q1 2009 earning report of celanese corp
TRANSCRIPT
1
Dave Weidman, Chairman and CEOSteven Sterin, Senior Vice President and CFO
Celanese 1Q 2009 EarningsConference Call / WebcastTuesday, April 28, 2009 10:00 a.m. ET
2
Forward Looking Statements, Reconciliation and Use of Non-GAAP Measures to U.S. GAAP
Forward-Looking StatementsThis presentation may contain “forward-looking statements,” which include information concerning the company’s plans, objectives, goals, strategies, future revenues or performance, capital
expenditures, financing needs and other information that is not historical information. When used in this release, the words “outlook,” “forecast,” “estimates,” “expects,” “anticipates,” “projects,” “plans,” “intends,”“believes,” and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements are based upon current expectations and beliefs and various assumptions. There can be no assurance that the company will realize these expectations or that these beliefs will prove correct. There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements contained in this release. Numerous factors, many of which are beyond the company’s control, could cause actual results to differ materially from those expressed as forward-looking statements. Certain of these risk factors are discussed in the company’s filings with the Securities and Exchange Commission. Any forward-looking statement speaks only as of the date on which it is made, and the company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances.
Reconciliation of Non-U.S. GAAP Measures to U.S. GAAPThis presentation reflects five performance measures, operating EBITDA, affiliate EBITDA, adjusted earnings per share, net debt and adjusted free cash flow, as non-U.S. GAAP measures. The
most directly comparable financial measure presented in accordance with U.S. GAAP in our consolidated financial statements for operating EBITDA is operating profit; for affiliate EBITDA is equity in net earnings of affiliates; for adjusted earnings per share is earnings per common share-diluted; for net debt is total debt; and for adjusted free cash flow is cash flow from operations.
Use of Non-U.S. GAAP Financial Information►Operating EBITDA, a measure used by management to measure performance, is defined as operating profit from continuing operations, plus equity in net earnings from affiliates, other income and depreciation and amortization, and further adjusted for other charges and adjustments. We may provide guidance on operating EBITDA and are unable to reconcile forecasted operating EBITDA to a GAAP financial measure because a forecast of Other Charges and Adjustments is not practical. Our management believes operating EBITDA is useful to investors because it is one of the primary measures our management uses for its planning and budgeting processes and to monitor and evaluate financial and operating results. Operating EBITDA is not a recognized term under U.S. GAAP and does not purport to be an alternative to operating profit as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. Because not all companies use identical calculations, this presentation of operating EBITDA may not be comparable to other similarly titled measures of other companies. Additionally, operating EBITDA is not intended to be a measure of free cash flow for management’s discretionary use, as it does not consider certain cash requirements such as interest payments, tax payments and debt service requirements nor does it represent the amount used in our debt covenants.►Affiliate EBITDA, a measure used by management to measure performance of its equity investments, is defined as the proportional operating profit plus the proportional depreciation and amortization of its equity investments. Affiliate EBITDA, including Celanese Proportional Share of affiliate information on Table 8, is not a recognized term under U.S. GAAP and is not meant to be an alternative to operating cash flow of the equity investments. The company has determined that it does not have sufficient ownership for operating control of these investments to consider their results on a consolidated basis. The company believes that investors should consider affiliate EBITDA when determining the equity investments’ overall value in the company. ►Adjusted earnings per share is a measure used by management to measure performance. It is defined as net earnings (loss) available to common shareholders plus preferred dividends, adjusted for other charges and adjustments, and divided by the number of basic common shares, diluted preferred shares, and options valued using the treasury method. We may provide guidance on an adjusted earnings per share basis and are unable to reconcile forecasted adjusted earnings per share to a GAAP financial measure without unreasonable effort because a forecast of Other Items is not practical. We believe that the presentation of this non-U.S. GAAP measure provides useful information to management and investors regarding various financial and business trends relating to our financial condition and results of operations, and that when U.S. GAAP information is viewed in conjunction with non-U.S. GAAP information, investors are provided with a more meaningful understanding of our ongoing operating performance. This non-U.S. GAAP information is not intended to be considered in isolation or as a substitute for U.S. GAAP financial information. ►The tax rate used for adjusted earnings per share approximates the midpoint in a range of forecasted tax rates for the year, excluding changes in uncertain tax positions, discrete items and changes in management’s assessments regarding the ability to realize deferred tax assets. We analyze this rate quarterly and adjust if there is a material change in the range of forecasted tax rates; an updated forecast would not necessarily result in a change to our tax rate used for adjusted earnings per share. The adjusted tax rate is an estimate and may differ significantly from the tax rate used for U.S. GAAP reporting in any given reporting period. It is not practical to reconcile our prospective adjusted tax rate to the actual U.S. GAAP tax rate in any future period.