The following is a discussion and analysis of our financial condition and results of operations since December 31, 2008. A discussion of consolidated financial condition and sources of additional capital is included under a separate heading "Financial Condition and Liquidity" on page 20.

Forward-looking Statements

Some of the information presented in this Quarterly Report on Form 10-Q, including the documents incorporated by reference, may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on our current expectations, which are in turn based on assumptions that we believe are reasonable based on our current knowledge of our business and operations. We have used words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "should," "will" and variations of such words and similar expressions to identify such forward-looking statements.

These forward-looking statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict and many of which are beyond our control. There can be no assurance, therefore, that our actual results will not differ materially from the results and expectations expressed or implied in the forward-looking statements. Factors that could cause actual results to differ materially include, without limitation:

• deterioration in economic and business conditions;

• future financial and operating performance of our major customers and industries 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 inability to pass through such increases;

• performance of acquired companies;

• changes in our markets in general;

• fluctuations in foreign currencies;

• changes in laws and increased government regulation of 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;

• 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 interest rates, to the extent such rates (1) affect our ability to raise capital or increase our cost of funds, (2) have an impact on the overall performance of our pension fund investments and (3) increase our pension expense and funding obligations;

• volatility and substantial uncertainties in the debt and equity markets; and

We assume no obligation to provide revisions to any forward-looking statements should circumstances change, except as otherwise required by securities and other applicable laws. The following discussion should be read together with our consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q.

Overview

We are a leading global developer, manufacturer and marketer of highly-engineered specialty chemicals. Our products and services enhance the value of our customers' end-products by improving performance, providing essential product attributes, lowering cost and simplifying processing. We sell a highly diversified mix of products to a wide range of customers, including petroleum refiners, utilities providers, and manufacturers of consumer electronics, building and construction materials, automotive parts, packaging, pharmachemicals and agrichemicals. We believe that our commercial and geographic diversity, technical expertise, flexible, low-cost global manufacturing base, and experienced management team enable us to maintain leading market positions in those areas of the specialty chemicals industry in which we operate.

First Quarter 2009

During the first quarter of 2009:

• quarterly net sales of $486.6 million resulted in earnings (net income attributable to Albemarle Corporation) of $25.4 million, or $0.28 per share

• solid progress on cost reduction initiatives

• inventory levels reduced by $98.6 million

• quarterly dividend increased to $0.125 per share of common stock ($0.50 annually)

Outlook

We continue to expect 2009 to be a very challenging year. While there is still much uncertainty as to the length of the current global economic downturn and to when meaningful demand will be restored in consumer end-markets, we believe our proactive response to the weakened global economic conditions should position our Company to operate leaner, more efficiently and on a lower cost basis while preserving growth opportunities.

Polymer Additives: We expect the continued downturn in the consumer electronics, automotive and construction sectors to impact volumes and profitability of our Polymer Additives segment. Although we are taking steps to restructure our operations and cut costs, we expect challenges in this business to continue until demand returns and our production rates improve. In the longer term, the increasing standard of living around the globe should drive higher demand for electrical and electronic equipment and new construction, and the potential for increasingly stringent fire-safety regulations and global climate initiatives should increase the need for insulation materials.

We are continuing to increase our presence in China as we build a foundation for expanding our business in Asia. Expansion of our now wholly owned antioxidants facility in Shanghai is expected to come on-line in early 2010.

New product development momentum continues in our Polymer Additives segment. The trend in some electronic components toward halogen-free flame retardants, while challenging our legacy products, also creates numerous development opportunities with our diverse customer base. We plan to begin commercializing sales of a new halogen-free product in one of our key-growth markets and have several others in various stages of development. We also plan to commercialize a new polyurea curative, which offers greater cure speed flexibility and thus expands and increases performance and use.

Catalysts: We expect revenue growth in our Catalysts segment to be driven by global demand for petroleum products, generally deteriorating quality of crude oil feedstock and implementation of more stringent fuel quality requirements as a part of clean air initiatives. While we continue to monitor developments in the global economy, we expect our Catalysts segment profit growth in 2009 to come primarily from new product introductions, new markets that we penetrate, FCC pricing improvements, and the continued growth in our polyolefin catalysts business.

With continuing global demand for oil and consumer fuel and tightening fuel quality regulations, we believe refiners will process more sour crudes, which should require additional HPC catalysts to remove the metals and impurities, further driving demand for these catalysts. We must also continue to successfully pass through metals costs and ensure optimal inventory levels in periods of declining metals prices.

