Arcadium Lithium Q2 2024 Earnings Call Highlights

Arcadium Lithium (ASX: LTM) shares are up more than 5% in early trade on Wednesday after reporting better-than-feared Q2 earnings and plans to lower capex spend by US$500 million over the next 24 months.

Q2 2024 Earnings Highlights

• Revenue down 55.3% to US$254.5m but ahead of $250.5m consensus

• Adjusted EBITDA down 69.9% to US$99.1m, in-line with $99m consensus

• EPS down 73.6% to 5 US cents, in-line with 5 US cents consensus

• Full-year revenue guidance between US$1.1-1.2bn, subject to lithium price changes

• Full-year lithium hydroxide and carbonate sales volume to rise 25% year-on-year

• 2025 lithium volumes to increase a further 25% year-on-year due to already-completed expansions

• Plans to reduce capex by approximately US$500m over the next 24 months

Earnings Call Highlights

Challenged lithium markets: "Lithium prices moved lower in the second quarter and have declined further third quarter to-date, testing new lows in this cycle." – CEO Paul Graves

Supply surprise: "Additional lithium supply has come into the market at a faster rate than many of us had expected." – CEO Paul Graves

Production growth: "We're now expecting a 25% increase in combined lithium hydroxide and carbonate sales volumes for full year 2024, with the volume growth coming predominantly in the second half of this year ... we expect 25% volume growth again in 2025 from these already completed expansions, given us two consecutive years of above-market volume growth." – CEO Paul Graves

Capex and cost savings: "We have therefore decided to slow down the pace of our own expansion plans by pausing investment in 2 of our 4 current expansion projects ... As a result of this decision to defer investment in two of our four current expansion projects as well as the process of identifying cost-saving opportunities in our remaining projects, we expect to reduce our capital spending by approximately $500 million over the next 24 months." – CEO Paul Graves

Analyst Q&A Highlights

What would encourage LTM to reaccelerate project development: "I think the single biggest factor, certainly for James Bay, for the Galaxy project is if there is a partner there that wants to come in and help us develop this by bringing certainty to the project while also putting in some capital today, that's probably the single biggest trigger that would help us reaccelerate that project again. But we also just have to be confident that the long-term fundamentals are going to be in a place that justify it." – CEO Paul Graves Placing Mt Cattlin into care and maintenance: "The question of care and maintenance, it's got to be acted in these market conditions, absolutely. And I can imagine we're asking those questions pretty intensively – internally about, is that the right strategy for Mt. Cattlin right now ... But if it looks clear that we're in a period of spodumene prices that are three digits and now four digits then I think our care and maintenance question becomes much more acute." – CEO Paul Graves

Supply continues to ramp up among major players – so what's going to give: So what needs to happen is this cycle needs to play out, and we need to get into the next cycle. There will be a natural tightening of supply and demand just from demand growth and the inability of the last big growth driver, lepidolite and African spodumene all the gas. So it will sort itself out. It just it's going to take a few quarters to get there." – CEO Paul Graves

This article was generated with the support of AI and reviewed by an editor.