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Celanese Corporation Reports Second Quarter Earnings; Maintains 2016 Outlook

DALLAS--(BUSINESS WIRE)--Celanese Corporation (NYSE: CE), a global technology and specialty materials company, today reported second quarter 2016 GAAP diluted earnings per share of $1.50 and adjusted earnings per share of $1.59. During the quarter, we delivered year-over-year earnings per share growth despite significant turnaround activity and heightened macroeconomic uncertainty. Our success is driven by our ability to drive differentiated results through the strength of our models and focus on productivity. In our Materials Solutions business, we combine the broadest materials portfolio with our applications expertise to develop innovative solutions for our customers in our engineered materials opportunity pipeline. In the Acetyl Chain, we leverage our global footprint to capture opportunities along our integrated value chain to maximize profitability.

Second Quarter 2016 Financial Highlights:

Three Months Ended
June 30,
2016
March 31,
2016
June 30,
2015
(unaudited)
(In $ millions)
Operating Profit (Loss)
Advanced Engineered Materials 82 88 67
Consumer Specialties 80 78 77
Total Materials Solutions 162 166 144
Industrial Specialties 29 31 28
Acetyl Intermediates 77 114 54
Eliminations 1
Total Acetyl Chain 107 145 82
Other Activities (26 ) (24 ) (38 )
Total 243 287 188
Three Months Ended
June 30,
2016
March 31,
2016
June 30,
2015
(unaudited)
(In $ millions, except per share data)
Adjusted EBIT(1)(2)
Advanced Engineered Materials 111 120 102
Consumer Specialties 108 106 105
Total Materials Solutions 219 226 207
Industrial Specialties 30 33 30
Acetyl Intermediates 80 115 107
Eliminations 1
Total Acetyl Chain 111 148 137
Other Activities (18 ) (16 ) (19 )
Total 312 358 325
Equity Earnings, Cost-Dividend Income, Other Income (Expense)
Advanced Engineered Materials 27 31 31
Consumer Specialties 28 28 27
Total Materials Solutions 55 59 58
Net earnings (loss) 223 259 201
Operating EBITDA(1) 385 431 391
Diluted EPS - continuing operations $ 1.50 $ 1.73 $ 1.34
Diluted EPS - total $ 1.50 $ 1.73 $ 1.33
Adjusted EPS(1) $ 1.59 $ 1.83 $ 1.58
Net cash provided by (used in) investing activities (63 ) (75 ) (181 )
Net cash provided by (used in) financing activities (259 ) (473 ) 18
Net cash provided by (used in) operating activities 349 287 283
Free cash flow(1) 285 217 193
______________________________

(1)

See "Non-US GAAP Financial Measures" below.

(2)

The company's discussion of adjusted earnings includes use of terms such as "segment income" and "core income". Those non-GAAP terms are defined below and reconciled in our Non-US GAAP Financial Measures and Supplemental Information document below.

Second Quarter 2016 Highlights:

  • Successfully completed the first ever major turnaround at our POM facility in Industrial Park Hoechst, Germany, the largest POM facility in the world. The turnaround was completed on time, safely and cost-effectively, minimizing the impact on our customers. The success of this project exemplifies the expertise and dedication of our talented operations team.
  • Launched 335 new projects through our engineered materials opportunity pipeline, our best quarterly performance ever. In the first half of 2016 we launched 647 new projects, keeping us on track to deliver 1,200 new project launches in 2016, an increase of 20 percent over the prior year.
  • Increased annual dividend by 20 percent from $1.20 to $1.44 per share, reflecting continued strong cash generation, a commitment to consistently growing our dividend and a high degree of confidence in our underlying businesses.
  • Received a credit rating upgrade to Investment Grade by both Standard & Poor's and Moody's Investors Service. Ratings were upgraded to BBB- and Baa3, respectively.
  • Refinanced our secured credit facility into a new unsecured credit facility consisting of a $500 million unsecured term loan and a $1 billion unsecured revolver.

"I am pleased to report strong earnings performance in the second quarter, despite heavy turnaround activity in both the Materials Solutions and Acetyl Chain cores. Our operations organization safely executed these planned turnarounds at multiple locations in an extremely efficient manner, to ensure a high level of reliability for our customers. We are encouraged by our results, as we continue to deliver value in a lower global demand environment marked by uncertainty and weak raw material prices. We generated impressive operating cash flow and free cash flow driven by year-over-year growth in Materials Solutions, resilient performance by the Acetyl Chain and disciplined working capital management. We deployed $200 million of cash in the quarter to repurchase 2.8 million shares, and we also increased our dividend by 20 percent to a rate of $1.44 per share on an annual basis. Our credit rating was upgraded to Investment Grade by Moody's and Standard & Poor's, validating our strong underlying business performance and the strength of our balance sheet," said Mark Rohr, chairman and chief executive officer.

