Celanese Q3 net income climbs 15% year-over-year to US$167M as revenues jump 20% to US$1.8B, primarily driven by higher pricing across all operating segments, favorable currency exchange

DALLAS , October 25, 2011 (press release) – * Net sales were $1,807 million, up 20% from prior year period
* Operating profit was $196 million versus $221 million in prior year period
* Net earnings were $167 million versus $145 million in prior year period
* Diluted EPS from continuing operations was $1.05 versus $0.93 in prior year period
* Operating EBITDA was $374 million, up 31% from prior year period
* Adjusted EPS was $1.27, up 44% from prior year period

Celanese Corporation (NYSE:CE - News), a global technology and specialty materials company, today reported third quarter 2011 net sales of $1,807 million, a 20 percent increase from the prior year period, primarily driven by higher pricing across all operating segments and favorable currency impacts. The higher pricing was a result of elevated year-over-year industry utilization in its Acetyl Intermediates segment, the recovery of rising raw material costs and continued strong demand throughout its global businesses, particularly in Advanced Engineered Materials. Operating profit was $196 million compared with $221 million in the same period last year. Other charges and other adjustments totaled $43 million in the quarter and included costs associated with the company's successful polyacetal (POM) European capacity expansion. Net earnings were $167 million compared with $145 million in the same period last year. Diluted earnings per share from continuing operations were $1.05 compared with $0.93 in the prior year period.

Adjusted earnings per share in the third quarter of 2011 rose 44 percent to $1.27 from $0.88 in the prior year period. The tax rate and diluted share count for adjusted earnings per share in the current period were 17 percent and 159.0 million, respectively. Operating EBITDA was $374 million, a 31 percent increase from the third quarter of 2010. Adjusted earnings per share and operating EBITDA excluded other charges and other adjustments in both periods.

"Celanese delivered a record third quarter, which included record performances in Advanced Engineered Materials and Industrial Specialties, reflecting year-over-year demand growth across our businesses and execution of our strategic objectives," said David Weidman, chairman and chief executive officer. "We remain confident that Celanese's strong business fundamentals, including leading technology, low cost positions, broad end-market diversity and strong presence in emerging economies, will continue to drive growth and create value for shareholders throughout an economic cycle."

Third Quarter Segment Overview

Advanced Engineered Materials

Advanced Engineered Materials delivered record operating EBITDA in the quarter as its innovative, high performance products continued to see healthy demand in its end-use applications, particularly automotive. Net sales for the third quarter of 2011 were $332 million compared with $271 million in the same period last year, driven by higher pricing, increased volumes, revenue associated with the company's recently acquired product lines and favorable currency impacts. During the quarter, the company opened the world's largest POM production facility, which is expected to meet the increased global demand for its innovative specialty solutions in polymer-based products. Operating profit in the third quarter of 2011 was $14 million compared with $63 million in the prior year period. The plant startup resulted in other charges and other adjustments of $19 million, primarily due to an inventory draw and related expenses. Third quarter 2010 results included a net gain of $22 million, primarily related to a reduction of legal reserves. The higher pricing and volumes offset higher raw material costs and increased spending primarily associated with geographic expansion into Asia. Operating EBITDA, which excluded the other charges and other adjustments, was $112 million compared with $90 million in the prior year period. Equity earnings from the company's affiliates totaled $52 million compared with $31 million in the third quarter of 2010, primarily driven by higher earnings in its Ibn Sina venture, which provides an economic hedge against raw material costs.

Consumer Specialties

Consumer Specialties continued to deliver solid results as its leading global positions benefited from favorable industry fundamentals. Net sales in the third quarter of 2011 were $298 million compared with $288 million in the prior year period, as higher pricing offset slightly lower volumes. Volumes in the company's Acetate Products business were impacted by a temporary manufacturing outage in the current period, but were partially offset by higher volumes in the company's Nutrinova business. Operating profit was $66 million compared with $71 million in the same period last year as the higher pricing offset higher raw material and energy costs, but did not fully offset increased spending associated with the temporary manufacturing outage. Operating EBITDA was $78 million compared with $81 million in the same period last year.

