Celanese Corp (CE) Reports Robust Cash Flow and Deleveraging in 2023 Despite Market Challenges
Net Sales: Increased to $10.9 billion in 2023, up 13% from the previous year.
GAAP Diluted EPS: Reported at $18.00 for the full year, with adjusted EPS at $8.92.
Operating Cash Flow: Achieved a record $1.9 billion, with free cash flow hitting a record $1.3 billion.
Debt Reduction: Reduced debt by $995 million and increased cash by $297 million, resulting in a $1.3 billion net debt reduction.
Acetyl Chain and Engineered Materials: Acetyl Chain adjusted EBIT at $1.3 billion; Engineered Materials net sales up 53% due to M&M acquisition.
On February 20, 2024, Celanese Corp (NYSE:CE), a global leader in the production of differentiated chemistry solutions and specialty materials, released its 8-K filing, detailing its financial performance for the full year 2023 and the fourth quarter. The company, known for its acetic acid production and specialty polymers used across various industries, faced a challenging year with demand fluctuations and competitive dynamics. Despite these challenges, Celanese demonstrated resilience by implementing strategic cost reductions and aligning production with demand.
Financial Performance Overview
Celanese reported a 13% increase in net sales, reaching $10.9 billion for the year, bolstered by a 23% increase in volume from the Mobility & Materials (M&M) acquisition. However, excluding M&M, volume decreased by 2% due to market challenges. The company's strategic actions led to a consolidated operating profit of $1.7 billion, with adjusted EBIT and operating EBITDA standing at $1.8 billion and $2.4 billion, respectively.
The Acetyl Chain segment experienced a 15% decrease in net sales, attributed to a 17% drop in pricing, while Engineered Materials saw a 53% increase in net sales due to the M&M acquisition. Despite lower pricing and volume, Engineered Materials managed to decrease inventory balances by $384 million and align production with demand.
Cost Management and Cash Flow
Celanese's focus on cost management and cash generation resulted in a record operating cash flow of $1.9 billion and free cash flow of $1.3 billion for 2023. The company successfully reduced working capital balances by $579 million, driven by a significant reduction in inventory balances. These efforts enabled Celanese to reduce its debt by $995 million and increase cash by $297 million, culminating in a substantial net debt reduction over the year.
Strategic Highlights and Outlook
Among the strategic highlights, Celanese commissioned a carbon capture and utilization (CCU) methanol expansion at its Clear Lake, Texas site, expected to capture 180 kt of CO2 emissions annually. The company also completed the transition of M&M to an upgraded ERP system and announced a collaboration with Under Armour for a new recyclable fiber alternative to spandex.
Looking ahead, CEO Lori Ryerkerk expressed cautious optimism, noting early signs of demand improvement in certain products and end-markets. Celanese anticipates first quarter adjusted earnings per share of $1.75 to $2.00, inclusive of M&M transaction amortization. The company remains focused on controlling what it can to sustainably increase earnings power.
Value investors may find Celanese's ability to generate strong cash flow, reduce debt, and manage costs in a challenging environment appealing. The company's strategic acquisitions and focus on high-margin specialty materials position it well for future growth and resilience.
For more detailed information, investors are encouraged to review the full 8-K filing and consider the implications of Celanese's performance on their investment strategies.
Explore the complete 8-K earnings release (here) from Celanese Corp for further details.
This article first appeared on GuruFocus.
