Investor Presentation KeyBanc Basic Materials Conference
Transcript of Investor Presentation KeyBanc Basic Materials Conference
Investor Presentation
KeyBanc Basic Materials Conference
September 11, 2013
Tony Parnell, Vice President, Global Sales & Supply ChainScott Tozier, Senior Vice President, Chief Financial Officer
Lorin Crenshaw, Director, Investor Relations
Forward-Looking Statements
Some of the information presented in this presentation and discussions that follow, including, without limitation,
statements with respect to product development, changes in productivity, market trends, price, volume and mix
changes, expected growth and earnings, input costs, surcharges, tax rates, stock repurchases, dividends, economic
trends, outlook and all other information relating to matters that are not historical facts may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of 1995. There can be no assurance that
actual results will not differ materially.
Factors that could cause actual results to differ materially include, without limitation: changes in economic and
business conditions; changes in financial and operating performance of our major customers, industries and markets
served by us; the timing of orders received from customers; the gain or loss of significant customers; competition from
other manufacturers; changes in the demand for our products; limitations or prohibitions on the manufacture and sale
of our products; availability of raw materials; changes in the cost of raw materials and energy, and our ability to pass
through such increases; acquisitions and divestitures, and changes in performance of acquired companies; changes in
our markets in general; fluctuations in foreign currencies; changes in laws and government regulation impacting our
operations or our products; the occurrence of claims or litigation; the occurrence of natural disasters; the inability to
maintain current levels of product or premises liability insurance or the denial of such coverage; political unrest
affecting the global economy, including adverse effects from terrorism or hostilities; political instability affecting our
manufacturing operations or joint ventures; changes in accounting standards; the inability to achieve results from our
global manufacturing cost reduction initiatives as well as our ongoing continuous improvement and rationalization
programs; changes in the jurisdictional mix of our earnings and changes in tax laws and rates; changes in monetary
policies, inflation or interest rates that may impact our ability to raise capital or increase our cost of funds, impact the
performance of our pension fund investments and increase our pension expense and funding obligations; volatility and
substantial uncertainties in the debt and equity markets; technology or intellectual property infringement, including
cyber security breaches, and other innovation risks; decisions we may make in the future; and the other factors detailed
from time to time in the reports we file with the SEC, including those described under “Risk Factors” in our Annual
Report on Form 10-K and Quarterly Reports on Form 10-Q.
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North
America
40%
W. Europe
20%
ROW
40%
Strong Positions in High Margin Businesses
Catalysts
• Leading supplier of top performance
catalysts and related services to the oil
refining and plastics industries
Bromine Derivatives
• Leading supplier of fire safety solutions
• Completion fluids, crop protection,
pollution control and food safety
• Robust bromine sourcing platform
Custom Manufacturing
• Leading custom mfr. within targeted ag,
renewable chemistry, specialty pharma
and electronic materials markets
(TT
M %
of
sale
s a
s o
f 2
Q1
3)
Competitively advantaged portfolio with strong leadership team, attractive growth
opportunities and customers that value performance-based technologies
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Fine
Chemistry
29%
Polymer
Solutions
32%
Catalysts
39%
63%
37%
Fine Chemistry
North
America
53%
ROW
30%
W. Europe
17%
Performance
Chemicals
Fine Chemistry
Services
2Q13 TTM Financial Summary
Sales: $0.75B
Segment Income: $0.15B
Segment Margin: 19%
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(TT
M %
of
sale
s a
s o
f 2
Q1
3)
Growth Drivers
• Resource Management
• Energy demand and increased deep water
spending driving completion fluids
• Clean air drives in developing markets
bolstering mercury control
• Population Growth & Rising Middle Class
• Aging populace supports APIs
• Higher protein diets will trigger improved food
safety standards
• Increased demand for ag actives and
intermediates to improve yields and efficiency
• Demand for rapid process R&D and
commercialization services
Competitive Advantages
• Technology / Product performance
• Access to robust bromine sourcing platform
• Speed to market
• Long history of performance and reliability
• Trade secrets related to bromine derivatives
China
Relative
Production
Capacity
(Total: ~675K MT)
Excellent Global Bromine Sourcing Position
0 2000 4000 6000 8000 10000
Dead Sea
Arkansas
India
China
Sea Water
ppm bromine
60-70 ppm
150-200 ppm
5000-6000 ppm
>10,000 ppm
Magnolia, AR
Safi, Jordan
Shandong, China
Gujarat, India
1500- 2500 ppm
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73%
27%
Polymer Solutions
North
America
32% ROW
44%
W. Europe
24%
Fire Safety
Stabilizers &
Curatives
2Q13 TTM Financial Summary
Sales: $0.86B
Segment Income: $0.17B
Segment Margin: 20%
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(TT
M %
of
sale
s a
s o
f 2
Q1
3)
Growth Drivers
