Celanese in $75m Q4 ’04 net loss but bullish on '05

28 February 2005 17:03  [Source: ICIS news]

LONDON (CNI)--Celanese slumped to a net loss of $57m (Euro43m) in the fourth quarter and a loss of $175m for the full year in 2004, the company disclosed on Monday.

 

Charges and costs related to the Blackstone takeover and subsequent restructuring were significant in both periods.

 

The Q4 net figure compares with 2003 Q4 earnings of $18m; the full year loss with net profits of $148m in 2003.

 

Underlying profits, however, particularly from the chemicals segment, were much stronger for the quarter and the full year. In its forecast, management said it expects a strong year for the company in 2005.  

 

Fourth quarter 2004 sales rose 15% to $1.33bn compared to corresponding sales in October to December 2003 of predecessor company Celanese AG. Prices in the chemical products segment were 12% higher in the period, Celanese said, and added $150m to the total on the back of strong volumes. Gross profit margins expanded, it said, while adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) were up 3% at $187m.

 

Operating profits were $28m in the quarter compared to a loss of $10m in the similar period of 2003.

 

Higher chemical product prices plus lower deprecation and amortisation expenses of $47m in the quarter were offset by a number of increased expenses. Interest charges rose by $59m because of higher debt levels. Selling, general and administrative expenses were up $94m mainly due to the inclusion of an unusual item of $50m for an extensive management compensation package.

 

The package includes a deferred compensation package for the company’s top 20 to 25 management personnel. It also covers a compensation programme for senior management linked closely to future performance. Other charges, including an income tax provision were $39m.

 

Celanese said that higher volumes and prices, lower deprecation and amortisation expenses, decreased stock appreciation rights and cost savings helped lift profits for the year but were offset by a number of factors. These included a higher interest expense of $257m, higher energy and raw material costs, special charges of $114m and other charges totalling $133m including the management compensation plan charge.

 

Debts rose to $3.39bn at the year end compared with $637m at the end of 2003 related to the Celanese acquisition and re-financing. Special charges were largely non-cash impairment costs taken as the acetate products segment was consolidated and acetate filament production discontinued. The charges also related to the decision to sell Ticona’s cyclo-olefin copolymers business.

 

Sales in 2004 were $5.07bn compared with $4.60bn, Celanese said. Adjusted EBITDA of $801m compared with $675m.

 

Celanese said that chemical products sales were up 21% in Q4 at $925m on “significantly higher pricing and favourable currency effects.” Prices increased for most products, particularly vinyl acetate and acetic acid, it added. Earnings from continuing operations before tax and minority interests were $131m against $35m.

 

Ticona’s sales were 8% higher in the quarter at $203m oh higher volumes and a favourable currency effect but offset by lower prices. The segment reported a pre-tax loss of $29m compared to a loss of $9m in the similar period of 2003 mainly due to the non-cash impairment charge taken against the cyclo-olefin copolymers business.

 

Acetate products sales fell 1% to $174m as lower demand offset higher prices. Pre-tax earnings rose to $18m, however, from $2m due mainly to a lower depreciation expense.

 

Performance products sales were flat in the quarter at $39m. Pre-tax profits fell to $3m from $11m. Strong Sunett sweetener volumes could not offset lower prices for Sunett and sorbates. Primary European and US production patents on Sunett expired at the end of March 2005.

 

Celanese said it expected the strong business environment seen in the fourth quarter of 2004 to continue. It forecast adjusted EBITDA for the company between 25% and 30% higher in Q1 than adjusted EBITDA of $208m in the first quarter of 2004. Underlying EBITDA growth in the business would be between 15% and 20%, it said.

 

Assuming global growth continues, Celanese said it expected 2005 to be a strong year. It expects to benefit from its methanol agreement with Southern Methanol in Trinidad which comes into effect in July and the recent acquisition of the Vinamul emulsions business.

 

The company warned of the challenges of volatile raw material costs and projected new capacity coming on-stream in Asia for acetyls which will loosen the currently tight supply/demand balance. It said, however, that it expected adjusted EBITDA for the full year to grow by between 12% and 17% over 2004.

 

Celanese said it had today redeemed approximately $207m of senior discount notes and $572m of senior subordinated notes of its subsidiaries. It said it expected to incur expenses of $115m in Q1 2005 related to the refinancing. Of this amount, $74m is expected to be a cash expense.

By: Nigel Davis
+44 20 8652 3214

< previous article(VIDEO - ICIS news Europe Lunchtime Bulletin 30 October 2009)

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly