1 Albemarle Corporation Fine Chemicals UBS Grass Roots Chemical Conference February 16, 2005 John Nicols Vice President Fine Chemicals
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Albemarle CorporationFine Chemicals
UBS Grass Roots Chemical ConferenceFebruary 16, 2005
John Nicols
Vice President Fine Chemicals
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Cautionary Statement
Some of this presentation constitutes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although Albemarle Corporation believes its expectations reflected in the presentation are based on reasonable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that actual results will not differ materially.
Factors that could cause actual results to differ from expectations include, without limitation, the timing of orders received from customers; the gain or loss of significant customers; competition from other manufacturers; changes in demand for our products; increases in the cost of raw materials and energy, and our inability to pass through such increases to our customers; changes in the market in general; fluctuations in foreign currencies; significant changes in new product introductions, resulting in increased capital spending; and the integration of the Akzo Nobel Refinery Catalysts business into our operations.
Additional factors that could cause Albemarle’s results to differ materially from those described in the forward-looking statements can be found in our prospectus dated January 13 th, 2005, filed pursuant to SEC Rule 424(b).
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Albemarle History
1887 - Albemarle Paper Manufacturing Company opens with a handful of employees producing Kraft and blotting paper.
1921 - The antiknock properties of tetraethyl lead (TEL) as a gasoline additive are discovered after a lengthy search by a team of General Motors research chemists. TEL is to be the principal product of Ethyl Corporation for more than 40 years.
1942 - Ethyl Gasoline Corporation changes its name to Ethyl Corporation to characterize a broader interest than just gasoline products.
1962 - Albemarle Paper Manufacturing Company borrows $200 million and purchases Ethyl Corporation (Delaware), a corporation 13 times its size, and Ethyl Corporation (Virginia) is formed. Floyd D. Gottwald becomes Chairman of the Board.
1976 - Ethyl leaves paper manufacturing with the sale of Oxford Paper. Ethyl opens a chemical plant in Feluy, Belgium to make aluminum alkyls.
1987 - Ethyl acquires Dow Chemical's bromine chemicals business and its Magnolia, Arkansas, plant.
1994 - Ethyl spins off its chemical businesses to create an independent, publicly traded company named Albemarle Corporation
1996 - Albemarle sells its alpha olefins, polyalphaolefins and synthetic alcohols businesses to Amoco for about $500 million.
1998 - Albemarle energizes M&A effort to grow the company based on longstanding foundation technologies of bromine and organometallic chemistry, supported by exceptional skill in process technology.
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Tender OfferFor A&W;Created Cash Gain
Formed Jordan Bromine Co;Started Project for ’02 Startup
Acquired FerroBrPS FR Bus
Took ownershipIn Jinhai Polymer& Expanded 2X
Acquired Martinswerk--Largest global mineral basedFR and Performance Chemicals
Acquired ChemFirst Fine Chemicals; Integrated with ALB to form Fine Chemistry Services
Formed Stannica JV with Atofina—crude tin stabilizers for PVC
Announced China Trading Company
20022002
2000200020012001
19991999
20032003
Acquired lube and fuel anti-oxidants of Ethyl
Acquired Phosphorus Flame Retardants of Rhodia
20042004
Acquired refining catalyst segment of Akzo Nobel
Fine ChemicalsJV / Acquisition Activity
Acquired Atofina S.A. Bromine Fine Chemicals
Acquired assets of Korean distributor of Albemarle; other products
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Company Overview
Albemarle is a global producer of specialty chemicals with leading market positions in a majority of its product lines
Albemarle provides innovative development, manufacturing and marketing of complex chemicals and services that create exceptional customer value while maximizing shareholder wealth.
