Celanese Third Quarter 1999 Results.FRANKFURT, Germany--(BUSINESS WIRE)--November 23, 1999-- Investor Information Third Quarter 1 -- Intense competition restrains third-quarter results -- Profit enhancement and restructuring programs proceeding rapidly -- Additional special charges to burden full year Dear Shareholder The third quarter of 1999 was marked by preparat ons for the demerger demerger n (Comm) → Abspaltung f, Demerger m of the chemical activities of Hoechst to Celanese AG and the subsequent listings in Frankfurt and New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of . By becoming an independent, listed company listed company n → compañía cotizable listed company n → société cotée en Bourse listed company list n → , we have the opportunity to enhance the value of our business and establish Celanese AG as one of the leaders n the chemical industry. Our new status gives us the necessary flexibility to refocus Verb 1. refocus - focus once again; The physicist refocused the light beam" focus - cause to converge on or toward a central point; "Focus the light on this image" 2. and to play an active role in the restructuring of the sector. To be in the top quartile Quartile A statistical term describing a division of observations into four defined intervals based upon the values of the data and how they compare to the entire set of observations. Notes: Each quartile contains 25% of the total observations. of chemical companies in terms of value creation for shareholders is our main objective. Our strategic priorities are to: -- generate value-added solutions for our customers -- strengthen our global presence -- enhance our leading technology positions -- achieve cost efficiencies through rationalization -- optimize our portfolio of businesses Celanese AG's start as a public company's taking place at a time of intense global competition, excess capacity and considerable pressure on margins due to higher raw material prices. As 1999 is a year of transition during which we lay the groundwork for the future, our financial statements also show substantial restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. . However, the business scenario is looking friendlier. North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. can growth rema ns robust, the European economy's pioking up, and As a seems to have overcome the recession. Despite these positive trends, we will continue to focus intensely on improving our profitability and restructuring where necessary. In addition, we will invest for growth in our most promising businesses. We believe that the keys to success in our ndustry are focus, flexibility, speed and creativity. Overview of Third Quarter Net Sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight in euro millions 1999 1998 Chg in % 1st half 2,178 2,485 -12 3rd quarter 1,135 1,063 7 Nine months 3,313 3,548 -7 After a weak first half, net sales in the third quarter rose 7 % to (euro) 1.14 billion, compared to the third quarter of 1998. In the segments, higher volumes (+4 %) and currency movements (+3 %) were primarily responsible for the better performance. In addition, cost-related selling price increases in Acetyl acetyl /ac·e·tyl/ (as´e-til) (as´e-tel?) (ah-se´til) the monovalent radical CH3COsbond, a combining form of acetic acid. a·ce·tyl n. Products and Chemical Intermediates almost offset declines elsewhere. Overall, prices were 1 % lower. EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become * (excluding special charges) in euro millions 1999 1998 Chg in % 1st half 127 252 -50 3rd quarter 94 123 -24 Nine months 221 375 -41 *Earnings before interest, taxes, depreciation and amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
EBITDA is our key measure of financial performance as it closely reflects our cash-flow management style. We are excluding special charges from EBITDA for better comparability between periods. As compared with the third quarter of 1998, we recorded a 24% decrease in EBITDA to (euro)94 million, primarily due to a continued squeeze on margins resulting from over-capacity and increased raw material costs in a number of our businesses. Operating Profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. in euro millions 1999 1998 Chg in % 1st half (238) 80 n.m. 3rd quarter (34) 43 n.m. Nine months (272) 123 n.m. The overall operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. of D 34 million in the third quarter narrowed substantially from the first six months of the year. As previously reported, significant special charges at Ticona and Nutrinova depressed first-half earnings. Earnings per Share from Continuing Operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the in euro 1999 1998 Chg n % 1st half (4.54) (0.38) n.m. 3rd quarter (0.79) (0.05) n.m. Nine