Our focus in FCC catalysts is on improving margins to support the value these products bring to the market. While we believe there remains room for further margin improvement, in order to be successful we must continue to deliver high-performing, superior quality products to meet the growing demands of refiners processing increasingly heavy crudes. We have seen incremental margin increases, although we continue to face raw material cost pressures related to imported rare earths and transportation costs. We believe, however, that our price increases should offset increasing raw material costs, but there is no guarantee that will occur.

We are focused on new product development in catalysts and have introduced high-throughput experimentation to more rapidly test and develop new technologies. Our marketing and research groups are tightly aligned so we can continue to bring innovative technologies to the market. We will continue to explore new opportunities for our catalysts in the alternative fuels business, which includes biodiesel, Canadian oil sands, gas to liquids (GTL), and coal to liquids (CTL) markets. These opportunities become increasingly viable with sustained price increases.

Fine Chemicals: In our performance chemicals sector, the current poor economic climate is impacting our bromine franchise in oil completion fluids and bromine consumption. We expect continued negative impacts from low production rates. Our fine chemistry services business continues to benefit from the continued rapid pace of innovation and the introduction of new products, coupled with the movement by pharmaceutical companies to outsource certain research, product development and manufacturing functions. Our long-term strategic areas of focus in our Fine Chemicals segment are to maximize our bromine franchise value in the performance chemicals sector and to continue the growth of our fine chemistry services business.

We are focused on profitably growing our globally competitive bromine and derivatives production network to serve all major bromine consuming products and markets. As we supply bromine feed stocks to our Polymer Additives segment, our profitability is generally impacted as market conditions change in that sector. In fine chemistry services, our new products pipeline continues to be robust, allowing us to develop preferred outsourcing positions serving leading chemical and pharmaceutical companies in diverse industries. We remain confident in continuing to generate growth in profitable niche products leveraged from this service business.

Corporate and Other: We are continuing our focus on reducing working capital and maximizing cash generation. In addition, we will continue to focus on tax efficiency; however, incremental income is more likely to be earned in locales with higher incremental rates. We believe our global effective tax rate will approximate 14%, but will vary based on the locales in which incremental income is actually earned. We increased our quarterly dividend by 4% in 2009 to $0.125 per share. Under our existing share repurchase program, we have the ability to periodically repurchase shares in 2009. In addition, we remain committed to evaluating the merits of any opportunities that may arise for acquisitions that complement our business footprint.

Additional information regarding our products, markets and financial performance is provided at our web site, www.albemarle.com. Our web site is not a part of this document nor is it incorporated herein by reference.

Results of Operations

The following data and discussion provides an analysis of certain significant factors affecting our results of operations during the periods included in the accompanying consolidated statements of income.

First Quarter 2009 Compared with First Quarter 2008



Selected Financial Data (Unaudited)
                                                        Three Months Ended             Percentage
                                                            March 31,                    Change
                                                       2009              2008         2009 vs. 2008
                                                         (In millions, except percentages and
                                                                  per share amounts)
NET SALES                                          $      486.6         $ 668.2                 (27 )%
Cost of goods sold                                        396.1           500.8                 (21 )%

GROSS PROFIT                                               90.5           167.4                 (46 )%
GROSS PROFIT MARGIN                                        18.6 %          25.1 %

Selling, general and administrative expenses               45.4            63.5                 (29 )%
Research and development expenses                          16.2            16.8                  (4 )%
Restructuring charges                                        -              3.3                   *

OPERATING PROFIT                                           28.9            83.8                 (66 )%
OPERATING PROFIT MARGIN                                     5.9 %          12.5 %
Interest and financing expenses                            (6.3 )         (10.2 )               (38 )%
Other (expenses) income, net                               (1.1 )           2.8                   *

INCOME BEFORE INCOME TAX EXPENSE AND EQUITY IN
NET INCOME OF UNCONSOLIDATED INVESTMENTS                   21.5            76.4                 (72 )%
Income tax expense                                          0.5            16.6                 (97 )%
Effective tax rate                                          2.4 %          21.8 %

INCOME BEFORE EQUITY IN NET INCOME OF
UNCONSOLIDATED INVESTMENTS                                 21.0            59.8                 (65 )%
Equity in net income of unconsolidated
investments (net of tax)                                    5.9             7.1                 (17 )%

NET INCOME                                                 26.9            66.9                 (60 )%
Net income attributable to noncontrolling
interests                                                  (1.5 )          (3.6 )               (58 )%

NET INCOME ATTRIBUTABLE TO ALBEMARLE
CORPORATION                                        $       25.4         $  63.3                 (60 )%

PERCENTAGE OF NET SALES                                     5.2 %           9.5 %

Basic earnings per share                           $       0.28         $  0.68                 (59 )%

Diluted earnings per share                         $       0.28         $  0.67                 (58 )%

* Calculation is not meaningful.

