DALLAS–(BUSINESS WIRE)– Celanese Corporation (NYSE: CE), a global chemical and specialty materials company, reported highest-ever GAAP diluted earnings per share of $17.41 and second-highest ever adjusted earnings per share of $15.88 for full year 2022. The Company generated record net sales of $9.7 billion in the year, an increase of 13 percent over the prior record set in 2021. Full year net sales reflected increases in pricing and volume of 11 percent and 6 percent over 2021, respectively. The Company delivered year over year pricing growth and productivity across both business segments to largely offset over $1.2 billion in raw material, energy, and supply chain cost inflation over 2021. As a result, the Company reported 2022 consolidated operating profit of $1.4 billion and adjusted EBIT of $2.2 billion. During the year, the Company generated record operating cash flow of $1.8 billion and free cash flow of $1.3 billion. Celanese returned $297 million in cash to shareholders via dividends in 2022.
On November 1, 2022, the Company successfully completed the acquisition of the Mobility & Materials (M&M) business of DuPont, acquiring a broad portfolio of engineered thermoplastics and elastomers, industry-renowned brands and intellectual property, global production assets, and a world-class organization. The acquisition establishes Celanese as the preeminent global specialty materials company. Full year 2022 financial results reflect the contribution of M&M performance in November and December.
The difference between GAAP diluted earnings per share and adjusted earnings per share for 2022 was primarily due to an income tax provision for U.S. GAAP that was a benefit for full year 2022 as a result of non-recurring internal restructuring transactions related to the M&M acquisition. The impact of the beneficial tax recognition more than offset the impact of costs related to the M&M acquisition, including approximately $267 million in M&A-related costs, and $158 million in net interest expense incurred prior to transaction closing and certain fees related to debt issued.
Celanese also reported fourth quarter GAAP diluted earnings per share of $7.03 and adjusted earnings per share of $1.44. The Company generated operating cash flow of $541 million and free cash flow of $395 million in the quarter.
“Our team delivered resilient performance despite an exceptionally challenging end to 2022 including accelerated destocking, poor sequential demand in Asia due to COVID, challenging competitive dynamics in Europe, and the impact of Winter Storm Elliott,” said Lori Ryerkerk, chair and chief executive officer. “Our 2022 adjusted earnings per share performance was within 12 percent of our all-time high delivered in 2021 and 44 percent higher than our next best year. Despite the impact of elevated volatility across a number of external dynamics, our Celanese team continues to execute our business models and demonstrate a long-term underlying lift in the earnings power of the company.”
Recent Highlights:
- Completed the acquisition of Mobility & Materials on November 1, 2022.
- Announced the signing of a term sheet to form a standalone Food Ingredients joint venture (JV) in which Celanese will contribute its Food Ingredients business and Mitsui will acquire a 70 percent stake. The transaction is expected to close in the third quarter and cash proceeds will be used to pay down debt.
- Completed a strategic overhaul of the acetate flake and tow products as part of the Acetyl Chain which is expected to deliver significant margin expansion in those products in 2023.
- Completed an ultra-low capital project, at the EVA facility in Edmonton, to repurpose existing manufacturing and infrastructure assets and unlock approximately 35 percent incremental capacity to meet strong demand growth.
Full Year 2022 and Fourth Quarter Business Segment Overview
Acetyl Chain
The Acetyl Chain reported 2022 net sales of $5.7 billion, a 3 percent decrease from record net sales set in the prior year. Full year net sales reflected a 6 percent increase in pricing, 6 percent decrease in volume, and 3 percent unfavorable impact from foreign currency. As a result of commercial pricing actions, the business offset the majority of approximately $650 million in raw material, energy, and supply chain cost inflation over the prior year. In the first half of 2022, the Acetyl Chain maintained volumes across its global network by pivoting volume from Asia to incremental demand and margin in the Western Hemisphere. In the second half of the year, weaker fundamental demand was amplified by destocking, particularly across Europe and China and the Acetyl Chain took decisive actions to reduce cost and align its production to market demand. The Frankfurt VAM unit, the highest-cost facility in its global VAM network, was idled for the majority of the second half of 2022. Additionally, the Acetyl Chain intentionally idled all five of its major production units in China at different points in the fourth quarter. As a result, the Acetyl Chain generated GAAP operating profit of $1.4 billion and adjusted EBIT of $1.6 billion, at margins of 25 and 28 percent, respectively. The 2022 results reflect a resegmentation of the former Acetate Tow reporting segment into the Acetyl Chain due to the successful completion of the strategic overhaul of that business as a derivative of acetic acid.