months (5.33) (0.43) n.m. The net loss from continuing operations amounted to (euro)44 million, or (euro)0.79 per share in the third quarter of 1999. This compares with a loss of (euro)3 million, or (euro)0.05 per share for the same period last year. Including discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. , net income was (euro)10 million, or (euro)0.18 per share as compared to a profit of (euro)3 million, or (euro)0.05 per share a year earlier. The per-share calculations are based on the number of shares issued at the time of the demerger. Profit and Loss Combined Income Statements Q3 Q3 Chg. 9 Mos. 9 Mos. in euro millions 1999 1998 in % 1999 1998 Net sales 1,135 1,063 7 3,313 3,548 Cost of sales (936) (847) 11 (2,802) (2,839) Gross profit 199 216 -8 511 709 Selling, general & admin. exp exp abbr. 1. exponent 2. exponential . (172) (133) 29 (469) (480) Research & development exp. (18) (22) -18 (55) (77) Special charges (40) (12) >100 (245) (27) Foreign exchange losses (5) (10) -50 (19) (18) Gain on disposition of assets 2 4 -50 5 16 Operating profit(loss) (34) 43 n.m. (272) 123 Equity income 16 4 >100 31 16 Interest expense (31) (34) -9 (90) (100) Interest & other income, net 6 13 -54 48 46 Profit (loss) before taxes from continuing operations (43) 26 n.m. (283) 85 Income taxes 4 (26) n.m. (11) (83) Minority interests 5 (3) n.m. 6 (26) Extraordinary loss (10) 0 n.m. (10) 0 Net income (loss) from continuing operations (44) (3) n.m. (298) (24) Net income from discontinued operations 54 6 >100 36 18 Net income (loss) 10 3 >100 (262) (6) Earnings per share from continuing operations (euro)* (0.79) (0.05) n.m. (5.33) (0.43) Earnings per share from continuing and discontinued operations (euro)* 0.18 0.05 >100 (4.69) (0.11) *Earnings per share are fully diluted and are calculated by dividing net income by the average number of shares outstanding. Key figures Q 3 Q 3 Chg. 9 Mos. 9 Mos. in euro millions 1999 1998 n % 1999 1998 Depreciation & Amortization 88 68 29 248 225 Capital expenditures 60 97 -38 185 250 Average shares outstanding (thou) 55,915 55,915 0 55,915 55,915 Third Quarter 1 In the third quarter of 1999, net sales amounted to D 1.14 billio on, up 7 % from the third quarter of 1998. Sales increases in the Acetyl Products, Chemical Intermediates and Ticona segments more than offset declines in sales of Acetate Products and Performance Products. In the nine-month period, sales decreased by 7 % to (euro)3.31 billion. Despite the increase in third-quarter net sales, gross profit declined 8% as a result of sharply higher raw material costs for several businesses. The 29 % increase in selling and administrative expenses was due primarily to costs associated with the demerger process and the realignment re·a·lign tr.v. re·a·ligned, re·a·lign·ing, re·a·ligns 1. To put back into proper order or alignment. 2. To make new groupings of or working arrangements between. of our businesses. Special charges of (euro)40 million in the third quarter relate largely to the planned shutdown of the Celanese Canada head office in Montreal and to restructuring measures at various plants. Equity income increased to (euro)16 million from (euro)4 million, mainly as a result of an mprovement at the polypropylene manufacturer Targor. We have recently agreed to sell our interests in the 50%-owned joint venture Targor to our partner BASF BASF Bar Association of San Francisco (since 1872; San Francisco, California) BASF Badische Anilin und Soda Fabrik (German chemical products company) BASF Builders Association of South Florida , and we have signed a letter of ntent to sell our 46 % holding in the fluoropolymer A fluoropolymer is a polymer that contains atoms of fluorine. It is characterized by a high resistance to solvents, acids, and bases. Fluoropolymers were discovered serendipitously in 1938 by Dr. Roy J. Plunkett. producer Dyneon to our partner 3M. In the third quarter, profits at our 45%-owned Polyplastics technical polymers joint venture in Japan were moderately below the comparable period of 1998 but higher than in each of the first two quarters because of an improving economy in the Asia-Pacific region. In the quarter, we had only a modest tax credit of (euro)4 million on a pretax loss pretax loss A loss reported before tax benefits are considered. of (euro)43 million, and in the first nine months, there was a tax charge of (euro)11 million on a pretax loss of D283 million. Tax expenses have been affected by non-deduct ble good-will amortization, limitations on foreign tax credit utilization, losses for which no benefits were recognized, increases in valuation reserves in Germany and new tax consolidation rules in Mexico. The extraordinary loss of (euro)10 million in the third quarter represents a part of the costs