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Celanese Corporation Reports Second Quarter 2022 Earnings; Reaffirms Full Year 2022 Outlook

·11 min read

DALLAS, July 28, 2022--(BUSINESS WIRE)--Celanese Corporation (NYSE: CE), a global chemical and specialty materials company, today reported GAAP diluted earnings per share of $4.03 and adjusted earnings per share of $4.99 for the second quarter of 2022. The Company generated net sales of $2.5 billion in the second quarter, a 2 percent decrease from the prior quarter and a 13 percent increase over the same quarter of 2021. Pricing increased 2 percent sequentially, the seventh consecutive quarter of pricing expansion, and partially offset a 2 percent decrease in volume and a 2 percent unfavorable currency impact. Celanese successfully mitigated continued cost inflation as well as unanticipated interruptions in raw material supply in the U.S. Gulf Coast to deliver second quarter consolidated operating profit of $483 million and adjusted EBIT of $646 million. In anticipation of the close of the DuPont M&M acquisition targeted for the fourth quarter of 2022, the Company has secured approximately $10.5 billion in permanent financing for the acquisition across a series of transactions, including two successful registered offerings of senior notes in the third quarter.

"I thank our teams for delivering, across the first half of this year, the strongest six month performance in our history," said Lori Ryerkerk, chairman and chief executive officer. "Their exceptional execution of our business models and M&A action plan, including securing financing for the M&M acquisition amid a challenging market backdrop, has prepared us to address, from a position of strength, some of the developing macro concerns."

Second Quarter 2022 Financial Highlights:

Three Months Ended

June 30,
2022

March 31,
2022

June 30,
2021

(unaudited)

(In $ millions, except per share data)

Net Sales

Engineered Materials

948

910

682

Acetate Tow

119

125

138

Acetyl Chain

1,456

1,538

1,409

Intersegment Eliminations

(37

)

(35

)

(31

)

Total

2,486

2,538

2,198

Operating Profit (Loss)

Engineered Materials

166

124

123

Acetate Tow

(1

)

4

24

Acetyl Chain

429

499

516

Other Activities

(111

)

(96

)

(96

)

Total

483

531

567

Net Earnings (Loss)

436

504

540

Adjusted EBIT(1)

Engineered Materials

224

211

161

Acetate Tow

35

40

62

Acetyl Chain

440

503

514

Other Activities

(53

)

(41

)

(46

)

Total

646

713

691

Equity Earnings and Dividend Income, Other Income (Expense)

Engineered Materials

53

49

32

Acetate Tow

36

36

37

Operating EBITDA(1)

744

813

781

Diluted EPS - continuing operations

$

4.03

$

4.61

$

4.81

Diluted EPS - total

$

3.98

$

4.61

$

4.77

Adjusted EPS(1)

$

4.99

$

5.54

$

5.02

Net cash provided by (used in) investing activities

(136

)

(149

)

177

Net cash provided by (used in) financing activities

(159

)

(95

)

(344

)

Net cash provided by (used in) operating activities

495

316

427

Free cash flow(1)

368

175

309

______________________________

(1)

See "Non-US GAAP Financial Measures" below.

Recent Highlights:

  • Generated second highest-ever quarterly GAAP operating profit and highest-ever adjusted EBIT in Engineered Materials in the second quarter.

  • Completed a registered offering of $7.5 billion principal amount of U.S. dollar-denominated notes priced on July 7 and a registered offering of €1.5 billion principal amount of euro-denominated notes priced on July 12 for financing the M&M acquisition. Concurrently entered into a euro cross-currency swap to effectively convert $2.5 billion of the U.S. dollar-denominated debt into euro-denominated borrowing, which lowered the effective borrowing rate and will help to align currency mix with anticipated global earnings.

  • Mitigated unanticipated interruptions in raw material supply in the U.S. Gulf Coast and subsequent declaration of force majeure across Acetyl Chain products to exceed second quarter earnings guidance for that business.

