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Celanese Inks Deal to Buy Elotex, Boosts Acetyls Business

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Celanese Corporation (CE - Free Report) has signed a deal to acquire Nouryon’s redispersible polymer powders business, which is offered under the Elotex brand.

Notably, Celanese agreed to purchase all of global production facilities of Nouryon for redispersible polymer powders throughout Europe and Asia. It will also acquire all products under the Elotex portfolio, and customer agreements, technology and commercial facilities worldwide.

Per management, the acquisition will offer Celanese direct access to a comparatively fast-growing applications and customer base, which in turn will complement its emulsion business. Notably, this deal will strengthen the company’s global leadership position in the vinyl acetate ethylene (VAE) emulsions space, and support customers in construction and building materials.        

The buyout also marks a vital step in the company’s acetyl core derivatization strategy. Notably, it offers additional flexibility and downstream growth optionality through derivatization, both of which are critical for unlocking value under its unique global acetyl chain business model.

Celanese plans to incorporate Elotex’s redispersible polymer powder product portfolio and manufacturing facilities into its global acetyl chain in order to cater to the global product demand.

The transaction is slated to be completed in the second quarter of 2020, subject to customary closing conditions, regulatory approvals and completion of the works council process. Notably, Celanese and Elotex are expected to continue to function as independent businesses until the transaction is completed.

The company also announced its plans to expand emulsion polymers derivatives business to strengthen its global acetyl chain. The investments announced by Celanese include implementation of a number of capital efficient VAE expansion and debottlenecking projects through 2023. These include significant expansions of the company’s Nanjing, China, and Geleen, Netherlands, VAE emulsions production sites.

Celanese’s shares have gained 4.2% in the past year, compared with the industry’s growth of 5.6%.

Last week, the company reported fourth-quarter 2019 earnings from continuing operations of 35 cents per share, down from 73 cents per share in the year-ago quarter. Moreover, adjusted earnings per share of $1.99 lagged the Zacks Consensus Estimate of $2.09.

Revenues declined 15.2% year over year to $1,432 million in the fourth quarter. Moreover, the top line missed the Zacks Consensus Estimate of $1,501.8 million.

Celanese does not expect any meaningful improvement in demand conditions on a year-over-year basis in 2020. Moreover, the company anticipates reaching 2020 adjusted earnings target of $11 per share, on the back of factors within its control.

Celanese Corporation Price and Consensus

Zacks Rank & Stocks to Consider

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

Some better-ranked stocks in the basic materials space are Daqo New Energy Corp. (DQ - Free Report) , Royal Gold, Inc. (RGLD - Free Report) and Commercial Metals Company (CMC - Free Report) .

Daqo New Energy has a projected earnings growth rate of 326.3% for 2020. The company’s shares have rallied 47.4% in a year. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Royal Gold has an estimated earnings growth rate of 83.5% for fiscal 2020. It currently flaunts a Zacks Rank #1. Its shares have rallied 31.7% in a year.

Commercial Metals has a Zacks Rank #2 (Buy) and a projected earnings growth rate of 17.3% for 2020. The company’s shares have rallied 17.1% in a year.

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