Ladies and gentlemen, thank you for standing by, and welcome to the Virtual Fireside Chest with David Begleiter at Deutsche Bank. At this time, all participants lines are in a listen only mode. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. David Begleiter, Managing Director of Chemicals And Agriculture at Deutsche Bank.
Sir, you may begin.
Thank you, and good morning. My name is David Begleiter of Deutsche Bank's U. S. Chemical team. I'd like to welcome you to a virtual fireside chat with the management team of Albemarle.
Joining us today from Albemarle is CEO, Luke Kissom CFO, Scott Tosher, Meredith Bandy, who recently joined Albemarle as President, Investor Relations And Sustainability and Sharon McGee, Vice President, Investor Relations And Corporate Development. This call will last 45 minutes. While the call to the public, there is no public Q And A session. However, if you'd like to ask some questions, please email them to me at David dot begletter@db.com. With that, I'll hand over to Luke and Scott for some open comments.
Hey, thanks, Dave, and thanks for hosting us this morning and really appreciate all the folks on the phone joining us. Before we begin the Q and A, let me say that our thoughts with all those around the globe impacted by the virus. Albemarle is managing the situation to protect our employees and the communities in which we operate. We've effectively implemented work from home protocols for non essential employees at virtually all of the Albemarle sites around the globe. To date, we have not experienced any material negative impacts on operations because of the virus.
All of our manufacturing units continue to operate as per our annual operating plan, but I'd caution everyone that a government act could change all that rapidly. Our focus is on controlling what is within our control. So we're monitoring our cash management daily. We're looking to accelerate our $100,000,000 cost reduction program. We're keeping in close contact with our customers and our vendors.
And we're making sure that our employees are safe, healthy, and that they have the tools that they need to perform their task in this environment. I know that there is a strategy remains intact. First of all, we're going to grow. We're going to invest in growth with a focus on cash generation and lithium through smart investments that leverage our advantaged resource position. We're going to maximize our earnings in cash from bromine and catalyst businesses through sustainable cost savings.
We're going to continue to assess our portfolio for opportunities to divest non core businesses and to acquire or build lithium conversion assets when the time is right. And finally, we're going to invest. We're going to take thoughtful and disciplined tropes to capital allocation while preserving financial flexibility. Now as we did when we saw the supply demand of lithium, we changed our overall investment strategy. We altered it based upon the conditions and we'll do that today.
We're looking at our investments from our capital projects around the globe to ensure that it still makes sense to move forward or if it makes sense to move forward on a different timeline, We want to maintain our financial flexibility and investment grade so that we have the opportunity in the future when the time is right to make strategic investments to accelerate our strategy. So we still feel great about our long term strategy We still feel like it's the wide strategy, but we know as we have in the past, we will alter and modify the execution of that strategy based on the conditions that we see in the
Hey, thank you, Luke. Maybe, Luke, maybe first thing, you mentioned your business is being impacted by coronavirus. How do they trend in the first 2 months of the quarter, how was the business impacted in China? And what are you seeing in March specifically more in the U. S.
Europe?
Yes. So if we look at January February, we saw the biggest impact on our business was logistic delays and the potential impact on deliveries to our customers and deliveries of raw materials to our facilities. We're managing that, but we're having to watch it closely. For instance, earlier this week or last week, I'm losing track of days, 2 big terminals at the port of Houston will shut down for a period of time. We're having to manage the logistics.
In lithium, the major operations hurdles we had in the first a couple of months where we were down some of our lithium plants at Chengdu and Xinyu either the front end or the back end of both were down longer than we had anticipated because of the coronavirus and because of the operating restrictions. But the date in lithium, we'd be experienced minimal order reductions from our customers. And we've been able to produce what we need to fill the orders that we expected for the first quarter. In bromine, we've seen a little slowdown weaker first quarter in China. Independent upon the continued outbreak, we could see that further on, but in the 1st couple of months of the year, what we saw again were logistics challenges.
We had the orders. We had it produced. Could we get the could we get it shipped by the end of the first quarter. So it's not a demand issue. It's not a production issue.
It was a logistical issue. In Catalyst, what we've seen is lower fuel demand because of the shelter in place and the lack of travel that we've seen related to the pandemic. So since our earnings call, we've seen incrementally lower FCC volumes. And we're now also seeing refineries start to push out some turnarounds that could impact FCC order timing and mix, but it'll they'll eventually have to turn around. It's just a matter of timing.
So overall, we still expect the first quarter to be down around 25% year over year in that range, somewhere like that. So not a not dramatically different than what we said on the call. And again, I'd say it's been more a logistics challenge then it has an order pattern or it has a production to date. And I think it's important to say right now today all of our manufacturing assets operating. Our non essential employees are work from home protocol, but our manufacturing sites are all still operating according to the annual operating plan and our major capital projects in Chile and Kimbertson have not yet been impacted as a construction people having to go home.
We are having issues relative to particularly in Kemerton, some of the equipment that we had placed on order. Just getting time in the shop as China ramps back up. But I think that'll take care over the course of the next few months.
And well, given some of the large scale shutdowns occurring in the U. S. And Europe, any sense your order books at least for April over the next maybe 3 to 4 weeks?
Yes. I mean, over the next 2 to 4 weeks, I mean, in lithium and bromine, it still looks good. The one kind of area that be a little weaker is in the specialty spot of lithium, the lithium alkyels and things like that, but that's a we haven't seen any thing in the battery space on energy storage, which would indicate over the next couple of months, we see any denition in our order books. I think because of you've all read about some of the OEM shutdowns in the automotive space. I think what we're watching is longer term, what impact will that have and where will that impact come from in catalysts, in refining catalysts, on HPC, particularly because of those turnarounds, we're concerned and watching the delay of some of those turnarounds in HPC.
And again, on FCC, we're seeing a lower volume, than we would have anticipated because of the lower fuel demand. For mouth drilling.
Very good. In today's slide deck, you mentioned on the terms of guidance that 2020 guidance will be updated situation unfold. So just to be clear, are you withdrawing guidance or is it being maintained for the time being?
I can't hear your question. I'm sorry, buddy.
I'm sorry, you state that 2020 guidance will be updated as a situation or full. So to be clear, are you withdrawing guidance or are they being maintained the time being?
Yeah. Right now, based upon the knowledge that we have today, our guidance is in place, but there's so much unfolding data So what we're saying is right now in the first quarter, we expect we're going to be down 25% in that range. And then we'll update you on the call, on our earnings call about what we're going to do for the full year. They're just it's rapidly evolving. Let me give you an example.
In they passed enacted the law in Jordan, which essentially gives the prime minister right to shut everything down. If they shut Jordan down and I can't export from the port of Akama, then I'm going to have to move things to Magnolia and change things around. I don't they hadn't done that. But that could happen. And if it does, we'll update you.
In Chile, there's a 5 am to our 10 pm to 5 am curfew. If they shut down La Negra, then we're going to move some things around. And I just don't know what's going to happen, David. So we're comfortable where we are for the first quarter and give us time. Let us get more of the information.
And when we do our first quarter earnings call, we'll look to update you on the best knowledge we have them about what the year looks like. But we just don't know.
Got it. And look just on Q1, the range did go from $20,000,000 to $25,000,000 to $25,000,000 to $25,000,000. It's about a $10,000,000 impact from the low to high. What segments is that being seen in that $10,000,000?
It's mainly catalysts and bromine. The bromine question is the logistics. It's not the orders and it's not the production. It's can we get it shipped? Can we get the vessels?
Can we get the containers? And we're working like crazy to try and get it done, but so is everybody else. And so it's just a matter of can we get it shipped? So it's not it's a it's not a 2020 issue. It's a 1st quarter issue.
Because I got told the 31st to get it all done and I'm not sure we will. And we're trying to get that caution. In Catalyst, it's a FCC issue. On the volume. Lithium still seems to be holding about where we thought it was going to be in fine chemistry services and PCS are about the same.
And I know you had given some first half guidance, which implied Q2 will be up roughly $50,000,000 versus Q1. I just mentioned, because before, a lot of uncertainty, but are you still looking at sequential growth Q1 to Q2? And is it inherently
Yes, David, you're I know you're and I understand you guys are searching for as much certainty and predictability as you can. We don't know right now. So if you just give us till we do the next earnings call. I consider to speculate all day, but we need to be able to have real data and a little more data points to be able to point to. So if you just give us until just bear with us until the earnings call, we will be as clear as we can.