Second Quarter 2022 Business Segment Overview

Engineered Materials

Engineered Materials generated record net sales of $948 million in the second quarter due to a sequential price increase of 6 percent and volume increase of 1 percent that offset a 3 percent unfavorable currency impact. The business delivered sequential volume growth by offsetting a decline in global auto builds through commercial wins from the pipeline model, growth in electric vehicle applications, and initial contributions from restructuring KEPCO to a manufacturing joint venture. Engineered Materials reported the sixth consecutive quarter of pricing expansion through the energy surcharge, improved product mix, and other commercial actions that fully offset additional cost inflation in the quarter. The energy surcharge implemented by the business in the fourth quarter of 2021 continued to successfully mitigate the impact of sequential energy inflation in Europe and the Americas. Engineered Materials delivered second highest-ever quarterly GAAP operating profit of $166 million and highest-ever quarterly adjusted EBIT of $224 million, increases over the prior quarter of $42 million and $13 million, respectively. Affiliate earnings contributed an additional $4 million sequentially, as strong performance at Ibn Sina offset the impact of the KEPCO restructuring.

Acetyl Chain

The Acetyl Chain generated second quarter net sales of $1.5 billion, a sequential decline of 5 percent due to a 3 percent decrease in volume and a 2 percent unfavorable currency impact. Volume declined sequentially primarily due to production losses at the Clear Lake, Texas facility as a result of supply disruptions from the two largest external raw material suppliers to that site. The disruption was resolved and the Acetyl Chain is currently operating its Clear Lake facility at full operating rates. In response to the disruption and the subsequent declaration of force majeure, the business immediately sourced product in the market and diverted significant volume produced in Asia to Europe. The business continued to leverage the optionality of its integrated product chain to capture value from products downstream of acetic acid and set a record for variable margin contribution from these products. The Acetyl Chain delivered second quarter GAAP operating profit of $429 million and adjusted EBIT of $440 million at margins of 29 percent and 30 percent, respectively. For the second consecutive quarter, the Acetyl Chain has delivered $2 billion in GAAP operating profit and adjusted EBIT in the trailing 12 month period.

Acetate Tow

Acetate Tow generated net sales of $119 million during the second quarter, which reflected a sequential volume decrease of 6 percent and stable pricing. Second quarter GAAP operating loss was $1 million and adjusted EBIT was $35 million. Dividends from affiliates in the quarter were $36 million. The Company initiated a strategic overhaul of the Acetate Tow business and will begin a transition to managing acetate flake and tow within the Acetyl Chain as downstream derivatives of acetic acid.

Cash Flow and Tax

The Company delivered operating cash flow of $495 million and free cash flow of $368 million in the second quarter. Capital expenditures in the second quarter were $124 million as the Company progressed on several key projects. Celanese returned $74 million in cash to shareholders via dividends in the quarter.

The effective U.S. GAAP tax rate was 20 percent for the second quarter compared to 18 percent for the same quarter of 2021. The higher effective tax rate was primarily due to changes in jurisdictional earnings mix. The effective tax rate for adjusted earnings remains at 13 percent based on expected jurisdictional earnings mix for the full year and projected utilization of foreign tax credit carryforwards.

Outlook

"At this stage, the third quarter order books look largely as expected, with some indications of softening demand including modest order deferrals and signals of normalizing inventory levels at customers," said Lori Ryerkerk. "While we see little firsthand indications that support a view of dramatic demand deterioration, we are taking controllable actions across the organization to prepare ourselves to continue to generate strong cash flow and to swiftly pay down debt balances following the close of the M&M acquisition. In the third quarter, we expect adjusted earnings of $4.00 to $4.50 per share, with performance at the bottom end of the range reflective of the potential for additional modest demand softening as we progress through the quarter. Short of a sharp deterioration in demand, which we do not currently foresee, we expect to deliver 2022 adjusted earnings per share approximately in line with our 2021 adjusted earnings per share performance."

A reconciliation of forecasted adjusted earnings per share to U.S. GAAP diluted earnings per share is not available without unreasonable efforts because a forecast of Certain Items, such as mark-to-market pension gains/losses, is not practical. For more information, see "Non-GAAP Financial Measures" below.

The Company's prepared remarks related to the second quarter will be posted on its website at investors.celanese.com under Financial Information/Financial Document Library on July 28, 2022. Information about Non-US GAAP measures is included in a Non-US GAAP Financial Measures and Supplemental Information document posted on our investor relations website under Financial Information/Non-GAAP Financial Measures. See also "Non-GAAP Financial Measures" below.

