Slide 1: Albemarle To Acquire Akzo Refinery Catalysts
Albemarle To Acquire Akzo Refinery Catalysts A New Global Chemicals Leader Emerges Mark C. Rohr, President & CEO May 4, 2004 Chicago
Slide 2: Caution Statement
Caution Statement Some of the information presented in the pages of this presentation constitutes forward-looking comments within the meaning of the Private Securities Litigation Reform Act of 1995. Although Albemarle Corporation believes its expectations are based on reasonable assumptions within t
Slide 3: Today's Objectives
Today’s Objectives • Describe Albemarle’s background • Present the strategy driving our growth • Discuss the rationale for the acquisition & related financing plan • Describe our ability to execute in a changing environment • Provide a detailed review of our business • Provide insight into our finan
Slide 4: Albemarle-Akzo Refinery Catalysts
Albemarle-Akzo Refinery Catalysts • To acquire refinery catalyst business of Akzo Nobel • Cash purchase consideration—~ $750 million • 8.9x Akzo’s 2003 EBITDA of $84 million, including JV’s • Closing in 2nd Quarter • Financing—refinance: •$ 300 million 5-year Revolver •$ 400 million 5-year amortizin
Slide 5: Akzo Nobel Catalysts Revenue
Albemarle-Akzo Refinery Catalysts Akzo Nobel Catalysts – 2003 Revenue Excluding Joint Venture Revenues $406 million FCC 53% Specialty 9% HPC 38% Including Joint Venture Revenues $571 million FCC 46% Specialty 6% HPC 48% * Based on exchange rate $1.17/€ Akzo sales information from Dutch GAAP statemen
Slide 6: Albemarle-Akzo Refinery Catalysts
Albemarle-Akzo Refinery Catalysts • Significantly broadens portfolio—specialty chemicals/service solutions • Current $80MM catalyst business + Akzo’s = strong third segment 2003 Albemarle Fine Chem 43% Polymer Cat/Add 57% Total Sales $1.1B 2004 Albemarle Estimate Refinery Cat/Add 37% Polymer Cat/Add
Slide 7: Specialty Chemical Position
Specialty Chemical Position Pro-Forma Albemarle Net Sales—2003 EBITDA Margin %—2003 * Lubrizol has announced its acquisition of Noveon – Source FactSet, as of April 17, 2004
Slide 8: Overview of Albemarle Corporation
Overview of Albemarle Corporation A New Global Chemicals Leader Emerges
Slide 9: Albemarle History
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
Slide 10: Forbes Best Big Companies 2004
Forbes 400 Best Big Companies 2004 • Top-10 Performance in 5-Year Average Return on Capital Praxair Ecolab Airgas Cabot Sigma—Aldrich Albemarle Engelhard S&P500 Cytec Valspar PPG • Top-10 Performance in 12-Month Return on Capital • Top-10 Performance 5-Year Average Sales Growth • Top-10 Performance
Slide 11: Current Business Segments
Current Business Segments Polymer Chemicals • Flame Retardants • Polyolefin Catalysts • Other Polymer Additives – Net Sales $629.9 million (2003) – Operating $ 70.3 million Profit (2003) Fine Chemicals • Pharmaceuticals & Agrichemicals • Fine Chemistry Services • Bromine, Bromine Derivatives and Spe
Slide 12: Flame Retardants and Market Leadership
Flame Retardants Catalysts Ag Pharma Additives Performance Chemicals Technology Relationships Innovation Bromine Process Development Aluminum Alkyls #1 Producer of Bromine-based Flame Retardants #1 Producer of Mineral Flame Retardants #1 Producer of Alkyl-based polyolefin catalysts #1 Producer of Me
Slide 13: Key Markets
Key Markets • Diversity – Balance Across Markets • Strategic Account Management – Work With Winners • World Market Knowledge – Direct Sales and Other Effective Channels • Portfolio improvements fit focus 46% 35% 19% Markets Served Growth Rate Construction 15% 5% Carpet /Fabric, Roofing, Insulation,
