Todays Participants Luke Kissam President & Chief Executive Officer Scott Tozier Senior Vice President & Chief Financial Officer Michael Wilson Senior Vice President & President, Catalyst Solutions Edwin Berends Vice President,…
2 0 1 4 I N V E S T O R D A Y OVERVIEW Luke Kissam President & Chief Executive Officer
Albemarle: Compelling Investment Opportunity History of industry-leading returns to shareholders Global leader in attractive markets: catalysts and bromine Differentiated, performance-based core technologies driving innovative…
A History of Value Creation Ten-Year Total Shareholder Return 450% ALB 400% Dow Jones US Chemicals Index 416% S&P 500 350% 300% 250% 200% 207% 150% 100% 109% 50% 0% -50% Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09…
A Focused Strategy and Clear Deliverables Strategy Deliverables Strengthen and grow catalyst Best-in-class Health, Safety & franchise Environmental performance Maximize profitability of existing Mid to high 20% segment income…
Organizational Structure Supports Strategy Execution Simpler organization drives faster Fine Custom Chemistry Manufacturing decision making and time to market Services Enhanced market and customer focus Refinery Non-Flame…
Integrated Platform Increases Speed to Market, Customer Influence, Supplier Leverage & Innovation Catalyst Solutions Performance Chemicals Performance Catalyst Refinery Catalyst Fire Safety Specialty Fine Chemistry Solutions Solutions…
A History of Actions to Drive Value PureGrowthTM High New polymer catalysts plants in Growth & Innovation Purity Metal Organics Korea & Saudi Arabia platform Products to Expanded bromine address tight oil HTE Amsterdam capacity…
Managing Portfolio to Focus on Our Core and Maximize Growth and Profitability Invest & Grow Maximize Profitability Improve or Exit Refinery catalysts Fine Chemistry Services Antioxidants Organometallics Curatives Ibuprofen…
Substantial Earnings Potential with Minimal Incremental Capital Spend Total Segment Margins* Well-positioned to capitalize on catalysts 26% - 29% and bromine market trends with major investments already in place 26% 26% 24%…
Valuation Not Reflective of Structurally Improved Margins 10-Year Average Relative P/E: 95% Current Relative P/E: 85% 10-Year Average Relative P/E Source: FactSet as of 4/24/2014 - Jefferies U.S. Chemicals Universe…
Todays Agenda Catalyst Solutions 1:50 2:25 pm Michael Wilson, Senior Vice President & President, Catalyst Solutions Catalyst Solutions R&D 2:25 - 2:45 pm Edwin Berends, Vice President, Catalysts Research and Technology 2:45 -…
2 0 1 4 I N V E S T O R D A Y CATALYST SOLUTIONS Michael Wilson Senior Vice President & President, Catalyst Solutions Edwin Berends Vice President, Catalyst Solutions Research & Technology
What is a Catalyst catalyst [kat-l-ist] noun Chemistry. A substance that initiates, accelerates or selectively directs a chemical reaction, without being consumed Used at some stage in the manufacture of 90% of all commercially…
Complex, Highly Engineered Materials Designed at the Atomic and Molecular Level Binder Functional Silica/Alumina x10 70 m Clay x1,000 Transmission Electron Microscopy 200 nm Pores Zeolite Catalyst development involves…
Global Catalyst Market Our View FCC max C3= AlkyClean Hydrotreating Albemarle Segment (RCS) 5.6B FCC VGO SSC PP Albemarle Segment (PCS) 0.7B SSC PE Hydrocracking NonAlbemarle Segment 17.5B Degree of Competitive Advantage…
Catalyst Solutions Overview Refinery Catalyst Solutions (RCS) Heavy Oil Upgrading (HOU) ( in millions) Net Sales* FCC catalysts for resid 1,200 FCC catalysts for max propylene FCC catalysts for vacuum gas oil 1,000 Clean Fuels…
Market Position Market Segment Position Core Strengths FCC Catalysts 2 Deep customer understanding Heavy Oil Max Propylene 1 Upgrading Heavy investment in R&D Resid 2 Global footprint Distillates 1 Unparalleled network of…
Catalyst Solutions Goal and Strategy Our Goal To be the leading catalyst company in the world Refinery Catalyst Solutions Performance Catalyst Solutions Heavy Oil Upgrading Leverage strength in core organometallics business,…
Integrated Global Network U.S. Pasadena, TX Amsterdam World class aluminum Refinery catalyst manufacturing alkyls facility HTE & pilot plant capabilities U.S. Bayport, TX HTT capabilities World-class facility for Japan refinery…
Refinery Catalyst Solutions - Joint Ventures and Partnerships Structure and Focus Strategic Value 50/50 JV with Petrobras Supplies majority of Petrobras requirements (65% of Leading provider of FCC catalysts and additives in South…