Will do. You also mentioned today's slide deck about on your cost actions perhaps accelerating some of these cost savings. I believe you have $50,000,000 of savings targeted in 2020 from $100,000,000 program. How much more could you realize in 2020? Where are they coming from?
Well, they'll come from the acceleration of some of the projects that we have. So plan to do some in the third quarter. We're trying to pull them up to get them done in the second quarter. So it's an acceleration of the same buckets that Scott described on that first quarter earnings call. In addition to that, there are other projects that we're looking at.
Obviously, some of them will be short term, David. We get into a situation where we can't run a facility either because of demand because of our customer shutdown or because of demand ultimately. Then we've got furloughs. We've got sites that we could shut down our highest cost production as set. We have the ability to do that around the globe because of our geographic diversity.
We also are going to look at non essential employees and that we have a rotating schedule. So everything we're pulling out the 2008, 2009 playbook. We're looking at everything that we did then that was successful and what wasn't. We're looking at various economic scenarios across the portfolio and having a plan to implement with objective criteria when we pull that trigger. To be able to rip cost out as fast as possible so that we can maintain not only as much profitability as possible but so that we can, generate as much cash as we can even in a bad environment.
Look on these other cost levers you mentioned, non essential employees for Lowe's travel, etcetera, to negate the effects of this downturn, any you can give us as to how large this bucket could be?
Well, look, if we told you that was $100,000,000 that we're going to get in 2 years, I mean, there's obviously another 50 that we expect we can get by the end of 2021. So how much could we accelerate into 2020? In addition to that, obviously, we said there was 100, but there's more on the list. It would be deeper cuts, but you just if we said it's 100, you can rest assured we're working on more than that. So what I would say is there's more opportunity But again, give us some time and we'll be updating that number as appropriate as we look at guidance for the rest of the year as well.
Got it. And I was looking more as maybe more of a temporary cost I would come back in as soon as things
Yeah, I'm sorry. Well, it depends, 100% on demand. So if you look at, if FC demand really drop. We've got 2 FCC units. We could furlough the highest cost.
We've got 5 HPC units. They all make a different grade. We could, we could shutter one of those units. So those are the kind of costs that I'm talking if operations aren't in running, if you don't have sales, you don't really need a whole lot of R and D. Don't need a whole lot of quality if you're not running your site.
So there's, I think, in the event that we get into a recession, It's like 'eight and 'nine where demand dries up for an extended period of time, there's significant leverage that we pull. I remind you in 2008 2009, we shut down one of the brine fields in Magnolia, Arkansas. We'd never done it before, but that's the kind of significant levers that we would have to that we have to pull and we have the opportunity to do so. If that's what the demand called for. Right now, again, we aren't seeing that from a demand perspective in lithium or in bromine.
And we're not seeing it to the extent in catalyst, but I'm just I'm watching miles driven demand. And we're watching that closely so that we have plans in place to address that if that stays down for a significant period of time.
Very good. Maybe include bring Scott into the conversation. Scott, there's a lot of focus in this environment on balance sheet and liquidity. Can you discuss Albemarle's balance sheet flexibility and your liquidity status today?
Yes, happy to, David. So we've got, over $1,000,000,000, about $1,300,000,000 of liquidity available to us. We actually have a residual amount of the delayed term, delayed draw term loan that we took out for the Wodgina transaction. Some of that's left over $1,000,000,000 on our revolver. So, so we're in pretty we feel like we're in pretty good shape Our next bond maturity isn't until the end of 2021.
And so far, the investment grade market has in moving ahead. Okay. So at this point in time, we're obviously watching it carefully and I'm staying very close to our banks and treasury guys are talking me daily in terms of what's coming at us and making sure we've got the cash and money and liquidity in the right spots around the world. So, we'll keep on top of it and make sure we do the right things. But this is a time when investment grade, our investment grade status is really paying off.
So, a key reason why we wanted to to maintain that investment grade rating is showing up now.
Very good. And Luke and Scott switching to CapEx and cash flow, are you thinking about on CapEx? Are you thinking about slowing down any of your expand in 2020 given the recent events? And is there a CapEx you can actually cut this year without long term implications to your growth rate?
Yes. So the majority of CapEx in 2020, as you know, is associated with the large projects that we have in La Negra and Kemerton. From a La Negra standpoint, we're bringing that to mechanical completion later in the year early next year. So it would be hard to stop it. You wouldn't get the significant amount of savings.