associated with the early retirement of North American outstanding public debt necessitated by the demerger. In September, we sold our 52 % interest in the generic pharmaceuticals producer Copley Pharmaceuticals to Teva Pharmaceutical Industries Teva Pharmaceutical Industries Ltd. (Hebrew: טבע תעשיות פרמצבטיות בע"מ), NASDAQ: TEVA is an international pharmaceutical company headquartered in , and agreed to sell our U.S. ethylene ethylene (ĕth`əlēn') or ethene (ĕth`ēn), H2C=CH2, a gaseous unsaturated hydrocarbon. It is the simplest alkene. oxide/ethylene glycol glycol (glī`kōl), dihydric alcohol in which the two hydroxyl groups are bonded to different carbon atoms; the general formula for a glycol is (CH2)n(OH)2. plant to Old World Industries Inc. We are in talks with potential purchasers to divest To deprive or take away. Divest is usually used in reference to the relinquishment of authority, power, property, or title. If, for example, an individual is disinherited, he or she is divested of the right to inherit money. the Millhaven polyester facility and the Celgard separation products business. As a result of these planned divestitures, we have reclassified Copley, Celgard, ll-haven and EO/ EG as discontinued operations and have shown their results separately in these financial statements. Net income of discontinued operations totaled (euro)54 million in the third quarter, primarily reflecting an after-tax gain on the sale of Copley. The income statement for the nine months shows special charges of (euro)245 million versus (euro)27 million in 1998. The most significant single items were the (euro)128 million charge relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the plumbing cases and (euro)38 million additional accrual for the Nutrinova sorbates anti-trust case. Remaining charges relate to restructuring activities and demerger costs throughout the organization. Combined Balance Sheets Sep 30 Dec 31 in euro millions 1999 1998 Assets Current Assets Current Assets Appearing on a company's balance sheet, it represents cash, accounts receivable, inventory, marketable securities, prepaid expenses, and other assets that can be converted to cash within one year. Cash and equivalents 49 0 Marketable securities Marketable Securities Very liquid securities that can be converted into cash quickly at a reasonable price. Notes: Marketable securities are very liquid as they tend to have maturities less than one year, and the rate at which these securities can be bought or sold has 1 1 Receivables, net 1,342 1,129 Receivables from Hoechst 873 819 Inventories 586 606 Deferred income taxes 192 152 Other assets other assets Assets of relatively small value. For financial reporting purposes, firms frequently combine small assets into a single category rather than listing each item separately. 42 60 Net assets Net assets The difference between total assets on the one hand and current liabilities and noncapitalized long-term liabilities on the other hand. net assets See owners' equity. of discontinued operations 192 245 Total current assets 3,277 3,012 Investments 664 600 Property, plant & equip., net 1,853 1,754 Deferred income taxes 281 225 Other assets 636 667 Intang ble assets, net 1,455 1,210 Total assets 8,166 7,468 Liabilities and Combined Equity Current liabilities Current Liabilities Usually appearing on a company's balance sheet, it represents the amount owed for interest, accounts payable, short-term loans, expenses incurred but unpaid, and other debts due within one year. Short-term borrowings and current portion of long-term debt Current Portion Of Long-Term Debt A portion of the balance sheet that represents the total amount of long-term debt that must be paid within the next year. The balance sheet has a liability section, which is broken down into long-term and current debt. 1,051 430 Accounts payable & accrued liabilities 1,789 1,366 Liabilities to Hoechst 100 83 Deferred income taxes 14 16 Income taxes payable 283 298 Total current liabilities 3,237 2,193 Long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. 838 1,079 Deferred income taxes 76 79 Other liabilities other liabilities Small and relatively insignificant liabilities. For financial reporting purposes, firms often combine small liabilities into this single category rather than listing each liability separately. 