Sat. Jan 18th, 2020

CE: Celanese Corporation (NYSE: CE)

27 min read

Celanese Corporation (NYSE: CE), a global chemical and specialty materials company, declared 3rd-quarter GAAP diluted earnings for each share of $2.170 and adjusted earnings for each share of $2.530, both sequential improvements over the prior quarter. The Company delivered net sales of $1.60B as 2.0 percent sequential volume growth offset the impact of a 1.0 percent decline in both pricing and foreign exchange. Despite no meaningful improvement in market demand over the 2nd-quarter, the Company recorded sequential growth in both Engineered Materials and the Acetyl Chain via their differentiated business models while again displaying a stable earnings profile in Acetate Tow. The Company generated an operating cash flow of $397.00M and a free cash flow of $315.00M. Celanese returned $352.00M of cash to shareholders in the quarter via $275.00M in share repurchases and $77.00M in dividends, bringing the total year-to-date cash returned to $1.00B. Based on an expectation that market conditions are unlikely to improve in 2k19, and counting the impacts of the formerly declared unplanned Clear Lake outage, the Company anticipates delivering 2k19 adjusted earnings between $9.600 and $9.800 for each share.

3rd-Quarter 2k19 Highlights:

  • Finalized permitting for the expansion of Clear Lake acetic acid to 2.00M tons for each year and Fairway methanol to 1.70M tons for each year, as part of the global acid reconfiguration. The engineering work progresses on both projects.
  • Accomplished the addition of new compounding lines in both Nanjing and Suzhou, China to meet growing demand from Engineered Materials’ customers in Asia.
  • Named ICIS Company of the Year for 2k18 based on analysis of 2k18 financial metrics, robust profitability in the Acetyl Chain, and accelerated project commercialization in Engineered Materials.
  • Commercialized 1,315 Engineered Materials project wins in the 3rd-quarter of 2k19 and on track to deliver more than 4,000 projects for the year.
  • Repurchased 2.0 percent of outstanding shares in the 3rd-quarter and 10.00 percent of outstanding shares over the last twelve months.

3rd-Quarter 2k19 Business Segment Overview

Engineered Materials (EM)

Engineered Materials stated net sales of $591.00M in the 3rd-quarter. Volume expanded 2.0 percent over the prior quarter as the business delivered 1,315 project wins in the 3rd-quarter, offsetting the continuation of depressed demand globally and some residual destocking, particularly in Europe. GAAP operating profit of $111.00M and adjusted EBIT of $154.00M both expanded sequentially as the business offset continued demand softness, a $6.00M impact from turnarounds, and lower than expected associate contributions.

Acetate Tow

Acetate Tow stated GAAP operating profit of $34.00M and adjusted EBIT of $71.00M in the 3rd-quarter, further demonstrating the continued stability of its earnings profile. Volume and price declined minimally on a sequential basis and were stable year over year, as secular demand and industry dynamics continue to stabilize. Dividends from associates were $27.00M in the 3rd-quarter, down slightly from the previous quarter because of the impact of timing and currency. In the 4th-quarter, Acetate Tow is expected to experience typical seasonality in its earnings, consistent with past years.

Cash Flow and Tax

The Company delivered an operating cash flow of $397.00M and a free cash flow of $315.00M in the quarter, driven by the continued strength of earnings to cash conversion. In the 3rd-quarter, capital expenditures were $82.00M, and the Company anticipates capital expenditures for 2k19 to total nearly $400.00M, inclusive of costs to repair the Clear Lake CO unit. During the 3rd-quarter, a total of $352.00M in cash was returned to shareholders via $77.00M in dividends and $275.00M in share repurchases. The U.S. GAAP effective tax rate was 16.00 percent in the 3rd-quarter contrast to 12.00 percent in the similar quarter of the previous year, mainly because of the impact of functional currency differences in certain jurisdictions partially offset by the release of valuation allowance on tax credit carryforwards. During the 3rd-quarter, the 2k19 tax rate for adjusted earnings for each share was revised down to 13.00 percent, based on a change in sourcing of U.S. earnings between domestic and foreign sources and the associated impact to foreign tax credit utilization for the year.


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