On August 1, 2024, Celanese Corp (CE, Financial) released its 8-K filing reporting its second quarter earnings for 2024. Celanese, a global leader in the production of acetic acid and specialty polymers, reported U.S. GAAP diluted earnings per share (EPS) of $1.42 and adjusted EPS of $2.38. The company generated net sales of $2.7 billion, reflecting a 2% increase from the prior quarter.
Company Overview
Celanese is one of the world's largest producers of acetic acid and its downstream derivative chemicals, which are used in various end markets, including coatings and adhesives. The company is also a major producer of specialty polymers used in the automotive, electronics, medical, building, and consumer end markets. Additionally, Celanese manufactures cellulose derivatives used in cigarette filters.
Performance and Challenges
Despite a modest increase in net sales, Celanese faced significant external challenges during the quarter. The company declared force majeure for acetic acid and vinyl acetate monomer (VAM) sold in the Western Hemisphere due to multiple supplier outages and curtailments. Persistent poor demand conditions across many of the company's end markets further compounded these challenges.
Celanese's performance is crucial as it reflects the company's ability to navigate through external headwinds and maintain operational efficiency. The declaration of force majeure and the ongoing weak demand environment highlight potential risks that could impact future performance.
Financial Achievements
Celanese reported an operating profit of $250 million, adjusted EBIT of $451 million, and operating EBITDA of $632 million, with margins of 9%, 17%, and 24%, respectively. These achievements are significant as they demonstrate the company's resilience and ability to generate substantial earnings despite external challenges.
Key Financial Metrics
Below is a summary of key financial metrics from the income statement, balance sheet, and cash flow statement:
| Metric | Q2 2024 | Q1 2024 | Q2 2023 |
|---|---|---|---|
| Net Sales | $2.7 billion | $2.6 billion | $2.8 billion |
| Operating Profit | $250 million | $210 million | $335 million |
| Net Earnings | $153 million | $124 million | $221 million |
| Adjusted EPS | $2.38 | $2.08 | $2.17 |
| Free Cash Flow | $173 million | $(40) million | $611 million |
Segment Performance
The Acetyl Chain segment reported net sales of $1.2 billion, a 5% decrease from the prior quarter, primarily due to the force majeure and delayed timing of opportunistic spot sales. Despite these challenges, the segment delivered an operating profit of $242 million and adjusted EBIT of $277 million.
The Engineered Materials segment reported net sales of $1.5 billion, a 6% sequential increase driven by a 7% increase in volume. The segment achieved record adjusted EBIT of $265 million and record operating EBITDA of $375 million, reflecting the effectiveness of the project pipeline model and strategic actions.
Cash Flow and Tax
Celanese reported operating cash flow of $292 million and free cash flow of $173 million for the second quarter. The company returned $77 million to shareholders via dividends and repaid a $500 million bond as part of its deleveraging plan. The effective U.S. GAAP income tax rate was 16% for the quarter, compared to a benefit of 2% in the same quarter of 2023.
Analysis
Celanese's second quarter results highlight the company's ability to manage through significant external challenges while maintaining operational efficiency. The modest increase in net sales and strong adjusted EBIT and EBITDA margins demonstrate the effectiveness of the company's action plans. However, the declaration of force majeure and persistent weak demand conditions pose potential risks that could impact future performance.
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Explore the complete 8-K earnings release (here) from Celanese Corp for further details.
