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Celanese (CE) Poised on Productivity Actions and Projects

Zacks Equity Research

We issued an updated research report on leading chemical and specialty materials maker, Celanese Corporation CE on Aug 14.

Celanese, which is among the prominent players in the chemical space along with PPG Industries, Inc. PPG, Air Products and Chemicals, Inc. APD and Eastman Chemical Company EMN, is poised to benefit from its inorganic growth actions, productivity measures and growth investments in organic projects amid a challenging environment.

Celanese’s strategic measures including cost savings through productivity initiatives, price increase actions and efficiency enhancement are expected to support its earnings in 2019. Its bottom line is expected to be aided by productivity actions and operational improvement. Celanese is committed to execute its productivity programs that include implementation of a number of cost reduction capital projects.

The company’s Engineered Materials (EM) unit is also poised for growth on the back of acquisitions, new business wins and significant project commercialization. The company commercialized 1,177 projects during the second quarter. It is on track to commercialize more than 4,000 projects in 2019.

Celanese also continues to actively pursue acquisitions, which are providing it opportunities for additional growth, investment and synergies. The acquisitions of SO.F.TER., Nilit and Omni Plastics are expected to significantly contribute to earnings expansion in the EM segment.

The company is also implementing several process improvement projects across a global network of acetyls manufacturing plants. All these positions its Acetyl Chain unit for solid growth. Celanese continues to invest in its businesses and further expand its capability to boost growth and create value for shareholders.

Moreover, the company remains committed toward rewarding its shareholders with dividends and share buybacks leveraging solid free cash flow generation. It returned $378 million to shareholders through dividends and share repurchases in the second quarter.

However, Celanese is exposed to a challenging business environment. The company faces a sluggish demand environment, partly due to weakness across Europe and Asia. It witnessed a slowdown in demand in the second quarter across several end markets, especially automotive and electronics. Lower demand hurt sales in its EM and Acetyl Chain units in the quarter. The challenging conditions are likely to continue in the third quarter.

Celanese also faces some pressure in its Acetate Tow segment. Low utilization rates across the tow industry are affecting volumes of acetate tow. Demand remains subdued in the tow industry.

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