1,376 1,224 Minority interests 26 157 Combined equity: Combined equity 2,542 2,851 Accumulated other comprehensive income In 1997 the Financial Accounting Standards Board issued a Statement on Financial Accounting Standards entitled “Comprehensive Income”. This statement required all income statement items to be reported either as a regular item in the income statement and or a special item as (loss) 71 (115) Total combined equity 2,613 2,736 Total liabilities and combined equity 8,166 7,468 From January through September, the balance sheet total increased by 9 % primarily as a result of the stronger dollar. In order to optimize and grow our core chemical activities in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , we acquired the minority interest in Celanese Canada in August which was the main factor behind the increase in net intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. . Investments in affiliates increased primarily because the stronger yen influenced the value of our holding in Polyplastics. Although capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. was less than depreciation in the nine-month period, net property plant and equipment rose modestly, mainly as a result of currency movements. During the first nine months, total financial debt increased from (euro)1,509 million to (euro)1,889 million. After deducting cash and equivalents and adjusting for the special receivables demerged from Hoechst, net financial debt increased from (euro)1,026 million to (euro)1,232 million. The increase was primarily because of currency effects and the cost of the Celanese Canada minorities. Accounts payable and accrued liabilities Accrued liabilities are liabilities which have occurred, but have not been paid or logged under accounts payable during an accounting period; in other words, obligations for goods and services provided to a company for which invoices have not yet been received. rose, mainly reflecting increased insurance reserves in our captive insurance Captive insurance companies are limited purpose insurance companies established with the specific objective of financing risks emanating from their parent group or groups, they sometimes also insure risks of the parent company's customers. activity which led to a corresponding increase in receivables from reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. companies. Minority interests decreased substantially due to the acquisition of the outstanding minorities in Celanese Canada. Combined Statements of Cash Flows 9 Mos. 9 Mos. in euro millions 1999 1998 Operating activities from continuing operations Net income (loss) (262) (6) (Gain) loss from operations of discontinued operations 40 (18) Special charges, net of amounts used 175 (22) Depreciation & amortization 248 225 Change in equity of affiliates (11) (4) Deferred income taxes (160) (3) Gains on sales of assets, net (5) (16) Gains on sales of businesses, net (21) 0 Changes in operating assets Operating Assets Another term for working capital. & liabilities: Receivables, net (89) 32 Inventories 60 (20) Accounts payable, accrued liabilities & other liabilities 199 (82) Income taxes payable (72) 40 Other, net 40 32 Net cash provided by operating activities 142 158 Investing activities from continuing operations Capital expenditures on property, plant & equipment (185) (250) Capital expenditures on investments (303) (3) Proceeds from sales of assets 27 29 Proceeds from sales of businesses 105 0 Purchases of marketable securities, net (8) (29) Other, net (3) (6) Net cash used in investing activities (367) (259) Financing activities from continuing operations Short-term borrowings from third parties, net (101) 323 Long-term borrowings from third parties, net (353) 46 Short-term borrowings from Hoechst, net 675 49 Other net activity with Hoechst 57 (282) Other (5) (32) Net cash provided by financing activities 273 104 Net cash provided by operations 48 3 Exchange rate effects on cash 1 (1) Net increase (decrease) in cash & equivalents 49 2 Cash & equivalents at beginning of year 0 13 Cash & equivalents on September 30 49 15 Net cash provided (used) by discontinued operations Operating activities 4 5 Investing activities (8) (10) Financing activities (1) 3 During the first three quarters, net cash provided by operating activities declined to (euro)142 million from (euro)158 million. Capital expenditure of (euro)185 million plus investments of (euro)303 million were only parti ally offset by proceeds from divestitures of (euro)105 million, resulting in net cash used in investing activities of (euro)367 million. Cash was supplemented by increased short-term borrowing, mainly from Hoechst, to finance the acquisition of the Celanese Canada minority and the early debt retirement necessitated by the demerger. In the fourth quarter, much of this higher borrowing is to be replaced by third-party debt and the settlement of some Hoechst receivables. Segment Performance Portfolio Celanese AG processes chemical raw materials such as ethylene, propylene propylene /pro·pyl·ene/ (pro´pi-len) a gaseous hydrocarbon, CH3CHdbondCH2. propylene glycol a colorless viscous liquid used as a humectant and solvent in pharmaceutical preparations. , natural