Consumables

Celanese Corporation Reports First Quarter 2011 Results; Raises Outlook for Remainder of Year

Friday 29. April 2011 - First quarter highlights: Net sales were $1,589 million, up 14% from prior year period Operating profit was $188 million versus ($14) million in prior year period Net earnings were $142 million versus $14 million in prior year period Operating EBITDA was $304 million, up 26% from prior year period Diluted EPS from continuing operations was $0.87 versus $0.06 in prior year period Adjusted EPS was $0.96, up 50% from prior year period

Three Months Ended
March 31,
(in $ millions, except per share data) – Unaudited 2011 2010

As Adjusted3
Net sales 1,589 1,388
Operating profit (loss) 188 (14 )
Net earnings (loss) attributable to Celanese Corporation 142 14
Operating EBITDA 1 304 242
Diluted EPS – continuing operations $ 0.87 $ 0.06
Diluted EPS – total $ 0.90 $ 0.07
Adjusted EPS 2 $ 0.96 $ 0.64
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 first quarter 2011 net sales of $1,589 million, a 14 percent increase from the prior year period, driven by higher pricing across all operating segments as well as improved volumes. Higher pricing was primarily attributed to the successful recovery of increased raw material input costs while volume improvement was driven by improved global demand. Pricing and volume improvements were also driven by innovation efforts within the company’s Advanced Engineered Materials and Industrial Specialties segments. Operating profit increased to $188 million from a loss of $14 million in the same period last year. Other charges and other adjustments in the current period totaled $4 million, including a $20 million gain related to the resolution of commercial disputes. First quarter 2010 results included $135 million of other charges and other adjustments, primarily associated with the previously announced closure of the company’s acetate manufacturing facility in Spondon, Derby, United Kingdom. Net earnings were $142 million compared with $14 million in the same period last year. Diluted earnings per share from continuing operations were $0.87 compared with $0.06 in the prior year period.
Adjusted earnings per share in the first quarter of 2011 rose 50 percent to $0.96 from $0.64 in the prior year period. The tax rate and diluted share count for adjusted earnings per share in the current period were 17 percent and 158.7 million, respectively. Operating EBITDA was $304 million, up 26 percent from the first quarter of 2010. Adjusted earnings per share and operating EBITDA excluded the other charges and other adjustments in both periods.
“Celanese once again delivered on the sustainable earnings growth objectives across the portfolio of global businesses. Strong demand, combined with excellent execution of our strategies, more than offset rising material costs, resulting in solid first quarter performance,” said David Weidman, chairman and chief executive officer. “Our leading technology positions and customer-focused innovation efforts are driving growth and profitability, while our relentless pursuit of productivity increases our ongoing operating leverage.”
Recent Highlights
Announced the expansion of its ethylene vinyl acetate (EVA) capacity at its Edmonton manufacturing facility due to strong growth in strategic, high-value segments. Global EVA production increases are fueled by growth in the photovoltaic cell industry in China, strong demand for EVA in other parts of Asia, and demand for EVA in innovative applications such as controlled-release excipients and medical packaging. The company is expected to increase capacity by up to 15 percent for premium EVA grades in the second half of 2011.
Announced that its board of directors has approved a 20 percent increase in the company’s quarterly common stock cash dividend. The dividend rate increased from $0.05 to $0.06 per share of common stock on a quarterly basis and from $0.20 to $0.24 per share on an annual basis. The board of directors also approved an increase in the company’s existing share repurchase authorization to a total of $200 million of its common stock. As of March 31, 2011, the company had $71 million remaining under its previously announced plan that authorized up to $500 million.
First Quarter Segment Overview
Advanced Engineered Materials
Advanced Engineered Materials experienced continued strong global demand across its product lines. Net sales for the first quarter of 2011 were $328 million compared with $282 million in the prior year period, driven by higher value-in-use pricing and increased volumes across its product lines. While all engineered polymers experienced strong demand, volumes for polyacetal products (POM) were temporarily constrained as the company continued to build inventory for its planned European capacity expansion. Results in the quarter also benefited from the company’s actions to enhance its product portfolio through recent acquisitions. Reported operating profit decreased from $48 million in the prior year period to $38 million in the current period. The favorable impact of higher pricing and volumes more than offset increased raw material costs, as well as investments for future growth. First quarter 2011 results included other charges and other adjustments of $12 million of expense primarily associated with the European production capacity expansion. Operating EBITDA, which excluded other charges and other adjustments in both periods, was $104 million in the first quarter of 2011, compared with $107 in the prior year period. Total equity earnings from the company’s affiliates were $10 million lower than the same period last year as volume growth in the company’s Asian affiliates was offset by higher raw material costs and the timing of certain expenses. The Japanese operations of the company’s Polyplastics venture were not materially impacted in the quarter by the recent natural disasters.
Consumer Specialties
Consumer Specialties delivered strong performance on higher volumes, particularly for cellulose acetate products. Net sales for the first quarter of 2011 increased to $266 million from $238 million in the prior year period due to higher volumes as well as increased pricing. The volume increase was due to modestly improved global demand in the current period as well as additional availability of supply compared with the prior year period. In the first quarter of 2010, net sales were temporarily impacted by an electrical disruption and subsequent production outage at the company’s acetate manufacturing facility in Narrows, Virginia. Operating profit rose to $54 million from a loss of $30 million in the same period last year as the increased volumes and pricing more than offset increased raw material and energy costs. First quarter 2010 results included $80 million of other charges and other adjustments, primarily associated with the company’s announced closure of its acetate manufacturing facility in Spondon, Derby, United Kingdom. Operating EBITDA, which excluded other charges and other adjustments, was $68 million compared with $61 million in the prior year period.
