Albemarle Corp (ALB) — Q2 2024 Earnings Call Transcript

Thank you and welcome everyone to Albemarle's second quarter 2024 earnings conference call. Our earnings were released after the market yesterday, and you'll find the press release and earnings presentation posted to our website under the Investor Section at albemarle.com. Also posted to our website is yesterday’s additional press release announcing our initiation of a comprehensive review of our cost and operating structure which we will also reference during our comments today. Joining me on the call today are Kent Masters, Chief Executive Officer; Neal Sheorey, Chief Financial Officer; Netha Johnson, President of Specialties; and Eric Norris, President of Energy Storage who are also available for Q&A. As a reminder, some of the statements made during this call, including our outlook, guidance, expected company performance and strategic initiatives may constitute forward-looking statements. Please note the cautionary language about forward-looking statements contained in our press release and earnings presentation which also applies to this call. Please also note that some of our comments today refer to non-GAAP financial measures. Reconciliations can be found in our earnings materials. And now, I'll turn the call over to Kent.

Thank you Meredith. During the second quarter, Albemarle continued to demonstrate strong operational execution. We recorded net sales of $1.4 billion and sequential increases in adjusted EBITDA and cash from operations, thanks in part to successful project delivery, productivity, restructuring initiatives, and working capital improvements. We continued to capture volumetric growth driven by our energy storage segment which was up 37% year-over-year, highlighting successful project ramps and spodumene sales in that segment. For example, during the quarter we achieved first commercial sales from Meishan ahead of our original schedule by approximately six months. During the second quarter, we also delivered more than $150 million in restructuring and productivity improvements consistent with our efforts to align our operations and cost structure with the current market environment. We are on track to exceed our full-year targets on this front by 50%. Looking to the rest of this year, our operational discipline allows us to maintain our full-year 2024 outlook considerations. Notably, we expect our $15 per kilogram lithium price scenario to apply even if lower July market pricing persists. This is due to higher volumes, cost reductions, productivity progress, and contract performance. We have made great progress in strengthening our competitive position and enhancing our financial flexibility. However, industry headwinds that began last year have persisted longer than the sector anticipated, making it clear that we must proactively take additional steps. Building on the actions we announced this past January, we announced yesterday that we are taking a comprehensive review of our cost and operating structure with the goal of maintaining Albemarle’s competitive position and driving long-term value. As part of the initial review, we announced the difficult but necessary decision to immediately adjust our operating and capital spending plans at our Kemerton site in Australia. These actions showcase our deeper focus on cost and operating discipline. There's no question that the global energy transition is underway; however, the pace of the industry's changes is dynamic, and we must remain agile as well. Later on the call, I will provide more detail on the cost and asset actions that we continue to take in this environment to maintain our competitiveness. I will also highlight the strategic advantages that remain proof points of Albemarle’s competitive and operational strengths. I'll now hand it over to Neal to talk about our financial results during the quarter.

Thanks Kent and good morning everyone. Beginning on Slide 5, let's move to our second quarter performance. In Q2 2024, we recorded net sales of $1.4 billion, compared to $2.4 billion in the prior year quarter, a decline of 40% driven principally by lower pricing. During the quarter, we recorded a loss attributable to Albemarle of $188 million and a diluted loss per share of $1.96. This result included an after-tax charge of $215 million, primarily related to capital project asset write-offs for Kemerton 4. Adjusted diluted EPS was $0.4 per share. Moving to Slide 6, our second quarter adjusted EBITDA of $386 million was down substantially compared to the year-ago period, as favorable volume growth was more than offset by lower prices and reduced equity earnings due to soft fundamentals in the lithium value chain. Compared to the first quarter, second quarter adjusted EBITDA rose 33%, driven by higher sales volumes across all businesses and higher income from increased Talison JV sales volumes. As a reminder, on last quarter's earnings call, we said that we expected an approximately $100 million sequential lift to our EBITDA from higher-than-normal off-take by a partner at the Talison JV, and that's what we saw in the quarter.