►Net debt is defined as total debt less cash and cash equivalents. We believe that the presentation of this non-U.S. GAAP measure provides useful information to management and investors regarding changes to the company’s capital structure. Our management and credit analysts use net debt to evaluate the company's capital structure and assess credit quality. This non-U.S. GAAP information is not intended to be considered in isolation or as a substitute for U.S. GAAP financial information.►Adjusted free cash flow is defined as cash flow from operations less capital expenditures, other productive asset purchases, operating cash from discontinued operations and certain other charges and adjustments. We believe that the presentation of this non-U.S. GAAP measure provides useful information to management and investors regarding changes to the company’s cash flow. Our management and credit analysts use adjusted free cash flow to evaluate the company’s liquidity and assess credit quality. This non-U.S. GAAP information is not intended to be considered in isolation or as a substitute for U.S. GAAP financial information.
Results UnauditedThe results presented in this presentation, together with the adjustments made to present the results on a comparable basis, have not been audited and are based on internal financial data furnished to management. Quarterly results should not be taken as an indication of the results of operations to be reported for any subsequent period or for the full fiscal year.
3
Dave Weidman
Chairman and Chief Executive Officer
4
Celanese Corporation 1Q 2009 highlights
$381
$1.06
$234
$1,846
1st Qtr 2008
$136Operating EBITDA
$27Operating Profit
$0.08 Adjusted EPS
$1,146Net Sales
1st Qtr 2009in millions (except EPS)
1 $32 million inventory accounting impact tax effected at 29% divided by 155.6 million diluted shares for the three months ended March 31, 2009.
First Quarter 2009:► Strong cash position with positive adjusted free cash flow► Inventory accounting impact of ~$0.15/share1 included in Adjusted
EPS
5
Peak and trough relative performanceRelative Peak versus Trough Quarter – Operating EBIDTA
Industrial Specialties
Acetyl IntermediatesAdvanced Engineered Materials
Consumer SpecialtiesOther Activities
Trough defined as four quarters of sustained -1% to 1% global GDPNote: Earnings from strategic affiliates included in total Operating EBITDA amounts but excluded from margin % amounts
Ope
ratin
g EB
ITD
A 18 – 20%
8 – 10%
22 – 25%18 – 20%
21 – 23%
Normalized Trough Conditions
10 – 12%
13 – 15% ► Seasonality
► Inventory accounting impacts
► Customer destocking
Impacting Factors
Normalized Peak Conditions
20 – 22%
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Steven Sterin
Senior Vice President and CFO
7
Celanese Corporation financialhighlights
$381167.326%
$1.06
$22
$145$234
$1,846
1st Qtr 2008
$0.08Adjusted EPS
29%Effective Tax Rate155.6Diluted Share Basis$136
$33
($20)$27
$1,146
1st Qtr 2009
Operating EBITDA
Other Charges/Adjustments
Net Earnings/(Loss) Operating Profit/(Loss)Net Salesin millions (except EPS)
1Q 2009► 1Q 2009 net sales decreased 38%
► Lower volumes on weak global demand► Lower pricing for acetyl products
► Operating profit decreased to $27 million► Net sales more than offset lower raw material,
energy, and spending costs► Adjusted EPS fell to $0.08/share► Operating EBITDA decreased to $136 million
8
First Quarter 2009:► Net sales decreased as higher pricing only partially offset lower volumes► Volume decline due to the timing of customer contract negotiations and lower
acetate flake sales► Operating EBITDA improvement due to the higher pricing, favorable currency
and lower spending and energy costs
Consumer Specialties
$65$282
1st Qtr 2008
$81$266
1st Qtr 2009
Operating EBITDANet Salesin millions
Outlook:► Stable volumes expected in 2009► Increased dividend expected in 2Q 2009 from Acetate China affiliates ► Continued sustained earnings performance with ongoing decreases in
spending and energy costs
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First Quarter 2009:► Net sales decrease primarily driven by lower volumes in Europe and North
America, as well as the effect of the AT Plastics force majeure► Lower raw material and energy costs, along with the benefits of the
company’s fixed spending reductions, more than offset slightly lower pricing► Inventory accounting impacts ($6 million) and lower volumes are the primary
reasons for decrease in Operating EBITDA
Industrial Specialties
$36$365
1st Qtr 2008
$26$242
1st Qtr 2009
Operating EBITDANet Salesin millions
Outlook:► Volumes in North America and Europe remain challenged► Continued success in Asia help offset volume weakness► Raw material and energy cost reductions should positively impact margins
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$60$294
1st Qtr 2008
$0$165
1st Qtr 2009
Operating EBITDANet Salesin millions
Advanced Engineered Materials
First Quarter 2009:► Net sales decreased as higher pricing could not offset lower volumes and
currency impacts► Volume decreases were driven by automotive production in the U.S. and
Europe and continued inventory destocking in consumer electronicapplications.