Slide 14: Albemarle's Global Reach
Albemarle’s Global Reach Bergheim, Germany Teesport, UK Avonmouth, UK Louvain-la-Neuve, Belgium St. Jakob/Breitenau, Austria (JV) Seoul, Korea Beijing, China Shanghai, China Tokyo, Japan Takaishi City, Osaka, Japan, (NAA JV) Ninghai County, Zhejiang Province, China Jin Shan District, Shanghai, China
Slide 15: Albemarle Strategic Overview
Albemarle Strategic Overview • Specialty Chemicals experience natural rotation through market maturity and technology innovation • Winners successfully manage rotation by providing innovative solutions of tangible value to their customers • Opportunities Identification: Innovate, Acquire, Integrate
Slide 16: Smart Execution Yields Growth
Smart Execution Yields Growth 27% of 2003 Revenue from Recent Acquisitions Tender Offer For A&W; Created Cash Gain Formed Jordan Br Co; Started Project for ‘02 Startup Acquired Ferro BrPS FR Bus Took ownership In Jinhai Polymer & Expanded 2X Acquired Martinswerk—Largest mineral-based Global FR Busin
Slide 17: General Business Overview
General Business Overview A New Global Chemicals Leader Emerges
Slide 18: Fine Chemicals
Fine Chemicals A New Global Chemicals Leader Emerges
Slide 19: Fine Chemicals
Fine Chemicals Life Sciences 40% of FC Sales Maximize Value Of Our 4 Actives Serve Market w/ Broad FCSI Capabilities: • Intermediates • Contract Research • Custom Manufacture Industrial Specialties 25% of FC Sales Manage for Cash Bromine Chemicals 35% of FC Sales #1 Bromine Company In The World
Slide 20: World-Class Bromine Position
World-Class Bromine Position Other 14% Pharma 3% Water Treatment 7% Ag 12% CCF 24% Flame Retardants 40% Albemarle’s production capturing market growth with premier, low cost domestic reserves and augmented by new production on the Dead Sea through joint venture Jordan Bromine Company Bromine-Industr
Slide 21: Fine Chemistry Services Successes
Fine Chemistry Services Successes Pre-Clinical Phase Phase II Phase III Patent Protected Generic 85 products in pipeline Inquiries for Custom Production Quotes
Slide 22: Fine Chemistry Services Model
Fine Chemistry Services Model Customer Needs & Opportunities Fine Chemistry Services & Intermediates 45% Ag ALB Intermediates Custom Mfr Contract Research 15% Other Markets Personal Care Photo Chems Flavors / Fragrances Etc. 45% Pharma ALB Intermediates Custom Mfr Contract Research ALB Actives Methy
Slide 23: Life Sciences
Life Sciences – Pharmaceutical and Agrichemicals Strengths • Competitive Situation • #1 in Aniline-Based Intermediates • Fine Chemistry Services and Intermediates Provides Contract Research Strength • Market Situation • Outsourcing Continues • Strong Competition from off-shore • Excess Capacity • Ou
Slide 24: Fine Chemicals Revenue Flat Year-to-Year
Fine Chemicals Revenue Flat Year-to-Year Revenue $MM 26.5 Bromine Atofina Fine Chem FCS Other (16.5) Ag (35) Zeolites 2004E
Slide 25: Polymer Chemicals
Polymer Chemicals A New Global Chemicals Leader Emerges
Slide 26: Polymer Chemicals Today
Polymer Chemicals Today FR $400MM Cat & Add $230MM Polymer Chemicals Sales – 2003 Who We Are • 2003 Sales – $630 million • 22% Av. Gross Margin • International Sales—Approx. 60% • Leading market positions in BRFR, min. FR, AA, Single Site Catalysis, AOX 330 • Success built on innovation, strong cust
Slide 27: Polymer Chemicals Growth 2004
Polymer Chemicals Growth 2004 Revenue $MM Flame Retardants Additives Catalysts >750 2004E Expect Sales Growth Across All Polymer Chem Business Units • Major Drivers to Hit 2004 _ New Product rollout _ Polymer volume growth in FRs _ Full year of Polyurethane FRs HP3010, BEM, & New Lube Antioxidants _