Net Sales

For the three-month period ended March 31, 2009, we recorded net sales of $486.6 million, a 27% decrease compared to net sales of $668.2 million for the three-month period ended March 31, 2008. This decrease was due primarily to a decline in volumes in all segments. Volumes had a negative impact on sales of 27%, foreign currency changes caused a 3% decrease and price and product mix had a positive impact on sales of 3% compared to the same period last year.

Polymer Additives net sales decreased $121.4 million, or 50%, for the three-month period ended March 31, 2009 compared to the same period in 2008 as a result of a decrease in volumes. Foreign currency also contributed to the decline, but this nominal impact was offset by similar improvements in price and product mix. Catalysts net sales decreased $33.5 million, or 12%, compared to the same period last year due mainly to a decrease in volumes contributing 11% and foreign currency impacts of 3%. These declines were partially offset by price and product mix improvements contributing 2% despite unfavorable metals impacts on HPC refinery catalysts net sales. Fine Chemicals net sales decreased $26.7 million, or 18%, compared to the same period last year primarily due to volumes contributing 22% of the decrease, foreign currency impacts of 2%, and was partially offset by improvements in price and product mix contributing 6%. For a detailed discussion of revenues and segment income before taxes for each segment see "Segment Information Overview" below.

Gross Profit

For the three-month period ended March 31, 2009, our gross profit decreased $76.9 million, or 46%, to $90.5 million from the corresponding 2008 period due mainly to volume declines, unfavorable production rate impacts on cost in our bromine franchise and high cost metals impacts on HPC refinery catalysts. These factors contributed to our decline in gross profit margin for the three-month period ended March 31, 2009 to 18.6% from 25.1% for the corresponding period in 2008.

Selling, General and Administrative Expenses

For the three-month period ended March 31, 2009, our selling, general and administrative, or SG&A, expenses decreased $18.1 million, or 29%, from the three-month period ended March 31, 2008. This decrease was primarily due to adjustments of $7.0 million associated with the reversal of certain long-term employee benefit accruals and a reduction in salaries and benefits as a result of our recent cost saving actions. As a percentage of net sales, SG&A expenses were 9.3% for the three-month period ended March 31, 2009 compared to 9.5% for the corresponding period in 2008.

Research and Development Expenses

For the three-month period ended March 31, 2009, our research and development expenses decreased $0.6 million, or 4%, from the three-month period ended March 31, 2008. As a percentage of net sales, research and development expenses were 3.3% for the three-month period ended March 31, 2009 compared to 2.5% for the corresponding period in 2008.

Restructuring Charges

The three-month period ended March 31, 2008 includes charges amounting to $3.3 million ($2.1 million after income taxes) that relate to severance in conjunction with personnel reductions at the Company's former Richmond, Virginia headquarters and Singapore sales office.

Interest and Financing Expenses

Interest and financing expenses for the three-month period ended March 31, 2009 decreased $3.9 million to $6.3 million from the corresponding 2008 period due to lower average interest rates.

Other (Expenses) Income, Net

Other (expenses) income, net for the three-month period ended March 31, 2009 increased $3.9 million from the corresponding 2008 period due primarily to an increase in foreign currency exchange losses and a decrease in interest income as a result of lower average interest rates.

Income Tax Expense

Our effective tax rate fluctuates based on, among other factors, where income is earned and the level of income relative to available tax credits. For the three-month period ended March 31, 2009, our effective income tax rate was 2.4% as compared to 21.8% for the three-month period ended March 31, 2008. The effective income tax rate for the three-month period ended March 31, 2009, is impacted by various non-recurring items totaling a net $2.5 million benefit, resulting from adjustments related to prior periods. Of this net benefit, the significant items were a $1.2 million increase in a valuation allowance for losses at our Brazilian entity and a net benefit of $2.7 million related to unrecognized tax benefits. Based on our current level and location of income, we anticipate that our effective tax rate for 2009 will approximate 14%.

The significant differences between the U.S. federal statutory income tax rate on pretax income and the effective income tax rate for the three-month periods ended March 31, 2009 and 2008 are as follows:

                                                          % of Income Before Income Taxes
                                                                Three Months Ended
                                                                     March 31,
                                                           2009                    2008
Federal statutory rate                                          35.0 %                  35.0 %
State taxes, net of federal tax benefit                          0.2                     0.5
Impact of foreign operations, net                              (19.4 )                 (13.1 )
Increase in valuation allowance                                  0.2                      -
Depletion                                                       (1.7 )                  (1.2 )
Effect of net income attributable to
noncontrolling interests                                        (0.1 )                  (0.5 )
Revaluation of unrecognized tax benefits/reserve
requirements                                                     0.6                     1.0
Other items, net                                                (0.8 )                   0.1

