Analysis of Profitability Ratios
Profitability ratios measure the company ability to generate profitable sales from its resources (assets).
Profitability Ratios (Summary)
Return on Sales
Return on Investment
Albemarle Corp., profitability ratios
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
The analysis of profitability ratios from 2018 to 2022 reveals a distinct U-shaped trajectory, characterized by a multi-year period of contraction followed by a significant recovery in the final year.
- Profit Margin Trends
- Gross profit margin exhibited a gradual decline from 36.07% in 2018 to a low of 29.99% in 2021, before surging to a period peak of 42.00% in 2022. Operating profit margin followed a similar pattern, declining from 27.01% in 2018 to 16.17% in 2020, then recovering steadily to 33.74% by 2022. The net profit margin showed the highest volatility, dropping sharply from 20.55% in 2018 to a trough of 3.72% in 2021, followed by a dramatic increase to 36.75% in 2022.
- Return on Investment Metrics
- Return on equity (ROE) and return on assets (ROA) mirrored the downward trend seen in net margins between 2018 and 2021. ROE decreased consistently from 19.34% to a minimum of 2.20% in 2021. Similarly, ROA fell from 9.15% in 2018 to 1.13% in 2021. Both metrics experienced a substantial reversal in 2022, with ROE ascending to 33.70% and ROA rising to 17.40%, indicating a sharp improvement in the efficiency of capital and asset utilization.
The overall evidence indicates a period of declining profitability and asset efficiency that bottomed out in 2021. This was followed by an exceptional recovery in 2022, where all profitability and return metrics reached their highest levels within the five-year observation window.
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Gross Profit Margin
Albemarle Corp., gross profit margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Gross profit | 3,074,587) | 997,971) | 994,853) | 1,257,778) | 1,217,256) | |
| Net sales | 7,320,104) | 3,327,957) | 3,128,909) | 3,589,427) | 3,374,950) | |
| Profitability Ratio | ||||||
| Gross profit margin1 | 42.00% | 29.99% | 31.80% | 35.04% | 36.07% | |
| Benchmarks | ||||||
| Gross Profit Margin, Competitors2 | ||||||
| Linde plc | 41.70% | 43.03% | — | — | — | |
| Sherwin-Williams Co. | 42.10% | 42.83% | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Gross profit margin = 100 × Gross profit ÷ Net sales
= 100 × 3,074,587 ÷ 7,320,104 = 42.00%
2 Click competitor name to see calculations.
The gross profit margin exhibited a period of consistent contraction from 2018 through 2021, followed by a substantial expansion in 2022. This trajectory indicates a shift from declining operational efficiency in the early part of the sequence to a significant increase in profitability by the end of the analyzed period.
- Profitability Margin Erosion (2018–2021)
- A steady downward trend in the gross profit margin is observed, falling from 36.07% in 2018 to a low of 29.99% in 2021. This progressive decline suggests that the cost of goods sold increased at a rate that outpaced revenue growth during these four years.
- Revenue and Gross Profit Volatility
- Between 2018 and 2021, net sales remained relatively volatile, peaking at 3,589,427 thousand US$ in 2019 before dipping to 3,128,909 thousand US$ in 2020. Gross profit followed a similar pattern, contracting from 1,217,256 thousand US$ in 2018 to approximately 997,971 thousand US$ by 2021.
- Performance Surge in 2022
- A sharp reversal in the trend is evident in 2022, characterized by a rapid increase in both volume and margin. Net sales expanded to 7,320,104 thousand US$, more than doubling the previous year's figures. Concurrently, gross profit rose to 3,074,587 thousand US$, driving the gross profit margin to a period high of 42.00%.
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Operating Profit Margin
Albemarle Corp., operating profit margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Operating profit | 2,470,061) | 798,434) | 505,812) | 666,123) | 911,540) | |
| Net sales | 7,320,104) | 3,327,957) | 3,128,909) | 3,589,427) | 3,374,950) | |
| Profitability Ratio | ||||||
| Operating profit margin1 | 33.74% | 23.99% | 16.17% | 18.56% | 27.01% | |
| Benchmarks | ||||||
| Operating Profit Margin, Competitors2 | ||||||
| Linde plc | 16.09% | 16.19% | — | — | — | |
| Sherwin-Williams Co. | 13.56% | 12.83% | — | — | — | |
| Operating Profit Margin, Sector | ||||||
| Chemicals | 15.08% | 14.87% | — | — | — | |
| Operating Profit Margin, Industry | ||||||
| Materials | 19.68% | 21.62% | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Operating profit margin = 100 × Operating profit ÷ Net sales
= 100 × 2,470,061 ÷ 7,320,104 = 33.74%
2 Click competitor name to see calculations.
The operating performance from 2018 to 2022 is characterized by an initial period of margin compression followed by a rapid and substantial expansion in both revenue scale and profitability. A U-shaped trend is observed in the operating profit margin, which reached a trough in 2020 before accelerating to a five-year peak in 2022.
