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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

Albemarle Corp., economic profit calculation

US$ in thousands

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Net operating profit after taxes (NOPAT)¹	3,022,027)	230,394)	504,001)	665,762)	827,216)
Cost of capital²	16.68%	16.27%	15.16%	13.78%	15.58%
Invested capital³	10,052,399)	6,792,146)	7,383,741)	6,900,307)	5,433,093)

Economic profit⁴	1,344,961)	(874,779)	(615,384)	(285,412)	(19,409)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2022 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 3,022,027 – 16.68% × 10,052,399 = 1,344,961

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Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	Albemarle Corp. economic profit decreased from 2020 to 2021 but then increased from 2021 to 2022 exceeding 2020 level.

Albemarle Corp., NOPAT calculation

US$ in thousands

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Net income attributable to Albemarle Corporation	2,689,816)	123,672)	375,764)	533,228)	693,562)
Deferred income tax expense (benefit)¹	93,339)	(38,500)	(1,976)	14,394)	49,164)
Increase (decrease) in allowance for doubtful accounts²	(25)	476)	(1,628)	(749)	(5,965)
Increase (decrease) in LIFO reserve³	12,600)	15,600)	(1,100)	(2,000)	(300)
Increase (decrease) in equity equivalents⁴	105,914)	(22,424)	(4,704)	11,645)	42,899)
Interest and financing expenses	122,973)	61,476)	73,116)	57,695)	52,405)
Interest expense, operating lease liability⁵	4,852)	5,456)	5,479)	5,292)	4,782)
Adjusted interest and financing expenses	127,825)	66,932)	78,595)	62,987)	57,187)
Tax benefit of interest and financing expenses⁶	(26,843)	(14,056)	(16,505)	(13,227)	(12,009)
Adjusted interest and financing expenses, after taxes⁷	100,982)	52,876)	62,090)	49,760)	45,178)
Net income (loss) attributable to noncontrolling interest	125,315)	76,270)	70,851)	71,129)	45,577)
Net operating profit after taxes (NOPAT)	3,022,027)	230,394)	504,001)	665,762)	827,216)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowance for doubtful accounts.

³ Addition of increase (decrease) in LIFO reserve. See details »

⁴ Addition of increase (decrease) in equity equivalents to net income attributable to Albemarle Corporation.

⁵ 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 134,784 × 3.60% = 4,852

⁶ 2022 Calculation
Tax benefit of interest and financing expenses = Adjusted interest and financing expenses × Statutory income tax rate
= 127,825 × 21.00% = 26,843

⁷ Addition of after taxes interest expense to net income attributable to Albemarle Corporation.

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Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	Albemarle Corp. NOPAT decreased from 2020 to 2021 but then increased from 2021 to 2022 exceeding 2020 level.

Albemarle Corp., cash operating taxes calculation

US$ in thousands

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Income tax expense	390,588)	29,446)	54,425)	88,161)	144,826)
Less: Deferred income tax expense (benefit)	93,339)	(38,500)	(1,976)	14,394)	49,164)
Add: Tax savings from interest and financing expenses	26,843)	14,056)	16,505)	13,227)	12,009)
Cash operating taxes	324,092)	82,002)	72,906)	86,994)	107,671)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

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Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	Albemarle Corp. cash operating taxes increased from 2020 to 2021 and from 2021 to 2022.

Albemarle Corp., invested capital calculation (financing approach)

US$ in thousands

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Current portion of long-term debt	2,128)	389,920)	804,677)	187,336)	307,294)
Long-term debt, excluding current portion	3,214,972)	2,004,319)	2,767,381)	2,862,921)	1,397,916)
Operating lease liability¹	134,784)	158,600)	139,062)	137,823)	132,098)
Total reported debt & leases	3,351,884)	2,552,839)	3,711,120)	3,188,080)	1,837,308)
Total Albemarle Corporation shareholders’ equity	7,982,627)	5,625,266)	4,268,227)	3,932,250)	3,585,321)
Net deferred tax (assets) liabilities²	434,336)	334,482)	374,535)	382,583)	365,953)
Allowance for doubtful accounts³	2,534)	2,559)	2,083)	3,711)	4,460)
LIFO reserve⁴	57,900)	45,300)	29,700)	30,800)	32,800)
Equity equivalents⁵	494,770)	382,341)	406,318)	417,094)	403,213)
Accumulated other comprehensive (income) loss, net of tax⁶	560,662)	392,450)	326,132)	395,735)	350,682)
Noncontrolling interests	208,220)	180,341)	200,367)	161,330)	173,787)
Adjusted total Albemarle Corporation shareholders’ equity	9,246,279)	6,580,398)	5,201,044)	4,906,409)	4,513,003)
Construction in progress⁷	(2,246,090)	(2,057,387)	(1,491,314)	(1,160,545)	(883,705)
Marketable securities⁸	(299,674)	(283,704)	(37,109)	(33,637)	(33,513)
Invested capital	10,052,399)	6,792,146)	7,383,741)	6,900,307)	5,433,093)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

¹ Addition of capitalized operating leases.

² Elimination of deferred taxes from assets and liabilities. See details »

³ Addition of allowance for doubtful accounts receivable.

⁴ Addition of LIFO reserve. See details »

⁵ Addition of equity equivalents to total Albemarle Corporation shareholders’ equity.

⁶ Removal of accumulated other comprehensive income.

