Delivering Today to Create a Better Tomorrow 2011 CEO Review 2011 CEO REVIEW There’s No Time Like the Present. In 2010, Albemarle developed a five-year plan to double its business through growth within core and adjacent markets. In 2011—year one of our Vision 2015 strategy—the company took an excellent first step toward meeting the challenge. Record sales and annual earnings. New markets and products. Multiple industry awards, 239 new patents and a constant eye on sustainable, conscientious growth. In the midst of a challenging economy and operating environment, we had both our best financial year ever and our safest year ever. All possible because in a culture built on innovation, collaboration and performance, creating a better tomorrow Globalization starts with delivering today. ($2,869 million net sales) 40% 38% About Albemarle Albemarle Corporation is a leading global developer, manufacturer and 22% marketer of highly engineered specialty chemicals for a wide range of markets, including petroleum refining, consumer electronics, plastics, crop North America protection, construction, automotive, pharmaceuticals, food safety and Western Europe Rest of World custom chemistry services. Our products and services create value for our customers by improving product performance, providing essential product attributes, lowering costs and simplifying processes. Segments ($2,869 million net sales) Headquartered in Baton Rouge, Louisiana, Albemarle employs more than 4,000 people worldwide and serves customers in approximately 100 countries through three business segments: Polymer Solutions, Catalysts and Fine Chemistry. Through its innovation-driven culture and 26% 35% growth-focused strategies, the company is committed to delivering exceptional performance that creates a better tomorrow for all of our stakeholders. 39% To view the 2011 Annual Report on Form 10-K and 2011 Corporate Sustainability Report, visit www.albemarle.com. Polymer Solutions Catalysts Fine Chemistry To Our Shareholders: Albemarle’s success is a result of our ability to understand the evolving needs of our customers, develop innovative, responsible solutions to meet those needs and quickly bring those solutions to market. Vision 2015, a five-year plan to double the size of our business, is predicated upon our ability to leverage these core strengths to drive organic growth and expand into adjacent markets. 2011 was a great first step toward Vision 2015. 2011 results were impressive by any measure. Revenue increased by 21% over 2010 to $2.9 billion and earnings increased by 35% to $436 million. These results were achieved in spite of a challenging economic environment in the second half of the year. Our strong operating performance and excellent working capital management led to record cash generation of $487 million. This cash generation allowed us to return substantial capital to our shareholders through a 25% increase in our dividend rate and a repurchase of $178 million in stock. We took advantage of attractive interest rates in 2011 and refinanced our revolving credit facility, increasing our borrowing capacity to $750 million, with the ability to borrow an additional $250 million under the facility. We also ended the year with the strongest balance sheet in our history, giving us the financial flexibility we need to continue to grow our business and provide value to our stakeholders. As a part of Vision 2015, we plan to expand the application of our base technologies into attractive adjacent markets. For example, we developed a proprietary technology for extracting lithium from the same brine reserves that we use to produce bromine at our Magnolia, Arkansas facilities. In 2011, we proved that the extraction technology worked and made solid progress in the development and design phase of this initiative. Another example is our development of our PureGrowth™ brand of high-purity metal organics for use in the rapidly expanding light emitting diode (LED) and compound semiconductor markets. Our extensive experience and leading global position in organometallics puts us in a particularly strong position to expand into this adjacency. 