Celanese to Build Methanol Plant

The specialty material company, Celanese Corporation (CE - Analyst Report) announced its plan to build a methanol plant at its Clear Lake, Texas acetyl complex with an annual capacity of 1.3 million metric ton. The plant is expected to be online by July 1, 2015.

A considerable portion of the methanol produced at the plant will be used to support Celanese’s acetyl operations at Clear Lake. The company expects to partner with one or more additional entities to sell the remaining methanol, provided they are interested in it.

The company aims to utilize its already existing infrastructure at Clear Lake for the new plant, which will help reduce its capital requirements. Celanese also intends to take advantage of the existing technologies at the facility. The facility will provide employment to a large number of people through the construction process as well as the start up phase.

In April 2012, Celanese released its first-quarter 2012 results. The company reported adjusted earnings (excluding one-time charges and gains) of 72 cents per share in the quarter, down from 96 cents a year ago. The profits were below the Zacks Consensus Estimate of 77 cents. However, the reported profit jumped 28.9% year over year to $183 million or $1.15 per share during the quarter.

Sales for the quarter amounted to $1,633 million, up 3% year over year, exceeding the Zacks Consensus Estimate of $1,616 million. The growth was driven by higher volumes and pricing in the company’s acetyl intermediates and industrial specialties divisions. However, higher costs and weaker demand in Europe led to a decline in operating profit by 91.8% to $98 million.

According to Celanese, challenging market conditions in Europe and Asia will last longer this year than expected. Therefore, the company will operate plants at appropriate levels to maximize profits while keeping a lid on discretionary spending. It expects to cut costs and expand customer relationships to counteract weak demand.

Celanese, which competes with BASF SE (BASFY) and Methanex Corporation (MEOH - Analyst Report), currently retains a Zacks #3 Rank, reflecting a short-term (1 to 3 months) Hold rating. Currently, we have a long-term (more than 6 months) Neutral recommendation on the stock.