- Celanese Corporation, previously Hoechst Celanese, is an American differentiated chemistry solutions producing company headquartered in Irving, Texas. The company was founded in 1918 as The American Cellulose & Chemical Manufacturing Company.
- The company operates through two business segments mainly - engineered materials, and the acetyl chain.
- Some of the industrial end-users of the company include automotive, chemical additives, construction, consumer and industrial adhesives, consumer and medical, energy storage, filtration, food and beverage, paints and coatings, paper and packaging, performance industrial and textiles industry.
- The operations of the company are located in North America, Europe and Asia and consist of 61 global production facilities and an additional 19 strategic affiliate production facilities.
- For the first quarter ended March 31, 2023, Celanese has reported sales of $2,853 million as compared to $2,538 million for the same quarter a year earlier. Despite the increase in sales, operating profit has decreased by $280 million to $251 million from $531 million. And net profit of the company has decreased to $93 million over the period.
- Celanese Corporation has generated total sales of $9,673 million in 2022 and $8,537 million in 2021, an increase of 1,136 or 13% year on year. Operating profit of the company in 2022 is $1,378 million as compared to $1,946 million, a decrease of $568 million. Net earnings attributable to Celanese Corporation is $1,894 million in 2022 which was $1,890 million a year earlier.
Brief Company Overview
Celanese Corporation (NYSE:CE) is a global company in producing differentiated chemistry solutions, specialty materials, and other chemical products. The company was founded in 2018 and currently headquartered in Irving, Texas, United States. The company produces high performance engineered polymers that are used in a variety of high-value applications. The company is also one of the largest producers of acetyl products in the world. Some categories of end-users of the company products include automotive, chemical additives, construction, consumer and industrial adhesives, consumer and medical, energy storage, filtration, food and beverage, paints and coatings, paper and packaging, performance industrial and textiles. The company operates through two business segments mainly - engineered materials, and the acetyl chain. The segment acetyl chain was newly created as a result of segment-reorganization effective from December 31, 2022. It's predecessor was Acetate Tow.
The operations of the company are located in North America, Europe and Asia and consist of 61 global production facilities and an additional 19 strategic affiliate production facilities. As of December 31, 2022, the company employed 13,263 people worldwide. Lori J. Ryerkerk BS is the current Chairman, President & CEO of the company.
As of May 2023, 52-week price range of the company stock is $86.71 to $161.37. Trailing P/E of the company is 6.25 time, price to sales ratio (ttm) is 1.23 times, net profit margin (ttm) is 14.85%, diluted earnings per share (most recent year) is $17.34, return on equity (ttm) is 29.1%, return on assets (ttm) is 7.74%. As on May 5, 2023, total number of shares of the common stock outstanding for the company is 108,787,807.
The M&M Acquisition
The Mobility & Material (M&M) business of DuPont was acquired by Celanese on November 1, 2022 in a cash transaction of $11.0 billion. The transaction was announced in February, 2022. Through the acquisition Celanese acquired a broad portfolio of engineered thermoplastics and elastomers, industry-renowned brands and intellectual property, global production assets, and a world-class organization. This includes a global network of 29 facilities, 850 patents with associated technical and R&D assets, and approximately 5,000 employees across manufacturing, technical, and commercial organizations. This acquisition of M&M enhances the engineered materials product portfolio of the company by adding new polymers, brands, product technology, and backward integration in critical polymers, allowing the Company to accelerate growth in high-value applications including future mobility, connectivity and medical. The acquisition was accounted for as a business combination and the acquired operations are included in the Engineered Materials segment.
The purchase price was accounted for as assets and liabilities on the balance sheet at fair value of them as of the acquisition date. The excess purchase price was recorded as goodwill, which amounts to $5,788 million.
- On November 1, 2022, Celanese acquired 100% ownership of entities and assets consisting of a majority of the Mobility & Materials business (M&M) of DuPont de Nemours, Inc. for a purchase price of $11.0 billion.
- On April 1, 2022, the Company completed the restructuring of Korea Engineering Plastics Co. ("KEPCO"), a joint venture owned 50% by the Company and 50% by
Mitsubishi Gas Chemical Company, Inc. KEPCO will now focus solely on manufacturing and supplying high quality products to its shareholders, who will independently market them globally. As part of the restructuring of KEPCO, the Company paid KEPCO $5 million and will pay 5 equal annual installments of
€24 million on October 1 of each year beginning in 2022. This resulted in an increase to the Company's investment in KEPCO of $134 million.