Diversified mix of solution-based products sold to a wide range of customers and end markets
– Over 3,400 customers– End markets include consumer electronics, petroleum refining, packaging, construction,
automotive, pharmachemicals and agrichemicals
Broad geographic footprint– Sales in approximately 100 countries– 38 locations (inc. JVs) in North and South America, Europe and Asia– Approximately 3,700 employees worldwide
2004 Results (1) - Net Sales $1,514 million- Net Income $76 million (up 13% over 2003)- EPS $1.78
(1) Year ending December 31, 2004 includes 5 months refinery catalysts business. Excludes special items, unaudited results
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Broad Geographic Reach
2004 Sales (ex. JVs) 42% 38% 20%
Americas Europe Asia
Worldwide manufacturing complemented by sales, marketing and distribution facilities in each of the world’s key regions
Bergheim, Germany
Teesport, UKAvonmouth, UK
SA JV)
Amersfoort, The Netherlands
Santa Cruz, Brazil
(FCC
Houston, TX, USA
Amsterdam, The Netherlands
Dayton, OH, USA
Tyrone, PA, USA
Richmond, VA, USA
Baton Rouge, LA, USAMagnolia, AR, USA
Safi, Jordan(JBC JV)
Orangeburg, SC, USA La Voulte, France (JV)Thann, France
Port-de-Bouc, France
Niihama, Japan(Nippon Ketjen JV)
St. Jakob/Breitenau, Austria (JV)
Shanghai, China (JVs)
Feluy, BelgiumSeoul, KoreaLouvain-la-Neuve, Belgium
Business Center Manufacturing Facility
Beijing, China
Singapore
R&D Facility
Pasadena, TX, USA
Tokyo, Japan
Osaka, Japan, (NAA JV)
Zhejiang Province, China
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Albemarle Corporation Today Refinery Catalysts acquired July 31, 2004 for €616 million ($763 million)
– Significantly enhances existing business by adding attractive strong specialty chemicals platform
– Leading positions in a market with strong industry fundamentals– Proprietary technology and service-driven business model– Strong margins and cash flows– Potential technology, raw material and other cost synergies
Balanced portfolio with common technology
Approx. Net Sales Distribution
Polymer Additives
Catalysts
Fine Chemicals
• Bromine integration• Leading positions in major
flame retardant chemistries• Additives niches• Global scope and reputation
• Leading positions in refinery and metallocene catalysts
• History of innovation• Strong customer relationships• Global scope and reputation
41%30%
29%
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Bromine
Phosphorus
Alumina
Orthoalkylation
Metal Alkyls
Leading Market Positions in Major Product CategoriesFoundation Chemistries
Solutions-Based Product Portfolio
Leading Global Market Positions
Flame Retardants
Catalysts
Plastic Additives
Fuel Additives
Agrichemicals
Pharmaceuticals
Performance Chemicals
Bromine-based FRs
Mineral FRs
HPC Catalysts
FCC Catalysts
Alkyl Co-Catalysts
Metallocene Co-Catalysts
Alkylated Anilines
Bromine
Ibuprofen
Process Technology
Innovation
Application “Know-How”
Service
Leading Customer
Relationships
Albemarle’s Formula for Success
Source: Industry Research and Management Estimates.
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Key Strategic Principles
Leverage Foundation Businesses and Technologies– Innovation allows for management of product rotation
– Customer-driven product line expansions
– Focus on higher-margin, solution-based products and services
Expand Global Reach– Expand with new and existing multinational customers
– Target high-growth economies
Drive Low-Cost Manufacturing and Continuous Operational Improvement– Continuous cost reduction efforts
– Flexible, multi-purpose sites
Establish Superior Customer and Technology Relationships– Drive innovation in regulatory-driven markets
– Provide value-added products and services
– Develop business with less capital and risk
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Fine Chemicals
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Albemarle Fine Chemicals
Product Diversity Strategic Clusters
Br2 & Derivatives
Services & Intermediates
Pharma Actives (APIs)
Ag Actives
Paper ChemicalsAlumina SpecialtiesOthers
Oilfield Chemicals
Tertiary AminesK & Cl2 Derivatives
Bromine Specialties
Fine Chemistry Services
Industrial Specialties
Bromine Chemicals
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New Strategy Potentials ?
Manage for Cash
Fine Chemicals Strategies
Bromine Chemical
s
Leading Bromine Company
Worldwide
Fine Chemistry Services
Industrial Specialtie
s
Serve Chemistry To Solve Customer Problems -------------------------------------------------------
Widen & Deepen Access Into Key End Markets: Pharma & Ag
-------------------------------------------------------
Drive To Actives: Highest Chemistry Value Add
Strategic Growth
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New Strategy Potentials ?
Manage for Cash
Fine Chemicals Strategies
Bromine Chemical
s
Leading Bromine Company
Worldwide
Fine Chemistry Services
Industrial Specialtie
s
Serve Chemistry To Solve Customer Problems -------------------------------------------------------
Widen & Deepen Access Into Key End Markets: Pharma & Ag
-------------------------------------------------------
Drive To Actives: Highest Chemistry Value Add
Strategic Growth
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World-Class Bromine Position
Albemarle Bromine Production
Albemrle holds strong positions in each of the key areas of the world’s bromine-using industries.
FlameRetardants
40%
Oilfield24%
Ag12%
WaterTreatment
7%
Pharma3%
Other14%
Low cost domestic reserves augmented by JV production
on the Dead Sea
Capturing growth through strong positions in
key areas of the world’s bromine-using industries
Bromine-Industry Usage - 2002USGS/Mining Engineering June 2003
M L
bs.
100
150
200
250
300
350
’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04
10-year CAGR = 7.5%
Long Time In Motion
Keep Building Momentum
EDB For TEL – Ethyl Beginnings1980
SaytechAcquired
1987Dow Br &
FR BusinessAcquired
1993Thann
Acquired
2000 FerroBrFRs
Acquired
2002JBC
Startup
2003AtoFina
BFCAcquired
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Leading Bromine Company
In The World
Pharma Int’s
MeBr
Br F R
Resource ManagedIn Fine Chemicals
MarketManaged
Bromine Specialties
High Volume Bromides
RelatedProducts
World-Class Bromine Position
Goal
Global Leader in BrFR
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Bromine Chemicals: Business Strategies
• Continue To Build & Drive The World’s Lowest Cost Global Bromine Sourcing Network
• Maximize Value While Ensuring Leading Share In All Significant Bromine Consuming Uses
• Lead In Developing New Applications For High Value Bromine Specialties
• Secure Advantage From Technologies Borrowing Bromides
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New Strategy Potentials ?
