News Column

Celanese Posts Quarterly Results

July 23, 2014

Celanese Corp. reported second quarter 2014 adjusted earnings per share of $1.47 versus $1.33 in the prior quarter.

"Our second quarter adjusted EPS was the highest in our history at $1.47 per share. We expanded segment income margin to 18.6 percent, a 90 basis point improvement sequentially and a 260 basis point improvement year-over-year. These results were driven by the efforts of our global teams that continued to deliver customer- centric applications that add value. We are also benefiting from the strategic decision to operate our technology-enabled business in a manner that increases our underlying business flexibility and our ability to take advantage of prevailing industry trends," said Mark Rohr, chairman and chief executive officer. "We again delivered strong cash flow, deploying $50 million on share repurchases and $39 million on dividends in the quarter. With a cash balance of $1.1 billion and net debt balance of less than $2.0 billion, we have an opportunity to create value through our balance sheet."

In its release on July 17, the company noted that recent highlights include:

-Announced the opening of the company's Commercial Technology Center in Seoul, Republic of Korea. The research and development center will support customer growth in South Korea and advance the technical capabilities of the Celanese product portfolio.

-Announced the expansion of the company's compounding capabilities at its integrated chemical complex in Nanjing, China, to include polyphenylene sulfide ("PPS"). PPS is used to replace metals and thermosets in applications spanning the automotive, electronics and aerospace industries. The expansion is expected to be operational by year-end 2014.

-Announced the expansion of the company's Florence, Kentucky facility to add compounding process lines to support demand for its engineered materials business. It is expected to be operational in the first quarter of 2015.

-Announced that the company will expand its Suzano, Brazil facility to include long-fiber reinforced thermoplastics production by mid-2015 to serve customers in Brazil and Latin America.

-Announced the company's intent to construct a VAE emulsions unit in Southeast Asia. The unit will allow Celanese to better serve customers with high-end applications in the architectural coatings, building and construction, carpet and paper industries. The unit is expected to begin production by mid-2016.

-Increased the company's quarterly common stock cash dividend by 39 percent, from $0.72 to $1.00 per share of common stock on an annual basis. This increased the company's dividend payout ratio to approximately 20 percent.

Second Quarter Business Segment Overview

Advanced Engineered Materials

In the second quarter, Advanced Engineered Materials generated record quarterly revenue of $389 million and expanded segment income margin by 170 basis points sequentially to 24.2 percent, on segment income of $94 million. Volumes increased 4 percent from the prior quarter. Demand for the company's advanced polymers in autos continues to be strong. Additionally, the business' ability to develop products and applications that resonate with customer needs drove incremental growth in consumer applications primarily in Asia and industrial applications in North America and Asia. Earnings from affiliates were $45 million. GAAP operating profit was $56 million.

Consumer Specialties

Second quarter segment income margin in Consumer Specialties was 37.0 percent on segment income of $107 million. On a sequential basis segment income decreased primarily due to a third party power outage that interrupted plant operations at the company's cellulose derivatives facility in Narrows, Virginia. Volumes decreased 3 percent from the prior quarter. Pricing declined by less than 1 percent mainly due to commitments under a legacy contract in acetate flake. Dividends from the cellulose derivatives ventures were $28 million, consistent with first quarter. GAAP operating profit was $80 million.

Industrial Specialties

In the second quarter, Industrial Specialties expanded segment income margin sequentially by 20 basis points on segment income of $22 million. Volumes increased 2 percent sequentially primarily driven by increased demand in North America for EVA polymers and seasonal trends in emulsion polymers in North America and Asia. Pricing increased 4 percent from the first quarter on improved product mix in EVA polymers, primarily medical, and in response to higher raw material costs, primarily vinyl acetate monomer (VAM), in emulsion polymers. GAAP operating profit was $24 million in the second quarter.

Acetyl Intermediates

Second quarter segment income margin in Acetyl Intermediates was 16.2 percent, a 480 basis points expansion sequentially on $146 million of segment income. These results demonstrate the strategic actions the company has taken to respond to prevailing industry conditions while also yielding a stronger base business. Pricing increased 6 percent sequentially, mainly in VAM, reflecting the impact of the company's strategic actions at non-integrated facilities in Europe as well as planned and unplanned industry outages in the United States gulf coast. The higher pricing more than offset the impact of the planned turnaround at the company's acetic acid unit at Clear Lake, Texas. GAAP operating profit was $143 million in the second quarter.

Cash Flow

During the second quarter of 2014, the company generated $253 million of operating cash flow primarily driven by continued strong earnings. The company's net investment in capital projects was $86 million mainly related to the methanol unit at its integrated facility in Clear Lake, Texas and the natural gas boilers at its cellulose derivatives facility in Narrows, Virginia. Adjusted free cash flow for the quarter was $161 million.

The company deployed $39 million on dividends and $50 million on share repurchases. As of June 30, $297 million remained under the company's share repurchase authorization.

The company ended the quarter with net debt of less than $2.0 billion, a $61 million decrease from March 31.

Outlook

"Our excellent performance through the first six months of the year gives me confidence that we can generate adjusted earnings per share growth in the range of 15 to 17 percent in 2014," said Rohr. "We now increase our focus on the Celanese-specific initiatives for 2015 that will help offset the expected headwind related to the expiration of a methanol contract in mid-2015."

The company's earnings presentation and prepared remarks related to the second quarter results will be posted on its website at www.celanese.com under Investor Relations/Events and Presentations after market close on July 17.

Celanese Corp. is a global technology company.

More information and complete details:

celanese.com

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