Celanese Corporation (NYSE: CE), a global chemical and specialty materials company, today reported GAAP diluted earnings per share of $4.03 and adjusted earnings per share of $4.99 for the second quarter of 2022. The Company generated net sales of $2.5 billion in the second quarter, a 2 percent decrease from the prior quarter and a 13 percent increase over the same quarter of 2021. Pricing increased 2 percent sequentially, the seventh consecutive quarter of pricing expansion, and partially offset a 2 percent decrease in volume and a 2 percent unfavorable currency impact. Celanese successfully mitigated continued cost inflation as well as unanticipated interruptions in raw material supply in the U.S. Gulf Coast to deliver second quarter consolidated operating profit of $483 million and adjusted EBIT of $646 million. In anticipation of the close of the DuPont M&M acquisition targeted for the fourth quarter of 2022, the Company has secured approximately $10.5 billion in permanent financing for the acquisition across a series of transactions, including two successful registered offerings of senior notes in the third quarter.
„I thank our teams for delivering, across the first half of this year, the strongest six month performance in our history,“ said Lori Ryerkerk, chairman and chief executive officer. „Their exceptional execution of our business models and M&A action plan, including securing financing for the M&M acquisition amid a challenging market backdrop, has prepared us to address, from a position of strength, some of the developing macro concerns.“
Second Quarter 2022 Financial Highlights:
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Three Months Ended |
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June 30, |
March 31, |
June 30, |
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(unaudited) |
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(In $ millions, except per share data) |
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Net Sales |
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Engineered Materials |
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948 |
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910 |
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682 |
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Acetate Tow |
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119 |
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125 |
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138 |
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Acetyl Chain |
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1,456 |
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1,538 |
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1,409 |
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Intersegment Eliminations |
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(37 |
) |
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(35 |
) |
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(31 |
) |
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Total |
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2,486 |
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2,538 |
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2,198 |
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Operating Profit (Loss) |
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Engineered Materials |
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166 |
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124 |
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123 |
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Acetate Tow |
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(1 |
) |
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4 |
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24 |
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Acetyl Chain |
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429 |
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499 |
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516 |
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Other Activities |
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(111 |
) |
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(96 |
) |
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(96 |
) |
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Total |
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483 |
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531 |
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567 |
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Net Earnings (Loss) |
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436 |
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504 |
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540 |
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Adjusted EBIT(1) |
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Engineered Materials |
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224 |
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211 |
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161 |
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Acetate Tow |
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35 |
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40 |
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62 |
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Acetyl Chain |
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440 |
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503 |
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514 |
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Other Activities |
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(53 |
) |
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(41 |
) |
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(46 |
) |
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Total |
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646 |
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713 |
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691 |
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Equity Earnings and Dividend Income, Other Income (Expense) |
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Engineered Materials |
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53 |
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49 |
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32 |
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Acetate Tow |
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36 |
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36 |
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37 |
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Operating EBITDA(1) |
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744 |
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813 |
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781 |
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Diluted EPS – continuing operations |
$ |
4.03 |
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$ |
4.61 |
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$ |
4.81 |
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Diluted EPS – total |
$ |
3.98 |
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$ |
4.61 |
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$ |
4.77 |
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Adjusted EPS(1) |
$ |
4.99 |
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$ |
5.54 |
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$ |
5.02 |
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Net cash provided by (used in) investing activities |
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(136 |
) |
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(149 |
) |
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177 |
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Net cash provided by (used in) financing activities |
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(159 |
) |
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(95 |
) |
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(344 |
) |
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Net cash provided by (used in) operating activities |
|
495 |
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316 |
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427 |
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Free cash flow(1) |
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368 |
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175 |
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309 |
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______________________________
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(1) |
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See „Non-US GAAP Financial Measures“ below. |
Recent Highlights:
- Generated second highest-ever quarterly GAAP operating profit and highest-ever adjusted EBIT in Engineered Materials in the second quarter.
- Completed a registered offering of $7.5 billion principal amount of U.S. dollar-denominated notes priced on July 7 and a registered offering of €1.5 billion principal amount of euro-denominated notes priced on July 12 for financing the M&M acquisition. Concurrently entered into a euro cross-currency swap to effectively convert $2.5 billion of the U.S. dollar-denominated debt into euro-denominated borrowing, which lowered the effective borrowing rate and will help to align currency mix with anticipated global earnings.
- Mitigated unanticipated interruptions in raw material supply in the U.S. Gulf Coast and subsequent declaration of force majeure across Acetyl Chain products to exceed second quarter earnings guidance for that business.
