Why is this ASX lithium share leaping 8% despite an earnings slump?

This lithium miner has performed ahead of expectations and is cutting its production growth plans.

| More on:
a man holds his arms out and shrugs his shoulders as if indicating he doesn't know the answer to a question he's been asked.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Arcadium Lithium (ASX: LTM) shares are outperforming the market by some distance on Wednesday.

At the time of writing, the ASX lithium share is up 8% to $4.34.

Why is this ASX lithium share surging?

Investors have been buying the lithium miner's shares today in response to its second quarter update.

Here's a summary of its performance during the three months ended 30 June:

  • Revenue down 55% to US$255 million
  • Adjusted EBITDA down 69.9% to US$99.1 million
  • Adjusted earnings per share down 74% to 5 US cents

While the above may look terrible on paper, Arcadium Lithium's revenue was actually ahead of expectations and its earnings matched consensus estimates. This explains why the ASX lithium share is outperforming today.

What happened during the quarter?

During the three months, Arcadium Lithium delivered a slight quarter on quarter increase in sales volumes. This reflects higher lithium carbonate and hydroxide sales, partially offset by lower spodumene sales due to reduced production at Mt. Cattlin.

However, with the company averaging a realised price of US$17,200 per tonne for combined lithium hydroxide and carbonate, the ASX lithium share's revenue more than halved compared to the prior corresponding period.

Management advised that the lower realised price was driven by a combination of lower market prices for lithium chemicals, the lag impact of price indices on a portion of the company's carbonate and hydroxide volumes, and changes in both product and customer mix.

Supply growth update

Also potentially giving the ASX lithium share a boost today is news that it is hitting pause on some of its lithium production expansion plans. This is in response to an oversupply in the industry.

Arcadium Lithium's CEO, Paul Graves, commented:

Despite where lithium market prices are today, we still see a strong long-term growth trajectory for lithium demand and expect a return to healthier market fundamentals over time. However, the market is clearly indicating that the industry does not need to add supply at the same pace as previously expected.

We have therefore decided to defer investment in two of our four current expansion projects.  While we remain fully committed to developing our highly attractive portfolio of expansion opportunities, each of which is expected to be amongst the lowest cost lithium operations globally when completed, we will seek to do so on a timeline that is supported by both the market and our customers.

Outlook

Despite the above, Arcadium Lithium is still forecasting strong sales volume growth this year and next.

It is forecasting a 25% increase in combined lithium hydroxide and lithium carbonate sales volumes for FY 2024. It then expects a further 25% increase in 2025 compared to 2024, both driven by already-completed expansions.

Should you invest $1,000 in Arcadium Lithium Plc right now?

Before you buy Arcadium Lithium Plc shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Arcadium Lithium Plc wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 6 March 2025

Motley Fool contributor James Mickleboro owns Arcadium Lithium shares. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Materials Shares

A lion dressed in a business suit roars as two sheep sit awkwardly at the boardroom table.
Materials Shares

Liontown share price roars higher on half year results

This lithium miner has handed in its report card on Friday.

Read more »

A man wearing a shirt, tie and hard hat sits in an office and marks dates in his diary.
Materials Shares

The Rio Tinto share price 'remains undervalued' and could rise 20%+

Goldman Sachs thinks this mining giant is being undervalued by the market.

Read more »

Ecstatic man giving a fist pump in an office hallway.
Materials Shares

Core Lithium shares jumps 7% on golden announcement

This lithium miner could be sitting atop a large gold system.

Read more »

a man holds his arms out and shrugs his shoulders as if indicating he doesn't know the answer to a question he's been asked.
Materials Shares

Why is this ASX 200 mining stock crashing 28% today?

Investors are rushing to the exits in large number. But why?

Read more »

A man checks his phone next to an electric vehicle charging station with his electric vehicle parked in the charging bay.
Materials Shares

Here's the lithium price forecast through to 2028

Will lithium prices be recovering any time soon? Let's find out.

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Materials Shares

Why is the BHP share price falling today?

Today's decline could actually be good news for the miner's shareholders.

Read more »

Businessman working and using Digital Tablet new business project finance investment at coffee cafe.
Materials Shares

Pilbara Minerals shares crashed 17% in February: Is this a buying opportunity?

Do analysts think that now is a good time to buy this lithium giant's shares? Let's find out.

Read more »

Business people discussing project on digital tablet.
Materials Shares

After a 5% price drop on its 2024 results, should I buy shares in this ASX 200 heavyweight?

Is now a good time to put money into this giant's shares? Let's find out.

Read more »