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Celanese (CE) & Mitsubishi Wrap Up Restructuring of KEP

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Celanese Corporation (CE - Free Report) recently announced the completion of the restructuring of Korea Engineering Plastics Co. (“KEP”). KEP is a joint venture owned 50% by Celanese and 50% by Mitsubishi Gas Chemical Company, Inc. (“MGC”).

KEP will be directed toward the production and supply of high-quality products to its shareholders, who will independently market them worldwide and without competitive restrictions. Celanese and Mitsubishi feel it is essential for KEP to focus its efforts on production and supply of innovative products due to the globalization of the engineering plastics industry, the fragmentation of the marketing supply chain and other changes in industry conditions.

The restructuring will provide Celanese greater access to original equipment manufacturers in Asia and more direct participation in major markets outside China. The company stated that it would benefit from KEP’s technical manufacturing expertise and wide product portfolio, which will be marketed using Celanese’s commercial teams, project model and global supply chain network.

Celanese and Mitsubishi will continue to find more ways to leverage KEP’s manufacturing strengths such as evaluating potential future expansions of its polymer and compounding capabilities post KEP’s restructuring.

Per the restructuring terms, Celanese agreed to sell land to KEP, currently leased by the joint venture, at its Ulsan, South Korea site, at a market value of roughly $10 million. This enabled Celanese to monetize a non-strategic asset and strengthened KEP’s presence in Ulsan.

Celanese anticipates the restructuring to be immediately accretive to adjusted EBIT and adjusted earnings per share.

Shares of Celanese have declined 6.4% in the past year compared with a 10.9% fall of the industry.

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Celanese, in its last earnings call, stated that the early 2022 order book reflects strong demand for its products across most end markets. It continues to monitor the impact of Covid-19 variants on demand conditions. However, the constant inflationary and volatile supply chain environment remains its biggest challenge.

It forecasts sequential margin expansion in first-quarter 2022 in its downstream businesses, led by Engineered Materials. The upside will likely offset the anticipated moderation in Acetyl Chain pricing conditions and boost expected first-quarter adjusted earnings of $4.30-$4.60 per share. With a strong start to 2022, the company is optimistic about its ability to achieve adjusted earnings of at least $15.00 per share in 2022, the company noted.

 

Zacks Rank & Key Picks

Celanese currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the basic materials space are The Mosaic Company (MOS - Free Report) , AdvanSix Inc. (ASIX - Free Report) and Allegheny Technologies Incorporated (ATI - Free Report) .

Mosaic has a projected earnings growth rate of 125% for the current year. The Zacks Consensus Estimate for MOS' current-year earnings has been revised 33.3% upward in the past 60 days.

Mosaic’s earnings beat the Zacks Consensus Estimate in three of the last four quarters while missing once. It delivered a trailing four-quarter earnings surprise of roughly 3.7%, on average. MOS has rallied around 123% in a year and currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AdvanSix has a projected earnings growth rate of 64.8% for the current year. The Zacks Consensus Estimate for ASIX’s current-year earnings has been revised 58% upward in the past 60 days.

AdvanSix’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, the average being 23.6%. ASIX has surged 77.9% in a year. The company sports a Zacks Rank #1.

Allegheny, currently sporting a Zacks Rank #1, has an expected earnings growth rate of 684.6% for the current year. The Zacks Consensus Estimate for ATI's earnings for the current year has been revised 20% upward in the past 60 days.

Allegheny’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 127.2%. ATI has rallied around 24.9% over a year.


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