⁷ Subtraction of construction in progress.

⁸ Subtraction of marketable securities.

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Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	Albemarle Corp. invested capital decreased from 2020 to 2021 but then increased from 2021 to 2022 exceeding 2020 level.

Albemarle Corp., cost of capital calculations

Dec 31, 2022

	Capital (fair value)¹	Weights					Cost of capital
Equity²	31,970,436)	31,970,436)	÷	35,098,247)	=	0.91	0.91	×	18.01%	=	16.41%
Long-term debt³	2,993,027)	2,993,027)	÷	35,098,247)	=	0.09	0.09	×	3.94% × (1 – 21.00%)	=	0.27%
Operating lease liability⁴	134,784)	134,784)	÷	35,098,247)	=	0.00	0.00	×	3.60% × (1 – 21.00%)	=	0.01%
Total:	35,098,247)					1.00					16.68%

Based on: 10-K (reporting date: 2022-12-31).

¹ US$ in thousands

² Equity. See details »

³ Long-term debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	22,453,475)	22,453,475)	÷	25,205,665)	=	0.89	0.89	×	18.01%	=	16.05%
Long-term debt³	2,593,590)	2,593,590)	÷	25,205,665)	=	0.10	0.10	×	2.57% × (1 – 21.00%)	=	0.21%
Operating lease liability⁴	158,600)	158,600)	÷	25,205,665)	=	0.01	0.01	×	3.44% × (1 – 21.00%)	=	0.02%
Total:	25,205,665)					1.00					16.27%

Based on: 10-K (reporting date: 2021-12-31).

¹ US$ in thousands

² Equity. See details »

³ Long-term debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	18,214,488)	18,214,488)	÷	22,136,775)	=	0.82	0.82	×	18.01%	=	14.82%
Long-term debt³	3,783,225)	3,783,225)	÷	22,136,775)	=	0.17	0.17	×	2.37% × (1 – 21.00%)	=	0.32%
Operating lease liability⁴	139,062)	139,062)	÷	22,136,775)	=	0.01	0.01	×	3.94% × (1 – 21.00%)	=	0.02%
Total:	22,136,775)					1.00					15.16%

Based on: 10-K (reporting date: 2020-12-31).

¹ US$ in thousands

² Equity. See details »

³ Long-term debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	9,096,557)	9,096,557)	÷	12,407,721)	=	0.73	0.73	×	18.01%	=	13.21%
Long-term debt³	3,173,341)	3,173,341)	÷	12,407,721)	=	0.26	0.26	×	2.70% × (1 – 21.00%)	=	0.55%
Operating lease liability⁴	137,823)	137,823)	÷	12,407,721)	=	0.01	0.01	×	3.84% × (1 – 21.00%)	=	0.03%
Total:	12,407,721)					1.00					13.78%

Based on: 10-K (reporting date: 2019-12-31).

¹ US$ in thousands

² Equity. See details »

³ Long-term debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	9,758,967)	9,758,967)	÷	11,622,335)	=	0.84	0.84	×	18.01%	=	15.12%
Long-term debt³	1,731,271)	1,731,271)	÷	11,622,335)	=	0.15	0.15	×	3.62% × (1 – 21.00%)	=	0.43%
Operating lease liability⁴	132,098)	132,098)	÷	11,622,335)	=	0.01	0.01	×	3.62% × (1 – 21.00%)	=	0.03%
Total:	11,622,335)					1.00					15.58%

Based on: 10-K (reporting date: 2018-12-31).

¹ US$ in thousands

² Equity. See details »

³ Long-term debt. See details »

⁴ Operating lease liability. See details »

Albemarle Corp., economic spread ratio calculation, comparison to benchmarks

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Selected Financial Data (US$ in thousands)
Economic profit¹	1,344,961)	(874,779)	(615,384)	(285,412)	(19,409)
Invested capital²	10,052,399)	6,792,146)	7,383,741)	6,900,307)	5,433,093)
Performance Ratio
Economic spread ratio³	13.38%	-12.88%	-8.33%	-4.14%	-0.36%
Benchmarks
Economic Spread Ratio, Competitors⁴
Linde plc	-6.52%	-6.50%	-8.01%	-8.35%	—

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2022 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 1,344,961 ÷ 10,052,399 = 13.38%

⁴ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic spread ratio	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	Albemarle Corp. economic spread ratio deteriorated from 2020 to 2021 but then improved from 2021 to 2022 exceeding 2020 level.

Albemarle Corp., economic profit margin calculation, comparison to benchmarks

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Selected Financial Data (US$ in thousands)
Economic profit¹	1,344,961)	(874,779)	(615,384)	(285,412)	(19,409)
Net sales	7,320,104)	3,327,957)	3,128,909)	3,589,427)	3,374,950)
Performance Ratio
Economic profit margin²	18.37%	-26.29%	-19.67%	-7.95%	-0.58%
Benchmarks
Economic Profit Margin, Competitors³
Linde plc	-14.14%	-15.31%	-23.15%	-23.24%	—

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

¹ Economic profit. See details »

² 2022 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × 1,344,961 ÷ 7,320,104 = 18.37%

³ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	Albemarle Corp. economic profit margin deteriorated from 2020 to 2021 but then improved from 2021 to 2022 exceeding 2020 level.

Albemarle Corp. (NYSE:ALB)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin