Albemarle Corporation Fine Chemicals

1

Albemarle CorporationFine Chemicals

UBS Grass Roots Chemical ConferenceFebruary 16, 2005

John Nicols

Vice President Fine Chemicals

2

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).

3

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.

4

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

5

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

6

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

7

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%

8

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.

9

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

10

Fine Chemicals

11

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

12

New Strategy Potentials ?

Manage for Cash

Fine Chemicals Strategies

Bromine Chemical

s

Leading Bromine Company

Worldwide


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

13


Manage for Cash


Bromine Chemical

s


Worldwide



s



-------------------------------------------------------


Strategic Growth

14

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

15


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

16

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

17


Manage for Cash


Bromine Chemical

s


Worldwide



s



-------------------------------------------------------


Strategic Growth

18

Fine Chemistry Services ModelFine Chemistry Services Model


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


19

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

20

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

21


Industrial Specialties

Further Downstream in Market to Higher Chemistry Value

Customer Needs & Opportunities

AgALB Intermediates


PharmaALB Intermediates


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

22

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%

23

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

24

Albemarle CorporationFine Chemicals

UBS Grass Roots Chemical ConferenceFebruary 16, 2005

John Nicols

Vice President Fine Chemicals

Albemarle Corporation Fine Chemicals

Documents

Transcript of Albemarle Corporation Fine Chemicals