Celanese Corporation is a global chemical leader in the production of differentiated chemistry solutions and specialty materials used in most major industries and consumer applications. Our businesses use the full breadth of Celanese's global chemistry, technology and commercial expertise to create value for our customers, employees, shareholders and the corporation. As we partner with our customers to solve their most critical business needs, we strive to make a positive impact on our communities and the world through The Celanese Foundation. Based in Dallas, Celanese employs approximately 8,500 employees worldwide and had 2021 net sales of $8.5 billion. For more information about Celanese Corporation and its product offerings, visit www.celanese.com.

Forward-Looking Statements

This release may contain "forward-looking statements," which include information concerning the Company's plans, objectives, goals, strategies, future revenues or performance, capital expenditures, financing needs and other information that is not historical information. All forward-looking statements are based upon current expectations and beliefs and various assumptions. There can be no assurance that the Company will realize these expectations or that these beliefs will prove correct. There are a number of risks and uncertainties that could cause actual results to differ materially from the results expressed or implied in the forward-looking statements contained in this release. These risks and uncertainties include, among other things: changes in general economic, business, political and regulatory conditions in the countries or regions in which we operate; volatility or changes in the price and availability of raw materials and energy, particularly changes in the demand for, supply of, and market prices of ethylene, methanol, natural gas, wood pulp and fuel oil and the prices for electricity and other energy sources; the length and depth of product and industry business cycles, particularly in the automotive, electrical, mobility, textiles, medical, electronics and construction industries; the extent to which resurgences or variants of COVID-19 may adversely impact the economic environment, market demand, our operations, availability and cost of transportation and materials, the labor supply and pace of economic recovery; the ability to pass increases in raw material prices, logistics costs and other costs on to customers or otherwise improve margins through price increases; the ability to complete the pending acquisition by us of the majority of DuPont’s Mobility & Materials business (the "M&M Acquisition"), including the possibility that the M&M Acquisition is not completed within the expected timeframe, or at all, because required regulatory approvals are not received or other closing conditions are not satisfied on a timely basis, or at all; the accuracy or inaccuracy of our assumptions regarding anticipated benefits of the M&M Acquisition; the possibility that the anticipated benefits of the M&M Acquisition, including synergies and growth opportunities, may not be realized as expected or may not be achieved within the anticipated timeframe, or at all, whether as a result of difficulties arising from the integration of the M&M Business or other unanticipated delays, costs, inefficiencies or liabilities; increased commercial, legal or regulatory complexity of entering into, or expanding our exposure to, certain end markets and geographies; risks in the global economy and equity and credit markets and their potential impact on our ability to finance the remainder of the purchase price for the M&M Acquisition on acceptable terms, at favorable pricing, in a timely manner, or at all; diversion of management's attention from ongoing business operations and opportunities and other disruption caused by the M&M Acquisition and the integration processes and their impact on our existing business and relationships; risks and costs associated with increased leverage from the M&M Acquisition, including increased interest expense and potential reduction of business and strategic flexibility; the ability to maintain plant utilization rates and to implement planned capacity additions and expansions as well as facility turnarounds; the ability to reduce or maintain their current levels of production costs and to improve productivity by implementing technological improvements to existing plants; the ability to identify desirable potential acquisition targets and to complete and integrate acquisition or investment transactions, including regulatory approvals, consistent with the Company's strategy; increased price competition and the introduction of competing products by other companies; market acceptance of our products and technology; compliance and other costs and potential disruption or interruption of production or operations due to accidents, interruptions in sources of raw materials, transportation logistics or supply chain disruptions, cyber security incidents, terrorism or political unrest, public health crises (including, but not limited to, the COVID-19 pandemic); other unforeseen events or delays in construction or operation of facilities, including as a result of geopolitical conditions, the occurrence of acts of war (such as the Russia-Ukraine conflict) or terrorist incidents or as a result of weather or natural disasters or other crises including public health crises; the ability to obtain governmental approvals and to construct facilities on terms and schedules acceptable to the Company; changes in applicable tariffs, duties and trade agreements, tax rates or legislation throughout the world including, but not limited to, adjustments, changes in estimates or interpretations or the resolution of tax examinations or audits that may impact recorded or future tax impacts and potential regulatory and legislative tax developments in the United States and other jurisdictions; changes in the degree of intellectual property and other legal protection afforded to our products or technologies, or the theft of such intellectual property; potential liability for remedial actions and increased costs under existing or future environmental, health and safety regulations, including those relating to climate change; potential liability resulting from pending or future claims or litigation, including investigations or enforcement actions, or from changes in the laws, regulations or policies of governments or other governmental activities in the countries in which we operate; changes in currency exchange rates and interest rates; our level of indebtedness, which could diminish our ability to raise additional capital to fund operations or limit our ability to react to changes in the economy or the chemicals industry; tax rates and changes thereto; our ability to obtain regulatory approval for, and satisfy closing conditions to, any transactions described herein; and various other factors discussed from time to time in the Company's filings with the Securities and Exchange Commission.