Slide 28: Successful Polymer Acquisition
Profile: Successful Polymer Acquisition <$35 million Cash Purchase Price + Assumed Liabilities Net Sales Op Profit Index Index 2002 Index Year 100 100 2003 120 143 2004 Estimate 142 204 Reason for success: • Globalization of sales • Diversified FR portfolio • Cost reductions offset raw materials inf
Slide 29: Flame Retardant Market
Flame Retardant Market Market Size: $2.4 billion Phosphorus 29% Antimony 8% Bromine 36% Other 10% Mineral 17% Key FR Chemistries Leadership • # 1 Brominated FR Marketer In World • # 1 Mineral FR Marketer In World • # 2/3 Phosphorus FR Marketer in World Innovations In 1990’s • Stream Of Successful Ne
Slide 30: Historic and Future Catalyst and Additive Strength
Historic and Future Catalyst and Additive Strength • Competitive Position • #1 Organometallic Co-Catalysts • #1 Metallocene Co-Catalysts • Process Technology and global footprint • Developing PO SS Catalyst Systems • Niche Technology Player in Additives and intermediates • Market Situation • Polyole
Slide 31: Polymer Additive Objectives
Polymer Additive Objectives •$ 1.0 billion by 2008 • Expand into Asia: Manufacturing & Marketing: PFR & Mineral FR • Acquire flame retardants for textiles and coatings • New products: polyurethane, nylon (high flow), enclosures, printed wiring board (high flow), HBCD and pentabrom alternatives • Ant
Slide 32: Consolidated Current Albemarle
Consolidated Current Albemarle A New Global Chemicals Leader Emerges
Slide 33: Innovation Momentum
Innovation Momentum 1998 1999 2000 2001 2002 2003 2004 E New Products 1st Year Sales
Slide 34: Revenue
Revenue ($ in milliions) $846 397 449 1999 $918 417 501 2000 $942 463 479 2001 $1,008 456 552 2002 $1,110 480 630 2003 $1,250+ 2004 E Polymer Chem Fine Chem * Total Revenue includes Corp Unallocated – Not Graphed **Freight has been removed from the Net Sales calculation to total distribution and fre
Slide 35: Akzo Catalysts Overview
Akzo Catalysts Overview A New Global Chemicals Leader Emerges
Slide 36: The Market for Catalysts
The Market for Catalysts 2002 Global Catalyst Market ($10 billion) Environmental 27% Polymers 22% Petrochemicals 20% Petroleum refining 21% Fine chemicals and intermediates 10%
Slide 37: Our Primary Market: Petroleum Refining
Our Primary Market: Petroleum Refining 2002 Petroleum Refining Catalyst Market ($2.1 billion) Reforming catalyst $120 million Other $400 million FCC Catalyst $800 million FCC additives $105 million Hydroprocessing Catalyst $660 million
Slide 38: Refining – Two Basic Functions
Refining – Two Basic Functions Petroleum refining Objective Clean Remove impurities from crude oil and other petroleum streams/products Product slate Allows refiners to produce a desired product mix from crude oil Examples of key processes HPC pretreatment HPC post-treatment Resid hydrotreating Flui
Slide 39: Tighter Fuel Quality Specifications
Tighter Fuel Quality Specifications Gasoline Sulfur Specifications (wt ppm) Europe Japan USA Diesel Sulfur Specifications (wt ppm) Europe Japan USA Source: Oil and Gas Journal
Slide 40: Tightening Specifications Will Drive Expansion of Hydrotreating Capacity
Tightening Specifications Will Drive Expansion of Hydrotreating Capacity “The projected desulfurization expansion requirements are unprecedented in the history of the worldwide refining industry” Hart Downstream Energy Services – World Fuels and Refining Analysis 2002 Global Hydrotreating Capacity (