- In September 2022, the Company announced that it will cease manufacturing operations at the Engineered Materials compounding facility in Silao, Mexico by the end of 2022, with decommissioning taking place in 2023. Manufacturing operations formally ceased on December 16, 2022.
Recent Financing Activities
- On February 8, 2023, Celanese declared a quarterly cash dividend of $0.70 per share on their Common Stock amounting to approximately $76 million.
- On July 14, 2022, Celanese U.S. completed an offering of $7.5 billion aggregate principal amount of notes of various maturities in a public offering registered under the Securities Act. On July 19, 2022, Celanese U.S. completed an offering of €1.5 billion in aggregate principal amount of euro-denominated senior unsecured notes due in 2026 and 2029 in a public offering registered under the Securities Act.
- On March 18, 2022, Celanese, Celanese U.S. and certain subsidiaries entered a term loan credit agreement to get a delayed-draw term loan facility 364-days of $500 million and a delayed-draw term loans 5-years of $1.0 billion. An additional term loan agreement was entered on September 16, 2022 which provided a delayed-draw facility due in 3 years in an amount equal to $750 million. The company has drawn fully the term loan facility during the three months ended December 31, 2022.
- Also on March 18, 2022, Celanese, Celanese U.S. and certain subsidiaries entered into a new revolving credit facility consisting of a $1.75 billion senior unsecured revolving credit facility, maturing in 2027.
- The company entered into a bridge facility commitment letter with Bang of America on February 17, 2022 in connection with M&M Acquisition. The commitment is to provide a 364-day $11.0 billion senior unsecured bridge term loan facility.
Financial Performance Highlights
Q1 2023 Highlights
For the first quarter ended March 31, 2023, Celanese has reported sales of $2,853 million as compared to $2,538 million for the same quarter a year earlier. Net sales increased $315 million, or 12% during the period mainly due to higher volume of sales from the Engineered Materials segment, which has improved mainly due to the acquisition of the Mobility & Materials business, and the Korea Engineering Plastics Co., Ltd. restructuring. Despite the increase in sales, operating profit has decreased by $280 million to $251 million from $531 million. The decrease is mainly due to higher raw material costs and spending in the Engineered Materials segment as a result of the acquisition of M&M Business as well as lower Net sales in the Acetyl Chain segment. Also, selling, general and administrative expenses increased $111 million, or 64%, over the period primarily due to an increase in spending of approximately $114 million in the Engineered Materials segment and Other Activities primarily related to acquisition of the M&M Business. Thus, for the aforementioned reasons, the net profit of the company has decreased to $93 million in the first quarter of 2023 from $504 million in the first quarter of 2022.
From the Engineered Materials segment Celanese has generated total sales of $1,630 million during the first quarter of 2023 as compared to $910 during the same quarter a year earlier, an increase of $720 million. The segment includes engineered materials business, food ingredients business and certain strategic affiliates. But the other segment of the company, Acetyl Chain, has experienced a decrease in the net sales to $1,250 million to $1,652 million over the periods, a decrease of $402 million. The Acetyl Chain segment, which includes the integrated chain of the company's intermediate chemistry, emulsion polymers, ethylene vinyl acetate polymers, redispersible powders and acetate tow businesses. The decrease in sales is mainly due to lower pricing for most of the products of the segment, primarily vinyl acetate monomer ("VAM") and acid due to weaker economic conditions particularly in Asia, partially offset by acetate tow, lower volume of products due to decreased demand particularly in Europe, and unfavorable currency impact resulting from a weaker euro relative to the U.S. dollar. Operating profit from this segment also has decreased by $225 million, to $278 million from $503 million.
Cash and cash equivalents decreased $341 million to $1.2 billion as of March 31, 2023 compared to December 31, 2022. Net cash used in operating activities increased $412 million to $96 million for the three months ended March 31, 2023 compared to cash provided by operating activities of $316 million for the same period in 2022. Net cash used in investing activities increased $29 million to $178 million during the period. And Net cash used in financing activities decreased $26 million to $69 million.
