Celanese (CE) Q4 2005 earnings summary

Executive summary

• FY 2005 revenue was $6.07bn, operating profit $561m and net earnings $277m; basic and diluted EPS were $1.73 and $1.67.

• Higher pricing and productivity gains supported results, while raw-material and energy inflation, acquisition integration costs and high debt remained significant factors.

• Operating cash flow was $714m; year-end cash was $390m, total debt $3.437bn and net debt $3.047bn.

Financial highlights

• Gross margin was $1.297bn; SG&A was $562m and R&D was $91m for FY 2005.

• Cash from operations of $714m included benefits from higher earnings, lower pension contributions and improved receivables turnover.

• FY 2005 effective tax rate was 16%; a $31m reversal of valuation allowance on certain German deferred tax assets contributed to the lower rate.

• Reported results included a $36m transportation antitrust settlement recorded as a reduction to cost of sales, a $23m property-sale gain, a $35m COC disposal loss and $34m of plumbing insurance recoveries.

Outlook and guidance

• A 600,000-metric-ton/year acetic acid plant at Nanjing, alongside planned VAM and emulsions units, targeted startup in H1 2007.

• A new Asian GUR plant was planned to begin production in H2 2007; Vantage Plus technology was intended to improve efficiency and reduce operating costs across the manufacturing network.

• U.S. air regulations were expected to add $35m-$45m in compliance costs through 2007; an adverse court outcome could add an estimated $50m.

• Management expected continued investment in growth capacity, cost reduction and productivity, while noting that capital spending remained below depreciation.