Any forward-looking statement speaks only as of the date on which it is made, and the Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances.

Non-GAAP Financial Measures

Presentation

This document presents the Company's three business segments, Engineered Materials, Acetate Tow and Acetyl Chain.

Use of Non-US GAAP Financial Information

This release uses the following Non-US GAAP measures: adjusted EBIT, adjusted EBIT margin, operating EBITDA, adjusted earnings per share and free cash flow. These measures are not recognized in accordance with US GAAP and should not be viewed as an alternative to US GAAP measures of performance or liquidity. The most directly comparable financial measure presented in accordance with US GAAP in our consolidated financial statements for adjusted EBIT and operating EBITDA is net earnings (loss) attributable to Celanese Corporation; for adjusted EBIT margin is operating margin; for adjusted earnings per share is earnings (loss) from continuing operations attributable to Celanese Corporation per common share-diluted; and for free cash flow is net cash provided by (used in) operations.

Definitions of Non-US GAAP Financial Measures

  • Adjusted EBIT is a performance measure used by the Company and is defined by the Company as net earnings (loss) attributable to Celanese Corporation, plus (earnings) loss from discontinued operations, less interest income, plus interest expense, plus refinancing expense and taxes, and further adjusted for Certain Items (refer to Table 8 of our Non-US GAAP Financial Measures and Supplemental Information document). We do not provide reconciliations for adjusted EBIT on a forward-looking basis (including those contained in this document) when we are unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing and amount of Certain Items, such as mark-to-market pension gains and losses, that have not yet occurred, are out of our control and/or cannot be reasonably predicted. For the same reasons, we are unable to address the probable significance of the unavailable information. Adjusted EBIT margin is defined by the Company as adjusted EBIT divided by net sales.

  • Operating EBITDA is a performance measure used by the Company and is defined by the Company as net earnings (loss) attributable to Celanese Corporation, plus (earnings) loss from discontinued operations, less interest income, plus interest expense, plus refinancing expense, taxes and depreciation and amortization, and further adjusted for Certain Items, which Certain Items include accelerated depreciation and amortization expense. Operating EBITDA is equal to adjusted EBIT plus depreciation and amortization.

  • Adjusted earnings per share is a performance measure used by the Company and is defined by the Company as earnings (loss) from continuing operations attributable to Celanese Corporation, adjusted for income tax (provision) benefit, Certain Items, and refinancing and related expenses, divided by the number of basic common shares and dilutive restricted stock units and stock options calculated using the treasury method. We do not provide reconciliations for adjusted earnings per share on a forward-looking basis (including those contained in this document) when we are unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing and amount of Certain Items, such as mark-to-market pension gains and losses, that have not yet occurred, are out of our control and/or cannot be reasonably predicted. For the same reasons, we are unable to address the probable significance of the unavailable information.

