21 October 2008 18:23 [Source: ICIS news]
HOUSTON (ICIS news)--US acetyls producer Celanese cut on Tuesday its 2008 earnings forecast based on the assumption that a recession had begun in Europe and economic recovery in North America was not on the horizon.
Shares of Celanese plunged almost 30% on the New York Stock Exchange, hitting a low of $13.81 (€10.36) in morning trading following a close of $19.69 on Monday.
Celanese lowered its earnings/share (EPS) outlook for full year 2008 to a range of $3.40-$3.55 from the previous estimate of $3.60-$3.85 due to effects of the global economic slowdown.
The cut overshadowed a 23.4% increase in third-quarter net earnings to $158m, driven by price hikes, higher volumes and positive currency impacts, the company said.
Celanese Chairman David Weidman explained in a conference call that he decided to cut the forecast when he came back from vacation in the first week of October and discovered that acetic acid prices in Asia had dropped sharply.
"Basically, orders just stopped," Weidman said.
Weidman said in late April that acetic acid production in China was the future of the company and that Celanese was forecasting prices of $600-$650/tonne through 2010.
However, in the past two weeks, the price there has hit 21-month lows, diving into the mid-$500/tonne range, according to global chemical market intelligence service ICIS pricing.
"There's a substantial amount of inventory correction going on," Weidman said of global acetic acid. "There have been significant declines in consumer confidence and business confidence."
Another major acetic acid producer, BP, also offered a gloomy economic prognosis on Tuesday.
BP's chief operating officer, Steven Welch, predicted a "somewhat negative" forecast for acetic acid in North America and Europe for the year.
Weidman at Celanese saw a positive side in the present downturn, saying the current economy is ideal for mergers and acquisitions, though he said the company has none it wants to discuss at this time.
"In this environment, there's probably more people willing to do things than there have been before," Weidman said.
US Gulf acetic acid contract prices were $700-$800/tonne during the week ended 17 October, according to ICIS pricing.
($1 = €0.75)
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