Industrial Specialties
Industrial Specialties delivered strong results as it continued to realize growth in both traditional and nontraditional sectors through increased global demand and its innovation efforts. Net sales for the first quarter of 2011 increased to $290 million from $242 million in the same period last year, driven by increased pricing and higher volumes. Higher pricing was attributed to recent pricing actions, current strong demand and improved product mix on increased sales to higher value-added applications, including photovoltaic applications. The increased volumes were driven by the benefits of product innovation and continued growth in Celanese’s vinyl emulsion applications, as well as higher demand for EVA performance polymers. Operating profit in the first quarter of 2011 was $25 million compared with $12 million in the same period last year, as the higher volumes, enhanced product mix and increased pricing more than offset higher raw material costs. Operating EBITDA was $35 million compared with $22 million in the prior year period.
Acetyl Intermediates
Acetyl Intermediates delivered improved results on continued strong global demand for acetic acid and downstream derivative products. Net sales for the first quarter of 2011 rose to $813 million from $724 million in the prior year period. The increase in net sales was primarily due to favorable pricing across all regions and all acetyl product lines. Higher industry utilization due to planned and unplanned production outages of multiple acetyl producers, as well as rising raw material costs, drove the increased pricing. Operating profit in the current period increased to $112 million from $0 in the prior year period as the favorable pricing and the benefit from its manufacturing realignment activities, including the closure of the company’s operations in Pardies, France, more than offset higher raw material and energy costs. The first quarter 2011 results included a $19 million gain related to vendor settlements and first quarter 2010 results included $52 million of other charges and other adjustments primarily related to a contract termination of a bankrupt supplier and write-off of other productive assets. Operating EBITDA, which excluded other charges and other adjustments, increased to $122 million in the first quarter of 2011 from $78 million in the same period last year.
Taxes
The tax rate for adjusted earnings per share was 17 percent in the first quarter of 2011 compared with 20 percent in the first quarter of 2010. The effective tax rate for continuing operations for the first quarter of 2011 was 23 percent versus (286) percent in the first quarter of 2010. The lower effective tax rate in the first quarter of 2010 was primarily due to the effect of tax legislation in Mexico, partially offset by foreign losses not resulting in tax benefits and the effect of healthcare reform in the U.S. Net cash taxes refunded were $6 million in the first quarter of 2011 compared with net cash taxes paid of $11 million in the first quarter of 2010.
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 $43 million in the first quarter of 2011, $6 million lower than the prior year period. Equity and cost investment dividends, which are included in cash flows, were $73 million, $16 million higher than the same period last year.
In the first quarter of 2011, earnings in equity investments for Ticona’s strategic affiliates in Asia were $13 million, $8 million lower than the same period last year, while proportional affiliate EBITDA in excess of equity net earnings was $17 million, $2 million lower than the prior year period.
Ticona’s Middle Eastern affiliates, which include the company’s Ibn Sina affiliate, reported equity in net earnings of $21 million in the first quarter of 2011, a $2 million decrease from the same period last year. The company’s proportional affiliate EBITDA in excess of equity net earnings for the Middle Eastern affiliates was $8 million, up $1 million from the prior year period.
The company’s total proportional affiliate EBITDA for the first quarter of 2011 was $78 million, a $7 million decrease from the prior year period and $35 million more than reported in the company’s operating EBITDA. As of March 31, 2011, the company’s total proportional net debt of affiliates was $122 million.
Cash Flow
Cash and cash equivalents at the end of the first quarter of 2011 were $722 million, a $417 million decrease from the same period last year, reflecting, among other items, $200 million in net debt repayment on its senior credit facility during the third quarter of 2010 and continued investment in organic growth opportunities throughout the company. The company generated $132 million of cash from operating activities compared with $55 million in the same period last year on strong performance and favorable exchange rate effects. Net cash used in investing activities was $151 million compared with $132 million in the prior year period. The 2011 results included $54 million of capital expenditures related to the relocation of Ticona’s business in Kelsterbach, Germany. Net debt at the end of the first quarter of 2011 was $2,500 million, a $22 million increase from the end of 2010.
Outlook
Based on the strong first quarter results, and an expectation for sustained global economic growth, the company increased its outlook for full year 2011 results. The company now expects 2011 operating EBITDA to be at least $200 million higher than 2010’s results of $1,122 million and adjusted earnings per share to be at least $0.85 higher than 2010’s results of $3.37, based on a tax rate and diluted share count of 17 percent and 158.7 million shares, respectively.
“Advantaged technologies, leading global portfolio positions and innovative customer-focused solutions combined to deliver significantly improved earnings in the first quarter and are expected to drive sustained earnings growth for Celanese throughout 2011,” said Weidman. “Additionally, our integrated business model continues to demonstrate the earnings growth resiliency it has successfully shown in the past, even in an environment of escalating raw material and energy costs.”