Thanks, Neal. Turning to Slide 10 for more details about the actions we announced yesterday to streamline our operations, build on the cost-out and productive actions we already have underway, and maintain Albemarle's competitive position across the cycle. Now on Slide 11, I'll first cover the fundamentals in our market. On the demand side, EV registrations are up more than 20% year-to-date through June, led by strong growth in China. However, the pace of growth in Europe and the U.S. has moderated substantially versus the industry's expectations. Across the value chain, we are seeing meaningful mix shifts. First, stronger growth in plug-in hybrid sales, which has translated to smaller batteries with less lithium per vehicle, and second, we see a continuation in the trend towards more carbonate-based batteries. Both of these developments are still positive for overall long-term lithium demand, however, they highlight the shifting nature of this value chain as it develops and matures. These demand changes are occurring at the same time as we see dynamic conditions on the supply side. We have yet to see significant changes at the mine level as existing and new supplies continue to come to market. And on the conversion side, there is still oversupply predominantly in China. At current Chinese spot pricing, we believe and are hearing from the market that many non-integrated producers are unprofitable, with some operating at reduced rates or idling production. We are hearing that even producers who are integrated into cathodes or batteries are under pressure. Moreover, current pricing is well below the incentive pricing required for Western greenfield lithium projects. At the same time, geopolitical developments are also adding uncertainties to our business, including escalating trade tensions and ongoing armed conflicts. Challenging Western supply chain dynamics are also at play. Notably, the IRA's 30D consumer tax credit has yet to benefit upstream producers like Albemarle. Specific to our position, as written, the Final U.S. Department of Energy Foreign Entity of Concern or FEOC rule will impact the eligibility of our Australian product, and we suspect that others could be impacted as well. While current dynamics add challenging uncertainties, there is no question that the energy transition remains well underway, and the long-term growth potential of our end markets is strong, as you can see on Slide 12. The global EV supply chain is on track to achieve the critical $100 per kilowatt-hour tipping point where EVs are at cost parity with internal combustion engine vehicles. The Chinese industry has likely surpassed that target, with the rest of the world not far behind. Taking all these changes into consideration, we continue to anticipate 2.5 times lithium demand growth from 2024 to 2030. Additionally, we see battery size growing over time, driven by technology developments and EV adoption. These factors all translate to significantly higher long-term global lithium needs. Turning to Slide 13, in January, we announced a series of proactive actions to preserve growth, reduce cost, and optimize cash flow. Our teams have successfully executed on many of those actions, including ramping in-flight projects at Xinyu, Meishan, and the Salar on or ahead of schedule, delivering cost-out and productivity actions, and we are now tracking to deliver 50% ahead of our initial targets, reducing 2024 estimated CAPEX by between $300 million and $400 million year-over-year, and enhancing our financial flexibility, including improving cash generation and conversion.

Turning to Slide 17, with all these near-term factors shifting and requiring us to take action, I think it's important to remember that Albemarle continues to have significant competitive strengths. And so I will end with a review of our framework and the core advantages we continue to prioritize as drivers of our long-term value creation. Our capital spending profile is another element of our comprehensive review and we'll have more to say about our near-term spending plan on future calls.

Thank you, and thank you all for joining us today. We continue to adapt and move Albemarle forward to better position ourselves in the current market environment, enhance our company's profitable organic growth trajectory, and create long-term value for shareholders. I remain confident in the long-term secular growth opportunities in our end markets and that we are taking the right steps to position Albemarle for value creation. Thank you.

Thanks and good morning everyone. This is Ryan on for Aleksey. My first question would just be kind of around your EBITDA outlook for the year, right. So I understand that you are kind of maintaining the base case or the low case in the $15 per kilo scenario, even though prices currently are, let's say, $11 to $12 per kilogram. Is there the potential that EBITDA could improve if prices were to recover to that $15 per kilogram scenario here in the back half? I mean, you guys talked a lot about improved costs, so just wondering what you think about that?

So, let's say you characterize what you've said. Even as we've moved from $15 to, say, $12 to $15. And then we commented that even at July prices, those hold for the rest of the year, we'll make that forecast. So if there's a chance it could be higher. If prices move up, there are a number of reasons we're able to hold that forecast. This is around the volumes that we're selling, contract terms, things like that. So it could move up if prices are stronger. It's not collared, so to speak. So if things work in our direction, it could be a number of different things. It could be higher than that. But that's the best visibility we have at the moment.

Okay, helpful. And then I know it's early but just kind of initial expectations on volume growth for maybe 2025 and 2026, just after these actions that have just been taken at Kemerton now?

Yes, it is early, but I believe our volume and the growth we projected at the start of the year should remain largely consistent. We are adjusting some of our conversion capacity, yet we still have the resources to support our goals. Therefore, it is not significantly different from what we communicated during the last call.

Yeah, thank you. Kemerton has some more meaningful freight costs than some of your Chinese conversion. But roughly what is the cash margin for Kemerton 2 and where would you put it on the cost curve, what quartile?

Yes. We've never disclosed specific costs associated with our assets. It's a combination of factors. So when you mention 2, point 3 really relates to some of our investments in growth. Kemerton 1 and 2 provide us several advantages, including closer proximity to resources and geographic diversity. We have operations in Chile and Australia, and we also have a presence in China. Additionally, we hope to establish conversion in the U.S. again if prices improve. While I'm not able to disclose our marginal or cash costs for Kemerton, that's part of the rationale behind our decisions.

It seems like there's more than just a cost cut; it's a supply cut. But regarding the roughly $1 billion, go ahead, Kent.

No, I was just going to say that it is on conversion. It is a capacity cut on conversion. The resource is still available.

Right. Understood. The $1 billion charge in 3Q, can you put that into buckets and how much of it is cash?

Yes, hi Steve, good morning. This is Neal. So let me answer the second part of your question and maybe the two kind of go together. Roughly speaking, at this time, we've only had a very small group of people working on this. So we'll obviously refine this number quite a bit in the third quarter. But you should think about of that roughly $1 billion charge we announced today, somewhere at least 60% of that is noncash. Similarly, you can expect that kind of order represents what's already on our balance sheet that we're writing off. And then we'll give you a better assessment when we get to the third quarter in terms of how much of the rest of that is actually cash. But I'd say at least 60% is noncash.

Hi, good morning. Thanks for taking my question. Maybe just trying to square the comments last time, cash conversion expectations expected to be well below historical averages versus strength in the outlook here. You had the $400 million to $600 million in headwinds. Was there any improvement in some of those items, whether it's deferral of discrete tax items or other things, some of the working capital ramp for projects, I'm just trying to understand cash drag for the remainder of the year?

Yes, this is Neal again. Thank you for your question. As mentioned in our prepared remarks, we are now expecting a conversion rate of up to 50%, which is at the higher end of our historical range. I want to highlight two areas where we are performing better than anticipated. First, the dividend contributions from our equity companies have exceeded our expectations for the year. Additionally, we noted in our prepared remarks the increased off-take from Talison, which positively impacted dividends in the second quarter and supported our cash conversion. Secondly, we are placing significant emphasis on managing working capital, and we have various initiatives in place. We are already seeing positive outcomes from these efforts in the first half of the year and will continue to focus on this in the second half. As a result, working capital has provided a favorable boost to our cash flow through the release of cash.

Understood, very helpful. And then just generally on how we should think about 3Q sequentially for energy storage. Can you help us triangulate how much lower volumes will be sequentially based on some of this onetime benefit, where we should stand for pricing if we kind of hold the July averages here? And then is the remaining sensitivity in your numbers mostly around volume or is there something else?

