We don’t know much about the lithium space, but we know that if you want to understand it and get great analysis of the players involved, there is no better place than The Lithium Spot. So we asked them if they could share some thoughts with our readers about FMC Corporation’s plans to spin off its lithium business. It is worth noting that FMC has been discussing spinning off its lithium assets for years. Please see their thoughts below, and visit www.TheLithiumSpot.com for more information and analysis on lithium and lithium stocks.
FMC Corporation(NYSE:FMC), a $11 Billion chemical company, reiterated this past week that they plan on spinning off their Lithium business sometime in 2018. While only about 5-10% of their overall revenues, Lithium is one of the most exciting areas right now within investment circles and could easily capture double digit growth over the next 5-10 years. In fact, FMC acknowledged their own success within their Lithium business this past week increasing their full year guidance by 33% to between $340-$360 million dollars. The overall Lithium market is in a tight squeeze currently between available supply and demand (both topics are covered in depth on The Lithium Spot). Thus, prices for the mineral have continued to rise, reaching all time highs throughout the past year and a half. With new industry supply slow to come online, pricing should remain steady with an upward bias, a trend that will help boost FMC Lithium’s already juicy margins and justify their elevated valuation multiples.
What’s most exciting about this spin, which was announced to take place sometime in the “second half of 2018”, is that it would be one of the largest pure play Lithium business’s traded publicly worldwide. Albemarle(NYSE:ALB), which is currently one of the best ways to ride the lithium boom, is trading at 20x trailing EBITDA despite lithium representing less than half of overall company revenues. Similarly, FMC is trading at 18x trailing EBITDA. While these are elevated multiples, it shows the investor demand for lithium stocks. Once FMC lithium is spun off, it would not be encumbered by other business lines and would be free to trade at similarly elevated multiples (if not higher).
With electric vehicle and energy storage demand rapidly increasing (both important elements of Lithium Demand), we’ll be sure to keep our eyes on this one for our readers!
Don’t bet the farm, but devote a smaller to moderate amount on the #Lithium play. #Cobalt too.#Commodities
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