Performance Catalyst Solutions - Joint Ventures Structure and Focus Strategic Value 50/50 JV with SABIC Solidifies long-term presence in Middle East World-class 6,000MT aluminium alkyls production Serves largest global growth area…
Refinery Catalyst Solutions (RCS) Heavy Oil Upgrading Clean Fuels Technologies FCC for Resid Hydroprocessing FCC for Max Propylene Isomerization FCC for Vacuum Gas Oil Alkylation (VGO) Solid Phosphoric Acid (SPA) Catalysts…
Refinery Catalysts A Large Market with Attractive Growth Global Revenues (2013) Projected Growth (2013 2019E) (6.9B) ( in millions) 1.25 38% CAGR = 2.3% FCC 1.00 Hydrotreating 17% Hydrocracking 1.3B 5.6B 0.75 CAGR = 3.3%…
Catalyst Solutions Throughout the Refinery Heavy Oil Upgrading (FCC) Clean Fuels Technologies (HPC) Albemarle provides the global refining industry with a wide range of catalyst solutions to convert crude oil into high value…
HOU: FCC Catalyst Demand Driven by Propylene Growth and Increased Transportation Fuels Demand Gasoline Consumption by Region, bcm Global FCC Catalyst Demand Driven by: 5000 China 4500 Other non-OECD Continuous investment in refining…
CFT: Catalyst Growth Will Be Accelerated by Clean Air Mandates Sulfur Standards per Region Global HPC Demand Growing: 10-15 ppm Substantial global capacity additions in 16-50 ppm refineries for hydroprocessing & hydrocracking 51-350…
Implications of Tight Oil 100% What is Tight Oil LPG 80% Liquid hydrocarbons obtained by hydraulically fracturing shale Naphtha formations; today a NA phenomenon 60% Distillate Typically a light, sweet, paraffinic feed 40%…
Capitalizing on RCS Market Trends Market Driver Innovation Value to Customer Global Fuel Consumption ACTION FCC catalysts Enhances transportation fuels and alky feedstock Raises octane value of gasoline Heavier Crudes UPGRADER FCC…
Performance Catalyst Solutions (PCS) Polymer Catalysts Electronic Materials Organometallics High Purity Metal Organics Single Site Catalysts used in LED, semiconductors and photovoltaic solar panels Ziegler Natta Catalysts…
Polymer Catalyst Market Global Revenues (2013) Projected Growth (2013 2019E) (3.4B) ( in millions) 1.0 16% 5% CAGR = 5.0% Zeigler Natta - PE 0.8 0.7B Single Site CAGR = 5.8% Zeigler Natta PP 0.6 19% CAGR = 5.0% 2.7B…
PCS: Developing Economies Drive Growing Polyolefin Demand Global Ethylene Capacity 450 Consumer trends and feedstock advantages will drive South America 400 regional polyolefin demand and supply Middle East Europe 350 Growing…
PCS: Poised to Capitalize on LED Opportunity Demand for LED lighting is increasing Government mandates being advanced LEDs Asia lighting market growth of 10-14% per year* Capacity expansion has pushed down prices in the High…
PCS: Investments in Future Growth Yeosu, Korea SOCC, Saudi Arabia Single-site catalyst production JV with SABIC State-of-the-art research & First TEA facility in the region operations center Meeting security of supply and Metal…
Performance Catalyst Solutions Technology Portfolio Market Driver Innovation Value to Customer Customers Activcat Single Site Catalyst Enabler of favorable polymer Demanding (SSC) platform economics by lowering the Performance…
Catalyst Solutions: Innovation Is Essential to Our Success Catalyst Solutions New Product Velocity (% of total sales from products introduced in past five years) 60% 59% 58% 56% 50% 50% 49% 40% 39% 37% 30% 20% 10%…
Grow the Core Strategic Pillars VISION: Advance our recognized leadership position in catalyst technologies Breakthrough Manufacturing technology Technology and product technology development development extensions Longer-term…
Catalyst Resources Aligned to Support Growth Amsterdam, The Netherlands St. Jakob/Breitenau, Austria Louvain-la-Neuve, Belgium Nippon Ketjen U.S. - Bayport, TX Safi, Jordan Yeosu, South Korea Tokyo, Japan U.S. - Baton Rouge,…
The Catalyst Innovation Chain Ideation Proof of Concept Research Development Commercialization Understanding Small Scale Commercial Customer Pilot Scale Scale Challenges grams kilograms metric tons Work collaboratively…
Decreasing Time-to-Market for New Technologies HIGH THROUGHPUT EXPERIMENTATION (HTE) High throughput system accelerates development and decreases time-to-market Reactor models and bench scale units are utilized for product testing…
Catalyst Technology Requires a Robust and Highly-Specialized Skill Set HOU CFT PCS Gel Chemistry Specialty Zeolites Washing/Separation Ion Exchange Drying/Calcination Particle Sizing Metals Impregnation Powder Handling Process…
Complex, Highly Engineered Materials Designed at the Atomic and Molecular Level Binder Functional Silica/Alumina x10 70 m Clay x1,000 Transmission Electron Microscopy 200 nm Pores Zeolite Catalyst development involves…
