Scott Tozier
Executive Vice President and Chief Financial Officer at Albemarle
Thanks, Kent, and good morning, everyone. I'll start on slide five. Diluted EPS for the third quarter was $7.61 compared to a loss of $3.36 in the prior year period. As a reminder, last year was negatively impacted by a settlement of a legal matter. Adjusted diluted EPS for the third quarter was $7.50, seven times the prior year EPS of just over $1. This overall performance was driven by strong net sales and margin improvement for the total company. Albemarle generated third quarter net sales of $2.1 billion, up 2.5 times year-over-year due to ongoing momentum in the Lithium and Bromine businesses. Adjusted EBITDA margins improved from 26% to 57% this year. Let's turn to slide six for more details on adjusted EBITDA. Third quarter adjusted EBITDA was up $1.2 billion, nearly 450% increase year-over-year.
This strong growth continued to be driven by higher Lithium EBITDA that was nearly $1 billion higher than last year. In fact, Lithium's Q3 EBITDA was more than double what we generated in all of last year. This record performance for the Lithium segment was driven by higher realized pricing, which was up nearly 300% and higher volumes that were up 20% versus the prior year quarter. Lithium adjusted EBITDA margins of 74% were more than double the previous year. Margins are expected to moderate in the Q4 and into next year for several reasons. First, a spodumene shipment from Talison originally expected in the fourth quarter occurred in Q3, resulting in a $100 million benefit in equity income. This benefit is not expected to reoccur. Second, margins benefited from the timing of spodumene shipments and the rapid rise we have experienced in spodumene and lithium prices. It takes up to six months for a ton of spodumene to navigate our supply chain from the mine to the customer.
This has given us above-average margins in 2022, particularly in Q3 because we are selling at higher lithium market prices, but cost of sales is based on lower-priced spodumene held in inventory. Note, we would not expect this benefit to repeat in 2023 unless we see a similar rise in spodumene and lithium prices from current levels. And third, as the MARBL joint venture starts to generate revenue and earnings, we anticipate some margin rate reduction. This is because the MARBL joint venture is being reported under a distributor model. Under this structure, we report -- Albemarle reports 100% of the revenue but only our pro rata share of earnings. We would expect overall, a return to more normal Lithium margin levels in the mid-50% range in Q4. Bromine was also up compared to the prior year, primarily due to higher pricing, up 18% and volumes up 10%. However, we are beginning to see softness in some bromine markets, which I'll talk about in a few minutes.
Catalysts EBITDA declined versus the year ago quarter as higher sales volumes and pricing continue to be more than offset by cost pressures, particularly for natural gas in Europe and raw materials. Moving to slide seven. We are tightening our ranges from the increased 2022 outlook we provided last quarter. This reflects the continued strength in execution in our Lithium business and more modest growth in Bromine while our Catalysts performance is in line with our expectations. We have narrowed the ranges for the full year 2022 guidance as follows: net sales of $7.1 billion to $7.4 billion, more than doubling versus last year; adjusted EBITDA of $3.3 billion to $3.5 billion, reflecting a year-over-year improvement of nearly 300%; and adjusted diluted EPS of $19.75 to $21.75, up about five times from 2021. We still expect to have positive free cash flow for the full year. And assuming flat market pricing, we expect to continue to generate positive free cash flow in 2023, even with continued growth investments.
Security of supply remains the number one priority for our customers and we continue to partner and work closely with them to meet their growth requirements. Let's look at the next slide for more detail on our outlook by segment. Lithium continues its stellar performance. We maintain our expectation for the Lithium segment's full year 2022 adjusted EBITDA to be up more than 500% year-over-year as strong market pricing flows through our index referenced variable price contracts. Pricing growth is expected to be 225% to 250% year-over-year resulting from our previously renegotiated contracts and increased market pricing. We also continue to expect year-over-year volume growth in the range of 20% to 30%. The current guidance range for the Lithium segment reflects the potential upside for spot price improvements and the potential downside of volume shortfalls for the remainder of the year. For Bromine, we are slightly modifying our full year 2022 EBITDA expectations with year-over-year growth at the lower end of our recent outlook of 25% to 30%, but that's still above the outlook we had earlier in the year. The modification in our expectations reflects emerging softness in some end markets, such as consumer and industrial electronics and building and construction.
The slowing in construction is a natural consequence of higher interest rates. Full year volume growth is also projected to be at the lower end of previous guidance for a 5% to 10% volume increase. For Catalysts, we expect full year EBITDA to be down between 45% and 65% year-over-year. We noted earlier that this market is being affected by significant cost pressures primarily related to natural gas in Europe affected by the Ukraine war, certain raw materials as well as freight and is partially offset by higher sales volumes and pricing. We are beginning to realize some price increases associated with natural gas surcharges and inflation adjustments, and those are expected to ramp up in Q4 and going into next year. Turning to slide nine for an update on our lithium pricing and contracts.
This slide reflects the expected split of our 2022 Lithium revenues. Battery-grade revenues continue to make up approximately 85% of our Lithium contracts. Our revenue and contract mix are unchanged from last quarter. We remain committed to long-term contracts with our strategic customers, and most of our volumes are sold under two to five-year contracts. The market index structure of our contracts allows us to capture the benefits of higher market pricing while also dampening volatility. It also means that neither Albemarle nor our customers are too far out of the market. From the beginning of the year to today, market indices are more than 100% higher on average, moving from about $35 per kilogram to over $70 now. After holding at these levels for the last six months, indices recently ticked up again, thanks to healthy EV-related demand, particularly in China and North America. If price indices remain where they are, we would expect to realize healthy double-digit percentage price increases in 2023.
Slide 10 shows the expected lithium sales volumes, including technical-grade spodumene and tolling sales. In 2022, as I said, we are looking at volume improvement of 20% to 30%, largely due to the expansion at La Negra, additional tolling, and some Qinzhou volumes. Volume growth in 2023 is expected to be north of 30% as La Negra, Kemerton and Qinzhou continue to ramp plus additional tolling volumes. Based on current project time lines, we see room for further upside in 2025 from additional conversion assets such as our greenfield plant in Meishan. Turning to slide 11. Our strong net cash from operations and solid balance sheet support continued organic growth and our ability to pursue acquisitions that complement our growth strategy. Our balance sheet includes $1.4 billion of cash and available liquidity of over $3 billion. Since last quarter, net debt-to-adjusted EBITDA improved to approximately 0.9 times and should end the year between 0.6 and 0.7 times.
These levels give us excellent flexibility. During October, we upsized and extended our revolving credit facility to reflect our larger scale and position us well in case of market turbulence. Over 90% of our debt position is at a fixed rate, which safeguards us against the impacts of a rising interest rate environment. Knowing that the economy is on everyone's mind, let's turn to slide 12 for more on the macro environment. We expect all three GBUs to grow in 2023 even in the turbulent market environment. But it's going to look different for each of our businesses. For example, in Lithium and Bromine, our vertical integration and access to low-cost resources helps control our cost structure. While approximately 45% of our costs come from raw materials and services, 20% of those relate to our own spodumene. We continue to expect strong demand for lithium driven by the secular shift to electric vehicles, including OEM investments and public policy support. We are watching to see how rising interest rates impact luxury vehicle sales in the short term, but we expect EVs to continue to grow and gain market share just as we saw in 2020 during the peak of the COVID pandemic. Of the three businesses, Bromine and our Lithium Specialties demand is likely the most leveraged to global economic trends in consumer and industrial spending, automotive and building and construction. At the same time, they benefit from having diverse end markets, meaning they can allocate production to higher growth or higher margin end markets as needed.
Bromine and Lithium Specialties also tend to rebound quickly after a recession. Finally, Catalysts demand is closely linked to transportation fuel demand. In a typical recession, Catalysts is relatively resilient. Think about it this way. Oil prices generally drop in a recession and that drives higher fuel demand, which equals higher catalyst demand for refining. And typically, the Catalysts business would benefit from lower raw material costs in a recessionary environment. Before I turn the call back over to Kent, I wanted to briefly reiterate our capital allocation priorities to support our growth strategy as seen on slide 13. Investing in high-return growth opportunities remains our top capital allocation priority. We remain committed to strategically growing our lithium and bromine capacity in a disciplined manner. For example, the Qinzhou acquisition we just closed allowed us to accelerate growth and meet our return hurdles. Maintaining financial flexibility and supporting our dividend are also key priorities. As we saw during the COVID pandemic, maintaining an investment-grade credit rating and a strong balance sheet are key to executing our growth strategy and weathering temporary economic downturns.
Now I'll turn it back over to Kent.