► Operating EBITDA decline was due to lower volumes, inventory accounting impacts ($5 million) and lower affiliate earnings
Outlook: ► Continued volume pressures due to further reductions in US and Europe
auto builds► Easing raw material and energy costs coupled with sustained pricing should
positively impact margins
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Acetyl Intermediates
$246$1,096
1st Qtr 2008
$48$572
1st Qtr 2009
Operating EBITDANet Salesin millions
First Quarter 2009:► Decrease in net sales due to substantial volume declines and lower pricing ► Pricing declined as the industry experienced lower utilization rates on
reduced global demand, particularly in Europe and the Americas.► Lower raw material and energy costs could not offset lower volumes and
inventory accounting impacts ($21 million)
Outlook:► Volumes expected to be at reduced levels performing at normalized trough
profile► Margins should be sustained in 2009 due to advantaged technology and
cost position
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0
25
50
75
100
1Q 2008 1Q 2009
$ m
illio
ns
Dividends - Equity Investments Dividends - Cost Investments
0
25
50
75
100
1Q 2008 1Q 2009
$ m
illio
ns
Earnings - Equity Investments Dividends - Cost Investments
► 1Q 2009: Earnings impact of $4 million decreased versus prior year due to lower dividends from the company’s Ibn Sina cost affiliate and lower earnings from the Advanced Engineered Materials equity affiliates
► Outlook: ►Increased dividend year over year expected in 2Q 2009 from Acetate China affiliates ►Other cost and equity affiliates challenged by weakened global demand environment
Income Statement
Affiliate Performance
Cash Flows
13
Solid cash generation
Adjusted Free Cash Flow
$81$56Less: Capital expenditures
$19$73Less: Other charges and adjustments1
$167$198Net cash provided by operating activities from continuing operations
$67$69Adjusted Free Cash Flow
($1)
$199
1st Qtr 2009
$1Adjustments to operating cash for discontinued operations
$166Net cash provided by operating activities
1st Qtr 2008$ in millions
1Amounts primarily associated with the Kelsterbach relocation and the cash outflows for purchases of other productive assets that are classified as ‘investing activities’ for U.S. GAAP purposes.
