Celanese Corporation — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. Celanese is a global chemical and specialty materials company. Comparisons below are with the corresponding 2020 periods unless otherwise noted; amounts are in $ millions except per-share data.
Financial performance
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Net sales | 2,198 | 1,193 | 3,996 | 2,653 |
| Gross profit | 761 | 242 | 1,246 | 590 |
| Operating profit | 567 | 83 | 893 | 277 |
| Operating margin | 25.8% | 7.0% | 22.3% | 10.4% |
| Net earnings attributable to Celanese | 538 | 107 | 860 | 325 |
| Diluted EPS | $4.77 | $0.90 | $7.58 | $2.72 |
Gross margin was 34.6% in Q2 versus 20.3% a year earlier, and 31.2% for the first half versus 22.2%. Higher sales reflected a post-pandemic demand recovery, substantial pricing gains—especially in Acetyl Chain—and favorable currency effects. Q2 sales rose 84%; pricing contributed 50 percentage points and volume 31 points. First-half sales rose 51%, with pricing contributing 31 points and volume 16 points.
- Acetyl Chain: Q2 sales of 1,409, up 113%; operating profit of 516 versus 121. First-half sales were 2,465, up 69%, and operating profit was 767 versus 256. Higher prices and volumes drove gains; raw materials, energy, sourcing, and operating costs partly offset them.
- Engineered Materials: Q2 sales of 682, up 62%, and operating profit of 123 versus a loss of 13. First-half sales were 1,327, up 35%, and operating profit was 253 versus 89.
- Acetate Tow: First-half sales were essentially flat at 257, while operating profit declined to 40 from 58, largely due to higher plant and energy costs.
Cash flow and liquidity: First-half operating cash flow was 543, down from 638, despite higher earnings. Working-capital use was a key factor, including increases in receivables and inventory; cash flow also included the 100 European Commission settlement payment. Investing cash flow was positive 275, including 500 of marketable-security sale proceeds. Financing cash flow was negative 715, including debt repayment, 517 of treasury-share purchases, and 154 of dividends. Cash and equivalents were 1,054 at June 30, versus 955 at year-end; 908 was held by foreign subsidiaries and the filing says these funds were largely accessible without material additional tax consequences.
Debt: Total debt was 3,656, down from 3,723 at December 31, 2020; cash exceeded by net debt of approximately 2,602. The company had 400 drawn on its 1.25 billion revolving facility and 850 available. It reported compliance with debt covenants.
Material changes and notable items
- Celanese signed an agreement on June 30 to acquire ExxonMobil’s Santoprene thermoplastic vulcanizates business for 1.15 billion in cash. Closing was expected in Q4 2021, subject to regulatory approvals, carve-out preparations, and customary conditions.
- The 5.875% notes matured in June; the company used 400 of revolving-credit borrowings to repay them.
- First-half share repurchases totaled 3.395 million shares for 500. On July 14, the board authorized an additional 1.0 billion of repurchases; 563 million remained under the prior authorization at June 30. A quarterly dividend of $0.68 per share was also declared after quarter-end.
- Other charges and gains included a first-half net gain of 3, including a 9 gain from terminating the Ferrara Marconi office lease. The prior-year period included asset impairment charges, including 25 related to European compounding facilities.
- Winter Storm Uri caused repair, restart, and energy costs. The company also cited higher raw-material, energy, and logistics costs amid supply constraints.
Outlook, risks, and contingencies
Management expected pandemic effects on demand to continue moderating, but noted uncertainty from resurgences and variants, vaccine effectiveness, and supply-chain impacts. It forecast 2021 capital expenditures of 500–550, primarily for growth and productivity investments. The filing does not provide a clear earnings or revenue forecast.
Risks discussed include changing demand and business cycles, raw-material and energy prices, ability to pass costs through, plant utilization and reliability, logistics constraints, competition, foreign exchange and interest rates, acquisition execution, regulatory and tax changes, and environmental and legal exposures. Management stated that liquidity sources were expected to cover operating, investment, and financial needs for the foreseeable future, while cautioning that future operating cash flows are not assured.
Unconditional purchase obligations totaled 3.3 billion, extending through 2042. Environmental remediation liabilities were 66 at June 30; the company cautioned that costs could materially affect results or cash flows in a given period. Its estimated share of Lower Passaic River cleanup costs was less than 1% and was not expected to be material. The company said it could not estimate remaining demerger or divestiture obligations, if any, beyond accrued amounts. The European compounding consolidation was expected to incur approximately 16 of additional exit and shutdown costs through 2022.
Key facts for investors to verify
- Whether strong Acetyl Chain pricing and demand persist, and whether cost inflation and supply constraints compress margins.
- Progress, purchase financing, approvals, and expected closing of the 1.15 billion Santoprene acquisition.
- Working-capital trends and recurring operating cash generation, apart from marketable-security sales and receivables programs.
- Debt, revolving-facility use, capital spending, buybacks, and dividends following the expanded repurchase authorization.
- Potential timing and scale of environmental, legal, and restructuring cash costs, including the limitations on estimating certain obligations.