Annual Performance Highlights
Celanese Corporation has generated total sales of $9,673 million in 2022 and $8,537 million in 2021, an increase of 1,136 or 13% year on year. The increase is primarily due to higher pricing in both of the segments, primarily driven by Engineered Materials segment, due to higher raw material costs, higher energy costs and product mix; and higher volume in the Engineered Materials segment, primarily in elastomers related to acquisition of the majority of the Mobility & Materials business (the "M&M Business"), the acquisition of the Santoprene™ thermoplastic vulcanizates elastomers business of Exxon Mobil Corporation ("Santoprene"), as well as the Korea Engineering Plastics Co., Ltd., ("KEPCO") restructuring. Operating profit of the company in 2022 is $1,378 million as compared to $1,946 million, a decrease of $568 million. The decrease is mainly driven by higher raw materials costs, low volume sales in Acetyl Chain segment, and higher spending in both of the segments, primarily as a result of acquisitions of the M&M Business and Santoprene, as well as increased plant operating and maintenance expenses. However, net earnings attributable to Celanese Corporation is $1,894 million in 2022 which was $1,890 million a year earlier. The gap was bridged by income tax benefits of $489 million in 2022, which was a tax expenditure of $330 in 2021. Effective income tax rate of the company during the year ended December 31, 2022 was negative 34% due to the reorganization of the company's foreign legal entity holding structure and relocation of certain of their intangible assets to align with the acquired M&M Business foreign operations.
The engineered materials segment Celanese has reported $4,024 million in net sales, an increase of $1,306 million year on year. Operating profits from this segment improved by $18 million to $429 million. The other segment, Acetyl Chain, has reported a revenue of $5,743 million in 2022 as compared to $5,894 million a year earlier. Revenue from this segment has decreased by $151 million due to primarily decreased demand of products. Operating profits in this segment has decreased by $428 million.
Cash and cash equivalents increased $972 million to $1.5 billion as of December 31, 2022 compared to December 31, 2021. Net cash provided by operating activities increased $62 million to $1.8 billion for the year ended December 31, 2022 compared to $1.8 billion for the same period in 2021. Net cash used in investing activities increased $10.0 billion to $11.1 billion for the year ended December 31, 2022 compared to $1.1 billion for the same period in 2021. Net cash provided by financing activities increased $11.3 billion to $10.3 billion for the year ended December 31, 2022 compared to net cash used in financing activities of $1.0 billion for the same period in 2021.
Celanese Corporation is a global chemical and specialty materials company. The company principally operates in two business segments: Engineered Materials and the Acetyl Chain. Acetyl Chain segment is newly formed as a result of resegmentation of Acetate Tow segment, effective from December 31, 2022.
The Engineered Materials segment includes the company's engineered materials business, food ingredients business and certain strategic affiliates. Global assets and resources under operations of this segment include polymerization, compounding, research and development, and customer technology centers in all regions of the world, including Argentina, Belgium, Brazil, Canada, China, Germany, India, Italy, Japan, Luxembourg, Mexico, South Korea, Switzerland, Taiwan, the United Kingdom and the U.S., along with sites associated with the company's 16 strategic affiliates in China, Germany, Japan, Luxembourg, Netherlands, Saudi Arabia, South Korea, United Kingdom and the U.S.
In July 2020, the company announced that they are establishing a European Compounding Center of Excellence at their Forli, Italy facility, which includes the intended consolidation of the compounding operations in Kaiserslautern, Germany; Wehr, Germany; and Ferrara Marconi, Italy. These operations are included in the Engineered Materials segment. The company expects to complete the consolidation of the compounding operations in 2023. The broad product heads under this segment are Nylon, POM, Polysters, UHMW-PE, LFRT, LCP, TPE, TPV, Polypropylene, VitalDose®, and Elastomers. Under each of these broad heads, the company operates more than one brands.
Engineered Materials' principal customers are original equipment manufacturers and their suppliers serving the automotive, medical, industrial and consumer industries.
This engineered materials business segment has long-standing relationships through multi-year and annual arrangements with many of its major customers and utilizes distribution partners to expand its customer base.
The Acetyl Chain segment, which includes the integrated chain of intermediate chemistry, emulsion polymers, EVA polymers, redispersible powders, and acetate tow businesses, is active in every major global industrial sector and serves diverse consumer end-use applications. These include traditional vinyl-based end uses, such as paints and coatings and adhesives, as well as other unique, high-value end uses including flexible packaging, thermal laminations, wire and cable, and compounds. Intermediate chemistry business of the company produces and supplies acetyl products, including acetic acid, VAM, acetic anhydride and acetate esters. These products are generally used as starting materials for colorants, paints, adhesives, coatings and pharmaceuticals.
