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BASIC INDUSTRIES: Albemarle (ALB Baa3/BBB[N]/BBB): S&P Downgrade

BASIC INDUSTRIES
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Consensus implies the rating should hold here, but uncertainty is very high and mostly beyond Albemarle’s control.

  • S&P downgraded Albermarle one notch to BBB- overnight, with outlook still negative. It comes on the back of protracted weakness in lithium prices, which is expects to persist until 2028 due to oversupply.
  • It previously expected FFO/debt >20%; it now expects 12-20% for the next two years. A prolonged drop below 12% could trigger a downgrade. Consensus sees 18%/26% for the next two years. Dividends received for its non-controlled JV are a large portion of cash flow so represents quite an unknown. Management said they didn’t expect a dividend from the main JV (Talison) in 4Q.
  • Albemarle also needs to maintain liquidity sources-to-uses above 1.2x for the next 12 months. Capital spending reductions (as planned are needed to protect the rating here. The company has used equity financing extensively in recent years.
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Consensus implies the rating should hold here, but uncertainty is very high and mostly beyond Albemarle’s control.

  • S&P downgraded Albermarle one notch to BBB- overnight, with outlook still negative. It comes on the back of protracted weakness in lithium prices, which is expects to persist until 2028 due to oversupply.
  • It previously expected FFO/debt >20%; it now expects 12-20% for the next two years. A prolonged drop below 12% could trigger a downgrade. Consensus sees 18%/26% for the next two years. Dividends received for its non-controlled JV are a large portion of cash flow so represents quite an unknown. Management said they didn’t expect a dividend from the main JV (Talison) in 4Q.
  • Albemarle also needs to maintain liquidity sources-to-uses above 1.2x for the next 12 months. Capital spending reductions (as planned are needed to protect the rating here. The company has used equity financing extensively in recent years.