TWST: What is Albemarle Corporation?
Mr. Diemer: Albemarle Corporation is a provider of specialty chemicals that go into producing products that you would use every day - catalysts that produce gasoline, flame retardants that protect your home and office from fire, and pharmaceutical and agricultural fine chemicals. At its roots are an innovative technology base and a customer-focused service model. The technology comes from significant investments over the past 15 years. Our company was a spinoff in the early 1990s from what at that time was Ethyl Corporation and today is known as NewMarket Corporation. In the specialty chemical area, we have three business segments, each of which has very strong product portfolios. The three segments are Polymer Additives, Catalysts and Fine Chemicals. One of our foundation chemistries is bromine based. Bromine is found all around the world. It is found in sea water at low concentration but in economically exploitable concentrations only in Arkansas and in the Dead Sea. We are the only company in the world that has access to bromine in both of those locations. That is what makes us quite unique.
TWST: If we were speaking 12 months ago, what would have been the goals and priorities for Albemarle? Give us a report card. How has the company fared over the past year?
Mr. Diemer: Twelve months ago, we were in the early stages of digesting and integrating a significant acquisition that we completed to make our Catalysts business a third leg of the company. In August 2004, we acquired the Akzo Nobel Refinery Catalysts business and, in doing so, took on a significant amount of debt. We did a secondary offering in early 2005 at $16. In the last 12 months, we had a major goal of paying down a significant portion of that debt, which we have accomplished. We have established the Catalysts business as a formidable portion of the corporation. Even a tough grader would give us an "A" grade for our strategic acquisition and subsequent execution. At the same time, we have driven each of our businesses to better realize the value that our products bring to our customers. So we've had a big emphasis on new technology and improving profitability and returns. We have also completed a major restructuring in our Fine Chemicals business segment. We made significant progress in that last year, and now we have that Fine Chemicals business delivering margins higher than our corporate margin goal.
TWST: What are the priorities for the company? What would make the next 12 months a success?
Mr. Diemer: Each of our businesses has a unique business cycle. One thing that has been fueling our top-line growth for the last couple of years, besides staying on top of raw material inflation, has been surging demand for our refinery catalysts. That has been driven by increasingly stringent regulations and by the increase in global demand for oil. That demand is also causing refineries and oil companies to use and refine more sour crudes, and that dynamic leads to an increased use of catalysts. The more sour the crude, the more catalysts you need to remove impurities like sulfur. Because we don't have the same level of new regulations in 2007 and because many of the refineries were forced to refresh our catalysts to meet those new requirements in 2006, this is a flat year volume-wise in terms of our HPC catalysts. We see increased catalyst volumes again in 2008 and 2009. Currently, we estimate there is a dime of catalysts in each barrel of oil, and we don't see that as being reflective of the value that catalyst brings to the end user equation here. So we are very much focused on improving the value equation and we are preparing for the next step up in catalyst use - which we expect will be in the 2008 and the 2009 period - by adding HPC capacity in Bayport Texas Another type of catalyst that we produce is called FCC catalysts - Fluid Cracking Catalysts. There has been a long period where there were poor returns in this business. As the supply and demand equation tightens, we think there is opportunity to increase pricing and to realize a more appropriate return. In Fine Chemicals, it's all about top-grading our portfolio and harvesting our new product pipeline to improve profitability. In our Polymer Additives business, we are emphasizing realizing the value in use of our products. One major area where our Polymer Additives are used is in flame retardancy. As there are better regulations around the world to promote flame retardancy, we expect there will be good demand for our products in that end use.
TWST: What compels investors to include ALB as part of their current portfolios and longer-term investment strategies?
Mr. Diemer: We have grown by leveraging our technology and our ability to identify and provide solutions for challenges that our customers face. Our growth in the future will be much more driven by emerging economies and the future needs of those emerging economies, so that the so-called BRIC countries, especially China, India and Russia, will be very key to us in the future. We feel we need to be good corporate citizens and have a sustainable corporate model, because as a chemicals company, people like chemistry, but they don't like chemicals. Our mantra is in doing what we can to satisfy problems that our customers have. We don't want to leave any sort of a footprint, because that's not sustainable. We want to provide clean energy, food and materials for today and for the world of tomorrow. It's about creating new, environmentally sensitive polymer additives and fuel additives and furthering our Fine Chemicals service model. All those things have us well positioned to make 2007 a very successful year, before moving to the next level in the 2008 and 2009 period.
ALB 1-yr chart