CFT: Catalyst Optimization for Specific Customer Needs THE RIGHT CATALYST FOR THE UNDERSTANDING THE REACTOR RIGHT APPLICATION Time-on-stream 100 hrs Time-on-stream 1000 hrs Log S, N Parameter B High Zone 1 S 2 2 N Low…
PCS: Beyond Organometallics Developing performance-based ActivCat finished catalysts and components High performance SSC for PE and PP production Engineering step-out activators and More efficient activation, significant performance…
Catalyst Solutions: Positioned to Deliver Profitable Growth and Margin Enhancement Hold leading positions in strong markets Deep customer relationships Global footprint Strong partnerships/alliances Broad technology platform to…
2 0 1 4 I N V E S T O R D A Y PERFORMANCE CHEMICALS Matt Juneau Senior Vice President & President, Performance Chemicals Dave Clary CTO & Vice President, Performance Chemicals Research & Technology
Performance Chemicals Overview Fire Safety Solutions Net Sales* ( in millions) Brominated Flame Retardants 1,800 Mineral Flame Retardants 1,600 Specialty Chemicals 1,400 Non-Flame Retardant Bromine Derivatives 1,200 Curatives…
Performance Chemicals Goal and Strategy Our Goal Maintain and strengthen our position as the leading bromine company in the world Fire Safety Solutions Specialty Chemicals Maintain and strengthen industry-leading FR portfolio…
Bromine is Essential to Performance Chemicals Pharma/ Ag Consumer Mercury Electronics Abatement Strong Barriers to Entry for Bromine Recovery is both capital & energy intensive Difficult & expensive to transport Additional…
Strong Core of Bromine & Derivatives with High Value Diverse Bromine and Bromine Delivering Attractive Derivatives Offering High-Value Margins Gross Profit from Bromine-based Products Relative Contribution/Kg Bromine Utilized…
Leading Bromine Sourcing Position Dead Sea Concentrate ALB & ICL 2014 Global Capacity Dead Sea Competitive Arkansas ALB & CHMT Noncompetitive 20% Michigan Closed in 2006 India Concentrate China 80% Seawater UK plant in…
Bromine: Snapshot of Global Capacity, 2009 to 2014 Albemarle has capacity to efficiently meet demand growth China production capacity continues structural decline Remaining producers (except ICL) operating at/near capacity…
Strong Core and Solid Growth Prospects 2.75B Global Market (2013E) Projected 4-6% Growth over Next 5 Years Trend Growth Markets Water Above-Trend Growth Markets Treatment Flame retardants for Other Flame retardants for auto,…
Market Trends: Performance Chemicals Data Processing and Automotive Oilfield Communications Transportation Mercury Abatement Pharmaceutical and Agricultural 58
FR: High Growth in Data Processing and Communications Semiconductor Consumption by Application ( in millions) 400 350 Compelling growth opportunities in: Communication & Mobile Devices: 300 Smartphones, Tablets Computing, Data…
FR: Communication & Mobile Devices Key to Growth Devices Sold (MM) 1000 12 900 10 800 700 Data 8 600 Processing, Communication 500 & 6 Mobile Devices 400 Markets Driving Server Growth 4 300 200 2 100 0 0 2012…
FR: Changing Consumption Pattern in Circuit Board Applications Estimated Circuit Board FR Consumption per Device (weighted by device unit sales) Server Desktop Laptop Tablet + Mobile Phone Source: Management…
FR: Automotive Electronics Becoming Growth Driver Key Drivers Stricter fuel economy and emissions mandates Requirements for advanced safety systems Consumer demand for greater infotainment capabilities Consumer demand for luxury…
Well-positioned to Capitalize on New Demand for FRs Best product portfolio for widest range of electrical and electronic applications across all markets 63
Oilfield Chemicals: Surging Global Exploration & Completions Key Drivers Offshore Gulf of Mexico rig count forecasted to rise from 43 to near 50 by end of 2014, and 60 by end of 2015 International CAPEX growth driven by Middle East…
Bromobutyl Rubber: Mobility & Modernization Driving Growth Key Drivers Recovery in car markets in developed world Higher rates of car ownership in developing world (India, China, etc.) Additional radialisation of the tire market in…
Ag & Pharmaceuticals: Steady Growth with Upside Potential Key Drivers Aging population continues to drive pharmaceuticals demand in U.S., Europe, Japan, etc. Increasing standards of living in developing world impacting both medicine…
Mercury Control: Strength in Major Market Channels Key Drivers EPA MATS standard (2Q 2015) will drive NA growth China is a major long-term opportunity Europe, industrial boilers, cement kilns are add-on opportunities Albemarles…