gas and wood pulp wood pulp: see paper. into value added Value Added The enhancement a company gives its product or service before offering the product to customers. Notes: This can either increase the products price or value. chemicals linked through an integrated value chain. Celanese is divided into five segments: Acetyl Products (acetic acid acetic acid (əsē`tĭk), CH3CO2H, colorless liquid that has a characteristic pungent odor, boils at 118°C;, and is miscible with water in all proportions; it is a weak organic carboxylic acid (see carboxyl group). , vinyl acetate Vinyl acetate, also known as VAM for vinyl acetate monomer, has the chemical formula CH3COOCH=CH2 and is a colorless liquid with a sweet flavor. Systematic names include 1-acetoxyethylene and acetic acid ethenyl ester. mo-nomer and acetyl derivatives), Chemical Intermediates (acrylic acid acrylic acid /acryl·ic ac·id/ a readily polymerizing liquid used as a monomer for acrylic polymers. , acrylates and oxo products), Acetate Products (textiles and filter products), Ti cona (technical polymers) and Performance Products (Trespaphan oriented polypropylene films and Nutrinova food ingredients). Acetyl Products The Acetyl Products segment consists of three businesses: methyls, acetyls and acetyl derivatives. Net sales of Acetyl Products rose 13 % to (euro)392 million in the third quarter of the year from (euro)346 million in the same period of the previous year. Although selling prices are still lagging behind volume developments, it has recently been possible to pass on higher raw material prices to customers to a limited degree. Before special charges, Acetyl Products recorded EBITDA of (euro)27 million, a decrease of 54 % from a year earlier. Despite progress on the implementation of cost-cutting programs, profits fell sharply due to a difficult competitive environment. Methyls experienced a tight squeeze on margins as a result of a significant increase in the price of methane. Business is expected to remain difficult in the near future, as a number of new competing plants come on stream. Acetyls are also facing tight margins due to a rise in the price of the raw material ethylene. Compared with a year earlier, sales volumes of acetic acid and vinyl acetate monomer monomer (mŏn`əmər): see polymer. monomer Molecule of any of a class of mostly organic compounds that can react with other molecules of the same or other compounds to form very large molecules (polymers). gathered pace in the third quarter, but prices remain low. Sales of acetyl derivatives increased mainly as a result of higher volumes. In the first nine months of the year, net sales of Acetyl Products decreased 5 % to (euro)1,119 million as compared to (euro)1,180 million a year earlier. EBITDA before special charges dropped 61 % to (euro) 65 million. Segment Sales Q3 Q3 Chg. 9 Mos. 9 Mos. in euro millions 1999 1998 n % 1999 1998 Acetyl Products 392 346 13 1,119 1,180 Chemical Intermediates 203 169 20 620 681 Acetate Products 171 197 -13 527 633 Ticona 191 179 7 575 573 Performance Products 100 105 -5 295 317 Segment total 1,057 996 6 3,136 3,384 Other activities 95 84 13 251 267 Intersegment eliminations (17) (17) 0 (74) (103) Total net sales 1,135 1,063 7 3,313 3,548 Factors Affecting Segment Net Sales in the 3rd Quarter of 1999 Cur- Consol- in percent Volume Price rency dation Total Acetyl Products 6 4 3 0 13 Chemical Intermediates 12 3 5 0 20 Acetate Products -15 -3 5 0 -13 Ticona 8 -2 1 0 7 Performance Products 6 -13 2 0 -5 Segment total 4 -1 3 0 6 Chemical Intermediates The Chemical Intermediates business segment consists of acrylates, oxo products and specialties. In the third quarter, net sales for the segment increased by 20 % to (euro) 203 million from (euro) 169 million in the third quarter of 1998. Before special charges, EBITDA showed a loss of (euro)1 million, as compared with a profit of (euro) D22 million a year earlier. In acrylates, the effect of higher volumes on earnings was more than offset by a squeeze on margins resulting from a significant increase in propylene raw material prices. Costs also rose in the quarter due to a maintenance turnaround at the main plant in Clear Lake, Texas. Oxo products showed a recovery n the third quarter, as an increase in prices was effected. Production problems at the Bay City plant, which influenced the first half of 1999, have been resolved, and output is picking up. However, the business is traditionally very volatile and conti Conti (kôNtē`), cadet branch of the French royal house of Bourbon. Although the title of prince of Conti was created in the 16th cent. nues to be plagued by significant industry over-capacity. During the course of 1999, specialties sales have exhibited the usual seasonal pattern of strength in the first and third