Yes. So I can maybe take the second part of that. We are obviously, from a volume perspective, tracking towards the higher end of the 10% to 20% volume growth range given at the beginning of the year. And I think at this point for the visibility we have, we're probably going to keep tracking towards the high end of that range. So I wouldn't say our earnings corridor or our outlook considerations are really driven by volume per se. It's really around the pricing range that we've given you, that kind of $12 to $15 range today.

Yes, the first part of the year showed strong volume results and reached the upper end of our expectations. Neal indicated that we will see less year-on-year growth in the second half, but that's simply due to the robust performance in the first half, along with a mix of spodumene sales that has advanced some of that growth.

Thank you and good morning everyone. Last quarter, you had a slide on capital allocation priorities and it had a couple of things in it. I just would like to revisit. One was a commitment to investment-grade rating, the second was your ultimate long-term net debt to adjusted EBITDA target of less than 2.5 times, and then thirdly, the continuation to support and grow the dividend. How are you thinking about those three things as part of the comprehensive review?

Yes, I believe our perspective remains unchanged. As we move forward, I will emphasize that, but I expect it will remain consistent.

And as a follow-up, could you speak a little bit about the factoring and how that process works for you and how we'll see it, I guess, in the working capital results?

Yes. So Vincent, to your question, that's right. We put in place an AR factoring program. It's an initial program. We'll continue to evaluate that and add to it as we can. But essentially, that factoring program is currently untapped. We will use it when we need liquidity if and when we need liquidity. And so basically, at that point, that's when you'll see it, and we'll talk about it. But at this point, it's an untapped resource available to us.

Hey, good morning. This is Harris Fein on for Chris. So we walked through that the $15 per kilo scenario still holds at $12. I guess how much of that is because of higher Talison shipments and cost improvements and I guess, where would EBITDA be absent those items if we were just isolating the contract component and I am just trying to get a sense of what that looks like if prices go down to, let's say, $10 per kilo through the back half of the year?

Yes. So we've said at July pricing, it basically holds the same, right. So $12 to $15 on the slide, but we've said in the remarks that that July pricing it holds. If July pricing extends throughout the balance of the year, it still holds. So you can work out exactly what that number comes to. And there are a number of pieces that allow us to do that. So it's the volume mix, it is a little bit of additional volume from Talison, it's our contracts. It's a lot of things, it's the cost savings we are putting in place. So it's a number of things that go into making that statement true. So it's not one particular thing.

Yes, to add to that, I want to reiterate that the outlook considerations we provided were always based on the average pricing throughout the year. In our recent earnings releases, we've provided information about our sales in energy storage and the volumes we've sold, which allows you to see our average realized price. It has been over $15 for the first half of the year. You can take any lithium price you prefer for the second half of the year and calculate the average. That's why we say that if you take July pricing and apply it moving forward, it aligns with the range we've provided. Regarding Talison, the best response is to refer back to our previous statements. We indicated that in the second quarter, we expected a sequential increase of about $100 million related to the additional Talison off-take, and that is precisely what occurred.

Got it, that's helpful. And then for my second question, in Slide 12 you show that the global average EV is on track for cost parity with ICE in the next year or two. It would be nice to hear your take maybe on what you make of some of the recent challenges that Western OEMs are having in making a profitable EV and also the fallout from European tariffs on Chinese EVs, kind of how that is playing into your demand outlook?

The cost curve you see in Slide 12 is something the industry has been monitoring for quite a while. The $100 per kilowatt hour mark has been considered a benchmark or tipping point that many have been looking for. Currently, we are below that level in China. While low lithium prices contribute to this, the primary reason lies in advancements in technology and battery production. We believe this trend will continue, with the rest of the world eventually following China's lead, although it hasn't happened in the West yet. I prefer not to comment on the cost positions of OEMs, as there are numerous factors at play, including the relevance of batteries compared to the overall vehicle. However, I can say that battery technology is meeting the benchmarks we've sought for a long time, and it is expected to improve further.