Manage for Cash
Fine Chemicals Strategies
Bromine Chemical
s
Leading Bromine Company
Worldwide
Fine Chemistry Services
Industrial Specialtie
s
Serve Chemistry To Solve Customer Problems -------------------------------------------------------
Widen & Deepen Access Into Key End Markets: Pharma & Ag
-------------------------------------------------------
Drive To Actives: Highest Chemistry Value Add
Strategic Growth
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Fine Chemistry Services ModelFine Chemistry Services Model
Fine Chemistry Services
Industrial SpecialtiesPersonal CarePhoto Chems
Flavors / FragrancesEtc.
ALB Actives (APIs)
Ibuprofen, Naproxen
ALB Actives
Methyl Bromide
Customer Needs & Opportunities
AgALB Intermediates
Custom MfrContract Research
PharmaALB Intermediates
Custom MfrContract Research
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2001
3 Pharma Products3 Ag ProductsLeading BFC’s In EU1 cGMP FacilitySeveral New Prod’s In Pipeline
2004
Historic Pharma/Ag/BFC ProductsContinued Pressures On IBP / NPXLeading US Custom Mfr3 Research Facilities (2 US, 1 EU)3 cGMP Facilities7 Flexible Multi-Product Sites90+ New Products In Pipeline
Albemarle’s Fine Chemistry ServicesArea Of Major Strategic Change
Products Capabilities Globally Leading
Capabilities
Flexible Plants’ Utilization Up Profit Up approx $10 MM in ’04 v. ’02
Stepping Up in ’05: Utilizations / Better Mix Pipeline Productivity New Products / Capabilities Owning Our Niches
Success w/ Specialty API’s Profit Up approx $3 MM in ’04 v. ’02
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Fine Chemistry Services New Product PipelineFine Chemistry Services New Product Pipeline
2003 2004
Inquiries Quotes Successful
Pre-Clinical Phase I Phase II Phase IIIPatent
Protected Generic
26 1520 10 15 4
+22%
+4%
+61%
90 products in our pharma pipeline
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Fine Chemistry Services
Industrial Specialties
Further Downstream in Market to Higher Chemistry Value
Customer Needs & Opportunities
AgALB Intermediates
Custom MfrContract Research
PharmaALB Intermediates
Custom MfrContract Research
Fine Chemistry Services: Build Synergistically
Gain More Market Access
Further Downstream in Market to Higher Chemistry Value
Other Market Servicing
Capability
Other Market Servicing
Capability
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Profit Growth In Fine Chemicals
Profit Perspective 2003 2004 2005 + Comments
Raw Mats & Energy - - - - Continued Headwind in ’05, but not like ‘03
Regulatory - - Methyl Bromide secured for 2005
Mature Products Pricing - - - 2004 peak, but select issues continue (i.e. China)
Zeolites - - - - Sales and profit impact comparison goes away
Jordan Startup - 0 Jordan low cost will create favorable ’05+ conditions
Br Chem Pricing + + + Accelerating due to favorable supply / demand
New Products + + + Accelerating due to improved pipeline
Asset Utilization + + + + Continued year-on-year improvements
BOTTOM LINE (19%)* (11%)* Poised & Healthier Leaving Peak ‘03 – ’04
Headwind Period
* Change in operating profit versus prior year, excluding specials. 2004 data unaudited.
Last 3 quarters 2004 vs. 2003 up 3%
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Fine Chemicals: Investment Considerations Strong Positions Driving Our Strategic Successes
Global Bromine Leadership – Tightening Supply Environment Broad Fine Chemistry Service Business Capabilities:
Developed, Entrenched Service Model Satisfying Our Targeted Client Base Leverages Corporate Chemistry / Process Development Foundation Strength Drives Us Into Attractive Pharma / Ag Markets For Chemistry / Innovation One Of Relatively Few Worldwide With Pharma / Ag Revenues > $200 MM
Sound Strategies Drive Improved Returns & Sustain Growth Disciplined Corporate Cost Focus – Improving Return on Assets M&A Activities Continue to Target Bolt-On Acquisitions, But Not
Essential To Long Term Fine Chemicals Success Strong Accountable Team
Mitigating Near-Term Exceptional Situations Successfully Managing Portfolio Rejuvenation
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Albemarle CorporationFine Chemicals
UBS Grass Roots Chemical ConferenceFebruary 16, 2005
John Nicols
Vice President Fine Chemicals