Albemarle Corporation’s (ALB) lithium business is experiencing a boost in volumes due to increased customer demand, capacity expansion, and productivity improvements. This, along with the company’s cost-saving initiatives, has allowed it to maintain strong margins despite headwinds from raw material costs and lower demand in the specialties market.
While the stock is down 24.3% year-over-year, it remains a Zacks Rank #3 (Hold) and appears to be worth retaining at this time.
Strong Lithium Demand Driving Results
Albemarle is benefiting from higher volumes in its lithium business due to expanding capacity, improvements in plant productivity, and growing customer demand. The La Negra III/IV expansion project in Chile and an increase in tolling volumes have contributed to higher volumes in the first quarter of 2023.
The company is also executing projects aimed at boosting its global lithium conversion capacity and investing in high-return projects to drive productivity. This has put it in a good position to take advantage of the long-term growth in the battery-grade lithium market.
Input Cost Inflation and Destocking Remain Concerns
Albemarle’s Ketjen unit is facing headwinds from increased raw material costs, expected to continue hurting margins. The Specialties unit is also experiencing lower demand and customer inventory destocking, which are expected to continue impacting volumes in the second quarter of 2023.
Stocks to Consider
For those considering other stocks in the basic materials space, better-ranked options include AngloGold Ashanti Limited (AU), L.B. Foster Company (FSTR), and Linde plc (LIN). AngloGold Ashanti and L.B. Foster carry a Zacks Rank #1 (Strong Buy), and Linde plc carries a Zacks Rank #2 (Buy).
Disclaimer: The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.