Celanese CEO Discusses Q2 2011 Results - Earnings Call Transcript

Celanese Corporation (CE)

Q2 2011 Earnings Call

July 21, 2011 10:00 am ET

Executives

Mark Oberle - SVP of Corporate Affairs

Dave Weidman - Chairman and CEO

Steven Sterin - SVP and CFO

Jon Puckett - VP, IR

Analysts

Bob Koort - Goldman Sachs

P.J. Juvekar - Citigroup

Kevin McCarthy - Bank of America-Merrill Lynch

John McNulty - Credit Suisse

David Begleiter - Deutsche Bank

Frank Mitsch - Wells Fargo Securities

Edlain Rodriguez - Gleacher & Company

Hassan Ahmed - Alembic Global Advisors

Bill Young - ChemSpeak

Jay Harris - Goldsmith & Harris

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the second quarter 2011 Celanese Corp. earnings conference call. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes.

I would now like to hand the presentation over to Mr. Mark Oberle, Senior Vice President of Corporate Affairs.

Mark Oberle

Thank you and welcome everyone to the Celanese Corporation second quarter 2011 financial results conference call. My name is Mark Oberle, Senior Vice President of Corporate Affairs. On the call today are Dave Weidman, Chairman and Chief Executive Officer; and Steven Sterin, Senior Vice President and Chief Financial Officer.

I'd also like to introduce Jon Puckett, our new Vice President of Investor Relations. Jon joined Celanese with a distinguished track record of investor relations and finance experience, most recently with ACS through the acquisition by Xerox. Welcome, John.

The Celanese Corporation's second quarter 2011 earnings release was distributed via BusinessWire this morning and is posted on our website, celanese.com. The PowerPoint slides referenced during this call are also posted on our website.

During this call, management may make forward-looking statements concerning, for example, Celanese Corporation's future objectives and results, which will be made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. The limitations inherent in such forward-looking statements are detailed on Page 6 of the earnings release referenced during this call.

Celanese Corporation's second quarter 2011 earnings release references the performance measures, operating EBITDA, business operating EBITDA, affiliate EBITDA and proportional affiliate EBITDA, adjusted earnings per share and net debt as non-U.S. GAAP measures. For the most directly comparable financial measures presented in accordance with U.S. GAAP in our financial statements and for a reconciliation of our non-U.S. GAAP measures to U.S. GAAP figures, please see the accompanying schedules to our earnings release posted on our website.

This morning Dave Weidman will review the performance and strategy of the company, and Steven Sterin will provide an overview of the business results for each segment and the financials. We'll have a question-and-answer period with Dave and Steven following the prepared remarks.

I'd now like to turn the call over to Dave Weidman.

Dave Weidman

Thanks and welcome everyone to today's call. I'm extremely delighted to share highlights of Celanese's record performance and report on progress in achieving our strategic growth objectives. I'll also provide more details on our improved outlook for the remainder of 2011.

And I could begin with the record quarter. Celanese's net sales in the second quarter were $1.8 billion. Operating EBITDA was $441 million. And adjusted EPS was $1.66 per share. Both operating EBITDA and adjusted EPS were our best quarterly performances ever.

Steven will provide additional commentary on each of the segments, but overall, we saw continued robust demand across the company, good businesses, good execution of our strategy and a very solid global economy.

Our business in Asia continues to experience healthy growth through Celanese's strong technology position, new and innovative applications for our customers and our exposure to a broad set of end market applications.

Based on our second quarter performance and expectations for continued global economic growth in the second half of the year, we're increasing our full year 2011 outlook for adjusted earnings per share to be approximately $1.20 higher than last year's $3.37 per share. As you may recall, our previous outlook for adjusted EPS was $0.85 higher than last year's results. And we now expect operating EBITDA to be approximately $275 million more than last year's results of $1.1 billion, an increase from our prior expectation of at least $200 million more than last year's results.

Celanese continues to make progress in meeting our short-term and long-term strategic objectives. On our Investor Day in May, we discussed our strategy for increasing shareholder value. There are two fundamental elements. First, topline growth, 100 to 200 basis points faster than global DGP. And second, converting our incremental revenue growth to earnings of at least 30%. These two features, strong topline growth and high operating leverage, translate into a very attractive value proposition.

Earnings increase in 10% to 15% per year, relatively higher margins, lower earnings volatility and return on invested capital significantly exceeds our weighted average cost of capital.

Now, beyond these core strategic elements, our new breakthrough TCX ethanol technology is another very robust product for Celanese. With our novel breakthrough TCX technology, we're able to produce cost-advantaged ethanol from raw material sources such as natural gas or coal.

We're running TCX, and I'd like to highlight few reasons of accomplishments. First, in June, we announced our entry into the ethanol market by modifying and enhancing our current Nanjing acetyl complex to produce at least 200,000 tons of industrial ethanol by 2013. By leveraging the existing infrastructure in Nanjing, we were able to accelerate our original plan by 6 to 12 months, faster than originally expected. This should improve our overall possibility of the site with a more possible product mix.

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