We are reaffirming our Neutral rating on leading chemical maker
) following its mixed first-quarter 2012 results. Its adjusted
earnings of 72 cents a share missed the Zacks Consensus Estimate by
Sales moved up 3% year over year to $1.63 billion, beating the
Zacks Consensus Estimate. Revenue growth was driven by higher
pricing and volume in the Acetyl Intermediates and Industrial
Specialties segments. However, softness in Europe impacted results
in the AdvancedEngineered Materials division.
Moving ahead, the company envisions the challenging market
conditions in Europe and Asia to last longer in 2012 than expected.
Celanese, however, remains optimistic that leading technologies,
low cost operations and a strong presence in emerging economies
will enable it to deliver incremental earnings in 2012.
Celanese is among the world's largest producers of acetyl
products as well as the leading global producer of high-performance
engineered polymers. It competes with
E. I. Du Pont de Nemours & Co.
Celanese continues to accelerate growth in the emerging markets,
including Asia. Its expansion initiatives in China are expected to
support earnings growth. The company's integrated chemical complex
in Nanjing, China, serves as a base for expansion in Asia,
supporting the region's increasing demand.
Celanese recently received all government approvals necessary to
modify its existing integrated acetyl facility at the Nanjing
Chemical Industrial Park. The facility, which is scheduled to go
live in mid-2013, is expected to boost ethanol production for
industrial use in China.
Celanese plans to cut costs and run its plants better to counter
weak demand. Moreover, the company continues to generate strong
cash flows and remains focused on returning value to its
However, Celanese is exposed to volatility in raw material
(natural gas, ethylene and methanol) pricing and intense
competition. Moreover, the company's balance sheet leverage is also
relatively high, limiting its financial flexibility.
Celanese is witnessing weak acetyl demand in China and Europe.
The company is also seeing softness in some of the advanced interim
market segments due to weak automobile builds in Europe. Our
recommendation on the stock is supported by a short-term Zacks #3
BASF SE (BASFY): Free Stock Analysis Report
CELANESE CP-A (CE): Free Stock Analysis Report
DU PONT (EI) DE (DD): Free Stock Analysis
METHANEX CORP (MEOH): Free Stock Analysis
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