2011 CEO REVIEW We continued to expand our global footprint in 2011 to better collaborate with our customers, thereby capturing our fair share of growth in these markets. Our 2011 capital expenditures were about twice the amount we have historically spent; however, this level was necessary to allow us to meet the market demand and continue to grow with our customers. In collaboration with our joint venture partner, SABIC, we broke ground on a world-scale aluminum alkyls unit in Saudi Arabia that will service the ever-growing need for that product in the Middle East. Once that unit is operational, the lead-time for aluminum alkyls in this region will be reduced from approximately six weeks to between two and ten days, depending on the customer’s location in the Middle East. We also broke ground on a polyolefin catalyst center in Yeosu City, South Korea, which will provide R&D and technical services to our customers in Korea and other parts of Asia, as well as serve as a local manufacturing site to service those customers. Finally, we began construction to double the capacity for bromine and certain bromine derivatives at our Safi, Jordan joint venture, the world’s lowest cost manufacturing center for these products. We are very pleased with the progress we have made and the milestones we have already met in all three of these projects. We should begin to see meaningful revenue from each of these in 2013. As we grow our businesses and our global footprint, we are doing so responsibly by staying true to our principles to provide innovative and sustainable solutions without doing harm to people or the environment. Always innovative, Albemarle employees were awarded 239 new patents and two prestigious innovation awards during 2011: The Center for the Polyurethane Industry’s “Polyurethane Innovation Award” and the World Refining Association’s “Biodiesel Corporation of the Year” award. With 31% of the company’s 2011 revenues derived from new products, we continued our trend of upgrading our portfolio by bringing new products to the market. 2011 was also the safest year in Albemarle history, which is a tribute to the 4,000 plus Albemarle employees around the globe who take great pride in doing things the right way, the first time, every time. We do this because it is the right way to run a business, and we were honored when we were named one of Corporate Responsibility Magazine’s 100 Best Corporate Citizens for the second year in a row. With the foundation laid in 2011, Albemarle is poised for continued growth. Our employees have the passion, the talent and the integrity to make Vision 2015 a reality. They demonstrate this each and every day in Albemarle facilities around the world and in the communities in which we live and operate. I am honored to lead this truly unique and talented team, and I am confident that their dedication, innovation and hard work will continue to fuel Albemarle's future success. I would be remiss to end this letter without recognizing the profound impact that Mark Rohr had on this organization. His focus on growth in emerging economies resulted in revenue growth from $846 million in 1999 to $2.9 billion in 2011 and profitability growth from $89 million in 1999 to $436 million in 2011. During his tenure, Albemarle shareholders were rewarded with a substantial cumulative return on investment, with our market cap growing from $866 million in 1999 to $5 billion in 2011, and enjoyed continuous dividend increases every year during his tenure. He set a vision and inspired and enabled our employees to achieve that vision. For that, we are grateful, and we wish him only the best. Sincerely, Luke Kissam Chief Executive Officer 2011 CEO REVIEW Key Financial Results* Increase (in millions, except per share amounts) 2011 2010 (decrease) Net Sales $ 2,869.0 $ 2,362.8 21% Net Income, excluding special items** $ 436.3 $ 328.3 35% Net Cash Provided by Operating Activities $ 487.4 $ 331.3 47% EBITDA, excluding special items** $ 700.6 $ 544.5 29% Total Assets $ 3,203.8 $ 3,068.1 4% Capital Expenditures $ 190.6 $ 75.5 152% Acquisitions and Other $ 13.2 $ 12.0 10% Total Long-Term Debt $ 763.7 $ 860.9 (11%) Total Long-Term Debt as a % of Total Capital 31.3% 36.8% (550) bps Shares Outstanding at End of Year 88.8 91.6 (3%) Return on Average Total Equity 27.7% 23.7% 400 bps Per Common Share Diluted Earnings Per Share, excluding special items** $ 4.77 $ 3.56 34% Cash Dividends Declared Per Share $ 0.67 $ 0.56 20% Total Equity Per Share $ 18.90 $ 16.11 17% Year-End Closing Price $ 51.51 $ 55.78 (8%) Net Sales Net Income Diluted EPS (in millions of dollars) excluding special items** excluding special items** (in millions of dollars) (in dollars) $3,000 $450 $5.00 $400 $4.50 $2,500 $4.00 $350 $3.50 $2,000 $300 $3.00 $250 $1,500 $2.50 $200 $2.00 $1,000 $150 $1.50 $100 $1.00 $500 $50 $0.50 0 0 0 ’10’09’08’07’06’05 ’11 ’10’09’08’07’06’05 ’11 ’10’09’08’07’06’05 ’11 * See Item 8—Financial Statements and Supplementary Data, beginning on page 51 of Form 10-K. ** See Reconciliation of Non-GAAP Financial Measures on the company’s website at www.albemarle.com/investors. Global Business Units POLYMER SOLUTIONS Spending by the global middle class is projected to rise from $21.3 trillion in 2009 to $35 trillion in 2020, as a dramatic increase in the population of consumers with disposable income occurs. Such trends are expected to continue to drive demand for consumer electronics, including TVs, personal computers and smart phones in which flame retardants provide essential fire retardant properties.