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Q1 2009 Earning Report of Celanese Corp

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1 Dave Weidman, Chairman and CEO Steven Sterin, Senior Vice President and CFO Celanese 1Q 2009 Earnings Conference Call / Webcast Tuesday, April 28, 2009 10:00 a.m. ET
Transcript
Page 1: Q1 2009 Earning Report of Celanese Corp

1

Dave Weidman, Chairman and CEOSteven Sterin, Senior Vice President and CFO

Celanese 1Q 2009 EarningsConference Call / WebcastTuesday, April 28, 2009 10:00 a.m. ET

Page 2: Q1 2009 Earning Report of Celanese Corp

2

Forward Looking Statements, Reconciliation and Use of Non-GAAP Measures to U.S. GAAP

Forward-Looking StatementsThis presentation may contain “forward-looking statements,” which include information concerning the company’s plans, objectives, goals, strategies, future revenues or performance, capital

expenditures, financing needs and other information that is not historical information. When used in this release, the words “outlook,” “forecast,” “estimates,” “expects,” “anticipates,” “projects,” “plans,” “intends,”“believes,” and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements are based upon current expectations and beliefs and various assumptions. There can be no assurance that the company will realize these expectations or that these beliefs will prove correct. There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements contained in this release. Numerous factors, many of which are beyond the company’s control, could cause actual results to differ materially from those expressed as forward-looking statements. Certain of these risk factors are discussed in the company’s filings with the Securities and Exchange Commission. Any forward-looking statement speaks only as of the date on which it is made, and the company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances.

Reconciliation of Non-U.S. GAAP Measures to U.S. GAAPThis presentation reflects five performance measures, operating EBITDA, affiliate EBITDA, adjusted earnings per share, net debt and adjusted free cash flow, as non-U.S. GAAP measures. The

most directly comparable financial measure presented in accordance with U.S. GAAP in our consolidated financial statements for operating EBITDA is operating profit; for affiliate EBITDA is equity in net earnings of affiliates; for adjusted earnings per share is earnings per common share-diluted; for net debt is total debt; and for adjusted free cash flow is cash flow from operations.

Use of Non-U.S. GAAP Financial Information►Operating EBITDA, a measure used by management to measure performance, is defined as operating profit from continuing operations, plus equity in net earnings from affiliates, other income and depreciation and amortization, and further adjusted for other charges and adjustments. We may provide guidance on operating EBITDA and are unable to reconcile forecasted operating EBITDA to a GAAP financial measure because a forecast of Other Charges and Adjustments is not practical. Our management believes operating EBITDA is useful to investors because it is one of the primary measures our management uses for its planning and budgeting processes and to monitor and evaluate financial and operating results. Operating EBITDA is not a recognized term under U.S. GAAP and does not purport to be an alternative to operating profit as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. Because not all companies use identical calculations, this presentation of operating EBITDA may not be comparable to other similarly titled measures of other companies. Additionally, operating EBITDA is not intended to be a measure of free cash flow for management’s discretionary use, as it does not consider certain cash requirements such as interest payments, tax payments and debt service requirements nor does it represent the amount used in our debt covenants.►Affiliate EBITDA, a measure used by management to measure performance of its equity investments, is defined as the proportional operating profit plus the proportional depreciation and amortization of its equity investments. Affiliate EBITDA, including Celanese Proportional Share of affiliate information on Table 8, is not a recognized term under U.S. GAAP and is not meant to be an alternative to operating cash flow of the equity investments. The company has determined that it does not have sufficient ownership for operating control of these investments to consider their results on a consolidated basis. The company believes that investors should consider affiliate EBITDA when determining the equity investments’ overall value in the company. ►Adjusted earnings per share is a measure used by management to measure performance. It is defined as net earnings (loss) available to common shareholders plus preferred dividends, adjusted for other charges and adjustments, and divided by the number of basic common shares, diluted preferred shares, and options valued using the treasury method. We may provide guidance on an adjusted earnings per share basis and are unable to reconcile forecasted adjusted earnings per share to a GAAP financial measure without unreasonable effort because a forecast of Other Items is not practical. We believe that the presentation of this non-U.S. GAAP measure provides useful information to management and investors regarding various financial and business trends relating to our financial condition and results of operations, and that when U.S. GAAP information is viewed in conjunction with non-U.S. GAAP information, investors are provided with a more meaningful understanding of our ongoing operating performance. This non-U.S. GAAP information is not intended to be considered in isolation or as a substitute for U.S. GAAP financial information. ►The tax rate used for adjusted earnings per share approximates the midpoint in a range of forecasted tax rates for the year, excluding changes in uncertain tax positions, discrete items and changes in management’s assessments regarding the ability to realize deferred tax assets. We analyze this rate quarterly and adjust if there is a material change in the range of forecasted tax rates; an updated forecast would not necessarily result in a change to our tax rate used for adjusted earnings per share. The adjusted tax rate is an estimate and may differ significantly from the tax rate used for U.S. GAAP reporting in any given reporting period. It is not practical to reconcile our prospective adjusted tax rate to the actual U.S. GAAP tax rate in any future period.►Net debt is defined as total debt less cash and cash equivalents. We believe that the presentation of this non-U.S. GAAP measure provides useful information to management and investors regarding changes to the company’s capital structure. Our management and credit analysts use net debt to evaluate the company's capital structure and assess credit quality. This non-U.S. GAAP information is not intended to be considered in isolation or as a substitute for U.S. GAAP financial information.►Adjusted free cash flow is defined as cash flow from operations less capital expenditures, other productive asset purchases, operating cash from discontinued operations and certain other charges and adjustments. We believe that the presentation of this non-U.S. GAAP measure provides useful information to management and investors regarding changes to the company’s cash flow. Our management and credit analysts use adjusted free cash flow to evaluate the company’s liquidity and assess credit quality. This non-U.S. GAAP information is not intended to be considered in isolation or as a substitute for U.S. GAAP financial information.

