Specialty materials company Celanese Corp. (CE) raised the low end of its 2013 outlook, driven by its plans to turn coal into ethanol in China.
Celanese now expects adjusted profit to be at least $6 per share in fiscal 2013, versus its prior expectation of $5.50 to $6.50 per share.
EBITDA is now expected to be at least $1.7 billion, versus its prior expectation of $1.6 billion to $1.8 billion.
Celanese plans to spend $350 million on two coal-to-ethanol facilities in China as part of a broad push to supply ethanol for industrial chemical production. Celanese has yet to receive building approval from the Chinese authorities. Once China approves the plants, it will take two-and-a-half years to build them.
The two plants, whose location is not yet decided, are expected to produce 400,000 tons of ethanol each year.
The product will help Celanese to increase earnings by 10% to 15% per year for the foreseeable future,
Recently, Celanese reported adjusted earnings of 96 cents per share in the first quarter of 2011, beating the Zacks Consensus Estimate of 83 cents. Diluted earnings per share in the quarter came in at 87 cents, versus 6 cents in the prior-year quarter.
Quarterly revenues grew 14% year over year to $1.6 billion, primarily driven by higher volumes across all business segments as well as improved volumes. Results were above the Zacks Consensus Estimate of $1.5 billion. Operating profit jumped to $188 million from a loss of $14 million in the prior-year quarter. Operating margins came in at a positive 8.5% from a negative 99% last year
Total debt in the quarter was $2.5 billion versus $2.48 billion in the prior year.
Celanese is one of the world's largest producers of acetyl products, as well as a leading global producer of high-performance engineered polymers. The company's earnings outlook has been improving due to a strong performance in the Advanced Engineered Materials business.
The company is operating its facilities in the Acetyl Intermediates segment at above the industry utilization rates of 80%, which provides cost advantages. Capacity utilization has also improved in the Industrial Specialties segment due to rising demand in the Asia Pacific.
However, Celanese is exposed to volatile raw material prices (natural gas, ethylene and methanol) used in the production of basic chemicals in the Acetyl Intermediates segment, principally formaldehyde, acetic acid and vinyl acetate monomer.
The company also faces stiff competition from larger peers, E.I. DuPont de Nemours and Co. (DD) and The Dow Chemical Co. (DOW) in the Advanced Engineered Material Segment as well as in the Industrial Specialties segment. Celanese's balance sheet leverage is also relatively high, which limits its financial flexibility.
Currently, Celanese holds a short-term (1 to 3 months) Zacks #1 Rank (Strong Buy) and a long-term (6 months and higher) Neutral recommendation.
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