Slide 41: Supplied by Petroleum Refineries: our Primary Customer
…Supplied by Petroleum Refineries: our Primary Customer Global Crude Oil Demand (1985–2015) units Actual Estimated Source: Hart analysis and forecast based on EIA data
Slide 42: Manufacturing
Manufacturing Pasadena, TX, USA Capacity (tonnes) FCC: 72,000 HPC: 7,000 Capacity (tonnes) FCC: 50,000 HPC: 13,000 Amsterdam, The Netherlands
Slide 43: Joint Ventures – Strategic Advantage in a Global Market
Joint Ventures – Strategic Advantage in a Global Market Capacity: 10,000 HPC t/yr Capacity: 32,500 FCC t/yr • Leverages technology and R&D – single global program • Extends the reach of our business • Provides regional advantage – knowledge of local industry culture, market needs and regulatory envi
Slide 44: Fluidized Catalytic Cracking – FCC
Fluidized Catalytic Cracking – FCC • 445 FCC units worldwide • Primary conversion unit for many refineries • Cracks heavy oil fractions into lighter, more valuable products • Major contributor to the refinery gasoline pool • Continuous catalyst addition • Technical service is key
Slide 45: HPC Business
HPC Business • More than 2,000 units worldwide • Batch process – typical cycle length, 1 to 2 years • Unit taken out of service during catalyst change • Catalyst loading tailored to individual units • Joint venture support
Slide 46: Competing Strongly for the Overall Number One Position
Competing Strongly for the Overall Number One Position € million Petroleum Refining Catalyst Suppliers – 2002 Revenues Isomerization Reforming FCC additives HPC/HC sales FCC catalyst
Slide 47: Strong Market Share in Two Main Businesses
Strong Market Share in Two Main Businesses 2002 Global Hydroprocessing Catalyst Revenues ($700 million) Other 25% Criterion 25% Grace/ART 18% Akzo Nobel/NK 32% 2002 Global FCC Catalyst Revenues ($900 million) CCIC 5% Chinese suppliers (2) 13% Engelhard 20% Akzo Nobel FCC-SA 27% Grace 35%
Slide 48: Global Assets and Resources
Global Assets and Resources Houston, USA Pasadena, USA Amsterdam, Netherlands Amersfoort, Netherlands La Voulte, France (Eurecat JV) Santa Cruz, Brazil (FCC-SA JV) Singapore Niihama, Japan (Nippon Ketjen JV) Headquarters Research and development facility* Catalyst services Regional marketing centre
Slide 49: Commitment to Technology
Commitment to Technology • 5–6% of sales revenue allocated to R&D • 168 R&D personnel (total employees 827) • Technology integral to sales and marketing • Global R&D network aligned with manufacturing and marketing • FCC – Amsterdam, Pasadena, Brazil (Petrobras) • HPC – Amsterdam, Japan (Nippon Ketj
Slide 50: Product and Process Innovation
Product and Process Innovation • 20 new patents filed in 2001 and 2002 • 1,000 patents and applications filed worldwide • 31 know-how packages completed in 2001/2002 • Over 40% of revenues are generated by products introduced in the last five years • Next generation products ready to leave the devel
Slide 51: Generations of Hydroprocessing Technology
Generations of Hydroprocessing Technology: “Three S-Curves” Nebula STARS Traditional catalysts 1950 1960 1970 1980 1990 2000 2010 Year
Slide 52: Albemarle's New Business
Albemarle’s New Business A New Global Chemicals Leader Emerges
Slide 53: The New ALB Catalyst Opportunities
The New ALB Catalyst Opportunities Essential to Global Markets $10 Billion Catalyst Industry • 3—5% industry growth annually •$ 200 to $300 million annual growth opportunity • Refinery Catalysts grew at about 4% annually over the last 4 years Environmental 27% Chemical 20% Akzo Strength Refinery 21%
