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Celanese's Earnings Top, Sales Miss

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Chemical and advanced materials maker Celanese Corporation (CE - Free Report) reported first-quarter 2013 adjusted earnings (excluding one-time items) of $1.14 per share, outperforming the Zacks Consensus Estimate of 79 cents and exceeding the year-ago earnings of 79 cents per share by 44%.

Earnings (as reported) from continuing operation were 88 cents a share in the quarter, down 27% from $1.21 recorded a year ago.

Sales for the quarter were $1,605 million, down 1.7% year over year, missing the Zacks Consensus Estimate of $1,608 million.

Segment Review

Advanced Engineered Materials: Sales increased 3.8% year over year to $329 million in the first quarter despite a 9% year over year decline in auto builds in Europe. Celanese achieved an all-time first quarter record due to constant success in global auto penetration and its innovation activities. The segment’s earnings before interest and taxes (EBIT) also increased 11% in the quarter due to improved global product mix, mainly medical applications.

Consumer Specialties: Sales jumped 11.7% year over year to $295 million. The segment’s adjusted EBIT increased by $50 million to $108 million.

The increase was driven by cash dividend from the company’s China acetate ventures and continued strong demand in acetate and lower energy costs related to the Spondon acetate facility. Beginning from the first quarter, Celanese anticipates that it will receive quarterly dividend from the Chinese ventures rather than annual dividend.

Industrial Specialties: Net sales decreased 6.8% from the year-ago quarter to $288 million. Volumes decreased 3% on lower emulsion demand in North America and Europe, offset by stronger demand in Asia for Vinyl Acetate Ethylene (VAE) applications. Adjusted EBIT declined 27.3% to $16 million due to lower demand for photovoltaic applications in Ethylene Vinyl Acetate and lower raw material costs, primarily ethylene, in Emulsions.

Acetyl Intermediates: The segment witnessed a 5.2% decline in sales to $808 million, due to lower acetyl pricing and demand. Adjusted EBIT increased by 22% to $79 million due to cost efficiencies and lower raw material costs.


Cash and cash equivalents were $978 million as of Mar 31, 2013, versus $727 million as of Mar 31, 2012. The company’s long-term debt stood at $2,959 million as of Mar 31, 2013, compared with $2,875 million as of Mar 31, 2012. Celanese generated $147 million in cash from operating activities in the first quarter of 2013, compared with $215 million in cash generated from operating activities in the year-ago quarter.


Celanese expects the challenging economic conditions to persist throughout 2013. For 2013, it expects earnings growth on the back of company-specific initiatives and to be consistent with its long-term growth objective of 12% to 14%, despite higher 2012 earnings base after its pension accounting policy change. The company remains focused on enhancing the competitiveness of its products through technological innovations.

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 in 2013.

Celanese continues to offer value-added solutions to its customers. It is aggressively expanding capacity in the emerging Asian markets. Its expansion initiatives in China are expected to support earnings growth.
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 impact the company’s results.

Celanese currently carries a short-term (1 to 3 months) Zacks Rank #3 (Hold).

Other companies in the chemical industry having favorable Zacks Rank are Olin Corp. (OLN - Free Report) , Compass Minerals International Inc. (CMP - Free Report) and Eastman Chemical Company (EMN - Free Report) While Olin holds a Zacks Rank #1 (Strong Buy), Compass and Eastman carry a Zacks Rank #2 (Buy).

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