You could stop it and it may be from a Chilean government standpoint that they prohibit travel in such an extent that we have to shut it down. And if we do, we will, and we can. But, we need that volume for 2021, the second half of twenty twenty one so we are we're working to be able to complete that project because it's so close to the end. All the major materials have now been ordered equipment stairs, just a matter of finishing the construction on some of the units. So we're working on that.
I don't think it makes as much sense, but if we're forced shut it down, we could do it. On Kemerton, a good deal of that commitment, equipment, excuse me, we've already had to buy So it's on the way. We still see the need for the volume as we bring that online in 2021. However, we continue to assess options to be able to slow that down if necessary in Western Australia. That is the one that in Australia is about 50% of our CapEx for 2020.
That's where the significant number is. Again, we've ordered a good deal of that equipment and can't really slow that down because we've already entered into the contracts, but there is the ability to limit what we could spend on that Kemerton project in 2020. That could push it out the mechanical completion further. In addition, we're looking at all the other spend that we have from a capital standpoint on sustaining capital small projects and things such as that and look into, rank each one of those projects. If it's related to safety, it's even as related to maintenance of an asset that we're going to need to operate consistently.
We're certainly not going to cut that. But other capital any other capital any discretionary capital that we approved is back under review again.
Luca, Australia, are you seeing restrictions on travel and work activity that could impact the pace of Hamilton?
Not well, we were all non essential employees are working from working from home now. The construction tilt still continues. We've been able to do that safely but that could change. So we are monitoring it. We're following the World Health Organization and the CDC protocols and the local protocols in Australia.
We believe we're still going to be able to operate, but you could see that. I'm more concerned about travel restrictions in Chile quite frankly than I'm in Australia. The restrictions that we saw in Australia is going to be, can we get the equipment is on order from various parts of the world to the site. In the timeframe that we expected, in order to continue the construction. Now what make sure that we had the flexibility in that schedule to move, the construction activities around so that we can be productive and efficient in that contract, in that in that construction, in spite of the fact that equipment may be delayed here and we may have to adjust what our schedule is.
So I think they're doing a great job. It's just a matter of what equipment can get there when.
Very good. And Scott, if your EBITDA is down, let's say, if you can $100,000,000 from the original guidance. Is free cash flow down by the exact by the same amount or are there some offsets here?
No, there'll be a there'll be some offsets from working capital. So generally when your revenue is down, you're going to liquidate some of your receivables from the balance sheet. So it won't be a one for one from a cash flow perspective. But obviously, if it will be down. There's no way that you can offset the full impact of EBITDA dropping.
And could you walk from EBITDA to free cash flow this year from a high level perspective?
Yes, the big I mean, obviously the EBITDA, we'll see how that all plays out, but then you've got CapEx it's in the $1,000,000,000 to $1,100,000,000 range assuming we don't do any other changes. That was our original guidance. Clearly could be lower than that given the changes that Luke just talked about Our current view on working capital is that we'll end up being above flat in working capital. So really no hurt or no gains from working capital. Again, we'll see as the year progresses.
And then we generally pay interest, cash interest in the range of this year will be up in the $80,000,000 to $90,000,000 range and cash taxes end up being normally in the high high teen on a percent of profit before tax. So those are the key movers.
Very good. And Luke, there is you do have a divestment process underway for fine chemistry and performance catalysts. Is that process continuing? And if so, any update on when you might come to conclusion on this process?
Yes, that that process, the talks are continuing. They've been very positive, but we put the process on pause right now. It's almost impossible to do the required due diligence and visits and things like that given all the travel restrictions. And given just that people have been consumed on dealing with the coronavirus and the impact on their other businesses. So We've taken a pause on that and we'll pick it back up at a point in time whenever everybody feels better about coronavirus and sometime let's give it some time and we'll pick it back up and go from there.
But right now it is on pause and I can't predict when we would be able to have more detailed diligence reviews and things like that. But it had been going well before. So it's unfortunate, but it's the best path for us to take.
Got it. Maybe diving into the business as we look first on catalyst you mentioned a lot of pressure on your refining customers, lower diesel, gasoline demand, narrower spreads, turnarounds being pushed out. Again, how is this manifesting itself in your catalyst business, both in Q1 and perhaps, going forward?