quarters as a result of association with the agricultural markets. In the first nine months of the year, net sales of Chemical Intermediates decreased 9 % to (euro) 620 million from (euro) 681 million in first three quarters of last year. EBITDA before special charges fell 61 % to (euro) 29 million from (euro) 75 million. Segment EBITDA* (excluding special charges) Q3 Q3 Chg. 9 Mos. 9 Mos. in euro millions 1999 1998 n % 1999 1998 Acetyl Products 27 59 -54 65 168 Chemical Intermediates (1) 22 n.m. 29 75 Acetate Products 24 27 -11 67 108 Ticona 32 21 52 87 85 Performance Products 25 18 39 45 47 Segment total 107 147 -27 293 483 Other activities (13) (24) n.m. (72) (108) Total EBITDA 94 123 -24 221 37 *Earnings before interest, taxes, depreciation and amortization Segment Operating Profit Q3 Q3 Chg. 9 Mos. 9 Mos. in euro millions 1999 1998 in % 1999 1998 Acetyl Products 4 43 -91 (27) 110 Chemical Intermediates (18) 6 n.m. (22) 28 Acetate Products 7 15 -53 18 66 Ticona 10 8 25 (92) 43 Performance Products 5 8 -38 (33) 19 Segment total 8 80 -90 (116) 266 Other activities (42) (37) n.m. (116) (143) Total Operating Profit (34) 43 n.m. (272) 123 Acetate Products Net sales in the Acetate Products segment for the third quarter decreased by 13 % to (euro) 171 million from (euro) 197 million in the third quarter of 1998 as a result of volume decreases (-15 %) and lower prices (-3 %) which were partially offset by favorable currency movements (5 %). Cellulose acetate cellulose acetate n. Any of several compounds obtained by treating cellulose with acetic anhydride, used in lacquers, photographic film, transparent sheeting, and cigarette filters. filament filament, in astronomy: see chromosphere. continues to experience significantly lower volumes and weaker pricing as a result of declines in the demand for acetate filament driven by a shift in fashion away from filament-based fabrics, the Asian economic crisis and inter-fiber competition. In accordance with the usual seasonal pattern, shipments of acetate tow were restrained in the third quarter but are expected to increase in the fourth. Before special charges, EBITDA fell 11% to (euro)24 million from (euro) 27 million in the third quarter of 1998. The Acetate Products business li ne continues to experience the negative effects of industry over-capacity and is therefore ntensifying efforts to maximize efficiency. The first-quarter announcement that 15,000 tonnes of acetate filament capacity would be permanently shut down in Rock Hill, South Carolina Rock Hill is the largest city in York County, South Carolina, and a satellite city of Charlotte, North Carolina. The population was 49,765 at the 2000 census. According to 2006 estimates, the city has a population of 61,620 , making it the fourth largest city in South Carolina. , and the recent announcement of the closure of the 15,000-tonne acetate filament site at Drummond-ville, Canada, are major elements in this strategy. The Drummondville restructuring will be reflected in fourth-quarter results. In the first nine months of the year, net sales of Acetate Products decreased 17% to (euro) 527 million from (euro) 633 million. EBITDA before special charges decl ned 38 % to (euro) 67 million from (euro) 108 million. Ticona Ticona provides value-added solutions for its customers by developing and supplying a broad portfolio of high performance technical polymers. In the third quarter, net sales climbed 7 % to (euro)191 million. The favorable impacts of volume growth (+8 %) and exchange rates (+ 1%) were partially eroded by lower prices (-2 %). The improvement in busi ness was partly due to the continuing strength of the U.S. economy, especially in the automotive sector, and dry weather n the U.S. resulted in high-er sales for irrigation irrigation, in agriculture, artificial watering of the land. Although used chiefly in regions with annual rainfall of less than 20 in. (51 cm), it is also used in wetter areas to grow certain crops, e.g., rice. products. In addition, the commercialization of new automotive applications, such as window frames and airbag systems, added to revenues. Last year's third quarter was impacted by the General Motors strike. In Europe, business improved in Germany and to a lesser extent in France and Italy. We successfully commercialized new applications in telecommunications and appliances. In the third quarter, prices stabili zed in Europe due to recovering Asian economies and the resulting decrease in over-capacity. Sales of polyacetal, which account for about half of Ticona's sales, rose in the third quarter, after a slight decline in the first two quarters of the year. The European Cel-stran. long-strand fiber business benefited from new applications in the automotive industry The automotive industry is the