Tags: Celanese | outperforms | rivals | CE

Celanese Outperforms Larger Rivals

By    |   Tuesday, 25 Oct 2011 02:59 PM

An investor might not believe that being a smaller company in an industry like chemical production would be an advantage, but it seems to be working for Celanese (CE). Over the past year the company's share price has performed significantly better than much larger rivals such as Dow Chemical (DOW) and E.I. du Pont de Nemours (DD).

Celanese divides its chemical production business into four segments. Acetyl Intermediates production and sales brings in just under half of revenues. These chemicals are used in the manufacture of a wide range of products, including coatings, adhesives, textiles and pharmaceuticals.

Advanced Engineered Materials are custom polymers developed for specific customer applications and account for 20 percent of sales. The balance of revenues is split between Consumer Specialties and Industrial Specialties chemical products. The acetyl products generate the most operating profits, but consumer specialties is not far behind with a 50 percent EBITDA margin.

For the third quarter of 2011, the company reported revenues of $1.81 billion, up 20 percent from a year earlier. Adjusted earnings per share were $1.27 versus 88 cents from a year ago.

Earnings per share outlook for the year were increased by 10 cents on these results to $4.67, compared to adjusted earnings of $3.37 in 2010. Celanese has exceeded the consensus earnings estimate in each of the last four reported quarters.

Expanding capacity

The global recession had a significant impact on chemical sales, so companies took steps to reduce production and control costs to maintain profit margins. Now Celanese is again expanding production to meet higher demand and strong pricing.

The second quarter earnings report highlighted capacity increases in four Asian plants and announced plans for a new facility in Texas. Recently, the company opened the world's largest polyoxymethylene production facility in Frankfurt, Germany. Celanese is preparing for a continued upward turn in the cyclical chemical business.

Recently, the analysts at Credit Agricole initiated coverage on CE with an outperform rating. UBS analysts have reiterated a neutral rating on the stock but have increased their target price by $4 per share. The company next reports in late January.

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An investor might not believe that being a smaller company in an industry like chemical production would be an advantage, but it seems to be working for Celanese (CE). Over the past year the company's share price has performed significantly better than much larger rivals...
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Tuesday, 25 Oct 2011 02:59 PM
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