Thank you and good morning. Kent, what do the Kemerton capacity curtailments mean for Wodgina production, if anything?

I don't believe it affects Wodgina production. As we mentioned, we're reducing conversion capacity, but we continue to operate both the Greenbushes and Wodgina resources. It isn't really linked to Kemerton.

Very good. And just on what's happening in China, how much LiFePo production do you think is shut down and has that number changed at all in the last couple of months here?

Good morning, David. This is Eric. I would say that over the past couple of months, there hasn't been a significant change. There has been a slight decrease, probably in the range of tens of thousands of tons or so, due to pricing and costs. Kent mentioned that there is considerable pressure on those who are not integrated and have to purchase either spodumene or LiFePo. Most of these companies are actually operating at a loss unless they are fully integrated within China. Additionally, this time of year usually sees an increase in brine production in Western China, which helps replace the reduction in LiFePo. Overall, we are observing an increase in lithium salt inventories, which is a concern. Coupled with the price pressures I mentioned earlier, we will need to see how the industry adapts. There is certainly a need for caution in the market given the current state of demand versus supply.

Hi, good morning. I was wondering Kent, appreciating that the review is ongoing, but I was wondering if you could talk a little bit more about your efforts on defining and lowering your sustaining capital. It seems like from the slide that you put forward on 16 that you're suggesting that sustaining capital is a little bit lower than it was previously and that there's a range here of minimum required capital that's sub-$1 billion. And I guess in an environment where current prices are sustained into 2025 do you envision corporate CAPEX below $1 billion next year? Is that a feasible number?

Yes. We are currently evaluating our situation carefully. While our growth has slowed, we are in the process of ramping up some assets and reassessing our view on sustaining capital. We plan to take a more aggressive approach compared to others, although it may involve some risks. This is an important aspect for us. Many of our assets are still in the early stages of ramp-up, which has led us to be conservative in our sustaining capital estimates. We are looking to refine our strategy and see this as a potential opportunity.

Thank you for that. I have a follow-up question. Considering you have significantly reduced your growth capital expenditures and are currently outperforming on the ramping assets this year, can anyone provide an estimate of the remaining growth potential within the program for 2025? Specifically regarding Salar and the various projects still underway, can we expect to see absolute volume growth continuing into 2025 based on these ramp-ups?

Yes, that's correct. I refer back to our earlier comments. Previously in this call and in the last quarter's call, we discussed the changes made in January. We have a couple of years of growth from our existing assets, and we will continue to ramp that up through 2025 and into 2026. However, without additional investment, we will start to reach our limits. Kemerton does not alter this situation. The resources are available, and the investments we've made there will continue to increase.

Good morning. Two questions. First can you just give a sense, not so much about the next round of restructuring, but how you think about the longer-term objective? I mean if, for example, prices were to just stay at the current range, where would you expect energy storage margins to go over four, five, six years, however long it took for you to right size or how much do you think you can bring down the cost structure, so that's the first one, just how you think about the longer-term objectives for the business if market conditions do not improve? And secondly, can you just give a bit of a spotlight comments on sort of the state of play for DLE projects in Latin America, what do you need to see either in terms of partnerships or government support for anything to move forward in current conditions?