The Acetyl Chain delivered fourth quarter net sales of $1.1 billion due to sequential pricing and volume declines of 10 percent and 9 percent, respectively. In the last two weeks of the quarter, the business proactively shut down its U.S. Gulf Coast production network in anticipation of Winter Storm Elliott, resulting in over 130 kt of lost production in addition to supply chain disruptions. Despite these challenges, the Acetyl Chain delivered fourth quarter GAAP operating profit of $204 million and adjusted EBIT of $242 million, in the upper half of the guidance range provided.
Engineered Materials
Engineered Materials delivered record net sales of $4.0 billion in 2022, a 48 percent increase over the prior year. Net sales was driven by volume and price increases of 33 percent and 23 percent, respectively, and an 8 percent unfavorable impact from foreign currency. Organic volume growth in the automotive, electronics, and medical end-markets as well as volume contributions from the Santoprene and M&M acquisitions offset the impact of underlying demand softness and destocking in the second half of the year. The Santoprene acquisition, which closed in the fourth quarter of 2021, contributed across the full year. The M&M acquisition, which closed on November 1, 2022, contributed in the last two months of 2022. Pricing across 2022 expanded significantly as a result of broad commercial initiatives, including the implementation of an energy surcharge, to mitigate nearly $600 million in raw material, energy, and supply chain cost inflation. Enhanced product mix also elevated pricing, due in part to the medical implant business returning to a pre-COVID condition in the second half of the year. Engineered Materials delivered 2022 GAAP operating profit of $429 million and adjusted EBIT of $779 million. The difference between GAAP operating profit and adjusted EBIT was due primarily to costs associated with the acquisition of M&M. Affiliate earnings contributed $202 million during the year.
Engineered Materials reported fourth quarter net sales of $1.2 billion due to a sequential volume increase of 34 percent and pricing decrease of 1 percent. Volume increased sequentially due to the impact of the M&M acquisition which was partially offset by seasonality and broad destocking. Pricing decreased as the impact of a lower energy surcharge and challenging competitive dynamics in Europe more than offset the impact of improved mix. Engineered Materials reported fourth quarter GAAP operating profit of $25 million and adjusted EBIT of $138 million which included affiliate earnings of $31 million.
Cash Flow and Tax
Celanese generated full year 2022 operating cash flow of $1.8 billion and free cash flow of $1.3 billion. Capital expenditures across the year were $543 million. Celanese returned $297 million in cash to shareholders via dividends in the year.
The tax rate for U.S. GAAP purposes was a benefit of (34) percent for full year 2022 due to deferred tax benefits related to non-recurring internal restructuring transactions related to the M&M acquisition, to centralize ownership of intellectual property with the business, and to facilitate future deployment of cash to service acquisition indebtedness. The effective tax rate for adjusted earnings was 13 percent for 2022 as certain benefits of the internal restructuring will be realized in future periods.
Outlook
“Our March order books reflect improvement in many of the recent external challenges we have seen, and we are taking action to address those which still persist,” said Lori Ryerkerk. “We are confident that the back half of the first quarter will represent an inflection point and that sequential earnings improvement across our businesses will drive anticipated first quarter adjusted earnings per share of $1.50 to $1.75, inclusive of approximately $0.30 per share of M&M transaction amortization1. We expect an upward trajectory in our quarterly earnings across 2023 as a result of demand improvement reflected in our current order books, enhancements to our businesses, and M&M synergies.”
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 fourth quarter will be posted on its website at investors.celanese.com under Financial Information/Financial Document Library on February 23, 2023. 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.
