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Celanese (CE) Extends Long-Term Feedstock Contract In China

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Celanese Corporation’s (CE - Free Report) subsidiary, Celanese (Nanjing) Chemical Co. Ltd., extended its long-term contract with Nanjing Chengzhi Clean Energy Co., Ltd to supply carbon monoxide to its chemical facility in the Nanjing Chemical Industrial Park, Nanjing City, China. The company has not disclosed financial details of the transaction.

Carbon monoxide is used as a key feedstock in the production of acetic acid. Per the company, this latest deal will provide Celanese’s Nanjing facility with a reliable supply of carbon monoxide for its 1,200-kiloton acetic acid plant.

Celanese’s shares have lost 21.6% in the past year against its industry’s 31.5% rise.

In first-quarter 2020 earnings call, the company stated that it expects to generate $300-$400 million of incremental cash from productivity actions being undertaken along with working capital management and capital expenditure prioritization. This will enable the company to offset challenges related to demand and earnings in 2020.

The company also suspended its earlier announced annual adjusted earnings per share guidance for 2020 due to uncertainties regarding the duration and impacts of the coronavirus pandemic.

Celanese is expected to gain from inorganic growth initiatives, productivity actions and investments in high-return organic projects. The company is committed to execute its productivity programs that include implementation of a number of cost reduction capital projects.

However, it is exposed to a sluggish demand environment. The company witnessed demand weakness due to the impacts of the coronavirus outbreak during the first quarter. Weak demand sales in the quarter. Soft demand conditions are likely to persist in the second quarter.

Zacks Rank & Key Picks

Celanese currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Barrick Gold Corporation (GOLD - Free Report) , Newmont Corporation (NEM - Free Report) and AngloGold Ashanti Limited (AU - Free Report) , all carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Barrick has an expected earnings growth rate of 54.9% for 2020. The company’s shares have surged 60.8% in the past year.

Newmont has an expected earnings growth rate of 80.3% for 2020. Its shares have returned 53.7% in the past year.

AngloGold has an expected earnings growth rate of 109.9% for 2020. The company’s shares have surged 64.3% in the past year.

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