Slide 54: Global Customer Support and Technical Service
Global Customer Support and Technical Service Bergheim, Germany Teesport, UK Avonmouth, UK Tyrone, PA, USA Amsterdam, The Netherlands Louvain-la-Neuve, Belgium St. Jakob/Breitenau, Austria (JV) Seoul, Korea Beijing, China Shanghai, China Tokyo, Japan Takaishi City, Osaka, Japan, (NAA JV) Niihama, Ja
Slide 55: Technology Overlap
Technology Overlap – Catalysts, Additives & Fine Chemicals Resources Albemarle • 239 Employees • 83 PhDs (34.7%) Yields: • #1 flame retardant company • #1 analgesic producer –ibuprofen • #2 bromine and derivatives • #1 metallocene catalysts • Active New Product Portfolio Technology Leverage • Alumin
Slide 56: Balanced, Technology-Based Portfolio
Balanced, Technology-Based Portfolio: “Top-Tier” Performance Status Additives 37% • Bromine integration • #1 or #2 positions in major flame retardant chemistries • Additives niches • Global scope and reputation Fine Chemicals 26% • Bromine Franchise • >$200 million in life sciences • New product pip
Slide 57: Key Growth Drivers
Key Growth Drivers “Top-Tier” Performance Status Polymer Additives $10 billion market Fire Safety Standards Consumer Electronics Specialty Polymers $200 million Market Growth ALB-Akzo/Yr. Fine Chemicals $40 billion market Pharmaceutical Innovators Bromine Franchise Generic Pharma & Ag Chemicals Cata
Slide 58: Timetable for Success
Timetable for Success First 3 Months • Receive credit ratings • Works Council advice • Regulatory approval • Close in second quarter • Plan transition (underway) 3 Months to 12 months • Focus on Customer, Technical Service • Form new Catalyst Division • Issue equity and senior notes • Capture synerg
Slide 59: Synergy Focus
Synergy Focus ($ in millions) Near Term Scope Raw material synergy $3 Self produce select intermediates 1 Information system / SAP 1 Fuel antioxidant volume growth 2 EMA site rationalization 2 Americas site rationalization 1 Manufacturing Manpower 5 $ 15 Near-term synergies assumed to be $5 million
Slide 60: Transition Team
Transition Team Transition Committee • J. Steitz, SVP Operations • R. Hurley, Pres., Akzo Catalysts • J. Harsh, VP Alliance Services • P. Rocheleau, SVP & CFO • L. Kissam, IV, VP & General Counsel • G. Newbill, SVP Manufacturing Transition Oversight Opportunistic Synergy Identification Steering Comm
Slide 61: Summary: ALB & Akzo Catalysts
Summary: ALB & Akzo Catalysts • Creating 3rd segment and expanding foundation Catalysis Technology • Favorable business attributes: Sustainable, high margin Strong share in growing markets Technology-driven, with excellent global footprint High quality management and R&D Global energy demand – regul
Slide 62: ALB's Stable Operating Cash Flow
ALB’s Stable Operating Cash Flow • EBITDA – earnings before interest, taxes, depreciation and amortization – reconciliation on www.albemarle.com Investor Information
Slide 63: Acquisition Financing
Acquisition Financing $1.2 Billion Commitment Investment Grade Target Term A with Bridge REVOLVER $300 M TERM A $400 M BRIDGE $500 M 12 Month Protection Combination of debt and equity Libor + 100 bps area Plus Standby Fee 2.5% All-In Libor + 100 bps area • Unsecured • Key Covenants: Debt / Capital &
Slide 64: Creating Value in the Chemicals Sector
Creating Value in the Chemicals Sector • Technology breadth, geographic profile, and discipline provides the framework to capture and create value • Portfolio generates high EBITDA margins over a sustained period of time. Historically, “excess” cash flow for share repurchase and acquisitions creates