Okay. So the first one on the restructuring. So our goal is to put the company within the cost structure and the supply chain that we can compete at the pricing that we see today, and if it stays that way long term. So that's the hypothetical question you're asking, but that's what we're planning for. We know a lot of players are operating below cash costs. We think they have to come up. We just don't know when. So we're structuring the company to operate and be competitive and profitable in that range. So what that margin looks like, I'm not going to hazard a guess on that, but we are going to put ourselves in a position to be profitable and able to compete where prices are today. Regarding DLE in South America, I want to focus on our perspective of DLE and our specific projects rather than the broader industry. We have two projects currently entering the pilot phase, which we've been preparing for quite a while. One project is centered around the brines at the Smackover formation in Magnolia, Arkansas, where we process bromine. We have a pilot currently starting up there. Additionally, we'll be conducting a similar pilot at the Salar de Atacama. We are approaching it in a few different methods. The essential aspect of DLE is the entire system, not just the extraction component. There is significant emphasis on the absorption or solvent extraction technology used to retrieve the lithium molecule, but the true challenge lies in ensuring the entire system works effectively and consistently every day. Many can perform this in a lab, but the real test is executing it reliably in the field, and that's why we are implementing scale pilots to validate our approach. In terms of government support, we are not primarily relying on government assistance; funding would certainly be beneficial, but we are progressing both projects independently. This technology is critical for the industry and for us so that we can utilize the lowest-cost resources in the Salar de Atacama and foster growth. We require DLE for that, but we are not depending on governments for funding or other assistance; we are moving ahead.

Yes, thank you and good morning. Kent, in your prepared remarks, I think you commented that you're seeing an ongoing trend for carbonate-based batteries. Can you discuss why that's the case and whether that trend is intensifying or not and does it have any bearing on your decision to idle Kemerton 2?

Okay, so I'll go at a high level. If it gets deeper, Eric will jump in. But carbonate is usually the preferred chemistry for LFP technology, and there's been a shift toward LFP. I would say that's the preferred technology in China. There's more of a shift of a little bit of a portfolio mix toward carbonate. Now the West is looking at carbonate or LFP as well. Therefore, our view from a year or two ago, we always expected a mix. It was a little more hydroxide heavy. Now it's probably carbonate heavy in that view. And that product mix, I mentioned product mix earlier when I was talking about Kemerton; that does play into that. Kemerton is hydroxide, and we can toll that same resource for carbonate if we need to, and that gives us more flexibility. So it was a consideration in our decisions around 2 and 3.

Thank you for that. And then as a follow-up, what would you need to see specifically to make a decision to restart Kemerton 2 and how quickly might you be able to do that and is there a meaningful cost to restart?

Yes. There is a cost involved in placing it in care and maintenance, and there would be an expense associated with bringing it back, but I don't believe it would be significant. It would be a normal procedure if we decided to reinstate it. There are several factors we need to consider. One reason for prioritizing Train 1 over Train 2 is to optimize that asset and ensure it operates effectively. We have faced challenges with workforce availability in Australia and found it difficult to ramp up both operations simultaneously. Therefore, we will concentrate on one, enhance its operations, and gain a better understanding of the technology and processes involved. We believe we can reactivate Train 2 more quickly and efficiently when conditions are favorable. Certain preparations must be completed before we can do that, such as getting the plant operational and comprehending the unique technology and process chemistry at Kemerton. Once we achieve that, we can proceed with Train 2. However, we will need an improvement in the market before we take action. Additionally, there will be a timeline for bringing it back online. It won't happen instantly, but we will prepare for it. The capital expenses won't be dramatic, but there will be costs associated with restarting it, and we will need to bring staff back as part of that process.

Thanks so much guys. As you're working through enforcing these contracts, can you talk about some of the dynamics with the customers and any sort of compromises that you might be making to adjustments? Historically, you've kind of enforced some pricing and you reallocated volumes. Just want to get a sense of how those dynamics are playing out?

