Celanese Third-Quarter 2002 Report.
Business Editors
KRONBERG, Germany--(BUSINESS WIRE)--Oct. 29, 2002--Celanese AG
(CZZ: FSE; CZ: NYSE)
- EBITDA excluding special charges increased by 61% to EUR142
million; margin improved to 12.7% of sales
- Earnings benefited from productivity initiatives and lower raw
material costs
- Net sales decreased from EUR1.2 to EUR1.1 billion largely on
currency translation
- Comparable EPS improved significantly from EUR0.40 to EUR0.79
During the third quarter of 2002, profitability at Celanese AG
improved significantly compared to the same period of 2001 as a result
of lower raw material and energy costs and savings from restructuring
and operational excellence initiatives. EBITDA excluding special
charges, Celanese's key measure of profitability, increased 61% over
that of last year.
In the third quarter of 2002, net sales decreased 9%, compared to
the same period in 2001 (currency -7%, selling prices -1%, volumes
-1%). The currency effect was largely a consequence of the
appreciation of the euro against the dollar. Although volumes in the
Technical Polymers Ticona and Performance Products segments improved,
these increases were offset by decreases in the Acetyl Products,
Chemical Intermediates and Acetate Products segments.
"Although sales were lower, company-wide operational excellence
efforts, including Six Sigma, continue to improve performance and
contributed to better than expected third quarter results," said
Celanese AG chairman Claudio Sonder. "Apart from other savings
efforts, our "Forward" initiative alone contributed EUR51 million in
the first nine months of this year."
EBITDA excluding special charges increased to EUR142 million
from EUR88 million a year earlier. Profitability improved in the
acetyls, Ticona and acetate businesses. In Acetyl Products, prices
have strengthened considerably since the beginning of the year. Ticona
realized higher volumes and benefited from lower raw material and
energy costs.
Operating profit increased to EUR67 million compared to a loss
of EUR16 million in the same quarter last year primarily due to
lower raw material and energy costs, especially in the Acetyl Products
and Technical Polymers Ticona segments, and successful cost reduction
throughout the company. These factors more than offset the unfavorable
effects of currency translation, lower selling prices and volumes.
Net earnings excluding special charges and adjusted for intangible
amortization in the third quarter of 2002 increased to EUR39
million, or EUR0.79 per share, from EUR20 million, or EUR0.40
per share, in the third quarter of 2001.
Strategic expansion
In the third quarter, Celanese also took major steps forward in
its strategy of growing its core businesses. On September 26, 2002 an
agreement to acquire Clariant's European emulsions business for
EUR147 million was announced. This business holds a leading position
in emulsions in Europe and generated annual sales of approximately
EUR300 million in 2001. The acquisition is expected to close by
year-end and be earnings and cash-flow positive in 2003.
Furthermore, the Ticona business announced that it and its Asian
partners will construct a world-scale 60,000 metric ton polyacetal
plant in China, the world's fastest growing engineering plastics
market. The new plant is expected to start operations in the second
quarter of 2005.
Maintaining a transparent and sound financial base
Celanese continues to focus on maintaining a sound financial
position. Net financial debt was reduced to EUR656 million at the
end of the quarter, while the company made a contribution of EUR101
million to its U.S. pension plan.
In a move to raise transparency, Celanese also announced that from
the third quarter, it is expensing the 1.11 million stock options it
granted to management on July 8, 2002. In accordance with the fair
value method defined in SFAS No. 123, Accounting for Stock Based
Compensation, the fair value of these 1.11 million options
approximates EUR10 million. The options will be amortized over the
accelerated vesting period of two years. As a result, as of September
30, 2002, compensation expense of around EUR1 million, or EUR0.02
per share, was recognized for these options.
Outlook
Economic recovery has been uneven during the year. In this
uncertain and volatile economic environment, results through the first
nine months were better than anticipated, positively influenced by
continued cost reductions and efficiency improvement. The company now
believes full-year EBITDA excluding special charges will be slightly
above last year's level.
"We anticipate favorable performance to continue for the rest of
the year in our acetyl business, where a number of temporary
maintenance shutdowns in the industry have contributed to an
improvement in the supply demand situation," said Chief Financial
Officer Perry Premdas. "At the same time, weaker consumer confidence
could dampen demand for engineering plastics."
