Celanese Corporation (NYSE:CE) Q4 2022 Earnings Call Transcript

Celanese Corporation (NYSE:CE) Q4 2022 Earnings Call Transcript February 24, 2023

Operator: Hello, and welcome to the Celanese’s Q4 2022 Earnings Call and Webcast. As a reminder, this conference is being recorded. It’s now my pleasure to turn the call over to your host, VP of Investor Relations, Brandon Ayache. Please go ahead, Brandon.

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Brandon Ayache: Thank you, Kevin. Welcome to the Celanese Corporation fourth quarter 2022 earnings conference call. My name is Brandon Ayache, Vice President of Investor Relations. And with me today on the call are Lori Ryerkerk, Chair of the Board and Chief Executive Officer; and Scott Richardson, Chief Financial Officer. Celanese Corporation distributed its fourth quarter earnings release via Business Wire and posted prepared comments on our Investor Relations website yesterday afternoon. As a reminder, we will discuss non-GAAP financial measures today. You can find definitions of these measures as well as reconciliations to the comparable GAAP measures on our website. Today’s presentation will also include forward-looking statements.

Please review the cautionary language regarding forward-looking statements, which can be found at the end of both press release as well as prepared comments. Form 8-K reports containing all these materials have also been submitted to the SEC. Since we’ve published our prepared comments yesterday, we’ll go directly to your questions. Kevin, let’s go ahead and please the line of questions.

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Q&A Session

Operator: Our first question today is coming from John McNulty from BMO Capital Markets. And we do ask you ask one question, one follow-up and then return to the queue. John, please go ahead.

John McNulty: Yes, good morning, Lori. Thanks for taking my questions. So, look, obviously a lot of moving pieces out there, but the tough first quarter outlook for a $1.50 to $1.75 of EPS makes the full year call for $12 to $13, look like a pretty chunky jump. I guess, can you help us to bridge that jump in earnings and help us to understand what some of the big buckets are that you expect to turn up or take a noticeable step-up?

Lori Ryerkerk: Thanks, John. Yes, look, we realize that looks like a big jump-up. But let’s kind of go through the math. We really need to deliver about 350 for the last three quarters of the year in order to hit that $12 to $13 guidance. So if you look at that, well, that seems like a big jump, it’s not unknown territory to us. In fact, that’s where we’ve been every quarter in the last two years up until this quarter. But if I look at just the jump-up from Q1 to Q2, let’s start with Acetyls. So in Acetyls, I would expect $50 million to a $100 million increase in Q2 off of Q1. We’ll start with natural gas. So natural gas pricing has come down significantly at the end of the fourth quarter and in the first-quarter, especially in the U.S., that’s a big help for us in Acetyls, the largest plants in Clear Lake, we have a lot of other facilities in the U.S. that benefit from that lower natural gas pricing.

And with coal staying higher in China and with crude being reasonably high and steady, that really benefits margins for our U.S.-based production, which is a large portion of our Acetyl. So if you look just at this natural gas pricing, if it were to hold through the second quarter that alone is probably more than $20 million of uplift in the second quarter. And then if we look at things like the Frankfurt VAM restart, that is being restarted a little bit early based on the good increase we’ve seen here going into March. For construction, paints and coatings in Europe a little bit quicker recovery than we expected, so that Western seasonality coming off, that’s probably another $10 million. And then you just have the normal good economics we typically experienced in the second quarter.

So we see destocking really been over. We’re past Chinese New Year, we see improvement in construction activities worldwide. And so we expect to see that same kind of volume rebound. As well as productivity, I mean, we last year in 2022, our productivity at the high range of our historic 100 to 150, we expect we’ll be in a similar level this year and adding on additional productivity from M&M for the EM side. So that all goes in there. So we feel very comfortable right now with where energy pricing is, that were actually probably towards the higher-end of that range for the Acetyl bump-up in the second-quarter. And then if we look at Engineered Materials and including M&M, again, Q2 is typically a stronger quarter for Engineered Materials as well.