Note: The income tax expense (benefit) on Certain Items ("Non-GAAP adjustments") is determined using the applicable rates in the taxing jurisdictions in which the Non-GAAP adjustments occurred and includes both current and deferred income tax expense (benefit). The income tax rate used for adjusted earnings per share approximates the midpoint in a range of forecasted tax rates for the year. This range may include certain partial or full-year forecasted tax opportunities and related costs, where applicable, and specifically excludes changes in uncertain tax positions, discrete recognition of GAAP items on a quarterly basis, other pre-tax items adjusted out of our GAAP earnings for adjusted earnings per share purposes and changes in management's assessments regarding the ability to realize deferred tax assets for GAAP. In determining the adjusted earnings per share tax rate, we reflect the impact of foreign tax credits when utilized, or expected to be utilized, absent discrete events impacting the timing of foreign tax credit utilization. We analyze this rate quarterly and adjust it if there is a material change in the range of forecasted tax rates; an updated forecast would not necessarily result in a change to our tax rate used for adjusted earnings per share. The adjusted tax rate is an estimate and may differ from the actual tax rate used for GAAP reporting in any given reporting period. Table 3a of our Non-US GAAP Financial Measures and Supplemental Information document summarizes the reconciliation of our estimated GAAP effective tax rate to the adjusted tax rate. The estimated GAAP rate excludes discrete recognition of GAAP items due to our inability to forecast such items. As part of the year-end reconciliation, we will update the reconciliation of the GAAP effective tax rate to the adjusted tax rate for actual results.

  • Free cash flow is a liquidity measure used by the Company and is defined by the Company as cash flow from operations, less capital expenditures on property, plant and equipment, and adjusted for capital contributions from or distributions to Mitsui & Co., Ltd. ("Mitsui") related to our methanol joint venture, Fairway Methanol LLC ("Fairway").

Reconciliation of Non-US GAAP Financial Measures

Reconciliations of the Non-US GAAP financial measures used in this press release to the comparable US GAAP financial measure, together with information about the purposes and uses of Non-US GAAP financial measures, are included in our Non-US GAAP Financial Measures and Supplemental Information document filed as an exhibit to our Current Report on Form 8-K filed with the SEC on or about July 28, 2022 and also available on our website at investors.celanese.com under Financial Information/Financial Document Library.

Results Unaudited

The results in this document, together with the adjustments made to present the results on a comparable basis, have not been audited and are based on internal financial data furnished to management. Quarterly results should not be taken as an indication of the results of operations to be reported for any subsequent period or for the full fiscal year.

Supplemental Information

Additional information about our prior period performance is included in our Quarterly Reports on Form 10-Q and in our Non-US GAAP Financial Measures and Supplemental Information document.

Consolidated Statements of Operations - Unaudited

Three Months Ended

June 30,
2022

March 31,
2022

June 30,
2021

(In $ millions, except share and per share data)

Net sales

2,486

2,538

2,198

Cost of sales

(1,781

)

(1,793

)

(1,437

)

Gross profit

705

745

761

Selling, general and administrative expenses

(197

)

(174

)

(161

)

Amortization of intangible assets

(11

)

(11

)

(5

)

Research and development expenses

(26

)

(24

)

(22

)

Other (charges) gains, net

1

(1

)

(3

)

Foreign exchange gain (loss), net

(1

)

(1

)

(3

)

Gain (loss) on disposition of businesses and assets, net

12

(3

)

Operating profit (loss)

483

531

567

Equity in net earnings (loss) of affiliates

60

56

37

Non-operating pension and other postretirement employee benefit (expense) income

25

24

38

Interest expense

(48

)

(35

)

(24

)

Interest income

1

1

4

Dividend income - equity investments

36

37

37

Other income (expense), net

(3

)

2

1

Earnings (loss) from continuing operations before tax

554

616

660

Income tax (provision) benefit

(112

)

(112

)

(116

)

Earnings (loss) from continuing operations

442

504

544

Earnings (loss) from operation of discontinued operations

(8

)

(6

)

Income tax (provision) benefit from discontinued operations

2

2

Earnings (loss) from discontinued operations

(6

)

(4

)

Net earnings (loss)

436

504

540

Net (earnings) loss attributable to noncontrolling interests

(2

)

(2

)

(2

)

Net earnings (loss) attributable to Celanese Corporation

434

502

538

Amounts attributable to Celanese Corporation

Earnings (loss) from continuing operations

440

502

542

Earnings (loss) from discontinued operations

(6

)

(4

)

Net earnings (loss)

434

502

538

Earnings (loss) per common share - basic

Continuing operations

4.06

4.64

4.83

Discontinued operations

(0.06

)

(0.04

)

Net earnings (loss) - basic

4.00

4.64

4.79

Earnings (loss) per common share - diluted

Continuing operations

4.03

4.61

4.81

Discontinued operations

(0.05

)