"For the beginning of 2003, visibility remains limited. We assume
that economic uncertainty, volatility in raw material prices and weak
U.S. dollar trends will continue," he added
"In the present environment our emphasis on productivity, cost
reduction, and financial soundness remain top priorities," Premdas
said.
As of September 30, 2002, Celanese had 11,700 employees, compared
to 12,700 a year earlier.
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*T
Financial Highlights
Q3 Q3 Chg.
in EUR millions in
2002 2001 %
2001
---------------------------------------------------------------------
Net sales 1,122 1,233 -9
EBITDA excluding special charges(1) 142 88 61
EBITDA margin(2) 12.7% 7.1%
Special (charges), net (2) 0 n.m.
Depreciation & amortization expense(3) 73 104 -30
Operating profit (loss)(3) 67 (16) n.m.
Earnings (loss) before taxes(3) 58 (5) n.m.
Earnings (loss) from continuing n.m.
operations(3) 39 (4)
Net earnings adj. for intangible
amortization(3) 39 20 95
Capital expenditures 41 55 -25
---------------------------------------------------------------------
Net earnings (loss) per share (EPS in
EUR)(4):
EPS from continuing operations 0.77 (0.08) n.m.
Adjustments to EPS:
Special charges, net of tax(5) 0.02 0.00
Intangible amortization(3) 0.48
---------------------------------------------------------------------
EPS from cont. Operations excluding
special
charges and adj. for intangible
amortization 0.79 0.40 98
Average shares outstanding (thousands) 50,343 50,335 0
---------------------------------------------------------------------
Sep 30 Dec 31
In EURmillions 2002 2001
---------------------------------------------------------------------
Trade working capital(6)(9) 752 687 9
Total financial debt(7,9) 720 880 -18
Net financial debt(8,9) 656 832 -21
Shareholders' equity 2,177 2,210 -1
Total assets 6,218 7,064 -12
---------------------------------------------------------------------
(1) Earnings before interest, taxes, depreciation and amortization
excluding special charges Equals operating profit plus
depreciation & amortization plus special
charges
(2) EBITDA excluding special charges as a percentage of net sales
(3) Refer to "Basis of the Presentation"
(4) Per-share data are based on weighted average shares
outstanding in each period
(5) Special charges excluding goodwill impairment tax affected
using a notional 38% tax rate (6) Trade accounts receivable
from third parties and affiliates, net of allowance for
doubtful accounts,
Plus inventories, less trade accounts payable to third parties and
affiliates. (7) Short- and long-term debt (8) Total financial debt
less cash & cash equivalents (9) Excluding the cash received from
the sale of receivables under the asset securitization
program,
Trade working capital and financial debt would have been EUR41
million higher on September 30,
2002
n.m. = not meaningful
Segment Summaries
Acetyl Products
Acetyl Products' third-quarter net sales decreased by 10% to
EUR465 million from the comparable period last year (currency -7%,
volumes -2%, selling prices -1%).
Volumes for polyvinyl alcohol, vinyl acetate monomer and acetic
acid increased from last year but were offset by lower volumes in
methanol and formaldehyde. Selling prices were slightly lower year on
year although they have continued to increase each quarter and have
recovered from first quarter 2002 lows.
EBITDA excluding special charges increased significantly from
EUR40 million to EUR76 million mainly because of lower raw
material and energy costs and continued savings from previously
announced restructuring and productivity initiatives. These positive
effects were dampened by the impact of the outage of a major supplier
to the company's Singapore plant, lower selling prices and unfavorable
currency movements.
EBITDA as a percentage of sales rose to 16% from 8% in the
previous year.
Chemical Intermediates
Net sales of Chemical Intermediates decreased by 14% to EUR222
million (volumes -6%, currency -6%, prices -2%).
Volumes in acrylates decreased due to difficult merchant market
conditions. Oxo volumes were lower, as last year's business benefited
from temporary market shortages in Asia. Volumes in specialties
increased slightly. Overall, pricing declined, with price increases in
oxo products more than offset by lower pricing in acrylates and
specialties.