Factors contributing to cash generation during first quarter 2009:
► Lower cash taxes
► Favorable trade working capital
► Reduced capital expenditures
14
Celanese capital structure
Term Loan - $2.8 billion
Other Debt Obligations -$706 million
Cash - $1,150 million
Net Debt - $2.3 billion
Revolver - $650 million
Cost
Stability
Flexibility
Structure CharacteristicsPrimary Components
Strong balance sheet provides flexibility and stability in current environment
Credit Linked Revolver -$143 million
Sour
ces
of L
iqui
dity
Deb
t Obl
igat
ions
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Appendix
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1Q 2009 Other Charges and Other Adjustments by Segment
(1)----(1)Plumbing insurance recoveries
(6)-(6)---Clear Lake insurance recoveries
1-1---Asset impairments
------Other
4-4---Plant closures
3----3Ticona Kelsterbach relocation
21-1--Business optimization
1----1Ticona Kelsterbach relocation
5
4
-
1
6
AI
3
1
-
2
2
IS
15
7
5
9
9
Other
-
-
-
-
-
CS
33
12
5
21
24
Total
-Other
1Total other adjustments
10
9
7
AEM
Total other charges and other adjustments
Total other charges
Employee termination benefits
$ in millions
17
Reg G: Reconciliation of Adjusted EPS
Adjusted Earnings (Loss) Per Share - Reconciliation of a Non-U.S. GAAP Measure
(in $ millions, except per share data) 2009 2008Earnings (loss) from continuing operations before tax (16) 218 Non-GAAP Adjustments: Other charges and other adjustments 1 33 22 Adjusted Earnings (loss) from continuing operations before tax 17 240 Income tax (provision) benefit on adjusted earnings 2 (5) (62) Noncontrolling interests - - Adjusted Earnings (loss) from continuing operations 12 178 Preferred dividends (3) (3) Adjusted net earnings (loss) available to common shareholders 9 175 Add back: Preferred dividends 3 3 Adjusted net earnings (loss) for adjusted EPS 12 178
Diluted shares (millions) 3
Weighted average shares outstanding 143.5 152.0 Assumed conversion of preferred shares 12.1 12.0 Assumed conversion of restricted stock units - 0.5 Assumed conversion of stock options - 2.8 Total diluted shares 155.6 167.3 Adjusted EPS 0.08 1.06 1 See Table 7 for details2 The adjusted tax rate for the three months ended March 31, 2009 is 29% based on the forecasted adjusted tax rate for 2009.3 Potentially dilutive shares are included in the adjusted earnings per share calculation when adjusted earnings are positive.4 The impact of inventory accounting adjustments on Adjusted EPS is $0.15 calculated as $32 million tax effected at 29% divided by 155.6 million diluted shares for the three months ended March 31, 2009.
Three Months EndedMarch 31,
18
Reg G: Reconciliation of Net Debt
Net Debt - Reconciliation of a Non-U.S. GAAP MeasureMarch 31, December 31,
(in $ millions) 2009 2008Short-term borrowings and current installments of long-term debt - third party and affiliates 195 233Long-term debt 3,274 3,300Total debt 3,469 3,533Less: Cash and cash equivalents 1,150 676Net Debt 2,319 2,857
19
Reg G: Other Charges and Other Adjustments
Reconciliation of Other Charges and Other Adjustments
Other Charges:
(in $ millions) 2009 2008Employee termination benefits 24 7 Plant/office closures - 7 Ticona Kelsterbach plant relocation 3 2 Clear Lake insurance recoveries (6) - Insurance recoveries associated with plumbing cases (1) - Asset impairments 1 - Total 21 16
Other Adjustments: 1
IncomeStatement
(in $ millions) 2009 2008 ClassificationBusiness optimization 2 9 SG&ATicona Kelsterbach plant relocation 1 (2) Cost of salesPlant closures 4 - Cost of salesOther 5 (1) Various Total 12 6
Total other charges and other adjustments 33 22 1 These items are included in net earnings but not included in other charges.
March 31,
Three Months Ended
