Celanese Corporation (Celanese) has reported net sales of $6.8 billion for the year-end 2008, compared with the net sales of $6.4 billion in the previous year-end. It has also reported net earnings of $278 million, or $1.70 per diluted share, for the year-end 2008, compared with the net earnings of $426 million, or $2.49 per diluted share, in the previous year-end.
The company has reported fourth quarter 2008 net sales of $1,286 million, a 27% decrease from the prior year period, driven by significantly lower volumes on weak global demand and unprecedented inventory destocking throughout its end-consumer supply chains. Operating profit was a loss of $152 million compared with a profit of $324 million in the same period last year. Results included fixed asset impairment charges of $94 million associated with the potential closure of the company’s acetic acid and vinyl acetate monomer (VAM) production facility in Pardies, France, and its VAM production unit in Cangrejera, Mexico, as well as other actions that the company is taking. Net earnings were a loss of $159 million compared with a profit of $214 million in the same period last year.
During the fourth quarter of 2008, the company aggressively managed its global production capacity in order to minimize inventory levels and optimize its working capital and cash positions. The company estimated that the total non-cash inventory accounting impact, which includes the negative effects of first-in, first-out (FIFO) accounting and inventory draw due to lower production levels, was about $101 million in the period.
Adjusted earnings per share for the fourth quarter of 2008 were a loss of $0.38 compared with a profit of $0.93 in the same period last year. These results exclude about $105 million of other charges and adjustments, including the fixed asset impairment charges. Operating EBITDA was $68 million in the fourth quarter of 2008 versus $349 million in the prior year period.
“During the fourth quarter, historically weak market conditions drove a dramatic decline in overall global demand for many industries that we supply. While our Consumer Specialties segment continued to deliver high earnings levels, recessionary trends, coupled with an unprecedented inventory destocking, resulted in sharp volume declines in our other businesses,” said David Weidman, chairman and chief executive officer. “We are pleased that the aggressive actions that we have taken to align our business operations and production with current demand levels resulted in solid cash generation.”
Announced the assessment of the potential closure of acetic acid and vinyl acetate monomer (VAM) production in Pardies, France, and VAM production in Cangrejera, Mexico, as well as certain other actions the company is considering.
Released its 2008 Sustainability Report, which details the company’s industry-leading commitment to safety, health and the environment across its worldwide operations. The report also highlights best practices driven by the company’s employees around the world. The company’s 2008 global OSHA Injury Rate (OIR), or the annual number of injuries per 100 employees, was 0.26, which is among the best in the chemical industry.
Reached an agreement with the Frankfurt, Germany, Airport (Fraport AG) to receive an advance payment of EUR322 million associated with the relocation of its Ticona business in Kelsterbach, Germany. This advance payment will be in lieu of the payments of EUR200 million and EUR140 million originally scheduled to be paid in June 2009 and June 2010, respectively.
Fourth Quarter Segment Overview:
Consumer Specialties continued to execute its strategy to deliver higher, sustainable earnings. Net sales in the quarter were $286 million, up $7 million from the prior year period, primarily driven by higher pricing on continued strong demand. The higher pricing was partially offset by overall lower volumes and unfavorable currency effects. The lower volumes were primarily attributed to lower acetate flake sales resulting from the company’s decision to shift flake production to its China ventures. Operating profit was $52 million, a $17 million decrease from the prior year period. Fourth quarter 2007 results included a one-time gain of $22 million associated with the sale of the company’s Edmonton, Canada facility. Operating EBITDA was $65 million, up 14% from the same period last year.
Industrial Specialties’ successful new market strategy in Asia and favorable pricing were offset by overall weaker demand in North America and Europe. Net sales in the quarter were $277 million, a $54 million decrease from the same period last year, driven by lower overall volumes and unfavorable currency effects. The company achieved higher overall pricing across all business lines to partially offset the lower volumes. Operating profit in the quarter was a loss of $8 million compared with a profit of $26 million in the prior year period, primarily driven by the lower volumes and inventory accounting impacts of $15 million. Operating EBITDA was $8 million compared with $41 million in the prior year period.
Advanced Engineered Materials:
Advanced Engineered Materials maintained increased pricing for its high value-in-use product portfolio but experienced significant volume pressure across many of its product lines. Net sales in the quarter were $195 million, a $58 million decrease from the prior year period. The higher pricing, aided by positive product mix, was not able to offset the lower overall volumes primarily driven by significant reductions in U.S. and European automotive production. Many non-automotive applications, such as medical, filtration and electronics, as well as applications for the China market, experienced only modest declines in the quarter. Operating profit in the fourth quarter was a loss of $48 million compared with a profit of $30 million in the prior year period and included $23 million of impact related to inventory accounting and $16 million associated with fixed asset impairments. Operating EBITDA, which excludes the impact of the asset impairments, was a loss of $3 million compared with a profit of $45 million in the same period last year. Additionally, equity in net earnings from Advanced Engineered Materials’ strategic equity affiliates were $5 million lower than the prior year period and contributed $4 million in the quarter.
Acetyl Intermediates experienced a dramatic decline in overall global demand for its products due to prolonged inventory destocking in its end-market customer supply chain and lower pricing for acetyl products. Net sales in the quarter were $656 million, a 39% decrease from the same period last year, primarily due to the lower volumes. The lower pricing was driven by lower overall demand and a decrease in raw material input costs, which impacted the formula-based pricing for many acetyl derivatives. Operating profit was a loss of $116 million compared with a profit of $276 million in the same period last year and included $75 million in net other charges and adjustments, primarily related to fixed asset impairments. Lower raw material and energy costs could not offset the lower volumes and decreased pricing in the quarter. The impact of inventory accounting totaled about $63 million in the current period. Operating EBITDA, which excludes the other charges and adjustments, was $21 million compared with $231 million in the same period last year. Dividends from the company’s Ibn Sina cost affiliate increased to $29 million compared to $22 million a year ago.
The tax rate for adjusted earnings per share was 26% in the fourth quarter of 2008 compared with 28% in the fourth quarter of 2007. The effective tax rate for continuing operations for 2008 was 15% versus 25% in 2007. The effective tax rate for 2008 is lower primarily due to increased earnings in jurisdictions with reduced tax rates and the U.S. impact of foreign operations. Cash taxes for 2008 were $98 million compared with $191 million in 2007, primarily as a result of tax losses in the U.S. and the timing of cash taxes in certain jurisdictions.