EBITDA excluding special charges decreased to a loss of EUR2
million from EUR0 million in the comparable period last year. Lower
raw material costs and savings from productivity initiatives only
partially mitigated lower pricing and sales volumes.
Capital expenditures increased by EUR7 million to EUR13
million mainly for the construction of a new production facility for
syngas, a primary raw material at the Oberhausen site in Germany.
Acetate Products
Acetate Products' net sales decreased by 14% to EUR160
million(currency -10%, volumes -5%, prices +1%).
Overall volumes declined, reflecting mainly lower shipments of
acetate tow, as well as continued weakness in filament demand from the
U.S. textile industry.
EBITDA excluding special charges rose by EUR10 million to
EUR24 million. Cost reductions, lower raw material costs and a
higher average tow price more than offset the effect of lower sales
volumes.
Operating profit of EUR10 million improved from a loss of
EUR17 million in the same period last year. Special charges of
EUR13 million were recorded in the comparable period of 2001.
Technical Polymers Ticona
Net sales for Ticona decreased by 2% to EUR182 million compared
to the third quarter last year (currency -6%, selling prices -4%,
volumes +8%).
Improved volumes in Europe across most end-use markets were
slightly offset by lower volumes in the United States. Competitive
pressure in some of the standard products and a change in the product
mix resulted in lower average pricing compared to last year.
Compared to the second quarter 2002, sales declined by 9% (volumes
-6%, currency -3%, selling prices stable). Volumes in North America
decreased, whereas volumes in Europe remained basically flat versus
the previous quarter.
EBITDA excluding special charges increased by EUR12 million to
EUR26 million as a result of lower raw material and energy costs and
higher sales volumes .
Operating profit increased by EUR5 million to EUR10 million
this year compared to the same quarter in 2001. This year's operating
result includes special charges of EUR2 million relating to
restructuring charges at a U.S. site, while last year's included the
positive effects of EUR11 million in special charges from insurance
recoveries associated with the plumbing cases.
Performance Products
Performance Products' net sales increased 4% to EUR117 million
(volumes +9%, currency -3%, prices -2%).
Nutrinova's sales improved slightly, as lower pricing was more
than offset by higher volumes for Sunett(R) sweetener. Sales of
Trespaphan's oriented polypropylene film (OPP) rose as the result of
higher demand and an increase in selling prices for standard-grade
products due to the pass-through of raw material price increases.
EBITDA excluding special charges declined slightly to EUR23
million as higher volumes were offset mainly by lower pricing in
Nutrinova and increased spending related to capacity debottlenecking
and product development at Trespaphan.
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*T
Consolidated Statements of Operations
in EURmillions Q3 Q3 Chg.
2001
2002 in %
----------------------------------------------------------------------
Net sales 1,122 1,233 -9
Cost of sales (929)(1,105) -16
----------------------------------------------------------------------
Gross profit 193 128 51
Selling, general & administrative
expense(1) (108) (120) -10
Research & development expense (19) (23) -17
Special charges, net (2) 0 n.m.
Foreign exchange gain 1 0 n.m.
Gain on disposition of assets 2 (1) n.m.
----------------------------------------------------------------------
Operating profit (loss) 67 (16) n.m.
Equity in net earnings of affiliates(1) 4 3 33
Interest expense (13) (20) -35
Interest & other income, net 0 28 -100
----------------------------------------------------------------------
Earnings (loss) before income taxes from
Continuing operations 58 (5) n.m.
Income tax expense (19) 1 n.m.
----------------------------------------------------------------------
Earnings (loss) from continuing operations 39 (4) n.m.
Gain on disposals of discontinued
operations 0 0 0
----------------------------------------------------------------------
Earnings (loss) before cumulative effect of
Change in accounting principle 39 (4) n.m.
Cum. effect of change in accounting 0 0
principle(1)
----------------------------------------------------------------------
Net earnings (loss) 39 (4) n.m.
Adjustment for intangible amortization(1) 24
----------------------------------------------------------------------
Net earnings adj. for intangible amortization 39 20 95
----------------------------------------------------------------------
----------------------------------------------------------------------
.