Well, I think in to and if you always think about any time that we've seen a oil price since we bought the business in 2004. Anytime that you've seen an oil price below $30 a barrel, here's generally what happens. Crash spreads do okay, gasoline demand and diesel demand jump because miles driven jump. And that's good for SCC Catalyst. You usually see a constant speed and a good volume of SCC Catalyst.
Here what you see is you're not seeing the miles driven because people are sheltering in place. Jets aren't flying as much. They've had white canceled. So you're seeing a reduction of demand for the end market fuels, which has that miles driven is what drives the FCC catalyst. So we've seen a reduction in volume for FCC catalyst.
And typically what you see on HPC is if it's below $30 particularly the integrated refiners, what you see is they push out that turnaround longer. And sometimes they buy regenerated catalysts or rejuvenated catalysts, which we would sell through our joint venture. So, but we're seeing them start to push out some of that demand. Now they can't push the turnaround out forever. Eventually, they may run the failure, run to a point that they have to turn it around and they'll that we'll get to bid.
But I think you're going to see a lower demand for FCC catalyst. What I will say is if the coronavirus or the travel restrictions ease up or summer driving or later this year for the driving think you're going to see a spike in demand for Atlas because you'll see a spike in demand for fuel in transportation fuel. It's a short term issue for I think FCC catalyst. If oil prices stay down at this low point ended period of time, you'll see even more lumpiness in the HPC catalysts, because of the push out of the turnouts.
Any concern over the overall health of your customers in the refinery industry?
No, not our customers. For most part, our customers are the large units and they're still running, and we're not selling we're not selling that much into the shale, a bit. We're selling more into the bigger refineries. Some national refineries. So I think we're going to be fine.
I'm not concerned about that at all.
If we do have a structurally lower oil price going forward, any changes you would make in your business to reflect that
About, I guess, got 5% to 10% of our overall raw material parts are on that oil chain type. So we ought to see some reduced yeah, some reduced raw materials there. Our logistics probably go down because of fuel prices going down and natural gas would be So that would help us a little bit on the input side. On the output side, if we're going to see oil below $30 for the tell me we're going to see that for the next 5 years. What I would tell you is that that would be great for FCC catalyst.
I would expect to see the actual industry being operating on the lunatic fringe of capacity for the non Chinese producers. And HPC eventually they're going to have to turn it around and this is becoming new normal for HPC. I don't see it having an impact on electric vehicles if that's the question you're getting to. I think that in our models and then the models that other people are talking about is more about regulatory driven miles per gallon cafe standards and things like that than it is the actual price of gasoline moving that change to the EV. So I don't see it having much an impact overall in the, in the EV demand going forward.
Got it. And last question here. You mentioned the slide deck today is raw material supply issues from China with sufficient supply into Q2. Just a little more color and what happens if things improve, in the next few weeks here?
Yes. I think if you look right now, China is pretty much open for particularly for the raw materials that impact us with the rare earth. We have some reliance on China for that. We'll but right now, we don't it's less of a problem today than it was 3 to 4 week to go. So we're seeing that open up and not too concerned about that.
And in the interim, we've worked through alternative plans that And we're doing that. Really, we talk about China, but we're having to do that across just like everybody else's across our portfolio, raw materials that we've purchased in our our purchases teams been, making sure we're not single sourced anywhere. We have options not only by companies geographic diversity of our raw materials that we can get in. Some of them is a penalty from a cost standpoint, but we'd be able to operate. And I'm comfortable in the plan that we'd put out there that allow us to get the raw materials we need even on a crisis situation.
So even remember, even when you had the rare earth issue from China a few years ago, maybe a decade ago now, we were able to get we were able to get the rarer that we needed. So I'm confident we'll be able to do it.
Very good. Switching to lithium, Luke, it's been a tough Q1, obviously. Any impact from other industry shutdowns on the industry? And is that just being offset by lower EBIT demand or it could be be some benefit from a supply demand basis?
Yes. Well, I think I think we got to be careful. I think you'd see that just recently in New York Cobre and Livent of both ceased operations in Argentina. But that happened this week. So that impact hadn't happened.
TNC announced they weren't starting up. They're lifting the drop side plant. In Kwinana, but that just got announced. So I don't think you've had it the recent news enough to ripple through ripple through the supply chain. Price has been about what we thought it was going to be.