Industrial Specialties

Industrial Specialties delivered record operating EBITDA in the quarter as increased global demand for its innovative product offerings resulted in strong results and sustained margins. Net sales in the third quarter of 2011 were $332 million compared with $276 million in the same period last year, primarily driven by higher pricing and demand for innovative applications in the emulsions and EVA performance polymers businesses, particularly in the growing Asia region. The higher pricing was largely due to pricing actions to successfully recover rising raw material costs, particularly for ethylene and related products. Operating profit in the current period was $30 million compared with $50 million in the same period last year. Third quarter 2010 results included $25 million associated with insurance proceeds related to the EVA production outage in 2009. Operating EBITDA, which excluded the insurance proceeds in the prior year period, increased to $43 million from $36 million in the same period last year, as higher pricing more than offset rising raw material costs.

Acetyl Intermediates

Acetyl Intermediates delivered year-over-year earnings growth and expanded margins as it benefited from favorable industry conditions and its advantaged technology and cost positions. Net sales for the third quarter of 2011 increased to $975 million from $777 million in the prior year period, primarily driven by higher pricing for all major acetyl derivative product lines. Higher pricing in the quarter reflected elevated year-over-year industry utilization due to planned and unplanned production outages of multiple acetyl producers and robust end-market demand for acetyl products. The higher pricing also reflected the recovery of higher raw material costs as compared to the prior year period. Operating profit in the current period increased to $128 million from $81 million in the prior year period on expanded margins. Operating EBITDA was $168 million compared with $110 million in the same period last year.

Taxes

The tax rate for adjusted earnings per share was 17 percent in the third quarter of 2011 compared with 20 percent in the third quarter of 2010. The effective tax rate for continuing operations for the third quarter of 2011 was 17 percent compared with 23 percent in the prior year period. The decrease in the effective tax rate is primarily due to decreases in uncertain tax positions that occurred during the current period. Net cash tax payments were $48 million in the first nine months of 2011 compared with cash taxes paid of $104 million in the first nine months of 2010. The decrease in cash taxes paid is primarily the result of tax refunds received in certain jurisdictions. The tax rate for the company's adjusted earnings per share is forecasted to be 17 percent for 2011.

Equity and Cost Investments

Earnings from equity investments and dividends from cost investments, which are reflected in the company's earnings and operating EBITDA, were $58 million in the third quarter of 2011, a $20 million increase from the prior year period's results. Equity and cost investment dividends, which are included in cash flows, were $48 million, a $19 million increase from the prior year period.

Earnings in equity investments for Ticona's strategic affiliates in Asia in the third quarter of 2011 were $18 million, a $4 million increase from the prior year period, while proportional affiliate EBITDA in excess of equity net earnings decreased to $17 million from $20 million in the prior year period. Earnings in equity investments for Ticona's strategic affiliates in the Middle East, which include its Ibn Sina affiliate, increased to $34 million from $17 million in the prior year period, primarily driven by higher margins. Proportional affiliate EBITDA in excess of equity net earnings for the Middle Eastern affiliates was $9 million, a $3 million increase from the prior year.

The company's total proportional affiliate EBITDA for the third quarter of 2011 increased to $98 million from $73 million in the prior year period and was $41 million more than reported in the company's operating EBITDA. As of September 30, 2011, the company's total proportional net debt of affiliates was $110 million.

Cash Flow

During the first nine months of 2011, the company generated $481 million in cash from operating activities, a $118 million increase from the prior year period's results. The increase was primarily driven by higher company earnings, partially offset by increased working capital and higher pension contributions. During the first nine months of 2011, the company invested in future operating efficiencies and capacity expansions, spending $174 million of capital expenditures related to its successful relocation of Ticona's operations in Kelsterbach, Germany. The company also received a final payment of $158 million related to the relocation during the period. Cash used in investing activities during the first nine months of 2011 was $296 million compared with $381 million in the same period last year. Results for the first nine months of 2010 included $219 million related to the Ticona relocation and a cash outflow of $46 million related to the company's acquisition of the Zenite® LCP and Thermx® PCT product lines from DuPont Performance Polymers. Net cash used in financing activities during the first nine months of 2011 was $224 million compared with $332 million in the prior year period.

During the first nine months of 2011, the company used a net of $154 million to repay debt, $128 million in contributions for its pension and OPEB fund, and $28 million to repurchase shares. Net debt at the end of the third quarter of 2011 was $2,350 million, a $128 million decrease from the end of 2010.