Earnings (loss) per Share - Basic and Q3 Q3 2001 Chg
Diluted(2)
in EUR 2002 in %
----------------------------------------------------------------------
Continuing operations 0.77 (0.08) n.m.
Discontinued operations 0.00 0.00
Cum. effect of change in accounting 0.00 0.00
principle(1)
----------------------------------------------------------------------
Net earnings (loss) 0.77 (0.08) n.m.
Adjustment for intangible amortization(1) 0.48
----------------------------------------------------------------------
Net earnings adj. for intangible amortization 0.77 0.40 93
*T
(1) Refer to "Basis of Presentation"
(2) Per-share data are based on weighted average shares
outstanding in each period
-0-
*T
Consolidated Balance Sheets
Sep 30 Dec
31
in EURmillions 2002 2001
---------------------------------------------------------------------
ASSETS
Current Assets:
Cash & cash equivalents 64 48
Receivables, net
Trade receivables, net - 3rd party & affiliates 668 700
Other receivables 443 516
Inventories 603 639
Deferred income taxes 78 102
Other assets 34 42
---------------------------------------------------------------------
Total current assets 1,890 2,047
Investments 458 566
Property, plant & equipment, net 1,757 2,036
Deferred income taxes 511 551
Other assets 554 693
Intangible assets, net 1,048 1,171
---------------------------------------------------------------------
Total assets 6,218 7,064
---------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current
Installments of long-term debt 125 267
Accounts payable & accrued liabilities:
Trade payables - 3rd party & affiliates 519 652
Other current liabilities 690 850
Deferred income taxes 12 10
Income taxes payable 441 458
---------------------------------------------------------------------
Total current liabilities 1,787 2,237
Long-term debt 595 613
Deferred income taxes 57 59
Other liabilities 1,590 1,933
Minority interests 12 12
Shareholders' equity 2,177 2,210
---------------------------------------------------------------------
Total liabilities and shareholders' equity 6,218 7,064
---------------------------------------------------------------------
Consolidated Statements of Cash Flows
in EURmillions 9M 2002 9M 2001
---------------------------------------------------------------------
Operating activities of continuing operations:
Net earnings 97 34
Cumulative effect of change in accounting
principle (10) 0
Special charges, net of amounts used (40) (15)
Depreciation & amortization 233 312
Change in equity of affiliates 54 12
Deferred income taxes (6) (112)
Gain on sale of businesses and assets (10) (6)
Gain on disposal of discontinued operations 0 (2)
Changes in operating assets and liabilities:
Receivables, net (17) 286
Sale of trade receivables 41 0
Inventories 2 66
Accounts payable, accrued liabilities & other
liabilities (153) (275)
Income taxes payable 15 148
Other, net 11 19
---------------------------------------------------------------------
Net cash provided by operating activities 217 467
Investing activities of continuing operations:
Capital expenditure on property plant & equipment (153) (143)
Acquisition of businesses & purchase of
investments 0 (2)
Outflow on sale of businesses and assets (21) 0
Proceeds from disposition of businesses and assets 0 14
Proceeds from disposal of discontinued operations 0 38
Proceeds from sale of marketable securities 170 197
Purchase of marketable securities (173) (222)
Return of capital from investments 41 0
Other, net 10 0
---------------------------------------------------------------------
Net cash used by investing activities (126) (118)
Financing activities of continuing operations:
Short-term borrowings, net (127) (136)
Proceeds from long-term debt 57 0
Payments of long-term debt (2) (190)
Dividend payments 0 (20)
Other, net 0 0
---------------------------------------------------------------------
Net cash used by financing activities (72) (346)
Exchange rate effects on cash (3) 0
---------------------------------------------------------------------
Net increase in cash & cash equivalents 16 3
Cash & cash equivalents at beginning of year 48 24
---------------------------------------------------------------------
Cash & cash equivalents at end of period 64 27
---------------------------------------------------------------------
Segment Performance
Segment Net Sales
Q3 Q3Chg. 9M 9M
in EURmillions in
2002 2001 % 2002 2001
----------------------------------------------------------------------
Acetyl Products 465 514 -10 1,429 1,699
Chemical Intermediates 222 259 -14 710 827
Acetate Products 160 187 -14 504 573