(0.04

)

Net earnings (loss) - diluted

3.98

4.61

4.77

Weighted average shares (in millions)

Basic

108.4

108.2

112.3

Diluted

109.1

108.9

112.8

Consolidated Balance Sheets - Unaudited

As of

June 30,

2022

As of

December 31,

2021

(In $ millions)

ASSETS

Current Assets

Cash and cash equivalents

783

536

Trade receivables - third party and affiliates, net

1,317

1,161

Non-trade receivables, net

510

506

Inventories

1,713

1,524

Marketable securities

7

10

Other assets

129

70

Total current assets

4,459

3,807

Investments in affiliates

935

823

Property, plant and equipment, net

4,158

4,193

Operating lease right-of-use assets

264

236

Deferred income taxes

232

248

Other assets

642

521

Goodwill

1,348

1,412

Intangible assets, net

675

735

Total assets

12,713

11,975

LIABILITIES AND EQUITY

Current Liabilities

Short-term borrowings and current installments of long-term debt - third party and affiliates

809

791

Trade payables - third party and affiliates

1,250

1,160

Other liabilities

419

473

Income taxes payable

117

81

Total current liabilities

2,595

2,505

Long-term debt, net of unamortized deferred financing costs

3,022

3,176

Deferred income taxes

589

555

Uncertain tax positions

285

280

Benefit obligations

514

558

Operating lease liabilities

220

200

Other liabilities

263

164

Commitments and Contingencies

Stockholders' Equity

Treasury stock, at cost

(5,492

)

(5,492

)

Additional paid-in capital

344

333

Retained earnings

10,466

9,677

Accumulated other comprehensive income (loss), net

(438

)

(329

)

Total Celanese Corporation stockholders' equity

4,880

4,189

Noncontrolling interests

345

348

Total equity

5,225

4,537

Total liabilities and equity

12,713

11,975

Non-US GAAP Financial Measures and Supplemental Information

July 28, 2022

In this document, the terms the "Company," "we" and "our" refer to Celanese Corporation and its subsidiaries on a consolidated basis.

Purpose

The purpose of this document is to provide information of interest to investors, analysts and other parties including supplemental financial information and reconciliations and other information concerning our use of non-US GAAP financial measures. This document is updated quarterly.

Presentation

This document presents the Company's three business segments, Engineered Materials, Acetate Tow and Acetyl Chain.

Use of Non-US GAAP Financial Measures

From time to time, management may publicly disclose certain numerical "non-GAAP financial measures" in the course of our earnings releases, financial presentations, earnings conference calls, investor and analyst meetings and otherwise. For these purposes, the Securities and Exchange Commission ("SEC") defines a "non-GAAP financial measure" as a numerical measure of historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that effectively exclude amounts, included in the most directly comparable measure calculated and presented in accordance with US GAAP, and vice versa for measures that include amounts, or are subject to adjustments that effectively include amounts, that are excluded from the most directly comparable US GAAP measure so calculated and presented. For these purposes, "GAAP" refers to generally accepted accounting principles in the United States.

Non-GAAP financial measures disclosed by management are provided as additional information to investors, analysts and other parties because the Company believes them to be important supplemental measures for assessing our financial and operating results and as a means to evaluate our financial condition and period-to-period comparisons. These non-GAAP financial measures should be viewed as supplemental to, and should not be considered in isolation or as alternatives to, net earnings (loss), operating profit (loss), operating margin, cash flow from operating activities (together with cash flow from investing and financing activities), earnings per share or any other US GAAP financial measure. These non-GAAP financial measures should be considered within the context of our complete audited and unaudited financial results for the given period, which are available on the Financial Information/Financial Document Library page of our website, investors.celanese.com. The definition and method of calculation of the non-GAAP financial measures used herein may be different from other companies' methods for calculating measures with the same or similar titles. Investors, analysts and other parties should understand how another company calculates such non-GAAP financial measures before comparing the other company's non-GAAP financial measures to any of our own. These non-GAAP financial measures may not be indicative of the historical operating results of the Company nor are they intended to be predictive or projections of future results.

