Celanese warns of big Q4 restructuring charge

23 November 1999 14:21  [Source: ICIS news]

LONDON (CNI)--German industrial chemicals company Celanese AG warned on Tuesday that restructuring costs in the fourth quarter would exceed the Euro245m ($252m) of special charges incurred during the first nine months.

The additional costs, which are expected to be partially offset by book gains and cash proceeds from divestments, were disclosed together with third quarter results which showed that profits at the former Hoechst subsidiary have continued to be hit badly by higher raw materials costs and a continued squeeze on margins.

Celanese, which earlier today announced the sale of its remaining polyester interests, made a pre-tax loss from continuing operations of Euro43m compared with a profit of Euro26m in the July to September period last year. The loss includes special charges of Euro40m, largely from the planned shutdown of Celanese Canada's head office in Montreal and restructuring measures at various plants.

Pre-tax losses from continuing operations during the first nine months totalled Euro283m (including the Euro245m of special charges) compared with a profit of Euro85m in 1998.

Total sales were up 7% to Euro1.14bn in Q3 thanks to higher volumes (+4%) and currency movements (+3%). Celanese said that overall prices were down 1%, although cost-related price increases in acetyl products and chemical intermediates almost offset declines elsewhere. The improvement in Q3 sales, however, was insufficient to outweigh the weak first half and revenues for the first nine months were down 7% at Euro3.31bn.

Celanese made an operating loss of Euro34m in Q3 against a Euro43m profit last year. At the nine months mark, operating losses were Euro272m compared with profits of Euro123m.

Net losses from continuing operations during the three months to 30 September totalled Euro44m (against a Euro3m deficit in Q3 1998) and included a Euro10m extraordinary loss associated with the early retirement of North American outstanding public debt necessitated by Celanese's demerger from Hoechst.

Discontinued operations (which now include Copley Pharmaceuticals, the Celgard separation products and the Millhaven polyester facility) contributed a profit of Euro54m in Q3, giving an overall net income of Euro10m compared with Euro3m last year.

In a review of its business segments, Celanese said intense competition resulting partly from overcapacity had hit margins. Acetyl products suffered a 91% slump to Euro4m in Q3 operating profits on sales up 13% at Euro392m. In the first nine months, acetyl products made an operating loss of Euro27m compared with a profit of Euro110m last year. Sales declined 5% to Euro1.12bn.

Chemical intermediates made an operating loss of Euro18m in Q3 compared with a Euro6m profit in 1998. Higher volumes helped sales climb by 20% to Euro203m. In the first nine months, chemical intermediates made an operating loss of Euro22m against a profit of Euro28m. Sales during January to September were down 9% at Euro620m.

Acetate products suffered a 53% decline to Euro7m in Q3 operating profits on sales 13% lower at Euro171m. Over nine months, profits fell from Euro66m to Euro18m on sales down 17% to Euro527m.

The Ticona technical polymers operation benefited from higher volumes and improved cost controls to boost Q3 operating profits by 25% to Euro10m on sales up 7% to Euro191m. In the first nine months, however, Ticona made an operating loss of Euro92m (against a profits of Euro43m) due largely to the second quarter special charge of Euro128m. Sales in the January to September period rose only marginally, from Euro573m to Euro575m.

Performance products suffered a 38% decline in Q3 operating income to Euro5m, reflecting a Euro6m special charge linked to the closure of the Trespaphan oriented polypropylene (OPP) films plant in Swindon, England. Further charges will be taken in the fourth quarter, said Celanese. Sales during July to September were down 5% to Euro100m as higher volumes were more than offset by lower prices. In the first nine months, performance products made a loss of Euro33m against profits of Euro19m. Sales slipped to Euro295m from Euro317m.

Looking ahead to the full year results, Celanese said it remained cautious despite some improvement in underlying Q3 results compared with the first half. However, it said further increases in raw materials costs were expected although it also hoped to selectively raise selling prices.

Celanese warned that overcapacity is expected to remain a problem in many of its businesses next year but added that pressure on margins is expected this to ease slightly.

By: Neil Sinclair
+44 20 8652 3214

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