Albemarle Corporation (Albemarle) has reported net sales of $2.5 billion for the year-end 2008, up 6%, compared with the net sales of $2.33 billion in the previous year-end. It has also reported a net income of $194.2 million, or $2.10 per diluted share, for the year-end 2008, compared with the net income of $229.7 million, or $2.36 per diluted share, in the previous year-end.

The company has reported a fourth quarter 2008 net income of $13.1 million, or 14 cents per share, compared to the net income of $58.6 million, or 60 cents per share, for the fourth quarter of 2007. The fourth quarter results include a $38.5 million pre-tax charge ($33.4 million or 36 cents per share after tax) related to the disposition of the Port de Bouc, France facility, a $22.5 million pre-tax charge ($14.7 million or 16 cents per share after tax) for restructuring costs, principally due to a reduction in force at various company locations and a $32.4 million or 35 cents per share one time gain from the settlement of the 2000-2004 tax audits with the US Internal Revenue Service. The company also established tax reserves of $6.9 million due to changes in tax rules and a $2.4 million valuation allowance based upon an assessment of its ability to use certain net operating losses. Together these tax charges total $9.3 million or 10 cents per share.

The net sales in fourth quarter of 2008 totaled $517.7 million compared to fourth quarter 2007 net sales of $599.2 million. The global economic crisis is having the most impact on our Polymer Additives business, with a sharp decline in fourth quarter sales and operating profit in this segment. These declines were partially offset by higher sales and profits in our Fine Chemicals business.

The net sales for 2008 were $2.47 billion compared to $2.34 billion for 2007, an increase of 6% and a new annual record for the company. Net income for 2008 was $194.2 million, or $2.10 per share, down from $229.7 million, or $2.36 per share, for 2007. Excluding the first quarter $2.1 million after tax restructuring charge and the fourth quarter $25.0 million after tax net charge detailed above, net income for 2008 was $221.3 million, or $2.39 per share. Net income for 2007, excluding the charge related to the closure of our Dayton fine chemistry facility, was $232.9 million, or $2.40 per share.

Commenting on results, Mark C. Rohr, president and chief executive officer, said, The fourth quarter was a very challenging quarter. As we approached year-end, it became clear that the depth and duration of the global economic slowdown was having a greater impact than we initially anticipated.

Against this backdrop, efforts to restructure manufacturing assets and improve transactional efficiencies were accelerated, the cost of which are captured in the fourth quarter charges. While taking immediate action to address the volume shortfall, our operating philosophy and key priorities have not changed, said Rohr. We remain firm in our value-creation strategy, our support of research and development, and our investment in innovative technologies. We continue to pursue aggressive actions to maintain a strong financial position, preserve the profitability of challenged operations and position our business to adapt to a changing global market.

The Quarterly Segment Results:

Fine Chemicals delivered net sales for the fourth quarter of 2008 of $161.3 million, a 23% increase versus the fourth quarter of 2007 due primarily to increased volume and pricing from fine chemistry services and improved pricing from our bromine portfolio. Fine Chemicals segment income for the fourth quarter of 2008 was flat compared to fourth quarter 2007 despite significant cost increases in raw materials and reduced volumes for bromine in the brominated flame retardant business. The Fine Chemicals segment delivered record segment income for the year.

Polymer Additives recorded net sales for the fourth quarter of 2008 of $148.7 million, a 36% decrease versus the fourth quarter of 2007. Net sales decreased in our flame retardants portfolio primarily due to lower volumes in brominated and mineral flame retardants caused by weakness in consumer end-markets. The Polymer Additives segment income for the fourth quarter of 2008 is $5.2 million compared to the fourth quarter of 2007 of $30.3 million. The decrease is due primarily to reduced volumes and higher raw material costs.

Catalysts generated net sales for the fourth quarter of 2008 of $207.7 million, a decrease of 11% versus the fourth quarter of 2007 due primarily to lower volumes in hydroprocessing catalysts (HPC) and unfavorable currency exchange rates partially offset by improved pricing. Catalysts segment income for the fourth quarter of 2008 is $31.4 million versus the fourth quarter of 2007 of $41.7 million. The decline is due primarily to reduced volumes in refinery catalysts and lower joint venture earnings. The Catalyst segment delivered record annual sales and segment income for the year.

Cash Flow:

In 2008, cash and cash flow from operations funded capital expenditures for plant machinery and equipment of $99.7 million, acquisitions of $64.0 million, dividends to shareholders of $42.3 million and $25.0 million in voluntary contributions to our U.S. defined benefit plans. The company utilized availability under our credit agreement for repurchases of about 4.7 million shares of our common stock for an aggregate cost of $168.9 million. During the quarter, interest and financing expenses were $9.7 million versus fourth quarter 2007 expenses of $9.5 million.

At December 31, 2008, the company had $253.3 million in cash and cash equivalents. Currently, about 56% of the company’s cash is in US Treasury or equivalent securities. In addition, the company has available commitments under our existing lines of credit of about $320 million. The company has no significant debt maturities before 2013.

Taxes:

Excluding special items, the one-time net benefit of the tax settlement and the establishment of certain tax reserves and the valuation allowance in the quarter, our total year 2008 effective income tax rate was 12.4%. The tax rate continues to be influenced by the level and mix of income and has benefited from a more favorable mix of income in lower tax jurisdictions.

During our fourth quarter 2008, we settled the 2000-2004 tax audits with the US Internal Revenue Service. The result of this settlement is a tax benefit for the fourth quarter of 2008 and the full year of $32.4 million or 35 cents per share. This settlement benefited our cash flow in the quarter by $2.5 million related to tax refunds and interest. During the fourth quarter 2008, we also established a $6.9 million tax reserve and a $2.4 million valuation allowance.

Outlook:

The company expects the recent downturn in consumer electronics, together with already lackluster demand in the automotive and construction sectors, to impact volumes and profitability of our Polymer Additives business through 2009. Although the company is taking steps to restructure our operations and cut costs, we expect 2009 will be challenging until consumer demand returns and global markets rebound.

The Fine Chemicals business has been relatively resilient and generated top-line growth in the fourth quarter of 2008, as the Fine Chemistry Services unit has a high percentage of its customers in the pharmaceutical and agricultural sectors, which have been less impacted to date by the current global economic conditions. The company believes new products in Performance Chemicals and a full year of business from our Sorbent mercury removal technology should also help Fine Chemicals offset reduced volumes of bromine supplied to our flame retardant business. In 2009, the company anticipates increased volumes for HPC and polyolefin catalysts, as well as a solid performance from fluid cracking catalysts (FCC). During 2009 the company should also see increased contribution from its alternative fuels technology business.