Albemarle (NYSE: ALB) inventory slumped by double digits this morning and was buying and selling 13.4% decrease as of 10:40 a.m. ET Tuesday. The world’s largest lithium producer is elevating cash to fund development capital expenditures amongst different issues, and the market believes it is a signal of how tough the enterprise surroundings stays for lithium corporations.
A transfer to bolster liquidity amid challenges
Albemarle stated it plans to promote $1.75 billion value of depositary shares, every representing 1/twentieth curiosity in necessary convertible most well-liked inventory. Albemarle intends to record the depositary shares on the New York Inventory Alternate.
Albemarle says it expects to make use of the proceeds for normal company functions, which can embody the funding of its development initiatives, significantly the development and enlargement of operations in Australia and Chile.
What this implies for Albemarle inventory
Albemarle was rising at a torrid tempo till lithium costs began to plummet in 2023. The corporate’s internet gross sales dropped 10% yr over yr and it reported a internet lack of $618 million versus a revenue of $1.1 billion within the fourth quarter, largely due to low lithium costs.
Albemarle, nonetheless, nonetheless ended 2023 with file gross sales of $9.6 billion, however it expects to generate gross sales value solely $6.9 billion to $7.6 billion in 2024 even at its highest projected lithium costs. If lithium costs do not get better, Albemarle’s gross sales may fall at the least 35% this yr.
Given the backdrop, it seems Albemarle’s money flows this yr is not going to be sufficient to fund development. Though the corporate had money and equivalents of practically $890 million as of Dec. 31, 2023, it expects to spend $1.6 billion to $1.8 billion in capital expenditures this yr. That is down from the $2.1 billion it spent in 2023 as administration desires to prioritize initiatives close to completion given the tightening liquidity.
Does that make Albemarle inventory a dangerous wager now? I would say no, as a result of Albemarle is doing what it ought to to spice up money flows amid a tough market. In the meantime, lithium costs are rebounding as effectively after final yr’s crash, rising 12.4% this yr to this point in keeping with information from Buying and selling Economics.
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Why Albemarle Inventory Is Crashing At this time was initially printed by The Motley Idiot