Specialty materials company Celanese Corporation (CE - Analyst Report) reported third-quarter 2012 adjusted earnings (excluding one-time items) of 93 cents per share, exceeding the Zacks Consensus Estimate of 91 cents but trailing the year-ago earnings of $1.27 per share.
Earnings (as reported) from continuing operation was down 29.5% year over year to 74 cents a share in the quarter from $1.05 a year ago. Lower pricing for some specialty chemical products due to soft economic conditions in Europe and Asia hurt the company’s bottom line in the quarter.
Revenues and Margins
Sales for the quarter were $1,609 million, down 11% year over year, missing the Zacks Consensus Estimate of $1,717 million. The decline was due to lower pricing in the company’s acetyl intermediates and Industrial Specialties businesses, and unfavorable currency impacts.
Advanced Engineered Materials: Sales decreased 3% year over year to $322 million in the third quarter, due to unfavorable currency translation. Prices rose 3% and strong volumes across America and Asia were offset by weak European demand across most of the company’s product lines. Operating EBITDA was down 2.7% to $109 million due to lower equity earnings and currency impacts, offsetting higher prices.
Consumer Specialties: Sales rose 5.1% year over year to $314 million, driven by a 6% increase in prices due to strong global demand and also reflects the strong value added applications that the segment provides to its customers. Operating EBITDA rose 11.5% to $87 million.
Industrial Specialties: Net sales decreased 10.5% from the year ago quarter to $297 million. Volumes increased 2% based on increased demand in North America and Asia, offset by lower European volumes. Pricing was also lower in the quarter due to soft demand in Ethylene Vinyl Acetate (EVA) applications and lower raw material costs. Weaker euro also negatively impacted the results. Operating EBITDA declined 16.3% to $36 million as record results in Emulsions were more than offset by lower demand for EVA applications.
Acetyl Intermediates: The segment witnessed a 19.5% decline in sales to $785 million, due to lower acetyl pricing and demand and negative currency impacts. The segment was impacted by weak economic conditions in Europe and Asia, which affected demand and pricing. Operating EBITDA decreased 45.8% to $91 million due to lower pricing.
Cash and cash equivalents were $928 million as of September 30, 2012, versus $682 million as of December 31, 2011. The company’s long-term debt stood at $2,839 million as of September 30, 2012, compared with $2,873 million as of December 31, 2011.
Celanese expects the challenging economic conditions to persist in 2013 but still anticipates fourth-quarter 2012 adjusted earnings to be modestly higher on a year-over-year basis. For 2013, it expects earnings growth to be driven by the company-specific initiatives and be consistent with its long-term growth objectives of 12% to 14%.
Celanese, which competes with BASF SE (BASFY) and Methanex Corporation (MEOH - Analyst Report), currently retains a Zacks #5 Rank, reflecting a short-term (1 to 3 months) Strong Sell rating. We have a long-term (more than 6 months) Neutral recommendation on the stock.