On February 14, 2017, Celanese Corporation (NYSE: CE), a global technology and specialty materials company, reported 2016 GAAP diluted earnings per share of US$6.19 and adjusted earnings per share of US$6.61. The company also reported fourth quarter 2016 GAAP diluted earnings per share of US$1.12 and adjusted earnings per share of US$1.52. Robust operating models in both Materials Solutions and the Acetyl Chain contributed to superior performance this year. Advanced Engineered Materials delivered strong results by expanding the opportunity pipeline which combines one of the broadest polymer portfolios with exceptional application expertise to develop customer specific solutions. Earlier today, Celanese announced an agreement to acquire Nilit Plastics' nylon compounding division, which will further enhance both the polymer portfolio and ability to service customers more comprehensively. The Acetyl Chain delivered differentiated results by leveraging its technology advantage, integrated network and global presence to sustain profitability in a slow growth environment.
Fourth Quarter and Full Year 2016 Highlights:
Three Months Ended Year Ended
December 31, December 31,
2016 2015 2016 2015
(unaudited)
(In $ millions, except per share data)
Operating Profit (Loss)
Advanced Engineered Materials 87 51 350 235
Consumer Specialties 76 46 302 262
Total Materials Solutions 163 97 652 497
Industrial Specialties 20 (4) 105 72
Acetyl Intermediates 66 (242) 340 (3)
Eliminations — — 1 —
Total Acetyl Chain 86 (246) 446 69
Other Activities (132) (156) (205) (240)
Total 117 (305) 893 326
Three Months Ended Year Ended
December 31, December 31,
2016 2015 2016 2015
(unaudited)
(In $ millions, except per share data)
Net earnings (loss) 161 (301) 906 285
Adjusted EBIT
Advanced Engineered Materials 121 85 479 397
Consumer Specialties 106 109 418 411
Total Materials Solutions 227 194 897 808
Industrial Specialties 18 22 106 110
Acetyl Intermediates 68 60 347 388
Eliminations — — 1 —
Total Acetyl Chain 86 82 454 498
Other Activities (24) (20) (73) (70)
Total 289 256 1,278 1,236
Equity Earnings, Cost-Dividend Income, Other Income
(Expense)
Advanced Engineered Materials 31 33 122 151
Consumer Specialties 27 27 110 108
Total Materials Solutions 58 60 232 259
Operating EBITDA 360 332 1,566 1,515
Diluted EPS - continuing operations $1.12 $(2.03) $6.19 $2.01
Diluted EPS - total $1.12 $(2.03) $6.18 $2.00
Adjusted EPS $1.52 $1.25 $6.61 $6.02
Net cash provided by (used in) investing activities (247) (97) (439) (558)
Net cash provided by (used in) financing activities (292) (2) (759) (66)
Net cash provided by (used in) operating activities (47) 136 893 862
Free cash flow (116) 74 623 556
"I am pleased to report second highest GAAP earnings per share and highest ever adjusted earnings per share for the year. We had tremendous success in offsetting typical fourth quarter seasonality and muted demand growth to deliver outstanding results," said Mark Rohr, chairman and chief executive officer. "Our Materials Solutions core contributed significantly to growth by leveraging our broad and differentiated polymer portfolio and commercializing unique solutions for customers across applications. To further advance the momentum in engineered materials (Advanced Engineered Materials excluding affiliates), we announced an agreement to acquire Nilit Plastics' nylon compounding division which has a comprehensive product portfolio and state-of-the-art production facilities. The Acetyl Chain continued to press through low global utilization rates and a weak demand landscape by leaning on the integrated global footprint and expanded commercial flexibility. Strong business performance resulted in another quarter of robust cash generation that supported US$200 million of share buy backs in the quarter for a total of US$500 million for the year. In 2016, we increased dividends per share by 20% year over year and returned US$201 million in dividends for the year. The success of our business models in both cores combined with the rigor of our productivity programs has enabled us to continue delivering strong and sustainable cash flow," said Rohr.
Full Year Business Segment Overview
Materials Solutions
Materials Solutions delivered its second highest GAAP operating profit of US$652 million and highest-ever adjusted EBIT of
US$897 million for the year. The core demonstrated strong growth over the prior year as volume growth and productivity initiatives more than offset the decline in tow pricing and lower contributions from affiliates. Advanced Engineered Materials had its strongest year ever driven primarily by the success of our opportunity pipeline which supported strong volume growth year over year. In 2016, the number of projects launched exceeded targets, commercializing about 1 385 value-enhancing projects. These projects spanned across industries and product lines and were supported by deep understanding of customer needs. Recent acquisitions provide further opportunity to translate and extend the success of this model. Volume in Advanced Engineered Materials increased year-over-year, led by growth in Asia, but spread across the product portfolio.
Equity earnings from Advanced Engineered Materials affiliates declined US$28 million year over year primarily driven by lower MTBE pricing in Ibn Sina partially offset by growth in earnings from Korea Engineering Plastics and Polyplastics.
Tow pricing was 8% lower in 2016 versus the prior year primarily due to a lower industry utilization rate outside of China but was more than offset by higher volumes and productivity gains. Volume increased compared to last year as the tow industry recovered from destocking in 2015.