Technical Polymers Ticona 182 185 -2 585 604
Performance Products 117 112 4 350 336
------------------------------------------------------ ------------
Segment total 1,146 1,257 -9 3,578 4,039
Other activities 15 19 -21 52 62
Intersegment eliminations (39) (43) -9 (121) (141)
------------------------------------------------------ ------------
Total 1,122 1,233 -9 3,509 3,960
----------------------------------------------------------------------
Factors Affecting Third-Quarter Segment Sales
in percent Vol.PriceCurr.Other Total
----------------------------------------------------------------------
Acetyl Products -2 -1 -7 0 -10
Chemical Intermediates -6 -2 -6 0 -14
Acetate Products -5 1 -10 0 -14
Technical Polymers Ticona 8 -4 -6 0 -2
Performance Products 9 -2 -3 0 4
Segment total -1 -1 -7 0 -9
----------------------------------------------------------------------
Segment EBITDA Excluding Special Charges
Q3 Q3 Chg. 9M 9M
in EURmillions in
2002 2001 % 2002 2001
2002
----------------------------------------------------------------------
Acetyl Products 76 40 90 181 183
Chemical Intermediates (2) 0 n.m. 9 17
Acetate Products 24 14 71 62 68
Technical Polymers Ticona 26 14 86 77 52
Performance Products 23 24 -4 67 62
-------------------------------------------------------- ----------
Segment total 147 92 60 396 382
Other activities (5) (4)n.m. (37) (28)
-------------------------------------------------------- ----------
Total 142 88 61 359 354
----------------------------------------------------------------------
*T
Basis of Presentation
Effective January 1, 2002, Celanese adopted Statement of Financial
Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible
Assets", and ceased amortization of goodwill and intangibles without
finite lives. The related charges in the third quarter of 2001 were a
net expense of EUR22 million in selling, general and administrative
expense ( EUR61 million in the first nine months) and a EUR2
million expense in equity in net earnings of affiliates ( EUR5
million in the first nine months). Additionally, the standard requires
that all negative goodwill on the balance sheet be written off
immediately and classified as a cumulative effect of change in
accounting principle on the consolidated statement of operations. As a
result, income of EUR10 million was recorded in the first quarter of
2002. During the first half of 2002, Celanese performed the required
impairment tests of goodwill as of January 1, 2002 and determined that
there was no impairment.
For further information please visit our website
(www.celanese.com)
Results unaudited: The foregoing results, together with the
adjustments made to present the results on a comparable basis, have
not been audited and are based on the internal financial data
furnished to management. Additionally, the quarterly results should
not be taken as an indication of the results of operations to be
reported by Celanese for any subsequent period or for the full fiscal
year.
Results adjusted for discontinued operations: The foregoing
results exclude operations which have been discontinued. The results
of these businesses are reflected in the interim balance sheets,
income statements and statements of cash flows as discontinued
operations.
Forward-looking statements: Forward-looking statements: 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 of 1995. Words such as "anticipate", "believe,"
"estimate," "intend," "may," "will," "expect," "plan" 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, application of new or changed accounting standards or
other government agency regulations, the impact of tax legislation and
regulations in jurisdictions in which Celanese operates, the timing
and rate at which tax credit and loss carryforwards can be utilized,
changes in the degree of patent and other legal protection afforded to
Celanese's products, 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, and other
factors discussed above. Many of the factors are macroeconomic 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 Annual Report on Form 20-F filed
with the SEC on March 7, 2002. Celanese AG does not assume any
obligation to update these forward-looking statements, which speak
only as of their dates.
--30--ne/uk*
CONTACT: Celanese AG
Europe:
Phillip Elliott, +49 (0)69 305 83199
P.Elliott@Celanese.com
or
US:
Vance Meyer, (US) +1 972 443 4847
VNMeyer@Celanese.com
KEYWORD: GERMANY INTERNATIONAL EUROPE
INDUSTRY KEYWORD: CHEMICALS/PLASTICS EARNINGS
SOURCE: Celanese AG
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