(Reuters) - Albemarle Corp, the world’s largest producer of the electric car battery ingredient lithium, said on Wednesday it would double its stock buyback for the year to $500 million, sending its shares up nearly 7 percent in morning trading.
The news comes a day after Albemarle reported that its quarterly earnings had tripled on rising sales for the light metal, undergirding the company’s belief that demand for battery-grade lithium will continue to spike in the next decade as Tesla Inc, Volkswagen AG VOWG_p.DE and others bring electric cars mainstream.
Shares of Albemarle had lost nearly a third of their value since January on concerns that new lithium projects under development by rivals could flood the market with fresh supply.
Albemarle executives have dismissed such concerns, saying they expect sales to only grow.
“We believe the stock is currently undervalued,” Chief Executive Officer Luke Kissam told investors on a Wednesday conference call.
The Charlotte, North Carolina-based company had launched a $250 million buyback in May. That round is nearly complete, executives said, fueling the board of director’s decision to launch an additional $250 million buyback for the year.
The company expects to buy about 5 million of its shares, ending the year with a float of about 108 million shares, executives said on the conference call.
Albemarle’s lithium margins are above 40 percent, a lucrative business that the company and its shareholders are not eager to lose.
Unlike some rivals, Albemarle has begun signing long-term contracts with customers that guarantee it a set price, a strategy executives said is not fully understood by Wall Street.
Shares rose 6.8 percent to $99.18 in morning trading.
Reporting by Ernest Scheyder; Editing by David Gregorio and Bernadette Baum