Livent’s revenue drops in Q1 on output disruption, higher costs

North American lithium producer Livent Corp's revenue fell 4% year on year to $98.3 million in the first quarter of 2019 from $103 million in the same quarter of 2018.

Adjusted earnings before interest, taxes, depreciation and amortization (Ebitda) was also down, falling by 41% to $27.6 million in the first quarter from $47 million in the same period last year.

Disruptions arising from heavy rainfall in late January at Livent’s operations in northern Argentina that reduced lithium carbonate sales, higher production costs as well as weak demand for high-performance lithium hydroxide were the main reasons behind these results, Livent said.

Livent’s operations in northern Argentina have returned to normal but the company lost approximately 1,000 tonnes of lithium carbonate due to the heavy rainfall.

The company said the production disruptions caused it to incur higher costs in the first quarter and expects this to continue in the second quarter mainly because it had to buy and process more lithium carbonate from a third party to supply lithium hydroxide to its customers.

Higher production costs in the first two quarters of 2019 are set to weigh on the average realized price for lithium carbonate across 2019. Livent said its average realized price will be around $4 per kg lower than prices achieved in 2018.

Livent did not specify at what price level it will sell its lithium carbonate compounds.

Fastmarkets’ Chinese domestic spot battery-grade lithium carbonate price (min 99.5% Li2CO3) has fallen by 46.18% year on year to 70,000-78,000 yuan ($10,270-11,444) per tonne on Thursday May 9, from 135,000-140,000 yuan per tonne on May 10, 2018.

The company also expects lower volumes and average realized prices for lithium hydroxide in 2019 due to a delay in orders of high-performance lithium hydroxide by a small number of customers.

“We are seeing weaker near-term demand for our high-performance lithium hydroxide, as several major customers have informed us about recent decisions to delay their own commercial launches of high-nickel cathode chemistries,” Livent president and chief executive officer Paul Graves said.

“This will result in lower delivered volumes of lithium hydroxide to these customers in 2019 than previously indicated and lower overall sales volumes for the year. In addition, it will result in Livent selling more hydroxide in China for use in cathode chemistries where performance requirements are not as high,” Paul added.

Selling lithium hydroxide in China under short-term arrangements could push down average prices achieved by $2 per kg in 2019 compared with 2018 due to softer prices in China.

Although the company did not specify their lithium hydroxide price level for the Chinese market, Fastmarkets’ battery-grade lithium hydroxide monohydrate (min 56.5% LiOH.H2O) spot price has fallen by 41.2% over the year to 85,000-90,000 yuan per tonne on May 9, from 148,000,000-150,000 yuan per tonne on May 10, 2018.

2019 guidance and production
Disruptions in production, higher production costs as well as lower prices achieved this year compared with the prior year will adversely affect Livent’s 2019 full-year results, the company said.

Livent anticipates flat revenue growth year on year at $105-115 million in the second quarter and an adjusted Ebitda of $26-30 million.

The company’s full-year revenue guidance was revised down to $435-$475 million from $495-525 million previously, and adjusted Ebita at $125-$145 compared with $190-200 million before.

On the production side, Livent has reduced its full-year guidance for production and sales of lithium hydroxide by 2,000 tonnes due to lower demand.

The company had expected production and sales of lithium hydroxide of 20,500-21,500 tonnes, as Fastmarkets reported previously.

Livent also slightly lowered its lithium carbonate production guidance to 17,000-18,000 tonne in 2019, from 17,500-18,500 tonnes previously, and hopes to sell 3,000 tonnes of lithium carbonate to existing customers.

The company plans to buy an additional 3,000 tonnes of lithium carbonate this year from third parties to meet customer demand.