Celanese (CE) Q4 2007 earnings summary

Executive summary

• Net sales rose 12% to $6.444bn as higher pricing and favorable currency effects more than offset lower volumes; reported operating profit increased 21% to $748m.

• Net earnings were $426m, including $336m from continuing operations and $90m from discontinued operations; reported results included substantial refinancing and deferred-compensation costs, alongside one-time recoveries and asset-sale gains.

Financial highlights

• 2007 net sales were $6.444bn, up from $5.778bn in 2006; pricing rose 6%, currency contributed 4%, and overall volume declined 2%.

• Gross profit was $1.445bn; gross margin was 22.4%, versus 22.7% in 2006.

• Operating profit was $748m versus $620m; net earnings were $426m versus $406m, and diluted EPS was $2.49 versus $2.36.

• Operating cash flow was $566m; cash and cash equivalents ended the year at $825m, up $34m from 2006.

• Reported operating profit included $40m of Clear Lake insurance recoveries, a one-time $31m vendor settlement and a $34m Edmonton facility-sale gain; the $256m refinancing expense included $207m of early-redemption premiums.

Outlook and guidance

• Expected cash capital expenditures were approximately $300m in 2008, compared with $288m of 2007 cash capital expenditures.

• Liquidity was expected to cover requirements, including debt service, through the remainder of 2008; this depended on operating cash generation and continued access to revolving credit.

• Acetic acid production at Nanjing was at full rates from June 2007; five additional complex plants were expected to begin operating by 2009.

• Ticona operations were to transition from Kelsterbach to Hoechst Industrial Park by mid-2011, with €670m of Fraport payments intended to offset relocation and closure costs.