ARKAY Arkema (PK)

Chemical and advanced materials maker Celanese Corporation (CE) reported fourth-quarter 2012 adjusted earnings (excluding one-time items) of 67 cents per share, exceeding the Zacks Consensus Estimate of 63 cents and the year-ago earnings of 58 cents per share. The company’s cost reduction measures aided earnings as well as operating margin expansion in the quarter.

Earnings (as reported) from continuing operation were 60 cents a share in the quarter compared with 61 cents recorded a year ago.

For full-year 2012, adjusted earnings came in at $3.80 per share, down 15% from $4.47 a year ago. However, it beat the Zacks Consensus Estimate of $3.76. Earnings per share from continuing operations, as reported, were flat year over year at $3.81.

Revenues and Margins

Sales for the quarter were $1,501 million, down 7% year over year, missing the Zacks Consensus Estimate of $1,534 million. The decline was due to lower volumes in the company’s acetyl intermediates segment and the Acetate footprint rationalization in its Consumer Specialties segment. Lower pricing also hurt sales.

For full-year 2012, revenues came in at $6,418 million, a year over year increase of 5.1%, but below the Zacks Consensus Estimate of $6,633 million.  

Segment Review

Advanced Engineered Materials: Sales increased 2.3% year over year to $299 million in the fourth quarter, despite challenging economic conditions in Europe, as the company’s new solutions for customers contributed to higher volumes. Operating EBITDA was up 20.5% to $88 million due higher volumes and higher equity earnings.

Consumer Specialties: Sales decreased 8.2% year over year to $281 million, due to 13% lower volumes as a result of the closure of a facility. Pricing, however, increased 5% on strong global demand. Operating EBITDA rose 17.8% to $83 million. The segment closed its Acetate facility at its Spondon site and placed itself for further profitability.

Industrial Specialties: Net sales decreased 7.7% from the year-ago quarter to $251 million. Volumes increased 2% on increased demand in North America and Asia, offset by lower European volumes. Pricing was also lower in the quarter due to soft demand in Ethylene Vinyl Acetate (EVA) applications and lower raw material costs. Operating EBITDA declined 33.3% to $20 million as record results in Emulsions were more than offset by lower demand for EVA applications.

Acetyl Intermediates: The segment witnessed a 9% decline in sales to $773 million, due to lower acetyl pricing and demand. Operating EBITDA decreased 7.4% to $88 million.

Liquidity

Cash and cash equivalents were $959 million as of Dec 31, 2012, versus $682 million as of Dec 31, 2011. The company’s long-term debt stood at $2,930 million as of Dec 31, 2012, compared with $2,873 million as of Dec 31, 2011. The company generated $722 million in cash from operating activities in 2012, up $84 million from 2011 due to lower trade working capital.

Outlook

Celanese expects the challenging economic conditions to persist in 2013. For 2013, it expects earnings growth on the back of company-specific initiatives and to be consistent with its long-term growth objective of 12% to 14%. The company remains focused on enhancing the competitiveness of its products through technological innovations.

Celanese currently retains a short-tem Zacks Rank #3 (Hold).

Other companies in the chemical industry with favorable Zacks Rank are Arkem S.A. (ARKAY), BASF SE (BASFY) and Air Products and Chemicals (APD). While both Arkem and BASF carry a Zacks Rank #1 (Strong Buy), Air Products holds a Zacks Rank #2 (Buy).
 

 
AIR PRODS & CHE (APD): Free Stock Analysis Report
 
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BASF SE (BASFY): Free Stock Analysis Report
 
CELANESE CP-A (CE): Free Stock Analysis Report
 
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