Celanese US Holdings LLC, a wholly owned subsidiary of specialty material company Celanese Corporation (CE), completed an offering of $400 million of senior unsecured notes at 55.775% due 2021.
The net proceeds from the offering were used to pay an existing senior secured credit facility indebtedness that was set to mature in 2014. The company paid additional $120 million of cash on hand to retire the debt.
Recently, Celanese reported adjusted earnings of 96 cents per share in the first quarter of 2011, beating the Zacks Consensus Estimate of 83 cents. Diluted earnings per share in the quarter were 87 cents versus 6 cents in the prior-year quarter.
Quarterly revenues grew 14% year over year to $1.6 billion, primarily driven by higher volumes across all business segments as well as improved volumes. Results were above the Zacks Consensus Estimate of $1.5 billion. Operating profit jumped to $188 million from a loss of $14 million in the prior-year quarter. Operating margins came in at a positive 8.5% from a negative 99% last year
Total debt in the quarter was $2.5 billion versus $2.48 billion in the prior year.
Celanese is one of the world’s largest producers of acetyl products, as well as a leading global producer of high-performance engineered polymers. The company’s earnings outlook has been improving driven by the strong performance in the Advanced Engineered Materials business.
The company is operating its facilities in the Acetyl Intermediates segment at above the industry utilization rates of 80%, which provides cost advantages. Capacity utilization has also improved in the Industrial Specialties segment due to rising demand in the Asia Pacific.
However, Celanese is exposed to volatile raw material (natural gas, ethylene and methanol) prices used in the production of basic chemicals in the Acetyl Intermediates segment, principally formaldehyde, acetic acid and vinyl acetate monomer.
The company also faces stiff competition from larger peers, E.I. DuPont de Nemours and Co. (DD) and The Dow Chemical Co. (DOW) in the Advanced Engineered Material Segment as well as in the Industrial Specialties segment. Celanese’s balance sheet leverage is also relatively high, which limits its financial flexibility.
Currently, Celanese has a short-term (1 to 3 months) Zacks #1 Rank (Strong Buy) and a long-term (6 months and higher) Neutral recommendation.
CELANESE CP-A (CE): Free Stock Analysis Report
DU PONT (EI) DE (DD): Free Stock Analysis Report
DOW CHEMICAL (DOW): Free Stock Analysis Report
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