Based in Dallas, Texas, Celanese Corporation (CE), a leading global chemical company, announced that it would release its second quarter 2009 results on Tuesday, July 28, 2009.
In the first quarter of 2009, the company had recorded a net loss of $20 million from continuing operations or $0.17 per diluted share compared to net earnings of $145 million from continuing operations or $0.87 per diluted share in the prior-year period. Net sales for the quarter declined 38% to $1.15 billion driven by lower volumes on continued weak global demand and lower pricing for acetyl products. Net sales in Advanced Engineered Materials dipped 44% to $165 million, Consumer Specialties shrunk 6% to $266 million, Industrial Specialties fell 34% to $242 million and Acetyl Intermediates dropped 51% to $572 million, all primarily driven by lower volumes.
Management has not provided guidance for the second quarter 2009. The company does not expect any improvement in earnings for the near term. For the full year 2009, the company expects volumes to remain under pressure on the back of weak demand. The company is emphasizing on fixed costs reduction to battle weak demand.
We expect Celanese to face slackened demand in 2009 on the revenue front due to a global economic slowdown, combined with exceptionally high raw material and energy costs. The company’s Acetyl Intermediates division, which forms about 46% of sales, has experienced a dramatic decline in overall global demand. Celanese is also witnessing lower volumes in its Advanced Engineered Materials division on the back of significant reductions in U.S. and European automotive production.
The downturn in the global economy and the anticipated lower demand has forced Celanese to reduce capacities. In the first quarter of 2009, the company had permanently shut down the Vinyl Acetate Monomer (VAM) production facility in Cangrejera, Mexico, which had an annual capacity of 115,000 tons. The company is also assessing the potential closure of acetic acid and VAM production in Pardies in France. The Pardies facility is capable of producing 450,000 tons of acetic acid and 150,000 tons of VAM annually. Recently, Celanese sold its PVOH business to Japan-based Sekisui Chemical Co., Ltd. for approximately $173 million.
We expect Celanese to report earnings in the range of $1.30 per share in the second quarter of 2009. Revenues should decline 15% to 20% year over year and fall between $5,000 million and $5,410 million in the quarter. We rate the shares a Sell with a target of $16.00.
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