Effective income tax rate excluding
non-recurring items                                             14.0 %                  21.8 %
Non-recurring items                                            (11.6 )                    -

Effective income tax rate                                        2.4 %                  21.8 %

Equity in Net Income of Unconsolidated Investments

Equity in net income of unconsolidated investments was $5.9 million for the three-month period ended March 31, 2009 compared to $7.1 million in the same period last year. This decrease of $1.2 million is due primarily to lower equity earnings from our Magnifin joint venture in our Polymer Additives segment due to decreased volumes as a result of weakness in the automotive sector, partially offset by net increased equity earnings from our various Catalysts segment joint ventures.

Net Income Attributable to Noncontrolling Interests

For the three-month period ended March 31, 2009, net income attributable to noncontrolling interests was $1.5 million compared to $3.6 million in the same period last year. This decrease of $2.1 million is due primarily to lower earnings of Stannica LLC as a result of a decline in volume due to the weak construction sector. In addition, earnings of Jordan Bromine Company Limited were lower as a result of a decline in bromine volumes.

Net Income Attributable to Albemarle Corporation

Net income attributable to Albemarle Corporation decreased to $25.4 million in the three-month period ended March 31, 2009 from $63.3 million in the three-month period ended March 31, 2008 primarily due to volume declines and unfavorable costs in our bromine franchise and high cost metals impacts on HPC refinery catalysts.

Segment Information Overview. We have identified three reportable segments as required by SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." Our Polymer Additives segment is comprised of the flame retardants and stabilizers and curatives product areas. Our Catalysts segment is comprised of the refinery catalysts and polyolefin catalysts product areas. Our Fine Chemicals segment is comprised of the performance chemicals and fine chemistry services and intermediates product areas. Segment income represents operating profit (adjusted for significant non-recurring items) and equity in net income of unconsolidated investments and is reduced by net income attributable to noncontrolling interests. Segment data includes intersegment transfers of raw materials at cost, foreign exchange transaction gains and losses and allocations for certain corporate costs.

                                                                                               Percentage
                                                   Three Months Ended March 31,                  Change
                                                        % of                      % of
                                           2009       net sales      2008       net sales     2009 vs 2008
                                                         (In millions, except percentages)
Net sales:
Polymer Additives                         $ 123.2          25.3 %   $ 244.6          36.6 %            (50 )%
Catalysts                                   242.6          49.9 %     276.1          41.3 %            (12 )%
Fine Chemicals                              120.8          24.8 %     147.5          22.1 %            (18 )%

Total net sales                           $ 486.6         100.0 %   $ 668.2         100.0 %            (27 )%


Segment operating profit (loss):
Polymer Additives                         $ (11.5 )           *     $  30.3          12.4 %           (138 )%
Catalysts                                    29.8          12.3 %      46.1          16.7 %            (35 )%
Fine Chemicals                               10.2           8.4 %      23.5          15.9 %            (57 )%

Subtotal                                  $  28.5                   $  99.9                            (71 )%


Equity in net income (loss) of
unconsolidated investments:
Polymer Additives                         $    -                    $   1.5                           (100 )%
Catalysts                                     5.9                       5.6                              5 %
Fine Chemicals                                 -                         -                              -  %
Corporate & other                              -                         -                              -  %

Total equity in net income of
unconsolidated investments                $   5.9                   $   7.1                            (17 )%


Net (income) loss attributable to
noncontrolling interests:
Polymer Additives                         $  (0.2 )                 $  (2.0 )                          (90 )%
Catalysts                                      -                         -                              -  %
Fine Chemicals                               (1.5 )                    (2.0 )                          (25 )%
Corporate & other                             0.2                       0.4                              *

Total net income attributable to
noncontrolling interests                  $  (1.5 )                 $  (3.6 )                          (58 )%


Segment income (loss):
Polymer Additives                         $ (11.7 )           *     $  29.8          12.2 %           (139 )%
Catalysts                                    35.7          14.7 %      51.7          18.7 %            (31 )%
Fine Chemicals                                8.7           7.2 %      21.5          14.6 %            (60 )%

Total segment income                         32.7                     103.0                            (68 )%
Corporate & other                             0.6                     (12.4 )                         (105 )%
Restructuring charges                          -                       (3.3 )                            *
Interest and financing expenses              (6.3 )                   (10.2 )                          (38 )%
Other (expenses) income, net                 (1.1 )                     2.8                              *
Income tax expense                           (0.5 )                   (16.6 )                          (97 )%

Net income attributable to Albemarle
Corporation                               $  25.4                   $  63.3                            (60 )%

* Calculation is not meaningful.