Albemarle wipes $1 billion off FY23 earnings forecast as ASX lithium shares fly on Friday

Lower lithium prices and higher production costs are taking their toll on the US lithium giant.

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ASX lithium shares are flying on Friday amid US lithium giant Albemarle Corporation (NYSE: ALB) predicting lower earnings for FY23 due to falling lithium prices and rising costs of production.

ASX lithium shares performing strongly on Friday include:

  • Azure Minerals Ltd (ASX: AZS) shares up 8.6%
  • IGO Ltd (ASX: IGO) shares up 4.4%
  • Allkem Ltd (ASX: AKE) shares up 4.1%
  • Pilbara Minerals Ltd (ASX: PLS) shares up 1.9%
  • Liontown Resources Ltd (ASX: LTR) shares up 6.6%
  • Sayona Mining Ltd (ASX: SYA) shares up 10.2%
  • Core Lithium Ltd (ASX: CXO) shares up 7.6%.

Meantime, the S&P/ASX All Ordinaries Index (ASX: XAO) is up 1.1%.

Albemarle dropped its third-quarter report on Wednesday, and its bosses conducted a conference call with analysts yesterday.

Let's take a look at the report's details and what the management team said during the webcast.

How Q3 looked for Albemarle

For the three months ending 30 September, Albemarle reported net sales of $2.3 billion, up 10% year over year (yoy), and net income of $302.5 million or $2.57 per diluted share.

Adjusted EBITDA came in at $453.3 million. The adjusted diluted earnings per share (EPS) was $2.74.

In a statement, Albemarle CEO Kent Masters said:

Albemarle grew net sales by 10%, driven by higher volumes in our Energy Storage business.

In the third quarter, we formed new strategic partnerships and streamlined our existing MARBL joint venture to better position Albemarle for long-term growth.

On the conference call, Eric Norris, Albemarle's President of Energy Storage, said all of the company's contracts were performing despite lower EV production in 2023 due to an inventory correction.

He said: "… what's happening now is road bumps, but certainly not a determinant for the long-term growth we have."

Albemarle issues FY23 earnings downgrade

Lower lithium commodity prices and higher costs of production have resulted in an earnings downgrade for full-year FY23.

Back in August, Albemarle told the market it was expecting net sales of between $10.4 and 11.5 billion. Now, it expects net sales of between $9.5 billion to $9.8 billion.

Its forecasted adjusted EBITDA has gone from a range of $3.8 billion to $4.4 billion to a range of $3.2 billion to $3.4 billion.

The company detailed its full-year outlook for sales and EBITDA:

Net sales are expected to increase 30% to 35% over the prior year, primarily driven by new mining and conversion capacity delivering 30% to 35% volumetric growth in Energy Storage.

Adjusted EBITDA is expected to be flat to down 5% year over year, primarily due to lower Energy Storage pricing as well as the realization of higher spodumene pricing in costs of goods sold from our JV-owned mines.

Albemarle is now reviewing its capital expenditure and intends to pull back on M&A activities after its failed takeover bid for Liontown Resources.

Albemarle and its joint venture partners at Greenbushes are reportedly considering production cuts amid falling demand for EVs, particularly in China.

Trading Economics reports that EV sales in China are expected to fall by 11% this year, while Masters warns that EV sales in the US and Europe could also decline next year due to a softer global economy.

Motley Fool contributor Bronwyn Allen has positions in Core Lithium. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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