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We are retaining our Neutral recommendation on Celanese Corporation (
- Analyst Report
following its mixed third-quarter 2012 results. Adjusted earnings of 93 cents per share topped the Zacks Consensus Estimate by a couple of cents.
Revenues fell 11% year over year to $1,609 million and missed the Zacks Consensus Estimate. Weak pricing and unfavorable currency translation dragged down sales in the quarter.
The company expects the challenging economic conditions to continue in Europe in the fourth quarter and the first two quarters of 2013. However, it sees fourth quarter adjusted earnings to be modestly higher on a year-over-year basis. For 2013, Celanese expects earnings growth to be driven by the company-specific initiatives and be consistent with its long-term growth objective of 12% to 14%.
Celanese is among the world’s largest producers of acetyl products as well as the leading global producer of high-performance engineered polymers. The company’s strong presence in the emerging markets will enable it to deliver incremental earnings this year. Moreover, Celanese remains focused on returning value to its shareholders, backed by strong cash flows.
Celanese is aggressively expanding capacity in the emerging Asian markets. Its expansion initiatives in China are expected to support earnings growth. The company’s integrated chemical complex in Nanjing, China, serves as a base for expansion in Asia, supporting the region's increasing demand.
However, Celanese is witnessing weak demand and pricing in its core acetyl business. The challenging economic conditions in Europe and sluggish growth in Asia may continue to impact its results moving ahead.
Moreover, Celanese is exposed to volatility in raw material costs and currency headwinds. The company’s balance sheet leverage is also relatively high, limiting its financial flexibility.
Celanese, which competes with BASF SE ( BASFY ) , Methanex Corp. ( MEOH - Analyst Report ) and E. I. Du Pont de Nemours & Co. ( DD - Analyst Report ) , currently retains a short-term Zacks #4 Rank (Sell).
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