Outlook

Based on its strong performance in the third quarter, the company increased its outlook for full year 2011 results. The company now expects 2011 adjusted earnings per share to be approximately $1.30 higher than 2010's results of $3.37, an increase of $0.10 per share from its previous outlook. Operating EBITDA is now expected to be approximately $280 million higher than 2010's results of $1,122 million. These expectations are based on a tax rate of 17 percent and diluted share count of 159 million shares. The company had previously expected 2011 adjusted earnings per share and operating EBITDA to be approximately $1.20 and $275 million higher than 2010, respectively.

"For the remainder of the year, we expect to see year-over-year earnings growth and typical fourth quarter seasonality. The temporarily expanded third quarter margins in acetyls should moderate to more normal levels in the fourth quarter of 2011," said Weidman. "Based on our business model and strong fundamentals, we remain well positioned to achieve our 2013 earnings growth objectives."
 

Consolidated Statements of Operations - Unaudited

 

    Three Months Ended
September 30,
      Nine Months Ended
September 30,
(in $ millions, except share and per share data)   2011  
 
2010
      2011     2010
Net sales   1,807       1,506         5,149       4,411  
Cost of sales   (1,406 )     (1,160 )       (3,987 )     (3,544 )
Gross profit   401       346         1,162       867  
Selling, general and administrative expenses   (140 )     (125 )       (408 )     (373 )
Amortization of intangible assets   (17 )     (15 )       (50 )     (45 )
Research and development expenses   (24 )     (17 )       (72 )     (52 )
Other (charges) gains, net   (24 )     36         (39 )     (47 )
Foreign exchange gain (loss), net   1       (1 )       1       1  
Gain (loss) on disposition of businesses and asset, net   (1 )     (3 )       (1 )     12  
Operating profit (loss)   196       221         593       363  
Equity in net earnings (loss) of affiliates   57       37         146       131  
Interest expense   (54 )     (48 )       (166 )     (146 )
Refinancing expense         (16 )       (3 )     (16 )
Interest income   1               2       2  
Dividend income - cost investments   1       1         80       73  
Other income (expense), net         (4 )       9       1  
Earnings (loss) from continuing operations before tax   201       191         661       408  
Income tax (provision) benefit   (34 )     (44 )       (151 )     (85 )
Earnings (loss) from continuing operations   167       147         510       323  
Earnings (loss) from operation of discontinued operations         (3 )       3       (8 )
Gain (loss) on disposition of discontinued operations                       2  
Income tax (provision) benefit, discontinued operations         1         (1 )     2  
Earnings (loss) from discontinued operations         (2 )       2       (4 )
Net earnings (loss)   167       145         512       319  
Net earnings (loss) attributable to noncontrolling interests                        
Net earnings (loss) attributable to Celanese Corporation   167       145         512       319  
Cumulative preferred stock dividends                       (3 )
Net earnings (loss) available to common shareholders   167       145         512       316  
Amounts attributable to Celanese Corporation                        
Earnings (loss) per common share - basic                        
Continuing operations   1.07       0.94         3.27       2.08  
Discontinued operations         (0.01 )       0.01       (0.03 )
Net earnings (loss) - basic   1.07       0.93         3.28       2.05  
Earnings (loss) per common share - diluted                        
Continuing operations   1.05       0.93         3.21       2.04  
Discontinued operations         (0.01 )       0.01       (0.03 )
Net earnings (loss) - diluted   1.05       0.92         3.22       2.01  
Weighted average shares (in millions)                        
Basic   156.2       155.9         156.1       154.2  
Diluted   159.0       157.9         159.0       158.4  
                                 

 

Celanese Corporation is a global technology leader in the production of specialty materials and chemical products which are used in most major industries and consumer applications. Our products, essential to everyday living, are manufactured in North America, Europe and Asia. Known for operational excellence, sustainability and premier safety performance, Celanese delivers value to customers around the globe with best-in-class technologies. Based in Dallas, Texas, the company employs approximately 7,250 employees worldwide and had 2010 net sales of $5.9 billion, with approximately 72% generated outside of North America. For more information about Celanese Corporation and its global product offerings, visit www.celanese.com.

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