Chemical and advanced materials maker
) said that it is changing its accounting policy for pension
plans and other post-retirement benefit plans.
Per the new policy dubbed mark-to-market (MTM) accounting,
Celanese will recognize actuarial gains and losses and changes in
the fair value of the plans' assets in the fourth quarter every
year. As such, it will no longer defer and amortize actuarial
gains and losses into future years. The change, which is
effective Jan 1, 2013, is retroactively applied to the company's
results for all periods referred in its latest Form 8-K.
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Given the retrospective application of the accounting policy
change, Celanese's earnings from continuing operations for 2012
dropped to $2.35 per share from $3.81 mainly on account of the
MTM adjustment of $389 million in the fourth quarter.
Barring the MTM adjustment, Celanese's adjusted earnings for 2012
rose to $4.07 per share from $3.80 on reduced amortization of
prior period actuarial losses. According to Celanese, the
retrospective application of the policy change is not expected to
impact its earlier announced growth rate for adjusted earnings
per share for this year.
Pursuant to the accounting policy change, Celanese is also
changing its allocation of net periodic benefit costs to properly
reflect actual operational costs of each business segment.
Celanese expects that the accounting change will offer investors
with greater transparency into its operating results and enable
them to better assess its underlying operating performance. It
further noted that the change will not impact benefits received
by participants of the plans.
Celanese is among the world's largest producers of acetyl
products as well as the leading global producer of
high-performance engineered polymers. The company's strong
presence in emerging markets will enable it to deliver
incremental earnings in 2013.
Celanese is aggressively expanding capacity in the emerging Asian
markets. Its expansion initiatives in China are expected to
support earnings growth.
However, Celanese is witnessing weak demand and pricing in its
core acetyl business. The challenging economic conditions in
Europe and sluggish growth in Asia may impact the company's
Celanese currently carries a short-term (1 to 3 months) Zacks
Rank #3 (Hold).
Other companies in the chemical industry having favorable Zacks
Akzo Nobel NV
). All of them carry a Zacks Rank #2 (Buy).