Second Quarter Business Segment Overview

Materials Solutions

The Materials Solutions core grew profitability over the prior year, overcoming the impact of turnarounds as well as headwinds from tow pricing and affiliate earnings. In engineered materials (Advanced Engineered Materials excluding affiliates) we delivered outstanding results, increasing volumes by 8 percent versus the prior year driven by our commercial efforts and the strength of our opportunity pipeline. We had tremendous success in our POM product line, selling record volumes despite increases in global capacity. Higher volume and lower raw material costs more than offset a decline in pricing. We successfully launched a record 335 new projects in the quarter as we continued to extend our opportunity pipeline with a focus on high-value applications. Affiliate results in the quarter were impacted mainly by planned turnarounds and lower prices for MTBE at the Ibn Sina joint venture.

In the tow industry, we continue to see low utilization rates resulting in lower pricing year-over-year. However, our continued efforts to drive productivity, as well as lower raw material and energy costs offset the impact of price declines.

Acetyl Chain

In the Acetyl Chain, we continued to drive differentiated results by leveraging our global platform and the optionality inherent in our integrated portfolio. Quarterly results were negatively impacted by scheduled turnaround activity at various sites during the quarter. Acetic acid pricing was weaker versus the prior year, principally driven by China and year-over-year declines in methanol pricing. These headwinds more than offset the benefits of productivity initiatives.

Cash Flow

The company recorded operating cash flow of $349 million, the second highest quarterly performance in our history, and we generated record free cash flow of $285 million. These results were driven by growth in the Materials Solutions core and disciplined working capital management. Capital expenditures in the quarter were $58 million. During the quarter, we returned $254 million to our shareholders, including $200 million to repurchase 2.8 million shares and $54 million of dividends.

Outlook

"Our financial results this quarter give us further confidence in the effectiveness of our strategy and our value creation models in this constantly evolving macro environment. Materials Solutions offers the best package of global presence, product portfolio and applications expertise in the industry, complemented by a rigorous pipeline process. This enables us to unlock value for customers and in turn drive earnings growth in this business in a sustainable manner. In the Acetyl Chain, our leading position as an integrated producer provides us with unparalleled choices that allow us to be agile in the global marketplace," said Mark Rohr, chairman and chief executive officer. "Recent events have added further uncertainty to expectations for economic growth, and raw materials prices still struggle to recover. However, based on our business plans, the strength of our commercial models and our focus on productivity and operational excellence, we continue to believe that we can deliver adjusted earnings per share growth in the range of 8-10 percent in 2016," said Rohr.

We are unable to reconcile forecasted adjusted earnings per share growth to US GAAP diluted earnings per share without unreasonable efforts because a forecast of Certain Items, such as mark-to-market pension gains/losses, is not practical. The company's earnings presentation and prepared remarks related to the second quarter results will be posted on its website at www.celanese.com under Investor Relations/Events and Presentations after market close on July 25, 2016. Information about Non-US GAAP measures is included in a Non-US GAAP Financial Measures and Supplemental Information document posted on our website and available at the link below. See "Non-GAAP Financial Measures" below.

Celanese Corporation is a global technology leader in the production of differentiated chemistry solutions and specialty materials used in most major industries and consumer applications. Our two complementary business cores, Acetyl Chain and Materials Solutions, use the full breadth of Celanese’s global chemistry, technology and business expertise to create value for our customers and the corporation. As we partner with our customers to solve their most critical business needs, we strive to make a positive impact on our communities and the world through The Celanese Foundation. Based in Dallas, Celanese employs approximately 7,000 employees worldwide and had 2015 net sales of $5.7 billion. For more information about Celanese Corporation and its product offerings, visit www.celanese.com or our blog at www.celaneseblog.com.

Forward-Looking Statements

This release may contain "forward-looking statements," which include information concerning the company's plans, objectives, goals, strategies, future revenues or performance, capital expenditures, financing needs and other information that is not historical information. All forward-looking statements are based upon current expectations and beliefs and various assumptions. There can be no assurance that the company will realize these expectations or that these beliefs will prove correct. There are a number of risks and uncertainties that could cause actual results to differ materially from the results expressed or implied in the forward-looking statements contained in this release. These risks and uncertainties include, among other things: changes in general economic, business, political and regulatory conditions in the countries or regions in which we operate; the length and depth of product and industry business cycles, particularly in the automotive, electrical, textiles, electronics and construction industries; changes in the price and availability of raw materials, particularly changes in the demand for, supply of, and market prices of ethylene, methanol, natural gas, wood pulp and fuel oil and the prices for electricity and other energy sources; the ability to pass increases in raw material prices on to customers or otherwise improve margins through price increases; the ability to maintain plant utilization rates and to implement planned capacity additions and expansions; the ability to reduce or maintain their current levels of production costs and to improve productivity by implementing technological improvements to existing plants; increased price competition and the introduction of competing products by other companies; market acceptance of our technology; the ability to obtain governmental approvals and to construct facilities on terms and schedules acceptable to the company; changes in the degree of intellectual property and other...


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