- Revenue and Profit Trends
- Net sales remained relatively stable between 2018 and 2021, fluctuating within a range of approximately $3.1 billion to $3.6 billion. However, a significant inflection point occurred in 2022, where net sales more than doubled to reach $7.32 billion. Operating profit exhibited higher volatility, declining from $911.5 million in 2018 to a low of $505.8 million in 2020, before experiencing an exponential increase to $2.47 billion by the end of 2022.
- Operating Profit Margin Analysis
- The operating profit margin experienced a consistent decline during the first three years of the analysis, falling from 27.01% in 2018 to 16.17% in 2020. This contraction suggests a period of diminished operational efficiency or unfavorable pricing environments. A strong reversal began in 2021, with the margin recovering to 23.99% and subsequently surging to 33.74% in 2022, marking the highest efficiency level within the reported period.
- Operational Leverage and Scalability
- The results for 2022 indicate strong operating leverage. During the transition from 2021 to 2022, net sales grew by approximately 120%, while operating profit grew by approximately 209%. This disproportionate growth indicates that the increase in revenue significantly outpaced the increase in operating expenses, resulting in a marked expansion of the bottom-line profitability per dollar of sales.
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Net Profit Margin
Albemarle Corp., net profit margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net income attributable to Albemarle Corporation | 2,689,816) | 123,672) | 375,764) | 533,228) | 693,562) | |
| Net sales | 7,320,104) | 3,327,957) | 3,128,909) | 3,589,427) | 3,374,950) | |
| Profitability Ratio | ||||||
| Net profit margin1 | 36.75% | 3.72% | 12.01% | 14.86% | 20.55% | |
| Benchmarks | ||||||
| Net Profit Margin, Competitors2 | ||||||
| Linde plc | 12.43% | 12.42% | — | — | — | |
| Sherwin-Williams Co. | 9.12% | 9.35% | — | — | — | |
| Net Profit Margin, Sector | ||||||
| Chemicals | 11.11% | 11.22% | — | — | — | |
| Net Profit Margin, Industry | ||||||
| Materials | 12.31% | 13.59% | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Net profit margin = 100 × Net income attributable to Albemarle Corporation ÷ Net sales
= 100 × 2,689,816 ÷ 7,320,104 = 36.75%
2 Click competitor name to see calculations.
The financial performance from 2018 to 2022 is characterized by a prolonged period of margin contraction followed by an abrupt and significant expansion in profitability.
- Profit Margin Erosion (2018–2021)
- A consistent downward trend in the net profit margin is observed between 2018 and 2021. The margin declined from 20.55% in 2018 to 14.86% in 2019, further dropping to 12.01% in 2020, and reaching a low of 3.72% by the end of 2021. This deterioration occurred despite net sales remaining relatively stable, fluctuating within a narrow range between approximately 3.1 billion and 3.6 billion US dollars. The disproportionate decline in net income, which fell from 693.6 million to 123.7 million US dollars over this period, indicates a substantial increase in operating costs or a reduction in pricing power.
- Profitability Surge (2022)
- A sharp reversal in the profitability trend occurred in 2022. Net sales experienced an exponential increase, rising to 7.32 billion US dollars, while net income grew substantially to 2.69 billion US dollars. This resulted in a net profit margin of 36.75%, representing the highest efficiency level recorded within the analyzed timeframe. The scale of this increase suggests a fundamental shift in market dynamics or a significant improvement in operational leverage.
- Comparative Analysis
- The 2022 net profit margin of 36.75% represents a nearly tenfold increase compared to the 2021 low of 3.72%. When compared to the 2018 baseline of 20.55%, the company concluded the five-year period with a significantly strengthened capacity to convert revenue into bottom-line profit.