From our contracts, we told you we had set reached agreement on pricing and volume from all our customers say, 1, that is still the case. And we are and they're operating under the terms of those agreements and have been complicit in those terms with the demand that they said they would take in the first quarter. So it hadn't really been impacted yet. Look, if we have an issue where, the demand slows down, a lot of these juniors are going to not, then not we'll be able to operate. I mean, you can they're just not they're not financially going to be able to operate long term like that.
And that's why it's so important for a company like Albemarle where we're the low cost producer in carbonate and the drop side with the valuable resources that we have and the quality resources we have around the globe. So I think Ultimately, this is an opportunity for Albemarle in lithium and one that will emerge from all this much, much stronger in the lithium space. Than some of the others.
Very clear. Maybe just very short term, are you still seeing prices stable in China and what do inventory stand among your customers and even your competitors?
Yes. I think price isn't about what we expected to be. I mean, there was a little blip up in China pricing, a couple of weeks ago and that kind of it went up and it came back down after China started getting operating back to the level it was before. So we hadn't seen any meaningful move in pricing in China on that market with the exception of that one blip up So
And again, Chinese demand, is it how much is it back to normal levels? Is it still below what you were expecting at this time of the year?
Well, I mean, you saw it. It's about what we expected overall China demand and everywhere else. And so Remember, our end call is February 20 something. So it's on the VIN 6 week or so. So it's about what we expected.
We're already seeing some of the coronavirus in China there. It rolled out. Again, David, short term, we hadn't seen it. What I remain more concerned come because there are automotive OEMs that are shut down. There are automotive OEMs who are reducing production that they're converting plants to produce other things other than automobiles.
So we hadn't seen the slowdown yet in the battery producers or the cathode producers bind the drops out of the carbonate. So eventually I'm concerned about some time down in the process in the year that there could be a buildup in that supply chain. But we haven't seen it yet in our book of orders to date that indicate that it's coming, but I am worried about that. I am worried about that. And we'll update you more on our earnings call at the end of the first quarter.
Got it. Maybe briefly and quickly on bromine, Luke, you mentioned the business holding up pretty well, but you do have some exposure to oil oil issues, completion fluids for high pressure wells. What's your expectation for that business and its impact from a low oil price? How big is this business, if you can remind people?
Yes. So, Scott, we're reminding how big the completion fluids business is. I can't remember off the top of my head.
Yes, it runs somewhere between 10% 12% of our volumes in bromine.
What we've seen today is the order book has been strong. In fact, it's been much stronger than I anticipated. There's still some of these deepwater wells are they've already started them. So if you remember 'eight and 'nine, there's a tail on completion fluids. If they've already started drilling the wells, they got to continue.
They continue. But if it's dragging a new rig somewhere and doing it in deep water, sometimes that's so there's a tail. And right now through everything that we're seeing even with the low oil prices, they're still continuing to drill where they are. And it's usually about an 18 month tail is what we experienced in 'eight, 'nine'nine. So I'm less worried about that.
I'm again more in Bromine about the logistics. And let's go back and look at 'eight and 'nine for a second. In 'nine, that bromine business essentially broke even for the first half of the year. And then it went on a trajectory because it had to build back up inventory in the system. So 20102011 were record years.
One of those years, I can't remember whether 10 or 11 was we made more money in bromine that year than we did in 2019, which was the 2nd best year we'd ever had. So it's a market that is you have to be able to respond rapidly both going up and going back down but it'll recover. If it goes down, if there's recession and if bromine drops, it'll recover rapidly.
And I segway into my last section, Luke, if we are in a recession or entering a recession, that could last typically 12 low 12 months on average. How do you think about, Albemarle's recessionary earnings power in this current environment?
Yes. So we talked a little I just talked a little bit about it there. Think in the 'eight, during the 'nine recession, our bromine business EBITDA was right below 20%. And we had positive EBITDA for that year in 2009. And again, in 2010 2011, we had just great year.
So it recovered recovered very quickly. And there's better, there's less production out of China than there was in 'eight and 'nine in 'twenty ten. So to me, I think bromine, will there be an impact? Absolutely, it'll still be profitable and we'll be able to recover quickly. Demand for catalysts is more closely tied to demand for transportation fuels in sulfur emissions.