Key products under this segment can be broadly categorised in acetyl products, solvents and derivatives, emulsion polymers, EVA polymers, redispersible powders, acetate tow and acetate flake. The products are sold both directly to the customers and through distributors. The company has different models for selling different class of products under this segment. For example, the company supplies to its customers acetic acid, VAM and acetic anhydride under a mix of short- and long-term agreements. The company sells solvents and derivatives to a diverse group of regional and multinational customers under multi-year contracts and on the basis of long-standing relationships. Acetate tow is sold principally to the major tobacco companies that account for a majority of worldwide cigarette production.
Other Business Information
Celanese Corporation has two wholly-owned captive insurance company that are key components to global risk management of the company. The strategic affiliates of the company represent an important component of their strategy. During 2022, the company acquired interests in several global strategic affiliates as part of the M&M Acquisition. The M&M acquisition refers to acquisition of Mobility & Materials business of DuPont de Nemours, Inc. on November 1, 2022. The M&M Acquisition was completed for a purchase price of $11.0 billion, subject to transaction adjustments. Celanese has historically entered strategic alliance investments to gain access to local demand, minimize costs, and accelerate growth where the company believes it has significant future business potential. The strategic affiliates contribute substantial earnings and cash flows to the company. During the year ended December 31, 2022, the equity method strategic affiliates of the company generated combined sales of $2.3 billion, resulting in recording $181 million of equity in net earnings of affiliates and $187 million of dividends.
In every of the strategic alliance investments, the company owns more than 20% of ownership. However, it does not exert significant influence on them because of local government investment and influence over these entities. The investments are reported at cost after considering observable price changes for similar instruments, minus impairment, if any. Some of the companies that Celanese has strategic alliances with include National Methanol Company, Korea Engineering Plastics Co., Ltd, Fortron Industries, LLC, Toray Celanese Co., Ltd, DuBay Polymer GmbH, DuPont Teijin Films, DuPont Filaments etc.
The company has equity method investment in several German InfraServs Groups where it holds indirect ownership interests. The InfraServs companies own and develop industrial parks and provide various technical and administrative services to tenants.
Celanese Corporation's history began in 1918 when the Swiss brother Drs. Camille and Henri Dreyfus founded the predecessor company The American Cellulose & Chemical Manufacturing Company. The company was formerly known as Amcelle. First plant of the company was set up in Cumberland, Maryland, USA during WWI to produce cheaper fabric for airplane manufacturing. However, the company could not start its manufacturing in this plant until 1924. In the meantime, in 1921, the company had started its production in Britain - producing commercial acetate yarn.
Celanese Canada, a publicly traded company, is formed in 1927, with Amcelle owning the majority share. From 1927 onwards, artificial silk is produced at the Canadian factory in Drummondville. During the same year, The American Cellulose & Chemical Manufacturing Co. changes its name to “Celanese Corporation of America”. The company, which will move on to produce plastics and chemicals, as well as fibers, will become one of the largest chemicals manufacturers in the country. Celanese Corporation of America commences trading on the New York Stock Exchange. In 1944, the company formed Celanese Mexican SA, in association with Mexican group. In 1945, Celanese establsihed production plants in Texas (Bishop in 1945, and Pampa in 1952) for the production of acetaldehyde, formaldehyde, methanol and acetone. However, Celanese fibers remain the company’s most important product line. The use of acetate tow in cigarette filters opens up a new business area. These efforts are completed by 1960.
In 1961, Celanese Corporation of America and Hoechst AG set up the Celanese Polymerwerke joint venture in Kelsterbach, Germany. The production of Hostaform, a high-performance plastic for technical applications, begins in 1963. In 1964, Celanese Corporation of America and Daicel Ltd. form Polyplastics Co., Ltd., a joint venture in Japan to produce and market acetal copolymer under Celanese licensing in Japan and the Far East. The Bay City plant commences production.
