Consumables

Celanese Corporation Reports Fourth Quarter and Full Year 2010 Results; Raises Outlook for 2011

Tuesday 01. February 2011 - Fourth quarter highlights: Net sales were $1,507 million, up 9% from prior year period Operating profit was $138 million versus $109 million in prior year period

Net earnings were $56 million versus $6 million in prior year period
Operating EBITDA was $262 million, up 15% from prior year period
Diluted EPS from continuing operations was $0.64 versus $0.00 in prior year period
Adjusted EPS was $0.73, up 43% from prior year period
“We continue to see healthy demand across all of our business lines and expect to see earnings growth in every segment in 2011.”
Three Months Ended Twelve Months Ended
December 31, December 31,
(in $ millions, except per share data) – Unaudited 2010 2009 2010 2009
As adjusted3 As adjusted3
Net sales 1,507 1,388 5,918 5,082
Operating profit (loss) 138 109 501 290
Net earnings (loss) attributable to Celanese Corporation 56 6 375 498
Operating EBITDA 1 262 228 1,122 857
Diluted EPS – continuing operations $ 0.64 $ 0.00 $ 2.68 $ 3.14
Diluted EPS – total $ 0.35 $ 0.03 $ 2.37 $ 3.17
Adjusted EPS 2 $ 0.73 $ 0.51 $ 3.37 $ 1.75
1 Non-U.S. GAAP measure. See reconciliation in Table 1.
2 Non-U.S. GAAP measure. See reconciliation in Table 6.
3 The company’s Ibn Sina investment is now included in the Advanced Engineered Materials segment using the equity method of accounting. These results were previously reported in the Acetyl Intermediates segment using the cost method of accounting. Amounts have been retrospectively adjusted to reflect these changes.
Celanese Corporation (NYSE: CE), a global technology and specialty materials company, today reported fourth quarter 2010 net sales of $1,507 million, a 9 percent increase from the same period last year. All of its operating segments experienced improved pricing and higher volumes which drove the improved results and more than offset unfavorable currency impacts. Operating profit increased to $138 million from $109 million in the prior year period. This quarter’s results included a net $16 million of other charges and other adjustments which were primarily related to the company’s previously announced manufacturing optimization efforts compared with $17 million in the prior year period. Net earnings were $56 million compared with $6 million in the same period last year, also reflecting strong performance from the company’s strategic affiliates in the current period. Diluted earnings per share from continuing operations were $0.64 compared with $0.00 in the prior year period. Diluted earnings per share were $0.35 compared with $0.03 in the same period last year.
Adjusted earnings per share in the fourth quarter of 2010 increased to $0.73 from $0.51 in the same period last year. Adjusted earnings per share in the current period were based on an effective tax rate of 20 percent and a diluted share count of 158.3 million. Operating EBITDA rose 15 percent to $262 million from $228 million in the same period last year. Adjusted earnings per share and operating EBITDA excluded the $16 million of other charges and other adjustments.
“Our fourth quarter 2010 performance concludes a very strong year with record full-year earnings in Consumer Specialties, Advanced Engineered Materials and Industrial Specialties, as well as significantly improved performance in Acetyl Intermediates,” said David Weidman, chairman and chief executive officer. “With successful innovation efforts, a sustained focus on productivity and the breadth of our geographic profile, Celanese, with its unique portfolio of leading global businesses, is extremely well positioned for value creation both in the near-term and long-term.”
Recent Highlights
Announced its newly developed advanced technology to produce ethanol. This innovative, new process combines the company’s proprietary and industry-leading acetyl platform with highly advanced manufacturing technology to produce ethanol from hydrocarbon-sourced feedstocks.
Signed letters of intent for projects to construct and operate industrial ethanol production facilities in Nanjing, China, at the Nanjing Chemical Industrial Park and in Zhuhai, China, at the Gaolan Port Economic Zone.
Signed a memorandum of understanding (MOU) with Wison (China) Holding Co., Ltd., a Chinese synthesis gas supplier, for production of certain feedstocks used in the company’s advanced ethanol production process.
Launched VitalDose, an ethylene vinyl acetate (EVA) polymer-based excipient that facilitates drug makers’ efforts to develop and commercialize controlled-release pharmaceutical solutions.
Fourth Quarter Segment Overview
Advanced Engineered Materials
Advanced Engineered Materials sustained year-over-year volume growth on continued strong global demand, further supported by the results of its successful innovation efforts. Net sales for the fourth quarter of 2010 were $274 million compared with $239 million in the prior year period, driven by increased volumes for its high performance polymers. This quarter’s results benefited from higher value-in-use pricing and sales related to the company’s recent acquisitions which more than offset the impacts of currency. Operating profit was $33 million compared with $34 million in the same period last year as the profit contribution from higher volumes and pricing were offset by increased raw material costs and other expenses primarily associated with a planned turnaround in North America and the timing of other costs. Operating profit in the quarter was also negatively impacted by expenses associated with the company’s planned European expansion. Operating EBITDA in the fourth quarter of 2010, which excluded the impact of the inventory build in support of the European expansion, was $68 million and unchanged from the prior year period. Advanced Engineered Materials strategic affiliates continued to provide benefits from both growth in emerging markets and advantaged raw material positions in the period. Equity earnings from the Ibn Sina affiliate were $17 million, a $1 million decrease from last year’s results. Total equity earnings from the company’s Asian affiliates were $13 million compared with $0 in the prior year period on improved performance in the current period and the impact of a planned turnaround at one of the Asian affiliates during the fourth quarter of 2009.
Consumer Specialties
Consumer Specialties delivered strong performance on improved global demand across all product lines, particularly for cellulose acetate products. Net sales for the fourth quarter were $281 million compared with $267 million in the same period last year driven by higher volumes and increased pricing. Operating profit increased to $59 million from $47 million in the prior year period as the favorable volume and pricing more than offset increased raw material and energy costs as well as other charges and other adjustments primarily associated with the planned closure of the company’s acetate flake and tow manufacturing operations in Spondon, Derby, United Kingdom. Operating EBITDA, which excluded charges associated with the plant closure and other adjustments, was $80 million compared with $65 million in the prior year.
