financial results during those periods. Although lithium index pricing began to rebound from low levels toward the end of 2025, it remains critical that the Company ensure an efficient operating model so it can compete and invest at every point of the cycle. High volatility or additional declines in the lithium prices could have a material and adverse effect on the revenues and profitability of the Company, and a further decrease in lithium prices may lead to additional inventory valuation charges.

The Company continues to monitor the potential impact of tariffs proposed or imposed by the U.S. and internationally, and at this time does not expect a material, direct impact to its financial statements from the tariffs announced to date. The potential direct exposure of the Energy Storage segment to proposed or imposed tariffs is expected to be minimal as most of its China production is sold into China or other Asian countries, and some critical materials are fully or partially exempt from tariffs in their currently proposed form. While there may be an impact to the Specialties and Ketjen businesses, the Company does not expect it to be material due to its global footprint and planned mitigation actions.

The most material risks to Albemarle's business include its substantial exposure to volatile lithium market pricing, which significantly decreased by approximately 85% to 95% ⁴⁴ from its high in January 2023 throughout 2024 and into 2025, and which could have a material and adverse effect on revenues and profitability. The Company is subject to risks related to brine extraction limits, particularly with respect to its early warning plan at its facilities in Chile, which if triggered could require significant reduction or halting of pumping rates, causing a significant decrease in lithium production. The Company's substantial international operations subject it to risks of doing business in foreign countries, with approximately 83% ⁴⁵ of net sales to foreign countries and 39% ⁴⁶ of total net sales shipped to or within China in 2025, exposing the Company to geopolitical and trade disputes, including tariffs on Chinese electric vehicles and lithium-ion batteries initiated in 2025. The Company's ability to service its $3.2 billion ⁴⁷ of aggregate long-term debt as of December 31, 2025 depends on its future performance, and a significant downturn in lithium market prices or demand could impact its ability to maintain compliance with its amended financial covenants under the 2022 Credit Agreement, which requires a maximum leverage ratio of 5.00:1.0 ⁴⁸ as of the end of the fourth quarter of 2025, stepping down to 3.50:1.0 ⁴⁹ by the third quarter of 2026. The Company faces significant risks related to the development of non-lithium battery technologies, as commercialized battery technologies that use no, or significantly less, lithium could materially and adversely impact its prospects and future revenues.

Management's message emphasizes that the current global business environment presents a diverse set of opportunities and challenges, and that despite ongoing price volatility, the Company believes its long-term business fundamentals are sound and that it is strategically well-positioned as it remains focused on increasing sales volumes, optimizing and improving the value of its portfolio through pricing and product development, managing costs and delivering value to customers and shareholders. The key strategic priorities emphasized for the period ahead are: (1) increasing sales volumes, particularly in Energy Storage where a 9% year-over-year volume increase was achieved in 2025; (2) optimizing and improving the value of the portfolio through pricing and product development; and (3) managing costs and delivering value, including achieving the $400 million ⁵⁰ per year cost and productivity improvement target. Management also highlights that the Company will continue to focus on cash generation, working capital management and process efficiencies, and that over the next three years, with respect to its use of cash, the Company will focus on deleveraging, investing in growth of the businesses and returning value to shareholders.