Hoechst AG acquires Celanese Corporation for $2.85 billion in 1987. After the approval of the friendly takeover by U.S. regulators on February 20, 1987, Celanese and American Hoechst Corporation join forces to form Hoechst Celanese Corporation in the U.S. Celanese strengthens Hoechst’s fiber, organic chemical and specialty chemical businesses.
By 1997, as a result of the strategic realignment of Hoechst AG, the various businesses are transferred to independent companies. The global basic chemical, cellulose acetate, phosphorous and chlorine businesses become part of Celanese. The independent company Ticona – industry leader in the field of polyacetals – runs the technical polymers business. In May, the Annual General Meeting approves the realignment of the Group. On July 1, Hoechst AG becomes a Strategic Management Holding company. At its autumn press conference in 1998, Hoechst announces plans to demerge most of its chemical activities to the new Celanese AG. On December 1, Hoechst and Rhône-Poulenc S.A. announce their plans to merge their life science businesses into the new company Aventis S.A., based in Strasbourg.
In July 15-16, 1999, at an extraordinary General Meeting of Hoechst AG, shareholders approve the demerger of Celanese AG into an independent company. The demerger is part of Hoechst’s strategy of focusing on its life science businesses. On October 25, 1999, Celanese AG becomes a publicly traded stock corporation, listed on the New York (NYSE: CZ) and Frankfurt (CZZ) stock exchanges. Celanese then receives gross proceeds of more than €1 billion from the sale of non-core businesses. The company acquires the outstanding 44% of Celanese Canada and a 50% share in Korea Engineering Plastics.
In December 2003, Blackstone Capital Partners announces intention to launch a voluntary public offer to acquire all of the outstanding shares of Celanese AG. The beginning of 2004 sees a total of 84.32% Celanese shares tendered and all conditions for the successful conclusion of the takeover by Blackstone are satisfied. In July, Celanese AG shares are delisted from the New York Stock Exchange (NYSE). Following an extraordinary shareholders’ meeting, a domination and profit loss transfer agreement between Celanese AG and Blackstone is entered into the Commercial Register and becomes effective on October 1. Blackstone signs an agreement in October, 2004 for the takeover of Acetex Corporation in a transaction valued at almost $500 million and states its intention to operate Acetex as part of Celanese’s global chemicals business. Acetex is a Canadian corporation which produces a variety of chemicals including acetic acid, polyvinyl alcohol, vinyl acetate monomer and technical polymers.
Blackstone Crystal Holdings Capital Partners (Cayman) IV Ltd. (the controlling legal entity of Celanese subsequent to the successful takeover of Celanese AG by Blackstone) changes its name to Celanese Corporation. Celanese Corp. is headquartered in Dallas, Texas, and is the parent company of Celanese’s North American operations and Celanese AG. Henceforth, Celanese AG is the holding company for Celanese’s European operations and most of its Asian activities. Celanese Corporation becomes a publicly traded company following an IPO in January, 2005.
In 2009, Celanese signs an agreement to form a 50/50 joint venture with Hebei Shield Technology Co. Ltd., a subsidiary of Tianjin Shield Fine Chemical Company Limited, to manufacture, distribute and sell the vinyl ester of neodecanoic acid. The company completes the sale of its polyvinyl alcohol (PVOH) business to Sekisui Chemical Co., Ltd in June of the same year.
In 2014, Celanese launches a growth strategy, with the first visible step being the acquisition of US-based Cool Polymers Inc., a leading compounder of conductive polymers. Celanese acquires Forli in 2016, Italy based SO.F.TER. Group, one of the world’s largest independent compounders. The acquisition nearly doubles Celanese’s engineered materials product platforms. In 2019, Celanese selects Lori Ryerkerk to succeed Mark Rohr as CEO, as Rohr assumes position of Executive Chairman of the Board of Directors. In 2019, Celanese announces a further consolidation of its global acetate manufacturing operations by initiating the shutdown of its manufacturing facility in Ocotlán, Jalisco, Mexico. During the same year, Celanese completes the acquisition of a synthesis gas production unit from Linde AG. In 2020, Mitsubishi Corporation and Celanese announce the signing of a memorandum of understanding (MOU), confirming their intent to restructure Korea Engineering Plastics Co. (KEP), a joint venture owned 50% by Celanese, 40% by MGC and 10% by Mitsubishi Corporation. In 2022, Celanese and Mitsubishi Gas Chemical completes the restructuring of Korea Engineering Plastics JV.
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