FMC Corporation (FMC Quick QuoteFMC - Free Report) has decided to triple its lithium hydroxide production capacity by adding 20,000 metric tons per year. This comes after the company’s Lithium segment’s outstanding performance in the first quarter of 2016. 

 

The company will execute this expansion in three phases over the next few years. By mid 2017, the first phase should be commissioned and on line. Planning for phase two is underway and with the completion of phase three, estimated to be in 2019, the total lithium production by the company will stand at 30,000 tons per year. The three phased approach to the expansion will give FMC time to sign long-term sales contracts before the execution of the next phase. The company has also made provisions in its schedule to adjust timing for meeting the market demand. 

 

FMC Corp.’s decision to increase production capacity is based on the growing demand for electric vehicles. In turn, demand for the company’s battery grade lithium hydroxide has also increased as the free-flowing granular is well-suited for the production of cathode materials which are used to manufacture lithium ion batteries. 

 

FMC Corp. performed well in the first quarter of 2016 with its adjusted earnings of 58 cents a share beating the Zacks Consensus Estimate of 52 cents. Earnings were driven by double-digit growth in sales, which came in at $798.8 million, even though the figure missed the Zacks Consensus Estimate. This performance prompted the company to increase its earnings guidance for 2016, expecting the same to be in the range of $2.55−$2.85 per share, up from the previously stated band of $2.50−$2.80. 

 

The Lithium segment was the best performing segment in terms of growth, outperforming the previous guidance. The segment’s revenues rose 8% to $60.3 million in the quarter while earnings grew by a whopping 170.9% from the year ago period to $14.9 million. An increase in average selling price combined with cost-reduction strategies helped realize these results. 

 

The company has raised the segment’s earnings outlook for 2016 by $10 million to the range of $43−$53 million. This represents more than 100% growth from earnings recorded in 2015. 

 

Shares of FMC Corp. rose around 3.5% in the trading session on Monday, closing the day at $47.44.

 

FMC Corp. currently has a Zacks Rank #3 (Hold). 

 

Some better-ranked companies in the chemical space include Akzo Nobel N.V. (AKZOY Quick QuoteAKZOY - Free Report) , BASF SE (BASFY Quick QuoteBASFY - Free Report) and Innophos Holdings Inc , all sporting a Zacks Rank #1 (Strong Buy). 

 

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