• Consumerism
• Rising global wealth driving demand for consumer
electronics, automotives and construction
• Prospect of fire safety standards in BRICs
• Technology
• Surging data traffic requires high-end servers
• Resource Management
• Demand for eco-friendly products
• Energy-driven insulation demand
Competitive Advantages
• Technology / Product performance
• Access to robust bromine sourcing platform
• Track record of reliable, safe, high-performing
products
• Trade secrets related to bromine derivatives
23%
77%
Catalysts
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2Q13 TTM Financial Summary
Sales: $1.01B
Segment Income: $0.25B
Segment Margin: 25%
North
America
37% ROW
44%
W. Europe
19%
Refinery
Catalysts
Performance Catalyst
Solutions
(TT
M %
of
sale
s a
s o
f 2
Q1
3)
• Resource Management
• More stringent air quality mandates being
implemented globally
• Population Growth & Rising Middle Class
• Rising fuel consumption in developing economies
• Rising per capita plastics consumption
• Infrastructure spending
• Technology
• High purity metal organics for LED market
• Prospective PE/PP capacity additions in NA
Growth Drivers
Competitive Advantages
• Technology / Product performance
• History of innovation and new investments
• Technical Service / Customer knowledge
• Complex chemistry & materials handling
• Structurally advantaged cost position (TMA)
• Trade Secrets / Patents
20132005
Forces of Globalization & Mega Trends Play to our Strengths
North
America 40%
W. Europe
20%
ROW
40%
(TT
M %
of
sale
s a
s o
f 2
Q1
3)
North
America 43%
W. Europe
32%
ROW
25%
Mega Trends and Strategic Investments Expected to Continue
Shifting Revenue Toward Faster-Growing Markets
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Asia: Organization in Place to Support Growth in Highly
Complex Market
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Meaningful critical mass
Local distributors key
channel to market
$342 Million
2005
Over 500 people focused
on building Asia
4 key manufacturing
assets
Opened first office in
Shanghai
$590 Million
2010Dramatic expansion (Korea
and China) advances
plastics and electronics
market positions
New HQ will expand and
better integrate sales,
business, R&D and tech
service efforts
Establishing robust supply
chain infrastructure to
serve and deliver
Satellite offices in Beijing
& Guangzhou
$637 Million
2013 8% CAGR
2005 - 2013
(Revenue in millions)
2013 revenue reflects TTM through 6/30/13
Middle East & India: Huge Growth Opportunities in
Supporting Downstream Integration
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$34 Million
2005
Regional office in Dubai to
service Arabian Gulf & India
Dramatic growth to support
refining shift
Established Saudi JV to
support petrochemical
growth
Gulf begins to establish
broader petrochemicals base
$171 Million
2010 Saudi JV operational;
drives leadership in
organometallics to meet
growing regional demand
and supply security needs
Strategic expansion of
bromine sourcing
platform complete
(Jordan)
Doubled size of Dubai
office
$241 Million
2013 28% CAGR
2005 – 2013
(Revenue in millions)
2013 revenue reflects TTM through 6/30/13
Sales handled remotely
from Europe
World-class Jordan
bromine base established
Latin America: Opportunity for Refinery Catalysts
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FCCSA joint venture with
Petrobras
$21 Million
2005
Established critical mass of
employee base
Miami office base
$56 Million
2010Brazil office creates
regional hub and platform
for growth
Increased technology
exchange/ collaboration
with Petrobras
Development of new core
business in region
Well-positioned to support
the eventual exploration
and production of reserves
$76 Million
2013 18% CAGR
2005 - 2013
(Revenue in millions)
2013 revenue reflects TTM through 6/30/13
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FCC: Performance-Based Sale with Tremendous Value in Use
Value Drivers:
• Crude Slate (today favors
ALB technology)
• Maximize Diesel Yield
• Maximize Propylene Yield
• Maximize Gasoline Yield
• Octane Enhancement
FCC Cost Per Barrel of Crude Refined: Minimal
Value
Per Unit
Cost Per Unit
Exceptional Value Proposition
Estimated 5 to 10x Return on Catalyst Investment by the Customer
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Bromine Value Creation
Value Drivers:
• Few Economic Product
Substitutes
• Excellent Adhesion to Rubber
• Minimal Air Permeability
• Fast Cure Rate = Maximum Throughput
Cost Per Radial Tire Manufactured: ~$0.015
Value
Per Unit
Cost Per Unit
Another Example of a Niche Specialty Chemical Value Play
Albemarle Sales Force: Diverse, Trained, Connected
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Multi-Cultural Experienced
Sales force has an average of 20 years
of specialty chemical experience
~60% of sales force has experience in multiple product
markets
Highly Trained
94% of sales force holds a college
degree
All are graduates of ALB Negotiation
Training
Asia
31%
EU & ME
37%
Americas
32%
Pension
$0.2
M&A
$0.03
Share
Buyback
$0.8 CAPEX
$0.7
Dividends
$0.2
Disciplined Capital Allocation
• Cash from operations of $500 - 550M
• CAPEX around $175M
• Strategic M&A
• Maintain investment grade credit rating
• 20% dividend increase in 1Q13
• Expect to buyback 10% of shares by year end
• No pension contributions in 2013
• Working capital target of 20% of sales
($ in billions)
2013 Outlook
Capital Allocation (2010 – Q2 2013)
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Targeting 1.0x Leverage Ratio (Net Debt-to-EBITDA)
www.albemarle.com
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