Albemarle vs. Livent: Whose Lithium Business Results Were Best in Q2?

Major lithium producers Albemarle (ALB 1.65%) and Livent (LTHM) reported their second-quarter 2023 results this past week. So investors can now compare their results in their lithium businesses.

Lithium stocks are garnering much investor attention because demand for lithium has been strong and is expected to remain so over the long term, as the electric vehicle (EV) revolution progresses. The material is needed to make the lithium-ion batteries for EVs.

Before we dig in, keep in mind these caveats: Long-term investors should not place too much weight on a single quarter's performance, and Albemarle has businesses other than lithium, so its overall results will also be affected by their performances. Nonetheless, the data in this article should help you make more informed investing decisions in the lithium space.

Size of lithium business relative to overall business 

This category is for informational purposes only. It doesn't lend itself to choosing a winner, so it's not included in the scoring.

This article uses Albemarle's energy storage segment's numbers for its "lithium business." This segment sells only lithium and includes all lithium sales for energy storage-related end uses, which include lithium-ion batteries for EVs and stationary energy storage products. The company's smaller specialties segment includes some sales of the forms of lithium that have other end uses, but we can't quantify these sales. 

Data sources: Company earnings reports. EBITDA = earnings before interest, taxes, depreciation, and amortization.

Winner: N/A

The takeaway here is that investors looking for a lithium pure play might want to favor Livent. That said, Albemarle's lithium business accounts for such a large percentage of its overall revenue and an even larger chunk of its profits, that the company is not far from a lithium pure play. 

Lithium business revenue growth

Data sources: Company earnings reports.

Winner: Albemarle

Albemarle, based in North Carolina, decisively beat its smaller Philadelphia-based rival in this category. 

A big factor here is lithium production capacity. Livent has not added any notable capacity for some time, while Albemarle has been significantly ramping up its capacity. So, Livent has been benefiting when its realized price for lithium rises, while Albemarle has been benefiting from this dynamic along with having higher volumes to sell. 

This situation is poised to improve for Livent. Next year, management expects to have about a 20% higher sales volume relative to this year. And volumes should continue to increase. The catalysts are the company's Nemaska joint venture in Canada and its pending merger with Australia-based Allkem, which has a considerable growth pipeline.

Lithium business profit growth (using adjusted EBITDA)

Albemarle uses adjusted EBITDA to gauge the profitability of each of its three business segments. So, we're going to use this metric as our profit comparison metric.

Data sources: Company earnings reports. 

Winner: Albemarle 

Along with seeing its lithium revenue grow faster, Albemarle's profit from the critical EV battery material is also growing more rapidly. 

There's a factor that makes this comparison -- and the next one -- not quite apples-for-apples. Livent's adjusted lithium business EBITDA result is the same as its overall EBITDA metric because the company is a pure play. Meanwhile, Albemarle's overall adjusted EBITDA includes a negative unallocated corporate adjusted EBITDA. This number is relatively small (negative $2.8 million), so even if we allocated a proportional amount of it to the company's lithium business' adjusted EBITDA, it would make very little difference in this comparison or the next one.

Yes, that explanation went into the weeds a bit -- but it's worth mentioning. In this case, it's not material. But it could be material if Albemarle's unallocated corporate EBITDA were larger, as is sometimes the case.

Lithium business profit margin (using adjusted EBITDA)

An adjusted EBITDA profit margin is calculated by dividing that metric by revenue. 

Data sources: Company earnings reports. 

Winner: Livent

Livent edges out Albemarle here, but both companies' lithium businesses are extremely profitable. 

And the winner is... Albemarle

Albemarle takes the gold medal, as it won two of the scoring metric comparisons, versus Livent's one win. But keep in mind the caveats mentioned at the top of the article. Moreover, when choosing between two or more stocks in the same space, there are other factors to consider, including financial liquidity, dividend policy, and stock valuation. 

As for dividends, Albemarle pays a modest one, currently yielding about 0.8%, while Livent doesn't pay one.