Yes. Good morning Colin, it's Eric. As you point out, it's obvious with where market pricing is going. It is a discussion certainly around helping our customers remain competitive through this period of time, while at the same time, respecting the contracts we have and the thresholds that we have there in order to continue to invest on their behalf. I would tell you that all of these contracts are performing to date and it's our expectation that we'll continue to do so. We'll keep working with our customers. There are things we can do in terms of sourcing. Some of these contracts have a little bit of flexibility, and we can work around spodumene supply versus salt supply. We can look at sourcing points that are different that help them with their supply chains while at the same time, respecting the core fundamentals of our contracts. So that's basically the nature of the discussions to date. This remains an area of focus for our growth. When we discuss advanced lithium-based materials, we are looking at prelithiation materials that will support the adoption of silicon anodes or silicon-doped anodes for higher-capacity batteries, which can lead to longer battery life or range. Furthermore, the next step is moving towards a lithium metal anode, whether that involves solid-state or liquid electrolytes with lithium anodes. These are growth areas that we expect to see faster adoption in technologies outside of electric vehicles, potentially starting with smaller format batteries that carry less risk for the customer base. At the same time, progressive vehicle manufacturers are investing significantly in these technologies. This is part of the overall partnership we maintain with our customers. It’s essential to uphold our contract relationships and provide support during low-price periods, as these relationships extend beyond mere supply to include technology collaborations.

Hi, thanks for the time today and for taking my questions. Maybe for Neal. I just wanted to understand, I think, the remarks with the Kemerton move, it saves $200 million to $300 million over the next 18 months or so. Can you talk about that in the context of where you expect next year's CAPEX to be? And more just is $1 billion of sustaining CAPEX, is that a reasonable target for what you could get to next year or still have to take sort of a multiyear progression?

I will address this similarly to Kent. As we look at CAPEX for 2025 and 2026, our decision regarding Kemerton will definitely contribute to reducing our CAPEX in those future years. We have consistently emphasized our commitment to achieving this in the current environment. As Kent noted earlier, we are collaborating with our teams on this matter. We recognize the current environment and the necessity of scrutinizing our CAPEX spending, seeking ways to reduce it and do so swiftly while avoiding unnecessary risks. We are actively working on this matter now and expect to provide more updates in the coming quarters.

I appreciate that. For my follow-up, moving forward with CGP 3 ramping up at Greenbushes and increasing volumes, considering that Kemerton has reduced capacity, will the commercial strategy primarily depend on tolling, or do you have the option to sell spodumene concentrate in the market? Will you be able to fulfill all your customer contracts solely through tolling?

It's not solely about tolling. We currently have a network of conversion assets in operation. Meishan is up and running and increasing production as we speak, with initial sales from Meishan recorded this quarter. As mentioned, we are ahead of schedule with several other facilities in China that we own and operate for conversion. Kemerton is part of our Hard Rock conversion assets, and it will be incorporated into a mix. While we will use some tolling to enhance our conversion capabilities, we possess substantial conversion assets, with Kemerton 3 and 4 being just a part of this. We will have one running and two more to follow. Overall, we have a considerable portfolio of conversion assets, and we also shouldn't overlook the carbonate sourced from Chile. Overall, this represents a solid portfolio of conversion assets. I would characterize this as a minor adjustment rather than a significant overhaul in our network with the changes to Kemerton.

Thanks, and who would have thought that the business would be the good performing area in the portfolio. I'll ask a question about the specialties business. Is some of the weakness in specialties due to temporary channel destocking, or have your channels already destocked like many others, such that the weakness you're seeing is actually reflective of the end market weakness?

Yes, John, this is Netha. We are seeing some end market weakness. And rather than weakness, maybe not as quick as a recovery as we expected, particularly in electronics. We did have volume growth of 9%, but price declined. If you look at the spot price, which is our only public spot price we have in the market in Q1, the Chinese bromine spot price was $3.11 per metric ton and in Q2 was $2.86 per metric ton, and that explains the pricing. But we are seeing green shoots and we are seeing that electronics recovery come, continuing strength in oil and gas, pharma and agriculture, and we expect to see that growth continue, maybe a little slower than what we thought, but throughout the rest of the year and sequential growth in our financials as a result of that.

Okay. Thank you, and thank you all for joining us today. We continue to adapt and move Albemarle forward to better position ourselves in the current market environment, enhance our company's profitable organic growth trajectory, and create long-term value for shareholders. I remain confident in the long-term secular growth opportunities in our end markets and that we are taking the right steps to position Albemarle for value creation. Thank you.