Restructuring and Related Activities

6 Months Ended

Jun. 30, 2024

Restructuring and Related Activities [Abstract]

Restructuring and Capital Project Assets Write-off

Restructuring and Capital Project Assets Write-off:

In January 2024, the Company announced measures to unlock near-term cash flow and generate long-term financial flexibility by re-phasing organic growth investments and optimizing its cost structure. During the second quarter of 2024, the Company indefinitely suspended construction of the fourth train at its Kemerton conversion plant in Western Australia, as well as deferred spending and investments with respect to certain other capital projects. The Company wrote-off the book value of assets related to these capital projects, which are no longer part of the Company’s modified capital plan, as it determined that these assets will not provide future value or will require significant re-engineering if the related projects are restarted, as well as recorded losses for associated contract cancellation costs. This resulted in charges of $292.3 million and $309.5 million recorded in Operating (loss) profit for the three-month and six-month periods ended June 30, 2024, respectively, and losses of $2.6 million and $5.4 million recorded in Other income, net for the three-month and six-month periods ended June 30, 2024, respectively.

The Company evaluated the significance of the fourth train at its Kemerton conversion plant in relation to the overall asset group and deemed it to be insignificant. Despite the insignificance of the Kemerton conversion plant to the asset group, the Company elected to evaluate the recoverability of its property, plant and equipment within the corresponding asset group as of June 30, 2024 and concluded that the carrying amount of the associated asset group is recoverable as the undiscounted cash flows of the asset group significantly exceed its carrying value. Accordingly, no impairment loss was recognized during the second quarter of 2024.

In addition, as part of the Company’s continuing plan to optimize its cost structure, the Company recorded severance costs of $2.5 million and $18.9 million during the three-month and six-month periods ended June 30, 2024, respectively, for employees in Corporate and each of the businesses. These expenses were recorded in Selling, general and administrative expenses (“SG&A”) and have primarily been paid, with the remainder expected to be paid in 2024. During the three-month and six-month periods ended June 30, 2023, $7.4 million of severance costs in the Ketjen business were recorded in SG&A.

Subsequent Event

In July 2024, the Company announced a comprehensive review of its cost and operating structure to maintain a competitive position, further generate long-term financial flexibility and drive long-term value creation. As part of this review, the Company concluded to stop construction of the third train at its Kemerton conversion plant. The Company also announced that it will put the second train at the Kemerton conversion plant into care and maintenance. As a result, the Company expects

to record a charge in the third quarter of 2024 in the range of approximately $0.9 billion to $1.1 billion, of which approximately $725 million to $800 million consists of the expected write-off of the carrying value of the Kemerton Train 3 assets less any salvage value, with the remainder related to contract cancellation, severance, decommissioning, demolition and other associated restructuring costs for both Kemerton Trains 2 and 3. The Company’s estimated range of the charge takes into account initial estimates for these activities and the determination of salvage value of the fixed assets, among other variables. The restructuring actions associated with these charges are expected to be substantially complete in 2024. The first train of Kemerton will continue to operate and activity around it is currently focused on commercialization efforts.

As a result of the actions taken at Kemerton Train 3 and Train 2 in the third quarter of 2024, there is a reasonable possibility within the next 12 months the Company may reach a conclusion a valuation allowance will be needed.