Industrial Specialties
Industrial Specialties benefited from its application innovation efforts and strong demand. Net sales for the fourth quarter of 2010 were $249 million compared with $229 million in the same period last year, resulting from higher pricing and volumes. Higher pricing for EVA performance polymers products was driven by favorable product mix on strong demand, particularly for photovoltaic applications, helping to offset unfavorable currency effects. Volumes also improved in the Emulsions business, driven by the benefits of new product innovation and commercialization. Operating profit in the fourth quarter of 2010 was $11 million compared with $16 million in the prior year period as the higher volumes and pricing were partially offset by higher raw material costs, particularly in the Emulsions business. Fourth quarter 2009 results included a $10 million captive insurance recovery related to the force majeure event at the company’s performance polymers facility in Edmonton, Canada. Operating EBITDA was $27 million compared with $19 million, excluding the insurance recovery in the prior year period.
Acetyl Intermediates
Acetyl Intermediates delivered improved results on seasonally strong demand for acetic acid and downstream derivative products. Net sales for the fourth quarter of 2010 were $799 million compared with $743 million in the same period last year. The increase was primarily driven by improved pricing across all global regions for the major acetyl product lines, particularly for downstream derivatives. The improved pricing environment was supported by increased raw material costs as well as favorable industry conditions resulting from energy conservation efforts in China that affected competing technologies. Downstream derivative volumes also improved due to demand recovery in the Americas and Europe. Operating profit in the current period increased to $94 million from $72 million in the prior year period, driven by the higher pricing and volumes, as well as the benefits of the closure of the company’s operations in Pardies, France. These benefits were partially offset by higher raw material costs for methanol and ethylene. Operating EBITDA rose to $127 million in the fourth quarter of 2010 from $111 million in the same period last year.
Taxes
The tax rate for adjusted earnings per share was 20 percent in the year ended December 31, 2010 compared with 29 percent in the first six months of 2009 and 23 percent for the last six months of 2009. The U.S. GAAP effective tax rate for continuing operations in 2010 was 21 percent versus negative 97 percent in 2009. The effective tax rate for 2009 was favorably impacted by the release of the U.S. valuation allowance on net deferred tax assets, partially offset by increases in valuation allowances on certain foreign net deferred tax assets and the effect of new tax legislation in Mexico. The effective rate for 2010 was favorably impacted by amendments to tax legislation in Mexico.
Cash taxes paid were $135 million in 2010 compared with $17 million in 2009. The increase in cash taxes paid is primarily the result of increased earnings in 2010 and the timing of cash taxes in certain jurisdictions.
Equity and Cost Investments
Earnings from equity investments and dividends from cost investments, which are reflected in the company’s earnings and operating EBITDA, were $37 million in the fourth quarter of 2010, a $15 million increase from the prior year period. Equity and cost investment dividends, which are included in cash flows, were $18 million, a $5 million decrease from the same period last year.
Earnings in equity investments for Ticona’s strategic affiliates in Asia were $13 million higher than the prior year period. Proportional affiliate EBITDA for the Asian affiliates was $30 million, a $9 million increase from the same period last year.
Equity in net earnings for Ticona’s Middle Eastern affiliates, which includes the company’s Ibn Sina affiliate, were $17 million in the fourth quarter of 2010 compared with $18 million in the same period last year. Proportional affiliate EBITDA for the Middle Eastern affiliates was $2 million lower than the prior year period.
The company’s total proportional affiliate EBITDA of equity investments for the fourth quarter of 2010 was $72 million, an $11 million increase from the same period last year and $35 million more than reported in the company’s operating EBITDA. The company’s total proportional net debt of affiliates was $96 million as of December 31, 2010.
Cash Flow
Cash and cash equivalents at the end of the fourth quarter of 2010 were $740 million, $514 million lower than the same period in 2009. Cash flow provided by operating activities was $452 million for the full year 2010 compared with $596 million in the prior year, as higher trade working capital and higher cash taxes offset the improved operating performance.
The company used $560 million in net cash for investing activities in the full year 2010 compared with $31 million provided in 2009. During 2010, the company spent a total of $312 million of capital expenditures related to the relocation of Ticona’s business in Kelsterbach, Germany and related capacity expansion. The 2009 results included an advance payment of $412 million and $351 million of capital expenditures and other expenses related to the relocation and expansion. The 2009 results also included net cash of $168 million received from the sale of the polyvinyl alcohol business.
Net cash used in financing activities totaled $388 million in the full year 2010 compared with $112 million in 2009. In 2010, the company repaid a net of $297 million of long-term debt, repurchased $48 million of its outstanding common shares, paid $31 million of dividends and paid $24 million of debt refinancing costs.
Net debt at the end of the fourth quarter of 2010 was $2,478 million, $231 million higher than the prior year period.
Outlook
Based on the strength of its 2010 performance, its confidence in its earnings growth programs, and its expectations for a continued, modest global economic recovery, the company raised its outlook for the full year 2011. The company expects full year 2011 adjusted earnings per share to be at least $0.60 higher and operating EBITDA to be at least $150 million higher than 2010 results.
“We are confident that our unique portfolio of technology and specialty materials businesses, coupled with our ongoing growth, innovation and productivity initiatives, will enable us to deliver significant earnings improvement and increased value for our shareholders,” said Weidman. “We continue to see healthy demand across all of our business lines and expect to see earnings growth in every segment in 2011.”