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Return on Equity (ROE)
Albemarle Corp., ROE calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net income attributable to Albemarle Corporation | 2,689,816) | 123,672) | 375,764) | 533,228) | 693,562) | |
| Total Albemarle Corporation shareholders’ equity | 7,982,627) | 5,625,266) | 4,268,227) | 3,932,250) | 3,585,321) | |
| Profitability Ratio | ||||||
| ROE1 | 33.70% | 2.20% | 8.80% | 13.56% | 19.34% | |
| Benchmarks | ||||||
| ROE, Competitors2 | ||||||
| Linde plc | 10.36% | 8.69% | — | — | — | |
| Sherwin-Williams Co. | 65.12% | 76.50% | — | — | — | |
| ROE, Sector | ||||||
| Chemicals | 14.30% | 12.24% | — | — | — | |
| ROE, Industry | ||||||
| Materials | 16.42% | 16.54% | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
ROE = 100 × Net income attributable to Albemarle Corporation ÷ Total Albemarle Corporation shareholders’ equity
= 100 × 2,689,816 ÷ 7,982,627 = 33.70%
2 Click competitor name to see calculations.
The financial performance from 2018 to 2022 exhibits significant volatility in profitability relative to the equity base, characterized by a prolonged contraction followed by a substantial recovery in the final year.
- Net Income Trends
- A consistent downward trajectory in net income is observed from 2018 through 2021, with values falling from US$693.56 million to a period low of US$123.67 million. This trend reversed abruptly in 2022, as net income surged to US$2.69 billion, indicating a dramatic increase in absolute profitability.
- Shareholders' Equity Growth
- The equity base grew steadily and uninterrupted throughout the five-year period, increasing from US$3.59 billion in 2018 to US$7.98 billion by the end of 2022. This consistent expansion of the capital base contributed to the dilution of return ratios during the years of declining income.
- Return on Equity (ROE) Dynamics
- ROE experienced a sharp decline from 19.34% in 2018 to 2.20% in 2021, reflecting the combined effect of diminishing net income and an expanding equity base. In 2022, the ratio rebounded aggressively to 33.70%, marking the highest efficiency level within the analyzed period and signaling a strong decoupling from the previous downward trend.
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Return on Assets (ROA)
Albemarle Corp., ROA calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net income attributable to Albemarle Corporation | 2,689,816) | 123,672) | 375,764) | 533,228) | 693,562) | |
| Total assets | 15,456,522) | 10,974,118) | 10,450,946) | 9,860,863) | 7,581,674) | |
| Profitability Ratio | ||||||
| ROA1 | 17.40% | 1.13% | 3.60% | 5.41% | 9.15% | |
| Benchmarks | ||||||
| ROA, Competitors2 | ||||||
| Linde plc | 5.21% | 4.69% | — | — | — | |
| Sherwin-Williams Co. | 8.94% | 9.02% | — | — | — | |
| ROA, Sector | ||||||
| Chemicals | 6.03% | 5.56% | — | — | — | |
| ROA, Industry | ||||||
| Materials | 6.28% | 6.65% | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
ROA = 100 × Net income attributable to Albemarle Corporation ÷ Total assets
= 100 × 2,689,816 ÷ 15,456,522 = 17.40%
2 Click competitor name to see calculations.
The analysis of profitability from 2018 to 2022 reveals a period of significant volatility in asset efficiency, characterized by a prolonged decline followed by a sharp recovery in the final year.
- Return on Assets (ROA) Trend
- A consistent downward trend in the ROA is observed from 2018 through 2021, with the ratio falling from 9.15% to a low of 1.13%. This deterioration indicates a diminishing ability to generate profit from the company's asset base during this four-year window.
- Net Income Performance
- Net income attributable to the corporation experienced a steady contraction between 2018 and 2021, dropping from 693,562 thousand US$ to 123,672 thousand US$. This trend reversed sharply in 2022, when net income surged to 2,689,816 thousand US$, representing a substantial increase in earnings.
- Asset Base Growth
- Total assets grew monotonically over the analyzed period, increasing from 7,581,674 thousand US$ in 2018 to 15,456,522 thousand US$ in 2022. The expansion of the asset base during the years of declining net income contributed significantly to the compression of the ROA.
- 2022 Profitability Spike
- The 2022 fiscal year demonstrates a dramatic improvement in operational efficiency. Despite the continued growth of total assets, the exponential increase in net income resulted in an ROA of 17.40%, the highest level recorded in the five-year period, indicating a high degree of asset productivity.
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