Second Quarter 2022 Business Segment Overview
Engineered Materials
Engineered Materials generated record net sales of $948 million in the second quarter due to a sequential price increase of 6 percent and volume increase of 1 percent that offset a 3 percent unfavorable currency impact. The business delivered sequential volume growth by offsetting a decline in global auto builds through commercial wins from the pipeline model, growth in electric vehicle applications, and initial contributions from restructuring KEPCO to a manufacturing joint venture. Engineered Materials reported the sixth consecutive quarter of pricing expansion through the energy surcharge, improved product mix, and other commercial actions that fully offset additional cost inflation in the quarter. The energy surcharge implemented by the business in the fourth quarter of 2021 continued to successfully mitigate the impact of sequential energy inflation in Europe and the Americas. Engineered Materials delivered second highest-ever quarterly GAAP operating profit of $166 million and highest-ever quarterly adjusted EBIT of $224 million, increases over the prior quarter of $42 million and $13 million, respectively. Affiliate earnings contributed an additional $4 million sequentially, as strong performance at Ibn Sina offset the impact of the KEPCO restructuring.
Acetyl Chain
The Acetyl Chain generated second quarter net sales of $1.5 billion, a sequential decline of 5 percent due to a 3 percent decrease in volume and a 2 percent unfavorable currency impact. Volume declined sequentially primarily due to production losses at the Clear Lake, Texas facility as a result of supply disruptions from the two largest external raw material suppliers to that site. The disruption was resolved and the Acetyl Chain is currently operating its Clear Lake facility at full operating rates. In response to the disruption and the subsequent declaration of force majeure, the business immediately sourced product in the market and diverted significant volume produced in Asia to Europe. The business continued to leverage the optionality of its integrated product chain to capture value from products downstream of acetic acid and set a record for variable margin contribution from these products. The Acetyl Chain delivered second quarter GAAP operating profit of $429 million and adjusted EBIT of $440 million at margins of 29 percent and 30 percent, respectively. For the second consecutive quarter, the Acetyl Chain has delivered $2 billion in GAAP operating profit and adjusted EBIT in the trailing 12 month period.
Acetate Tow
Acetate Tow generated net sales of $119 million during the second quarter, which reflected a sequential volume decrease of 6 percent and stable pricing. Second quarter GAAP operating loss was $1 million and adjusted EBIT was $35 million. Dividends from affiliates in the quarter were $36 million. The Company initiated a strategic overhaul of the Acetate Tow business and will begin a transition to managing acetate flake and tow within the Acetyl Chain as downstream derivatives of acetic acid.
Cash Flow and Tax
The Company delivered operating cash flow of $495 million and free cash flow of $368 million in the second quarter. Capital expenditures in the second quarter were $124 million as the Company progressed on several key projects. Celanese returned $74 million in cash to shareholders via dividends in the quarter.
The effective U.S. GAAP tax rate was 20 percent for the second quarter compared to 18 percent for the same quarter of 2021. The higher effective tax rate was primarily due to changes in jurisdictional earnings mix. The effective tax rate for adjusted earnings remains at 13 percent based on expected jurisdictional earnings mix for the full year and projected utilization of foreign tax credit carryforwards.
Outlook
„At this stage, the third quarter order books look largely as expected, with some indications of softening demand including modest order deferrals and signals of normalizing inventory levels at customers,“ said Lori Ryerkerk. „While we see little firsthand indications that support a view of dramatic demand deterioration, we are taking controllable actions across the organization to prepare ourselves to continue to generate strong cash flow and to swiftly pay down debt balances following the close of the M&M acquisition. In the third quarter, we expect adjusted earnings of $4.00 to $4.50 per share, with performance at the bottom end of the range reflective of the potential for additional modest demand softening as we progress through the quarter. Short of a sharp deterioration in demand, which we do not currently foresee, we expect to deliver 2022 adjusted earnings per share approximately in line with our 2021 adjusted earnings per share performance.“
A reconciliation of forecasted adjusted earnings per share to U.S. GAAP diluted earnings per share is not available without unreasonable efforts because a forecast of Certain Items, such as mark-to-market pension gains/losses, is not practical. For more information, see „Non-GAAP Financial Measures“ below.
The Company’s prepared remarks related to the second quarter will be posted on its website at investors.celanese.com under Financial Information/Financial Document Library on July 28, 2022. Information about Non-US GAAP measures is included in a Non-US GAAP Financial Measures and Supplemental Information document posted on our investor relations website under Financial Information/Non-GAAP Financial Measures. See also „Non-GAAP Financial Measures“ below.
Celanese Corporation is a global chemical leader in the production of differentiated chemistry solutions and specialty materials used in most major industries and consumer applications. Our businesses use the full breadth of Celanese’s global chemistry, technology and commercial expertise to create value for our customers, employees, shareholders 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 8,500 employees worldwide and had 2021 net sales of $8.5 billion. For more information about Celanese Corporation and its product offerings, visit www.celanese.com.
