Celanese (CE) Q4 2004 earnings summary

Executive summary

• Acquired ~84% of Celanese AG in April 2004 and became a single-listed, U.S.-headquartered corporation; the post-acquisition reporting basis differs from predecessor periods.

• Nine-month net sales rose 10% YoY to $3,826 million, with volume growth across all segments; gross profit increased 27% on sales growth and productivity.

• Net loss was $253 million, reflecting sharply higher interest and transaction-related costs alongside operating and restructuring items.

Financial highlights

• Nine months ended Dec. 31, 2004: net sales $3,826 million; operating profit $78 million; net loss $253 million; diluted EPS $(2.55).

• Operating profit increased 70% YoY from $46 million; higher sales, cost savings and $76 million lower stock-appreciation-rights expense were partly offset by higher costs and special charges.

• Cost of sales was $3,092 million and included a $53 million non-cash purchase-accounting inventory charge; D&A was $184 million, including lower expense from purchase accounting adjustments.

• Net cash used in operating activities was $170 million for 2004; $473 million of pension contributions, a $95 million payment and $59 million of stock-appreciation-rights payments weighed on cash flow.

Outlook and guidance

• 2005 capital expenditures expected at $210 million to $230 million, focused on capacity, efficiency, safety and environmental projects.

• Nanjing acetic acid plant, planned at 600,000 metric tons per year, expected to start up in late 2006 or early 2007.

• Acetex acquisition, valued at ~$261 million plus assumed debt of ~$231 million, remained subject to regulatory and customary approvals; a $242 million delayed-draw facility was intended to fund it.

• U.S. air-rule compliance costs expected to rise $30 million to $45 million through 2007, with a possible additional $50 million depending on a court challenge.