Celanese Corporation — Q1 2021 Form 10-Q
Business context and period: Celanese is a global chemical and specialty materials company. This unaudited filing covers the three months ended March 31, 2021, compared with Q1 2020; amounts are in millions of dollars except per-share data.
Financial performance
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Net sales | $1,798 | $1,460 |
| Gross profit / margin | $485 / 27.0% | $348 / 23.8% |
| Operating profit / margin | $326 / 18.1% | $194 / 13.3% |
| Net earnings attributable to Celanese | $322 | $218 |
| Diluted EPS | $2.82 | $1.82 |
| Operating cash flow | $116 | $259 |
| Capital expenditures | $92 cash outflow | $119 cash outflow |
Sales increased 23%, driven mainly by higher Acetyl Chain pricing, favorable currency translation, and higher volumes in Acetyl Chain and Engineered Materials. Operating profit rose 68%; higher sales were partly offset by raw-material and energy inflation and Winter Storm Uri-related disruption costs. Equity earnings from affiliates fell to $29 from $57, including lower earnings from Ibn Sina and the sale of the Polyplastics investment in October 2020.
- Engineered Materials: Sales $645, up 15%; operating profit $130, up 28%. Demand recovery, currency and pricing supported results; Uri-related energy and input costs were offsets.
- Acetate Tow: Sales $119, down 8%; operating profit $16, down 41%, mainly reflecting lower volume amid acetic-acid supply constraints caused by Uri.
- Acetyl Chain: Sales $1,056, up 32%; operating profit $251, up 86%. Higher pricing and demand were partly offset by Uri-related costs, higher raw-material and energy costs, and Elotex-related costs.
Financial position and liquidity
At March 31, 2021, cash and cash equivalents were $791, down from $955 at year-end 2020; marketable securities were $331. Total debt was $3,632, comprising $497 of current debt and $3,135 of long-term debt, down from $3,723 at year-end. The company reported $1.25 billion available under its revolving credit facility and said it was compliant with debt covenants. Management believes available liquidity will meet operating, investment and financial obligations for the foreseeable future, including the next 12 months.
Operating cash flow declined to $116, notably reflecting the $100 European Commission settlement payment, higher receivables and inventory, and working-capital needs. Investing activities provided $98, including $200 of proceeds from marketable securities sales. Financing activities used $371, including $267 for treasury-stock purchases and $78 for dividends. The company repurchased 1.83 million shares for $250 at an average $136.47 per share. A $0.68-per-share dividend was declared in April, payable in May.
Outlook, risks and unusual items
- Celanese expected the impact of COVID-19 on demand and results to continue decreasing during the remainder of 2021, assuming effective vaccine rollout and no resurgences; it stated that pandemic duration and effects remain uncertain. Plants were operating at more normalized levels, and demand in China and the U.S. had recovered to pre-pandemic levels.
- 2021 capital expenditures were expected to total $500–$550, principally for growth and productivity investments in Engineered Materials and Acetyl Chain. The filing provides no specific earnings or sales guidance.
- Winter Storm Uri caused supply disruptions, higher energy and raw-material costs, repairs and restart costs, and constrained production in certain products.
- The European Commission matter was fully settled with a $100 cash payment in January 2021. Environmental remediation liabilities totaled $66. The company estimated its allocable share of Lower Passaic River cleanup costs at less than 1% and did not expect it to be material. Broader legal outcomes remain uncertain.
- Unconditional purchase obligations were $3.4 billion, extending through 2042. For the Forli compounding consolidation, the company expected about $22 of additional exit and shutdown costs through 2022; remaining employee termination costs were expected to be less than $10.
- Other notable items included a $9 gain on termination of the Ferrara Marconi lease, partly offset by $2 of employee termination benefits, and a $28 unfavorable tax impact from uncertain tax positions, primarily concerning internal treasury lending terms.
Important facts for investors to verify
- Whether higher Acetyl Chain pricing and demand persist, and whether the business can recover or pass through higher input and energy costs.
- Whether cash conversion improves after the settlement payment and working-capital outflows; monitor receivables, inventory and operating cash flow.
- Execution of the $500–$550 capital-spending plan alongside dividends, repurchases and debt obligations.
- Progress on the Forli consolidation, remaining costs, and any changes in environmental, tax or other legal exposures.
- COVID-19, supply-chain, raw-material availability and price, currency, and customer-demand developments that could affect results.