Celanese is named ICIS Company of the Year
Celanese is the ICIS Company of the Year based on its standout financial performance in 2018.
The company scored highly in the ICIS analysis of the financial performance of the Top 100 global chemical producers with strong sales of its specialty materials based on the acetyls chain driving growth.
The analysis looks at the financial performance company by company in the most recent fiscal year and growth in profit margins and profit to assets ratios. It is based on comparable year-on-year performance as well as the ranking a company has in terms of certain financial ratios within the group of Top 100 chemical companies. That listing is generated each year by ICIS to provide a snapshot view of the standing of the chemical majors.
Also in the top 10 chemical companies in the ICIS analysis this year are Albemarle, Methanex, Dow, HB Fuller, LANXESS, the Iranian petrochemical producer PGPIC, Saudi producer Tasnee, Tronox and Chemours.
Each of these companies produced a strong profits performance in 2018, some with exceptional year-on-year growth, against a backdrop of rising sales.
CELANESE DELIVERS RECORD EPS
Celanese delivered a particularly solid all round performance producing record earnings per share. The company said that robust contributions from its Engineered Materials and Acetyl Chain drove financial performance. The businesses generated record operating cash flow, free cash flow and shareholder returns in the form of share buybacks and dividends.
A successful year for Albemarle was based on the strong growth and a significant contribution from its lithium products. Methanex capitalised on the uptick in the global methanol market and increased production capacity to generate record financial results.
Dow separated from DowDuPont on 1 April 2019 but produced a strong net profit performance in 2018.
Double-digit growth in Engineering Adhesives helped drive the performance of HB Fuller over the course of the year. The companies included in the ICIS listing of the world’s major chemical companies – its Top 100 – grew sales by 10% on average in 2018. And while business was pressured in the second half, and particularly in the fourth quarter, the year, overall, proved successful.
Operating profits declined on average, by 9% while the average increase in net profits was 29%.
The operating profit margin (operating profit to sales ratio) for the 121 companies in the analysis this year was 12% with the margin range running from 2.5% to close to 32%. A year of wide ranging operating profit performance saw 14 companies produce operating profit margins of more than 20%.
The average net margin was 7% while 28 companies produced a net margin of more than 10%.
The analysis reflects the strength of many companies in the industry in 2018 but suggests that the year could have seen a turning point. The sharp drop in the oil price in the fourth quarter hit the upstream petrochemical and polymer producers. Customer confidence waned with the US-China trade war looming large in their thinking.
Chemical markets have largely been under pressure this year with prices falling for some products in key markets. A profits warning from industry giant BASF ahead of its second quarter financial results has very much marked the mood across the sector.
In China, spreads on key products have narrowed as the economic backdrop has clouded. Companies are having to manage length in the ethylene chain in the US as many of them capitalise on the availability abundant natural gas liquids (NGLs).
The ICIS year-on-year performance analysis shows operating margins declining on average by 0.7% in 2018. There was a similar decline in the average net margins for companies in the analysis.
ICIS collects a range of data on the leading chemical companies including, when available, information on capital spending (or spending on property, plant and equipment, personal protective equipment), R&D spending and employee numbers.
Certainly, capital spending is driving growth for sector companies currently. The average increase in capital spending among those companies supplying the data, was 14%. Year on year increases of more than 50% were reported by more than a handful of companies.
The capital spending to sales average in 2018 was 6%. Companies were also spending more on R&D with the average increase 7%. The R&D to sales ratio for the Top 100 companies was 5%, 2% higher than in 2017.
Employee numbers are increasing on average across the Top 100 companies.
Underpinning Celanese’s standout financial performance in 2018 was net sales growth of 17% to $7.2bn. Product prices were high and product volumes increased for the company.
The company said that its acetyls chain products, which include chemicals such as vinyl acetate monomer, widely used in paints and adhesives, elevated earnings to new levels helped by improving industry fundamentals.
The Celanese Engineered Materials business sells performance polymers to industries such as aerospace and automotive. Products range from thermoplastic elastomers to polyesters and liquid crystal polymers and include acetyls, long fibre reinforced thermoplastics and ultra high molecular weight polyethylene.
This segment grew in 2018 on the back of expanded production capacity and contributions from the recent acquisition of the nylon compounding division of Nilit and custom compounder Omni Plastics, as well as improved joint venture performance.
Celanese said it generated operating cash flow of $1.6bn in 2018 and free cash flow of $1.2bn, returning $1.1bn in cash to shareholders over the course of the year.
The company has been faced this year with a weakened acetyls market, declining VAM prices in the US and pressure from weaker end use markets such as automobiles.
For the first half of 2019 lower demand and accelerated destocking were certainly a feature, with second-quarter reported Engineered Materials adjusted operating profits down 19% year on year. Second-quarter net profits fell 39%.
The company says it faces challenging industry fundamentals in 2019 but looks to some improvement in the second half.
Reacting to the Company of the Year award, Celanese chief financial officer, Scott Richardson said: “Our most recent fiscal year saw strong performance as a result of customer and employee engagement, product and solutions-based innovation, and commercial excellence. We are pleased with the achievements we have delivered through a focus on these underlying business fundamentals.”
Graphics by Samantha Wright