Three Months Ended
March 31,
20
Reg G: Reconciliation of Operating EBITDASe
gmen
t Dat
a an
d R
econ
cilia
tion
of O
pera
ting
Prof
it (L
oss)
to O
pera
ting
EBIT
DA
- a
Non
-U.S
. GAA
P M
easu
re
(in $
mill
ions
)20
0920
08N
et S
ales
Adv
ance
d E
ngin
eere
d M
ater
ials
165
294
Con
sum
er S
peci
altie
s26
6
28
2 I
ndus
trial
Spe
cial
ties
242
365
Ace
tyl I
nter
med
iate
s57
2
1,
096
Oth
er A
ctiv
ities
1-
-
I
nter
segm
ent e
limin
atio
ns(9
9)
(191
)To
tal
1,14
6
1,
846
Ope
ratin
g Pr
ofit
(Los
s) A
dvan
ced
Eng
inee
red
Mat
eria
ls(1
9)
30
Con
sum
er S
peci
altie
s66
50
I
ndus
trial
Spe
cial
ties
10
17
Ace
tyl I
nter
med
iate
s12
17
7
Oth
er A
ctiv
ities
1(4
2)
(40)
To
tal
27
234
Equi
ty E
arni
ngs,
Cos
t - D
ivid
end
Inco
me
and
Oth
er In
com
e (E
xpen
se)
Adv
ance
d E
ngin
eere
d M
ater
ials
(8)
9
C
onsu
mer
Spe
cial
ties
3
-
Ind
ustri
al S
peci
altie
s-
-
A
cety
l Int
erm
edia
tes
4
29
O
ther
Act
iviti
es 1
6
4
Tota
l5
42
Oth
er C
harg
es a
nd O
ther
Adj
ustm
ents
2
Adv
ance
d E
ngin
eere
d M
ater
ials
10
1
C
onsu
mer
Spe
cial
ties
-
1
Ind
ustri
al S
peci
altie
s3
5
A
cety
l Int
erm
edia
tes
5
8
Oth
er A
ctiv
ities
115
7
Tota
l33
22
Dep
reci
atio
n an
d Am
ortiz
atio
n Ex
pens
e A
dvan
ced
Eng
inee
red
Mat
eria
ls17
20
C
onsu
mer
Spe
cial
ties
12
14
Ind
ustri
al S
peci
altie
s13
14
A
cety
l Int
erm
edia
tes
27
32
Oth
er A
ctiv
ities
12
3
To
tal
71
83
Ope
ratin
g EB
ITD
A A
dvan
ced
Eng
inee
red
Mat
eria
ls-
60
Con
sum
er S
peci
altie
s81
65
I
ndus
trial
Spe
cial
ties
26
36
Ace
tyl I
nter
med
iate
s48
24
6
Oth
er A
ctiv
ities
1(1
9)
(26)
To
tal
136
38
1
2 S
ee T
able
7.
1 O
ther
Act
iviti
es p
rimar
ily in
clud
es c
orpo
rate
sel
ling,
gen
eral
and
adm
inis
trativ
e ex
pens
es a
nd th
e re
sults
from
cap
tive
insu
ranc
e co
mpa
nies
.
Thre
e M
onth
s En
ded
Mar
ch 3
1,
21
Reg G: Equity Affiliate Preliminary Results and Celanese Proportional Share - Unaudited
1Ticona Affiliates includes Polyplastics (45% ownership), Korean Engineering Plastics (50%), Fortron Industries (50%), and Una SA (50%)2Infraserv includes Infraserv Entities valued as equity investments (Infraserv Höchst - 31% ownership, Infraserv Gendorf - 39% and Infraserv Knapsack 27%)3Affiliate EBITDA is the sum of Operating Profit and Depreciation and Amortization, a non-U.S. GAAP measure4Calculated as the product of figures from the above table times Celanese ownership percentage5Product of Celanese proportion of Affiliate EBITDA less Equity in net earnings of affiliates; not included in Celanese operating EBITDA
Equity Affiliate Preliminary Results - Total - Unaudited
(in $ millions)2009 2008
Net SalesTicona Affiliates1 172 355 Infraserv2 510 548 Total 682 903
Operating ProfitTicona Affiliates (19) 33 Infraserv 25 19 Total 6 52
Depreciation and Amortization Ticona Affiliates 27 22 Infraserv 23 27 Total 50 49
Affiliate EBITDA3
Ticona Affiliates 8 55 Infraserv 48 46 Total 56 101
Net IncomeTicona Affiliates (16) 19 Infraserv 19 (2) Total 3 17
Net DebtTicona Affiliates 260 185 Infraserv 562 325 Total 822 510
Three Months EndedMarch 31,
Equity Affiliate Preliminary Results - Celanese Proportional Share - Unaudited4
(in $ millions)2009 2008
Net SalesTicona Affiliates 80 163 Infraserv 163 176 Total 243 339
Operating ProfitTicona Affiliates (8) 15 Infraserv 8 6 Total - 21
Depreciation and Amortization Ticona Affiliates 12 10 Infraserv 7 9 Total 19 19
Affiliate EBITDA3
Ticona Affiliates 4 25 Infraserv 15 15 Total 19 40
Equity in net earnings of affiliates (as reported on the Income Statement)Ticona Affiliates (8) 9 Infraserv 6 1 Total (2) 10
Affiliate EBITDA in excess of Equity in net earnings of affiliates5
Ticona Affiliates 12 16 Infraserv 9 14 Total 21 30
Net DebtTicona Affiliates 118 85 Infraserv 177 102 Total 295 187
Three Months EndedMarch 31,