Acetyl Chain
The Acetyl Chain leveraged its position as a global leader across the value chain and its commercial agility to persevere in a low utilization and deflationary raw materials environment. Pricing for acetyl products was lower in 2016 versus the prior year primarily due to lower methanol pricing for most of the year which offset productivity improvements. The core grew margin despite pricing pressure and softer demand by effectively leveraging low-cost facilities in the U.S. Gulf Coast and Singapore. In 2016, the newest vinyl acetate ethylene (VAE) production unit on Jurong Island, Singapore, came on-line to support growing demand for ecologically friendly materials in Southeast Asia.
Recent Highlights
* Signed a definitive agreement to acquire the nylon compounding division from Nilit Group, a major independent producer of high performance nylon resins, fibers and compounds. Celanese will acquire Nilit Plastics’ nylon compounding product portfolio, customer agreements and manufacturing, technology and commercial facilities.
* On December 1, 2016, completed the transaction to acquire the Forli, Italy based SO.F.TER. Group, one of the world’s largest independent thermoplastic compounders. SO.F.TER. Group’s sophisticated and modern manufacturing facilities and product portfolio provide a vehicle for additional growth, investment and synergies.
* Accelerated the launch of 389 projects in the fourth quarter, an all-time record, for a total of 1 385 new project commercializations in 2016 in Advanced Engineered Materials. The growing success of the opportunity pipeline demonstrates the efficiency and rigor of managing unique customer needs.
* Earned top plastic and automotive industry recognition at the Society of Plastics Engineers' 46th Annual Automotive Division Innovation Awards Gala in Detroit, Michigan. Celanese won in two categories, Safety and Body Exterior, as the materials supplier for award-winning components of the all-new 2017 Ford Super Duty pickup.
Fourth Quarter Business Segment Overview
Materials Solutions
Materials Solutions delivered strong growth over last year primarily due to volume growth, lower raw material costs and productivity initiatives which more than offset lower pricing. Advanced Engineered Materials recorded its second highest fourth quarter GAAP operating profit of US$87 million and record fourth quarter adjusted EBIT of US$121 million. Profits grew significantly over the fourth quarter of 2015, overcoming normal seasonality. The opportunity pipeline drove broad-based growth by solving unmet customer needs and commercializing projects independent of seasonal trends. A record 389 projects were launched in the fourth quarter, successfully commercializing products across multiple industries and applications.
Productivity combined with lower raw material costs more than offset mix-driven pricing decline in Advanced Engineered Materials. Volume grew versus the fourth quarter in 2015, primarily driven by growth in Asia.
Consumer Specialties maintained profitability year over year as productivity initiatives and lower raw material costs offset a 10% decline in tow pricing.
Acetyl Chain
The Acetyl Chain demonstrated the strength of its flexible commercial model by improving margins and growing profitability year over year despite muted demand and a sluggish raw material environment. Productivity gains and a reduction in raw material costs more than offset pricing pressure and volume decline. Increased optionality from a global asset base enabled reduction in costs throughout the chain as raw material dynamics evolved. VAM pricing in Asia was lower versus the same quarter last year due to low industry utilization, while global pricing in emulsion polymers was weaker primarily due to lower raw material costs, mainly VAM. Volume was lower in VAM in Europe and due to weak demand for EVA polymers in Asia.
Cash Flow
Operating cash flow was US$893 million for the year. Free cash flow was US$923 million before including US$300 million of voluntary pension deleveraging in the US pension plan. Capex for the year was US$246 million and US$60 million for the quarter.US$701 million of cash was returned to shareholders, repurchasing 7.0 million shares for US$500 million and distributing US$201 million in dividends for the year. As of December 31, 2016, US$531 million remains under the current share repurchase authorization.
Outlook
"In 2016, we successfully executed on our plans to deliver yet another year of strong growth despite several headwinds. We saw great success from our opportunity pipeline in Materials Solutions and managed with strength through a difficult operating environment in the Acetyl Chain. In 2017, we are starting to see early signs of recovery in the Chinese economy while Europe and the Americas remain stable. Advanced Engineered Materials should continue to unlock value by commercializing new projects and extending the pipeline model through our recent acquisitions. The prevailing uplift in the raw materials complex is encouraging and allows us to flex the acetyl value chain to expand margins globally. We believe that the agility of our business models in both the cores and our commitment to productivity will enable us to grow over the headwinds in tow and currency. At this time, we see a path to increasing adjusted earnings per share in the range of 8-11% in 2017, with a back-half loaded earnings profile due to major planned turnarounds in the first half," said Rohr.
Regarding a forward view on a US GAAP basis, we are unable to reconcile forecasted adjusted earnings per share growth to US GAAP diluted earnings per share without unreasonable efforts because a forecast of Certain Items, such as mark-to-market pension gains/losses, is not practical. The Company's earnings presentation and prepared remarks related to the fourth quarter and full year results will be posted on its website at www.celanese.com under Investor Relations/Events and Presentations prior to market open on February 1, 2017. Information about Non-US GAAP measures is included in a Non-US GAAP Financial Measures and Supplemental Information document posted on our website and available at the link below. See "Non-GAAP Financial Measures" below.
