Celanese ups profit targets after better than expected Q1

29 April 2002 14:01  [Source: ICIS news]

LONDON (CNI)--German industrial chemicals producer Celanese raised its first half and full year profit targets on Monday after announcing much better than expected first quarter results.

Chief executive Claudio Sonder said Celanese now expects first half earnings before interest, tax, depreciation and amortisation (EBITDA) and excluding special charges to be stronger than the second half last year. This contrasts with the warning given in February by chief financial officer Perry Premdas when he forecast unsatisfactory earnings at about the level of the second half of 2001.

Premdas predicted today that full year EBITDA excluding special charges profits will be in line with 2001 at Euro420m ($377m).

However, he cautioned that increasing raw material costs, reduced restocking effects and plant maintenance turnarounds are expected to pressure second quarter results.

Nevertheless, the first quarter results were encouraging, particularly compared with the dismal final three months of last year. EBITDA (excluding special charges) in January to March this year were Euro115m - down 14% compared with Q1 last year but up 74% against Q4. Sales were 11% lower at Euro1.18bn compared with the corresponding period last year but were 4% ahead against October to December. The year on year sales decline reflected lower selling prices which were partially offset by favourable currency movements and higher volumes, explained Celanese.

It pointed out that first quarter earnings from continuing operations were unchanged from a year earlier at Euro26m, while comparable earnings per share (EPS) were Euro0.52 against Euro0.92.

Higher sales volumes combined with lower raw material prices and rigorous cost cuts were behind the strong recovery compared with the fourth quarter.

Sonder commented: "Despite the difficult market environment, we saw some substantial improvements in some of our businesses in the first quarter. Combined with productivity gains, this contributed to better than expected results. In addition, we realised cost savings from our restructuring and Six Sigma [quality assurance and efficiency] initiatives and worked successfully on our portfolio."

Ticona, the technical polymers business, recorded EBITDA, excluding special charges, of Euro28m in Q1 compared with break-even in Q4. The 7% decline against profits of Euro30m in Q1 last year was blamed on lower volumes and pricing, which were partially offset by lower raw material and energy costs. Ticona made sales of Euro202m in the first three months of this year, down 6% against Q1 last year but up 20% on Q4. Celanese said the downturn in the global telecommunications market and weakening in the European automotive business was largely to blame for the year-on-year decline.

The effect of lower raw material and energy costs was particularly marked in Celanese's chemical intermediates division. It recorded an EBITA of Euro21m against only Euro1m in Q1 last year. Sales were down 12% to Euro248m, with lower product prices offset only partially by increased volumes and currency effects.

Acetyl products EBITDA fell 40% to Euro73m from Euro44m in Q1 last year, although income this year was boosted by a compensation payment of Euro31m from a carbon monoxide supplier in Singapore. Celanese said the impact of significantly lower selling prices was mitigated by higher sales volumes and cost savings through restructuring initiatives and other efforts. Compared with Q4, higher volumes and cost cuts led to a rise in EBITDA margin to 9.3% from 5.5%. Acetyl sales in Q1 this year fell 18% to Euro473m against the comparable period of 2001, with lower selling prices far outweighing higher volumes and currency effects.

The main disappointment in Celanese's Q1 results was acetate products. EBITDA fell 38% to Euro13m compared with Q1 last year, primarily due to lower filament volume. Sales fell 6% to Euro169m, with stable prices and positive currency effects undermined by lower volumes. Celanese said the decline in acetate filament volumes was the result of weaker demand from the US textile industry.

Performance products EBITDA sank 5% to Euro20m compared with Q1 last year on sales up 2% at Euro114m.

By: Neil Sinclair
+44 20 8652 3214

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