Results UnauditedThe results presented in this presentation, together with the adjustments made to present the results on a comparable basis, have not been audited and are based on internal financial data furnished to management. Quarterly results should not be taken as an indication of the results of operations to be reported for any subsequent period or for the full fiscal year.

Page 3: Q1 2009 Earning Report of Celanese Corp

3

Dave Weidman

Chairman and Chief Executive Officer

Page 4: Q1 2009 Earning Report of Celanese Corp

4

Celanese Corporation 1Q 2009 highlights

$381

$1.06

$234

$1,846

1st Qtr 2008

$136Operating EBITDA

$27Operating Profit

$0.08 Adjusted EPS

$1,146Net Sales

1st Qtr 2009in millions (except EPS)

1 $32 million inventory accounting impact tax effected at 29% divided by 155.6 million diluted shares for the three months ended March 31, 2009.

First Quarter 2009:► Strong cash position with positive adjusted free cash flow► Inventory accounting impact of ~$0.15/share1 included in Adjusted

EPS

Page 5: Q1 2009 Earning Report of Celanese Corp

5

Peak and trough relative performanceRelative Peak versus Trough Quarter – Operating EBIDTA

Industrial Specialties

Acetyl IntermediatesAdvanced Engineered Materials

Consumer SpecialtiesOther Activities

Trough defined as four quarters of sustained -1% to 1% global GDPNote: Earnings from strategic affiliates included in total Operating EBITDA amounts but excluded from margin % amounts

Ope

ratin

g EB

ITD

A 18 – 20%

8 – 10%

22 – 25%18 – 20%

21 – 23%

Normalized Trough Conditions

10 – 12%

13 – 15% ► Seasonality

► Inventory accounting impacts

► Customer destocking

Impacting Factors

Normalized Peak Conditions

20 – 22%

Page 6: Q1 2009 Earning Report of Celanese Corp

6

Steven Sterin

Senior Vice President and CFO

Page 7: Q1 2009 Earning Report of Celanese Corp

7

Celanese Corporation financialhighlights

$381167.326%

$1.06

$22

$145$234

$1,846

1st Qtr 2008

$0.08Adjusted EPS

29%Effective Tax Rate155.6Diluted Share Basis$136

$33

($20)$27

$1,146

1st Qtr 2009

Operating EBITDA

Other Charges/Adjustments

Net Earnings/(Loss) Operating Profit/(Loss)Net Salesin millions (except EPS)

1Q 2009► 1Q 2009 net sales decreased 38%

► Lower volumes on weak global demand► Lower pricing for acetyl products

► Operating profit decreased to $27 million► Net sales more than offset lower raw material,

energy, and spending costs► Adjusted EPS fell to $0.08/share► Operating EBITDA decreased to $136 million

Page 8: Q1 2009 Earning Report of Celanese Corp

8

First Quarter 2009:► Net sales decreased as higher pricing only partially offset lower volumes► Volume decline due to the timing of customer contract negotiations and lower

acetate flake sales► Operating EBITDA improvement due to the higher pricing, favorable currency

and lower spending and energy costs

Consumer Specialties

$65$282

1st Qtr 2008

$81$266

1st Qtr 2009

Operating EBITDANet Salesin millions

Outlook:► Stable volumes expected in 2009► Increased dividend expected in 2Q 2009 from Acetate China affiliates ► Continued sustained earnings performance with ongoing decreases in

spending and energy costs

Page 9: Q1 2009 Earning Report of Celanese Corp

9

First Quarter 2009:► Net sales decrease primarily driven by lower volumes in Europe and North