industry involved in the design, development, manufacture, marketing, and sale of motor vehicles. In 2006, more than 69 million motor vehicles, including cars and commercial vehicles were produced worldwide. , such as the production of a new dashboard system for a European auto manufacturer. Ticona also realized gains Realized Gain A gain resulting from selling an asset at a price higher than the original purchase price. Notes: There may be tax consequences for a realized profit. in the telecommunications market which is a key segment for Vectra. liquid crystal polymers Liquid crystal polymers (LCPs) are a unique class of wholly aromatic polyester polymers that provide previously unavailable high performance properties. In particular, they are highly inert chemically and highly resistant to fire. . Before special charges, EBITDA in the third quarter rose to (euro)32 million from (euro) 21 million. Earnings improved as a result of higher volumes in most product lines combined with benefits from cost control and profit improvement programs. In the first nine months of the year, net sales increased slightly to (euro) 575 million from (euro) 573 million in the first nine months of 1998. Ticona sustained an operating loss of (euro)92 million in the first three quarters, after an operating profit of (euro)43 million a year earlier. The loss was mainly due to a special charge of (euro)128 million in the second quarter relating to the plumbing cases. Before special charges, EBITDA increased 2 % to (euro)87 million. Performance Products The Performance Products business segment consists of the oriented polypropyle-ne or OPP OPP Opposite OPP Opportunity/Opportunities OPP Office of Pesticide Programs OPP Ontario Provincial Police (Ontario, Canada) OPP Office of Polar Programs (National Science Foundation) films business of Trespaphan and the food ingredients business conducted by Nutrinova. Net sales for the Performance Products segment declined 5 % to (euro) 100 million in the third quarter of 1999. At Nutrinova, a stronge rise in sales volumes of both the high intensity sweetener Sweetener A special feature added to a debt obligation or preferred stock to promote marketability. Notes: Warrants and convertibles are two popular sweeteners. See also: Convertible Bond, Kicker, Warrant Sweetener Sunett. and sorbates was more than offset by lower prices due to the intensely competitive business environment. At Trespaphan, process fell in most product lines because of over-capacity in the industry. The expansion of the plant in Mexico made it possible to achieve higher sales volumes in the Americas, but the resulting sales increase was partly offset by lower volumes in Europe where the market remains particularly weak. Excluding special charges, EBITDA for the whole segment advanced 39 % to (euro) 25 million in the third quarter as compared to (euro)18 mIllIon a year earlier. The improvement was mainly due to better performance at Nutrinova. Operating profit includes a special charge of (euro)6 million linked to the closure of Trespaphan's plant in Swindon, UK, and further charges will be recognized in the fourth quarter. The closure of the site represents a step away from commodity OPP films towards a greater focus on specialty products. In the first nine months of the year, net sales for Performance Products slipped to (euro) 295 million from (euro)317 million a year earlier. The segment sustained an operating loss of (euro)33 million after a profit of (euro) 19 million in the first nine months of 1998. The weakness of the operating result largely reflects a (euro) 38 million special charge at Nutrinova relating to U.S. antitrust actions in the sorbates industry. Hoechst has agreed to ndemnify Celanese for 80% of any costs relating to this matter. Celgard's financial results are reported under discontinued operations. Other activities Other activities primarily include the inorganic chemical lines, other ancillary businesses and general corporate functions including charges relating to the demerger. Outlook Although we reported an mprovement in underlying results in the third quarter as compared with the first half, we remain quite cautious concerning the outlook for the full year. We have recently accelerated our broad-based restructuring activities. This process has involved a detailed review of the profitability of our businesses and facilities, as well as the analysis of the valuations of our assets. As a result, we will incur special charges in the fourth quarter in excess of the amount recorded in the first nine months. The successful implementation of our divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). program is also expected to generate significant book gains and cash proceeds. The economic background in our