Celanese (CE) Q4 2006 earnings summary

Executive summary

• FY 2006 net sales rose 10.3% to $6.656B; operating profit increased 30.3% to $747M and net earnings reached $406M, supported by pricing, volume gains, productivity and lower one-time charges.

• Q4 net sales were $1.656B, operating profit $185M, net earnings $77M and diluted EPS $0.45.

Financial highlights

• FY net sales grew 10.3% YoY; pricing contributed 4% and volumes 1%, with acquisitions and currency also lifting sales.

• Gross margin was 21.7% versus 21.6% in 2005; higher pricing and volumes largely offset raw material and energy cost increases.

• Operating profit was $747M versus $573M; adjusted for 2005 debt-refinancing premiums and accelerated financing-cost amortization, FY 2006 interest expense fell to $294M from $387M.

• Net earnings were $406M versus $277M; continuing-operations diluted EPS was $2.37 versus $1.66.

• Operating cash flow was $751M; cash and equivalents ended 2006 at $791M, up $401M YoY.

Outlook and guidance

• 2007 capital expenditures expected at $280M, versus $252M in 2006; spend includes growth capacity, equipment replacements, cost reduction and environmental projects.

• Nanjing integrated chemical complex, including a 600,000-metric-ton acetic acid plant, was targeted to begin commercial sales in 2007.

• Acetate tow market expected to grow 1%–2% annually; technical polymers demand expected to grow 5%–6% annually.

• Liquidity resources expected to cover requirements, including debt service, for the remainder of 2007; outlook remained dependent on cash generation and credit availability.