Specialty Applications: Optimize Bromine Assets & Create Added Value High-growth, attractive markets Etching for semiconductors Water Treatment Food Safety Precision cleaning solvents for electronics & automotive Leverages every…
Historical Evolution of US Bromine Consumption 1970s-1980s 2013 Future 16% 19% 24% 26% 3% 36% 42% 3% 8% 3% 11% 9% 1% 48% 3% 23% 26% Flame Retardants Gas Additives Clear Brine Fluids Water Treatment PTA Methyl…
Bromine: The Wonder Element Unique and versatile combination of properties provides value across a wide range of applications Forms Dense Oxidizes Bulky Stable Metal Radicals Liquid & Affects Creates Oxidizes High Redox…
Creating New Bromine Demand Drivers Addressing Substantial Market Opportunities A Strong and Growing Delivering value by leveraging bromine properties Pipeline of Projects Executable and realistic Uniquely Positioned to Succeed…
The Right Skill Set & Capabilities to Develop New Bromine Businesses Custom Outside Bromine Catalysts Services Collaboration Process Optimization Corrosive/Hazardous Material Handling High Throughput Experimentation Bromination…
Growth Opportunity: Energy Storage Market Key Drivers Increased reliance on distributed solar and wind power generation Micro-grids for commercial and defense applications Backup power for developing nations with rising diesel fuel…
Energy Storage: The Flow Battery Solution Advantages Decoupling of power and storage (allowing long-duration discharge) Less expensive materials: 300/kW vs. 1000/kW for Li-ion Can fully charge/discharge with little electrode damage…
Flow Batteries: Bromines Potential Bromine is well positioned Albemarle is moving quickly Advantages versus other flow-battery chemistries: Developing high-performance electrolytes Bromine is liquid at standard conditions Providing…
Growth Opportunity: Gold Recovery Bromine offers a sustainable, effective alternative to cyanide in gold recovery Key Drivers Environmental pressure on existing cyanide technology Better performance for some types of gold ore…
Performance Chemicals: Leading the Way in Bromine Committed to delivering: Industry-leading segment margins and profitability 20+% ROCE Revenue growth of 4-6% World-class Health, Safety & Environmental performance Through intense…
2 0 1 4 I N V E S T O R D A Y FINANCIAL PERFORMANCE & OUTLOOK Scott Tozier Senior Vice President & Chief Financial Officer
Our Financial Priorities Invest in core to drive innovation and organic growth Focus on return on capital employed Capital Returns Sustainable working capital reductions Disciplined merger and acquisition strategy…
Return on Capital Employed Recent Trend Reflects Major Investments 30% Portfolio Actions & Improved Asset Utilization to Drive Improvement 26% 25% 25% 23% 20% 20% 16% 19% 15% 16% 15% 15% 14% 14% 16% 13% 14% 12% 10% 14% 9%…
Working Capital: Substantial Cash Flow Opportunity Days Inventory Outstanding Days Sales Outstanding Days Payable Outstanding 165M potential 27M potential 88M potential 94 impact impact impact 65 62 57 57 59 53 46 37…
Improve Working Capital: Transforming the Supply Chain Assessing every part of supply chain to Delivery identify overlaps and opportunities Excellence Significant opportunity to deliver working capital improvement Operations…
Disciplined Mergers and Acquisitions Consistent with our strategy Strengthen and grow catalysts Expand uses for bromine Technological synergies Market leaders Attractive industry structure Creates stronger free cash flow…
Strong Record of Returning Capital to Shareholders Total Return of Capital ( millions) 660 Disciplined Capital Allocation Dividends Share Repurchases Major bromine and catalysts capacity expansions largely complete 236 234+*…
Continued Disciplined Approach to Capital Allocation 2004-2013 Outlook ( in millions) Committed to continued dividend growth CAPEX in the range of 4% of sales 1.2B 1.6B Working capital reduction of 100M by 2015 Disciplined…
Financial Outlook Operating Revenue 2013 Segment Segment Margin Growth and Profitability Drivers Segment Growth Targets Margin* Target Improved asset utilization Catalyst High incremental margins 1.0x - 2.0x GDP 22% 24% - 27%…
Albemarle: Compelling Investment Opportunity History of industry-leading returns to shareholders Global leader in attractive markets: catalysts and bromine Differentiated, performance-based core technologies driving innovative…
Albemarle is Positioned to Succeed People Products R&D Financials Experienced Constantly Investing in the Outstanding profit leadership with innovating future margins incentives aligned Strong cash flow Performance-based 2,400…
Tomorrows Agenda Depart for Plant Welcome/Safety Review Plant Tour Texas BBQ Closing Remarks 91
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