Financial Data and Key Metrics Changes - Livent reported third quarter revenue of $211 million, adjusted EBITDA of $120 million, and adjusted earnings of $0.44 per diluted share, with revenue down 9% year-over-year but adjusted EBITDA up 8% [10][11][18] - Adjusted EBITDA margin remained roughly flat compared to the prior quarter and was nine percentage points higher than a year ago [7][11] - Total capital spending year-to-date was $239 million, below adjusted cash from operations of $274 million, with expectations for increased spending in the fourth quarter [14][15] Business Line Data and Key Metrics Changes - Volume sold was roughly flat, with any meaningful expansion volumes expected only in the fourth quarter [10][12] - Average realized prices in the third quarter were lower than the first half of the year, reflecting continued price declines in the market, particularly in China [12][13] - Adjusted EBITDA margins remained unchanged compared to the second quarter of this year, driven by lower royalties and input costs [13][18] Market Data and Key Metrics Changes - Customer buying activity for lithium in Q3 was weaker than end market demand indicators would imply, despite NEV battery installations in China being up 24% year-over-year [20][21] - Global EV sales grew 25% in September and are up 37% year-to-date, but lithium demand did not align with these growth figures [21][22] - The lithium supply side saw production expansion delays globally, with higher-cost materials coming online, leading to reduced production from some operators [22][23] Company Strategy and Development Direction - Livent is focused on multiple capacity expansion projects, including the Nemaska Lithium project in Quebec, which is crucial for North American supply chains [8][34] - The company is nearing the completion of its merger with Allkem, expected to close around the end of 2023, which will enhance its global scale and growth profile [50][54] - Livent aims to produce and sell significantly higher volumes in 2024, potentially 50% more than in 2023, supported by ongoing expansions [44][46] Management's Comments on Operating Environment and Future Outlook - Management noted that current market conditions do not reflect equilibrium supply-demand conditions for lithium, with long-term demand remaining strong [27][72] - The company expects to see a rapid increase in lithium prices when buying restarts, as supply chain inventory levels decline [25][27] - Management remains confident in the ability to fund capacity expansions internally, supported by strong cash generation and a solid balance sheet [15][49] Other Important Information - Livent's total capital expenditures for 2023 are projected to be between $325 million and $375 million, with a revised revenue guidance of $890 million to $940 million [18][16] - The company released a feasibility study for the Whabouchi mine, projecting a total capital requirement of approximately $1.6 billion for the Namaska Lithium Project [35][34] Q&A Session Summary Question: What destruction of supply has been witnessed as lithium market prices continue to descend? - Management noted supply interruptions from non-integrated producers shutting down operations and a 40% reduction in lipid light production in China [56][57] Question: If current production expectations hold in Argentina, how much would production capability grow in 2024? - Management indicated that production capability could nearly double by the end of the year, with a 35% to 45% increase expected [60][61] Question: Can you provide visibility into the overbuild in China? - Management characterized battery cell producers in China as tiered, with tier two producers particularly keen to pull back production due to financial pressures [63][64] Question: Is there any slowdown in demand in North America? - Management acknowledged that while there are bumps in the road, the long-term trend remains unchanged, with supply continuing to be the constraint on demand [72][71] Question: Can you elaborate on the guidance revision? - The revision was primarily driven by a reduction of approximately 3,500 metric tons in expected volume sold, impacting revenue and EBITDA [74][75] Question: Is repayments from customers still a potential source of attractive funds for Nemaska? - Management confirmed that conversations with OEMs regarding support for Nemaska are ongoing, and they expect to fund their share of capital requirements internally [79][81] Question: Do you see opportunities to improve Allkem's Olaroz lithium extraction facility? - Management expressed confidence in the potential for collaboration to optimize expansion plans and improve operations at Allkem's facilities [83][85] Question: How much higher will the capital program be in 2024? - Management indicated that capital investment for next year will be slightly lower than the current year, but cash flow is expected to grow [91][92]
Arcadium Lithium plc(ALTM) - 2023 Q3 - Earnings Call Transcript