America, as well as the effect of the AT Plastics force majeure► Lower raw material and energy costs, along with the benefits of the

company’s fixed spending reductions, more than offset slightly lower pricing► Inventory accounting impacts ($6 million) and lower volumes are the primary

reasons for decrease in Operating EBITDA

Industrial Specialties

$36$365

1st Qtr 2008

$26$242

1st Qtr 2009

Operating EBITDANet Salesin millions

Outlook:► Volumes in North America and Europe remain challenged► Continued success in Asia help offset volume weakness► Raw material and energy cost reductions should positively impact margins

Page 10: Q1 2009 Earning Report of Celanese Corp

10

$60$294

1st Qtr 2008

$0$165

1st Qtr 2009

Operating EBITDANet Salesin millions

Advanced Engineered Materials

First Quarter 2009:► Net sales decreased as higher pricing could not offset lower volumes and

currency impacts► Volume decreases were driven by automotive production in the U.S. and

Europe and continued inventory destocking in consumer electronicapplications.

► Operating EBITDA decline was due to lower volumes, inventory accounting impacts ($5 million) and lower affiliate earnings

Outlook: ► Continued volume pressures due to further reductions in US and Europe

auto builds► Easing raw material and energy costs coupled with sustained pricing should

positively impact margins

Page 11: Q1 2009 Earning Report of Celanese Corp

11

Acetyl Intermediates

$246$1,096

1st Qtr 2008

$48$572

1st Qtr 2009

Operating EBITDANet Salesin millions

First Quarter 2009:► Decrease in net sales due to substantial volume declines and lower pricing ► Pricing declined as the industry experienced lower utilization rates on

reduced global demand, particularly in Europe and the Americas.► Lower raw material and energy costs could not offset lower volumes and

inventory accounting impacts ($21 million)

Outlook:► Volumes expected to be at reduced levels performing at normalized trough

profile► Margins should be sustained in 2009 due to advantaged technology and

cost position

Page 12: Q1 2009 Earning Report of Celanese Corp

12

0

25

50

75

100

1Q 2008 1Q 2009

$ m

illio

ns

Dividends - Equity Investments Dividends - Cost Investments

0

25

50

75

100

1Q 2008 1Q 2009

$ m

illio

ns

Earnings - Equity Investments Dividends - Cost Investments

► 1Q 2009: Earnings impact of $4 million decreased versus prior year due to lower dividends from the company’s Ibn Sina cost affiliate and lower earnings from the Advanced Engineered Materials equity affiliates

► Outlook: ►Increased dividend year over year expected in 2Q 2009 from Acetate China affiliates ►Other cost and equity affiliates challenged by weakened global demand environment

Income Statement

Affiliate Performance

Cash Flows

Page 13: Q1 2009 Earning Report of Celanese Corp

13

Solid cash generation

Adjusted Free Cash Flow

$81$56Less: Capital expenditures

$19$73Less: Other charges and adjustments1

$167$198Net cash provided by operating activities from continuing operations

$67$69Adjusted Free Cash Flow

($1)

$199

1st Qtr 2009

$1Adjustments to operating cash for discontinued operations

$166Net cash provided by operating activities

1st Qtr 2008$ in millions

1Amounts primarily associated with the Kelsterbach relocation and the cash outflows for purchases of other productive assets that are classified as ‘investing activities’ for U.S. GAAP purposes.

Factors contributing to cash generation during first quarter 2009:

► Lower cash taxes

► Favorable trade working capital

► Reduced capital expenditures

Page 14: Q1 2009 Earning Report of Celanese Corp

14

Celanese capital structure

Term Loan - $2.8 billion

Other Debt Obligations -$706 million

Cash - $1,150 million

Net Debt - $2.3 billion

Revolver - $650 million

Cost

Stability

Flexibility

Structure CharacteristicsPrimary Components

Strong balance sheet provides flexibility and stability in current environment

Credit Linked Revolver -$143 million

Sour

ces

of L

iqui

dity

Deb

t Obl

igat

ions

Page 15: Q1 2009 Earning Report of Celanese Corp

15

Appendix

Page 16: Q1 2009 Earning Report of Celanese Corp

16

1Q 2009 Other Charges and Other Adjustments by Segment

(1)----(1)Plumbing insurance recoveries

(6)-(6)---Clear Lake insurance recoveries

1-1---Asset impairments

------Other

4-4---Plant closures

3----3Ticona Kelsterbach relocation

21-1--Business optimization

1----1Ticona Kelsterbach relocation

5

4

-

1

6

AI

3

1

-

2

2

IS

15

7

5

9

9

Other

-

-

-

-

-

CS

33

12

5

21

24

Total

-Other

1Total other adjustments

10

9

7

AEM

Total other charges and other adjustments

Total other charges

Employee termination benefits

$ in millions

Page 17: Q1 2009 Earning Report of Celanese Corp

17

Reg G: Reconciliation of Adjusted EPS

Adjusted Earnings (Loss) Per Share - Reconciliation of a Non-U.S. GAAP Measure

(in $ millions, except per share data) 2009 2008Earnings (loss) from continuing operations before tax (16) 218 Non-GAAP Adjustments: Other charges and other adjustments 1 33 22 Adjusted Earnings (loss) from continuing operations before tax 17 240 Income tax (provision) benefit on adjusted earnings 2 (5) (62) Noncontrolling interests - - Adjusted Earnings (loss) from continuing operations 12 178 Preferred dividends (3) (3) Adjusted net earnings (loss) available to common shareholders 9 175 Add back: Preferred dividends 3 3 Adjusted net earnings (loss) for adjusted EPS 12 178

Diluted shares (millions) 3

Weighted average shares outstanding 143.5 152.0 Assumed conversion of preferred shares 12.1 12.0 Assumed conversion of restricted stock units - 0.5 Assumed conversion of stock options - 2.8 Total diluted shares 155.6 167.3 Adjusted EPS 0.08 1.06 1 See Table 7 for details2 The adjusted tax rate for the three months ended March 31, 2009 is 29% based on the forecasted adjusted tax rate for 2009.3 Potentially dilutive shares are included in the adjusted earnings per share calculation when adjusted earnings are positive.4 The impact of inventory accounting adjustments on Adjusted EPS is $0.15 calculated as $32 million tax effected at 29% divided by 155.6 million diluted shares for the three months ended March 31, 2009.

Three Months EndedMarch 31,

Page 18: Q1 2009 Earning Report of Celanese Corp

18

Reg G: Reconciliation of Net Debt

Net Debt - Reconciliation of a Non-U.S. GAAP MeasureMarch 31, December 31,

(in $ millions) 2009 2008Short-term borrowings and current installments of long-term debt - third party and affiliates 195 233Long-term debt 3,274 3,300Total debt 3,469 3,533Less: Cash and cash equivalents 1,150 676Net Debt 2,319 2,857

Page 19: Q1 2009 Earning Report of Celanese Corp

19

Reg G: Other Charges and Other Adjustments

Reconciliation of Other Charges and Other Adjustments

Other Charges:

(in $ millions) 2009 2008Employee termination benefits 24 7 Plant/office closures - 7 Ticona Kelsterbach plant relocation 3 2 Clear Lake insurance recoveries (6) - Insurance recoveries associated with plumbing cases (1) - Asset impairments 1 - Total 21 16

Other Adjustments: 1

IncomeStatement

(in $ millions) 2009 2008 ClassificationBusiness optimization 2 9 SG&ATicona Kelsterbach plant relocation 1 (2) Cost of salesPlant closures 4 - Cost of salesOther 5 (1) Various Total 12 6

Total other charges and other adjustments 33 22 1 These items are included in net earnings but not included in other charges.

March 31,

Three Months Ended

Three Months Ended

March 31,

Page 20: Q1 2009 Earning Report of Celanese Corp

20

Reg G: Reconciliation of Operating EBITDASe

gmen

t Dat

a an

d R

econ

cilia

tion

of O

pera

ting

Prof

it (L

oss)

to O

pera

ting

EBIT

DA

- a

Non

-U.S

. GAA

P M

easu

re

(in $

mill

ions

)20

0920

08N

et S

ales

Adv

ance

d E

ngin

eere

d M

ater

ials

165

294

Con

sum

er S

peci

altie

s26

6

28

2 I

ndus

trial

Spe

cial

ties

242

365

Ace

tyl I

nter

med

iate

s57

2

1,

096

Oth

er A

ctiv

ities

1-

-

I

nter

segm

ent e

limin

atio

ns(9

9)

(191

)To

tal

1,14

6

1,

846

Ope

ratin

g Pr

ofit

(Los

s) A

dvan

ced

Eng

inee

red

Mat

eria

ls(1

9)

30

Con

sum

er S

peci

altie

s66

50

I

ndus

trial

Spe

cial

ties

10

17

Ace

tyl I

nter

med

iate

s12

17

7

Oth

er A

ctiv

ities

1(4

2)

