Today, leading lithium producer Albemarle (NYSE:ALB) announced that it would undertake a series of cost-cutting initiatives. Among the measures that the lithium miner intends to implement are deferring investments on a number of projects and cutting its capital spending.
Maybe most noteworthy, however, is that the company intends to reduce the size of its workforce through layoffs. Now, ALB stock is falling slightly, down roughly 2% in early trading this morning.
ALB Stock: The Albemarle Layoffs and Lower Capital Spending
Albemarle expects to spend between $1.6 billion and $1.8 billion on capital projects in 2024. That’s well below the roughly $2.1 billion that the company devoted to such initiatives last year. What’s more, the firm plans to prioritize projects that are “significantly progressed, near completion and in startup.”
Additionally, Albemarle expects to realize $50 million in cost savings this year as part of an effort to reduce costs by “approximately $95 million annually.” As part of this, the firm will be cutting the amount it spends on sales, general and administrative (SG&A) expenses. Albemarle will also reduce the size of its workforce and curtail its use of “contracted services.”
The lithium producer noted that it would “record a charge” in the first quarter of 2024 related to severance and other benefit costs, “exit and disposal activities, and asset write-downs. ”
Albemarle’s Goals and Outlook
Albemarle believes that these actions will help boost its cash flow by more than $750 million in the near term. The company says that the moves will also “generate long-term financial flexibility.”
“The long-term fundamentals for our business are strong and we remain committed to operating in a safe and sustainable manner,” said CEO Kent Masters.
Indeed, although the lithium market is currently in oversupply mode, multiple analysts expect lithium prices to jump over the longer term. This may happen as demand — sparked by the electric vehicle (EV) revolution — continues to climb.
As of this writing, ALB stock is down 15% for the past one month and down nearly 50% for the past six months.
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