Like I talked about in 2009, we saw a slight decline in the HPC orders because they were delaying turnarounds but our FCC business wouldn't impact it as much because miles driven remained pretty good during that period. But again, I'd remind you of what we talked about about the coronavirus. So the 2010 was a really good year for catalyst. So it popped back up again. Lithium, it's tough to look historically at lithium because, lithium around the globe generally remained profitable during the 2008, 2009 recession.
First quarter of 2009 was the worst quarter. And really where the impact was with specialties showed earlier decline than did the energy storage applications, but it is much, much more difficult to make direct comparisons in lithium than the other business because the end market mix and the demand is so drastically different it was in 2009. We're maintaining close contact with our customers. Our customers still indicate they intend to take the volume under the contracts. So I think we'll hold up about as expected, but we may need to push some volume into the next year depending upon what the automotive OEMs do.
So we got to be smart there and we will. So I think this business our goal is to structure our businesses so that we outperform in good times and in bad times. And I think in we've learned from 809, we've learned from raw material processes like we saw with the wearer epidemic that we had in about a decade ago out of China. So we are working to ensure that we put into practice plans for various scenarios with objective criteria that we can pull the trigger early earlier than we did in 'eight, 'nine, so that we can meet our customers' demand, yet still be as effective and efficient with cash and earnings as possible for album So that's what we're working on today, David.
Great. 2 last questions on the balance sheet. Luke and Scott, first on covenants. Maybe, Scott, if you don't sell these assets or pause them, any issues with the covenants? And again, how what actions could you take for the balance sheet, if EBITDA is less than you were expecting and would you issue equity to stay investment grade?
Yes. As we look at our covenant, we do have 1 covenant on our revolver It's a total debt to EBITDA limit that is at 4.0 turns. And that carries us through to the end of 2020 when it drops down to 3.5 turns. And obviously, we're looking at all the different possible that we have out there to make sure that, that we meet that covenant. Like a lot of companies, you know, we're talking to our banks about the potential for needing to have a waiver or some sort of a renegotiation on that covenant as well.
So, you know, that's what a lot of companies are doing that right now. We're doing the same. So those are the we'll look at that. We're looking at other possible options in terms of assets that we have on the balance sheet like our receivables that could be converted to cash as well.
And Tuesday investment grade, would you equity at some point?
I don't think it's going to come to that, David. We're going to be okay. We're going to be okay. We're going to maintain our investment grade rate. That is very critical for us and for our shareholders.
And I We have pressure tested this through various doomsday scenarios And in every eventuality, we have the ability with things within our control. To be able to maintain the cash flow to pay down the debt to allow us to be investment grade. And that's our that's we're very committed to that. And I do not believe we will have to issue equity. We're in a much liquidity position than that.
And we do we would prefer not to do that. It would have to get I mean, we'd have to have a prolonged extended recession much worse than 'eight and 'nine for us to get in that position.
Very good and very clear loop for that. Let me hand it back to you for a couple of closing comments.
Yes. Hey, David, first of all, thanks a lot. I know these are uncertain times and in uncertain times people won't specificity and predictability. We don't have that because we don't know what is in store force around the corner. I want everyone to understand that we're working hard to control everything we can control.
We're keeping our people safe. We're making sure we're talking to our vendors about raw materials receivables and payables. We're talking to our customers to make sure we understand where they are. And we've got plans in place with under various economic scenarios so that we can be proactive in leading what we want to do and being intentional about the actions we take rather than having to react at the last second. That having said that, something's going to happen that none of us is that.
And we'll deal with that with the resilience that we've always done. Our full pronged strategy long term is in place. But as I said, and as we've shown in the past, we will alter that based upon the conditions that we see in the market. So the path for the next 5 years hasn't changed. But certainly some things could be delayed or things could move or we could be adjusted here or there from an execution based on things that are going to have to take priority.
We're going to be great stewards of cash and we're going to focus again to be able to outperform our competitors through good times and through bad. And with that, I'd like to thank everybody. I hope everybody stays safe and please please take care of yourself, take care of your loved ones and let's get through this together. Thanks a lot David. We appreciate it.
Thank you guys and thank you all for attending. Have a nice day.
The program. You may all disconnect. Everyone, have a wonderful day.