most important geographic markets seems to be firming, and we believe that prospects for growth are improving as industrial activity picks up. We anticipate further increases in raw material costs but also selectively in selling prices. Over-capacity is expected to continue to be a problem in many of our businesses next year. While pressure on margins should remain, we expect this to ease slightly. The global consolidation of the chemical industry is expected to continue, and our strategy is to improve the efficiency of all of our businesses, while participating actively in this process. Frankfurt am Main, November 1999 Celanese AG The Board of Management Footnotes Results unaudited: The foregoing quarterly results, together with the adjustments made to present the results on comparable basis, have not been audited and are based on the internal financial data furnished to management. Accordingly, the quarterly results should not be taken as an indication of the results of operations to be reported to be spoken of; to be mentioned, whether favorably or unfavorably. See also: Report by Celanese for any subsequent period or for the full fiscal year. Results adjusted for discontinued operations: The foregoing quarterly results have been adjusted for Copley, Celgard, Millhaven and EO/EG, which have been or are being discontinued. The results of these businesses are reflected in the income statement, balance sheet and statement of cash flows as discontinued operations. Year 2000: Celanese AG has continued the year 2000 risk prevention projects initiated by Hoechst. Operating responsibility for these projects lies ith the individual businesses. They have substantially completed their inventories, risk assessments, remediation and testing of their operations. In addition, they have identified and evaluated the contingency planning of important customers and suppliers. In some cases, mostly in connection with embedded chips See embedded processor. and highly specialized software, remediation and testing is continuing. The costs of the Y2K See Y2K problem and Y2K compliant. Y2K - Year 2000 project are currently estimated to be in the order of (euro)32 million, excluding the costs of plant shutdowns and the stockpiling stock·pile n. A supply stored for future use, usually carefully accrued and maintained. tr.v. stock·piled, stock·pil·ing, stock·piles To accumulate and maintain a supply of for future use. of critical inventories. No projects material to the business or the financial results have been deferred or delayed as a result of the Y2K compliance programs. -0- Forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. : Any statements contained in this report that are not historical facts are forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Words such s "believe," "estimate," "intend," "may," "will," "expect," and "project" and similar expressions as they relate to Celanese or its management are intended to identify such forward-looking statements. Investors are cautioned that forward-looking statements in this report are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. Important factors include, among others, changes in general economic, business and political conditions, fluctuating exchange rates, the length and depth of product and industry business cycles, changes in the price and availability of raw materials, actions which may be taken by competitors and by regulatory authorities, changes in the degree of patent and other legal protection afforded to Celanese's products, problems encountered in connection with the "Year 2000" issue, potential disruption or interruption of production due to accidents or other unforeseen events, delays in the construction of facilities, potential liability for remedial actions under existing or future environmental regulations and potential liability resulting from pending or future litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. , and other factors discussed above. Many of the factors are macroeconomic mac·ro·ec·o·nom·ics n. (used with a sing. verb) The study of the overall aspects and workings of a national economy, such as income, output, and the interrelationship among diverse economic sectors. in nature and are therefore beyond the control of management. The factors that could affect Celanese's future financial results are discussed more fully in its filings with the U.S. Securities and Exchange Commission (the SEC), including its Form F-1 Registration Statement filed ith the SEC on October 25, 1999. Celanese does not assume any obligation to update these forward-looking statements, which speak only as of their dates. Next Announcement Results for the 4th quarter of 1999 will be announced on March 23, 2000. |
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