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Celanese Beats Both on Earnings and Sales

ASH AIQUY CE

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Chemical and advanced materials maker Celanese Corporation’s (CE - Analyst Report) fourth-quarter 2013 adjusted earnings (excluding one-time items) of $1.04 per share beat the Zacks Consensus Estimate of $1.01.
 
Earnings (as reported) from continuing operations came in at $4.16 per share in the quarter, compared with a loss of $1.05 recorded a year ago.

For full-year 2013, adjusted earnings came in at $4.50 per share, up exceeding the Zacks Consensus Estimate of $4.47. Earnings (as reported) from continuing operations were $6.91 per share, up 194% year over year from $2.35 per share reported a year ago.
 
Sales in the quarter were $1,616 million, up 7.7% year over year, surpassing the Zacks Consensus Estimate of $1,560 million. For full-year 2013, sales were $6,510 million, up 1.4% year over year.
 
Segment Review
 
Advanced Engineered Materials: Sales decreased 6.1% sequentially to $325 million in the fourth quarter. The segment’s adjusted earnings before interest and taxes (EBIT) decreased 30.9% sequentially and income margin dropped to 17.2% in the quarter. Volumes declined 4% due to normal and expected seasonal trends in North America and Europe which offset sustained penetration in autos riding on innovative applications. However, operating profit increased to $781 million in the quarter due to gains associated with the final disposition of the Kelsterbach site and pension accounting.
 
Consumer Specialties: Sales declined 4.8% sequentially to $295 million in the fourth quarter. The segment’s adjusted EBIT increased 2.8% from the previous quarter to $111 million and income margin increased 280 basis points (bps) to 37.6%. Volumes declined 5% sequentially but were offset by higher dividends from Celanese’s cellulose derivatives ventures and continued success from Celanese-specific efficiency programs.
 
Industrial Specialties:
Net sales decreased 8.7% from the previous quarter to $273 million. Adjusted EBIT decreased 48% sequentially to $13 million. Volumes decreased 10% sequentially due to normal fourth quarter seasonality in emulsion polymers in Europe and Asia. Price and raw material costs were flat compared with the prior quarter.
 
Acetyl Intermediates:
The segment’s sales rose 4.3% from the previous quarter and came in at $829 million. Adjusted EBIT increased 16.7% sequentially to $84 million despite challenging demand environment and considerably higher raw materials costs in the quarter. Income margin increased 100 bps to 10.1%. Volumes increased 2% sequentially due to higher VAM volumes. Pricing increased 1% due to higher methanol costs in the fourth quarter.

Liquidity
 
Cash and cash equivalents were $984 million as of Dec 31, 2013, up roughly 3% from $959 million as of Dec 31, 2012. The company’s long-term debt stood at $2,887 million as of Dec 31, 2013, down 1.5% from $2,930 million as of Dec 31, 2012. Celanese generated $154 million in cash from operating activities in the reported quarter on the back of strong earnings.
 
Dividend

Cash dividends received in the fourth quarter from equity investments were $38 million compared with $11 million in the previous quarter. During the fourth quarter, the Celanese received a quarterly dividend of $24 million from its cellulose derivatives ventures, $3 million more than the prior quarter.

Outlook
 
For 2014, Celanese expects earnings growth on the back of company-specific initiatives to be consistent with its long-term growth plan. The company-specific initiatives including innovation of new products and enhancement of efficiencies through productivity are expected to drive earnings growth in 2014. Celanese expects to grow adjusted EBIT by roughly $100 million on the back of its strategic actions.
 
Celanese currently carries a Zacks Rank #4 (Sell).
 
Some better-ranked stocks in the chemical industry include L'Air Liquide SA (AIQUY), Northern Technologies International Corp. and Ashland Inc. (ASH - Snapshot Report). While L'Air Liquide and Northern Technologies International hold a Zacks Rank #1 (Strong Buy), Ashland retains a Zacks Rank #2 (Buy)

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