Celanese Corporation — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; comparison is with Q1 2021 unless otherwise noted. Celanese is a global chemical and specialty materials company. Results are unaudited and prepared under U.S. GAAP.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Net sales | $2.538 billion | $1.798 billion |
| Gross profit | $745 million | $485 million |
| Operating profit | $531 million | $326 million |
| Net earnings attributable to Celanese | $502 million | $322 million |
| Diluted EPS | $4.61 | $2.82 |
| Operating cash flow | $316 million | $116 million |
| Capital expenditures | $137 million | $92 million |
Operating margin was 20.9%, up from 18.1%; gross margin was approximately 29.4%, versus 27.0% (calculated from reported figures). Sales rose 41%, reflecting 32% higher pricing and 12% higher volume, partly offset by a 2% unfavorable currency effect. Higher raw-material, energy, logistics and operating costs also affected results.
At March 31, 2022, cash and equivalents were $605 million, current assets $4.200 billion and current liabilities $2.554 billion. Total debt was $3.992 billion, including $860 million of short-term borrowings and current debt and $3.132 billion of long-term debt. Cash less reported total debt was approximately $3.387 billion. The company reported $1.45 billion available under its $1.75 billion revolving facility and said it was compliant with debt covenants.
Operating cash flow increased year over year, supported by higher earnings and the absence of a prior-year $100 million European Commission settlement payment, but partly offset by $133 million of unfavorable trade working capital. Cash increased $69 million during the quarter. Financing cash outflow was $95 million; the company paid $73 million in dividends and $44 million in bridge-facility commitment fees. It sold or factored receivables, including $262 million under its U.S. receivables facility during the quarter.
Segments and changes versus prior year
- Engineered Materials: Sales rose 41% to $910 million, but operating profit fell 5% to $124 million and margin declined to 13.6% from 20.2%. Santoprene acquisition volume and pricing boosted sales; higher raw-material, energy and logistics costs and $39 million of higher spending weighed on profit.
- Acetate Tow: Sales increased 5% to $125 million; operating profit fell 75% to $4 million. Management cited higher raw-material and energy costs.
- Acetyl Chain: Sales increased 46% to $1.538 billion and operating profit nearly doubled to $499 million; margin rose to 32.4% from 23.8%. Higher pricing and volume more than offset higher input, energy and distribution costs.
Consolidated operating profit rose 63%. SG&A increased 27% to $174 million, primarily because of higher functional and project spending. The effective tax rate fell to 18% from 21%, mainly because of nonrecurring uncertain-tax-position impacts in Q1 2021.
Outlook, notable items and risks
- Management expected 2022 capital expenditures of approximately $550 million, after reducing the anticipated amount by about $50 million. No specific earnings or sales guidance is provided in the filing.
- Celanese agreed to acquire a majority of DuPont’s Mobility & Materials business for $11.0 billion, subject to adjustments, with closing expected around year-end 2022 subject to regulatory approvals and customary conditions. The company had $9.5 billion remaining in bridge commitments after arranging $1.5 billion of delayed-draw term loans; it intended to issue senior unsecured notes in lieu of drawing the remaining bridge commitments. Management said the transaction would increase leverage and emphasized rapid deleveraging and maintaining an investment-grade rating. Share repurchases were paused.
- Management cited significant inflation and supply disruptions in raw materials, energy, logistics and labor; increased Western Hemisphere and especially European energy prices; and continued pricing actions to offset costs. It expected these pressures to remain significant through 2022 and anticipated acetyls pricing in China to move toward more normalized levels as the year progressed. COVID-19-related restrictions and the Russia-Ukraine conflict could affect demand, suppliers, costs and supply chains.
- Environmental remediation liabilities were $57 million. For the Lower Passaic River Superfund matter, Celanese estimated its ultimate allocable share at less than 1%; a February 2022 settlement in principle was expected not to be material. The company also disclosed ongoing U.S., Netherlands and Germany tax audits, including proposed transfer-pricing adjustments, and preliminary Mexico audit findings it disputes. Outcomes could require material tax adjustments in the period resolved.
- Unconditional purchase obligations totaled $3.5 billion through 2042. The company said it had no material off-balance-sheet arrangements and no material changes to previously disclosed risk factors.
Key facts for investors to verify
- Whether the DuPont Mobility & Materials acquisition closes on the expected timetable, its final purchase price and financing mix, and the resulting leverage and deleveraging trajectory.
- Whether price increases continue to offset input, energy and logistics inflation, particularly as acetyls pricing in China normalizes.
- Whether Engineered Materials can recover margins after Q1 cost pressure and Santoprene-related spending.
- How working-capital requirements, receivables sales and cash generation evolve, and whether planned 2022 capital expenditures remain near $550 million.
- Developments in the tax audits and environmental matters, including any changes to recorded provisions or estimates.