Celanese Corp. (CE), a leading global chemical company, and Saudi Basic Industries Corporation are planning to construct a polyacetal production facility in Saudi Arabia through its joint venture National Methanol Co. The joint venture produces methanol, which is a key raw material in polyacetal production, as well as methyl tertiary-butyl ether.
The joint venture was formed between Celanese, Saudi Basic Industries and Duke Energy Corporation in 1981. Saudi Basic Industries − a chemical, fertilizer, plastic and metal company − is heading the joint venture with a 50% interest while Celanese and a subsidiary of Duke Energy each hold a 25% interest in the venture.
On completion of construction at the plant, the affiliate of Duke Energy would be required to divest the 7.5% stake in the joint venture, which would be acquired by Celanese. Celanese’s stake would increase to 32.5% from the initial holding of 25%. Saudi Basic Industries would continue to lead the joint venture.
The facility that involves a total investment of about $400 million will be a part of Celanese’s Advanced Engineered Materials segment. The proposed polyacetal facility is in line with the company’s plans of expanding its Engineering Polymers business in Ticona.
Celanese’s Advanced Engineered Materials segment produces high performance technical polymers for application in automotive and electronics products and in other consumer and industrial applications. Polyacetal is the primary product of the Advanced Engineered Materials segment. Polyacetal is used in automotive components, electronics and appliances.
Celanese is one of the leading global producers of high-performance engineered polymers. The company is the world leader in acetic acid and vinyl acetate monomer production, with market shares of 28% and 30%, respectively.
However, Celanese is facing a weak demand. Lower volumes, primarily driven by significant reductions in the U.S. and European automotive production, have impacted the Advanced Engineered Materials division. The weak demand is likely to continue through 2010 due to the global economic slowdown.
Nonetheless, Celanese has managed about a 6% per annum growth in the Advance Engineered Products segment, although the bulk of the sales are made to the auto industry.
We maintain our Neutral recommendation on Celanese.
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