(40)

To

tal

27

234

Equi

ty E

arni

ngs,

Cos

t - D

ivid

end

Inco

me

and

Oth

er In

com

e (E

xpen

se)

Adv

ance

d E

ngin

eere

d M

ater

ials

(8)

9

C

onsu

mer

Spe

cial

ties

3

-

Ind

ustri

al S

peci

altie

s-

-

A

cety

l Int

erm

edia

tes

4

29

O

ther

Act

iviti

es 1

6

4

Tota

l5

42

Oth

er C

harg

es a

nd O

ther

Adj

ustm

ents

2

Adv

ance

d E

ngin

eere

d M

ater

ials

10

1

C

onsu

mer

Spe

cial

ties

-

1

Ind

ustri

al S

peci

altie

s3

5

A

cety

l Int

erm

edia

tes

5

8

Oth

er A

ctiv

ities

115

7

Tota

l33

22

Dep

reci

atio

n an

d Am

ortiz

atio

n Ex

pens

e A

dvan

ced

Eng

inee

red

Mat

eria

ls17

20

C

onsu

mer

Spe

cial

ties

12

14

Ind

ustri

al S

peci

altie

s13

14

A

cety

l Int

erm

edia

tes

27

32

Oth

er A

ctiv

ities

12

3

To

tal

71

83

Ope

ratin

g EB

ITD

A A

dvan

ced

Eng

inee

red

Mat

eria

ls-

60

Con

sum

er S

peci

altie

s81

65

I

ndus

trial

Spe

cial

ties

26

36

Ace

tyl I

nter

med

iate

s48

24

6

Oth

er A

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ities

1(1

9)

(26)

To

tal

136

38

1

2 S

ee T

able

7.

1 O

ther

Act

iviti

es p

rimar

ily in

clud

es c

orpo

rate

sel

ling,

gen

eral

and

adm

inis

trativ

e ex

pens

es a

nd th

e re

sults

from

cap

tive

insu

ranc

e co

mpa

nies

.

Thre

e M

onth

s En

ded

Mar

ch 3

1,

Page 21: Q1 2009 Earning Report of Celanese Corp

21

Reg G: Equity Affiliate Preliminary Results and Celanese Proportional Share - Unaudited

1Ticona Affiliates includes Polyplastics (45% ownership), Korean Engineering Plastics (50%), Fortron Industries (50%), and Una SA (50%)2Infraserv includes Infraserv Entities valued as equity investments (Infraserv Höchst - 31% ownership, Infraserv Gendorf - 39% and Infraserv Knapsack 27%)3Affiliate EBITDA is the sum of Operating Profit and Depreciation and Amortization, a non-U.S. GAAP measure4Calculated as the product of figures from the above table times Celanese ownership percentage5Product of Celanese proportion of Affiliate EBITDA less Equity in net earnings of affiliates; not included in Celanese operating EBITDA

Equity Affiliate Preliminary Results - Total - Unaudited

(in $ millions)2009 2008

Net SalesTicona Affiliates1 172 355 Infraserv2 510 548 Total 682 903

Operating ProfitTicona Affiliates (19) 33 Infraserv 25 19 Total 6 52

Depreciation and Amortization Ticona Affiliates 27 22 Infraserv 23 27 Total 50 49

Affiliate EBITDA3

Ticona Affiliates 8 55 Infraserv 48 46 Total 56 101

Net IncomeTicona Affiliates (16) 19 Infraserv 19 (2) Total 3 17

Net DebtTicona Affiliates 260 185 Infraserv 562 325 Total 822 510

Three Months EndedMarch 31,

Equity Affiliate Preliminary Results - Celanese Proportional Share - Unaudited4

(in $ millions)2009 2008

Net SalesTicona Affiliates 80 163 Infraserv 163 176 Total 243 339

Operating ProfitTicona Affiliates (8) 15 Infraserv 8 6 Total - 21

Depreciation and Amortization Ticona Affiliates 12 10 Infraserv 7 9 Total 19 19

Affiliate EBITDA3

Ticona Affiliates 4 25 Infraserv 15 15 Total 19 40

Equity in net earnings of affiliates (as reported on the Income Statement)Ticona Affiliates (8) 9 Infraserv 6 1 Total (2) 10

Affiliate EBITDA in excess of Equity in net earnings of affiliates5

Ticona Affiliates 12 16 Infraserv 9 14 Total 21 30

Net DebtTicona Affiliates 118 85 Infraserv 177 102 Total 295 187

Three Months EndedMarch 31,


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