Retaining Celanese at Neutral - Analyst Blog


We are reaffirming our Neutral rating on leading chemical maker Celanese Corporation ( CE ) following its mixed first-quarter 2012 results. Its adjusted earnings of 72 cents a share missed the Zacks Consensus Estimate by a nickel.

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 BASF SE ( BASFY ), Methanex Corp. ( MEOH ) and E. I. Du Pont de Nemours & Co. ( DD ).

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 shareholders.

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 Rank (Hold).

BASF SE (BASFY): Free Stock Analysis Report
CELANESE CP-A (CE): Free Stock Analysis Report

DU PONT (EI) DE (DD): Free Stock Analysis Report
METHANEX CORP (MEOH): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: BASFY , CE , DD , EI , MEOH

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