Pursuant to the requirements of SEC Regulation G, whenever we refer to a non-GAAP financial measure, we will also present in this document, in the presentation itself or on a Form 8-K in connection with the presentation on the Financial Information/Financial Document Library page of our website, investors.celanese.com, to the extent practicable, the most directly comparable financial measure calculated and presented in accordance with GAAP, along with a reconciliation of the differences between the non-GAAP financial measure we reference and such comparable GAAP financial measure.

This document includes definitions and reconciliations of non-GAAP financial measures used from time to time by the Company.

Specific Measures Used

This document provides information about the following non-GAAP measures: adjusted EBIT, adjusted EBIT margin, operating EBITDA, operating EBITDA margin, operating profit (loss) attributable to Celanese Corporation, adjusted earnings per share, net debt, free cash flow and return on invested capital (adjusted). The most directly comparable financial measure presented in accordance with US GAAP in our consolidated financial statements for adjusted EBIT and operating EBITDA is net earnings (loss) attributable to Celanese Corporation; for adjusted EBIT margin and operating EBITDA margin is operating margin; for operating profit (loss) attributable to Celanese Corporation is operating profit (loss); for adjusted earnings per share is earnings (loss) from continuing operations attributable to Celanese Corporation per common share-diluted; for net debt is total debt; for free cash flow is net cash provided by (used in) operations; and for return on invested capital (adjusted) is net earnings (loss) attributable to Celanese Corporation divided by the sum of the average of beginning and end of the year short- and long-term debt and Celanese Corporation stockholders' equity.

Definitions

  • Adjusted EBIT is a performance measure used by the Company and is defined by the Company as net earnings (loss) attributable to Celanese Corporation, plus (earnings) loss from discontinued operations, less interest income, plus interest expense, plus refinancing expense and taxes, and further adjusted for Certain Items (refer to Table 8). We believe that adjusted EBIT provides transparent and useful information to management, investors, analysts and other parties in evaluating and assessing our primary operating results from period-to-period after removing the impact of unusual, non-operational or restructuring-related activities that affect comparability. Our management recognizes that adjusted EBIT has inherent limitations because of the excluded items. Adjusted EBIT is one of the measures management uses for planning and budgeting, monitoring and evaluating financial and operating results and as a performance metric in the Company's incentive compensation plan. We do not provide reconciliations for adjusted EBIT on a forward-looking basis (including those contained in this document) when we are unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing and amount of Certain Items, such as mark-to-market pension gains and losses, that have not yet occurred, are out of our control and/or cannot be reasonably predicted. For the same reasons, we are unable to address the probable significance of the unavailable information. Adjusted EBIT margin is defined by the Company as adjusted EBIT divided by net sales. Adjusted EBIT margin has the same uses and limitations as Adjusted EBIT.

  • Operating EBITDA is a performance measure used by the Company and is defined by the Company as net earnings (loss) attributable to Celanese Corporation, plus (earnings) loss from discontinued operations, less interest income, plus interest expense, plus refinancing expense, taxes and depreciation and amortization, and further adjusted for Certain Items, which Certain Items include accelerated depreciation and amortization expense. Operating EBITDA is equal to adjusted EBIT plus depreciation and amortization. We believe that Operating EBITDA provides transparent and useful information to investors, analysts and other parties in evaluating our operating performance relative to our peer companies. Operating EBITDA margin is defined by the Company as Operating EBITDA divided by net sales. Operating EBITDA margin has the same uses and limitations as Operating EBITDA.

  • Operating profit (loss) attributable to Celanese Corporation is defined by the Company as operating profit (loss), less earnings (loss) attributable to noncontrolling interests ("NCI"). We believe that operating profit (loss) attributable to Celanese Corporation provides transparent and useful information to management, investors, analysts and other parties in evaluating our core operational performance. Operating margin attributable to Celanese Corporation is defined by the Company as operating profit (loss) attributable to Celanese Corporation divided by net sales. Operating margin attributable to Celanese Corporation has the same uses and limitations as Operating profit (loss) attributable to Celanese Corporation.

  • Adjusted earnings per share is a performance measure used by the Company and is defined by the Company as earnings (loss) from continuing operations attributable to Celanese Corporation, adjusted for income tax (provision) benefit, Certain Items, and refinancing and related expenses, divided by the number of basic common shares and dilutive restricted stock units and stock options calculated using the treasury method. We believe that adjusted earnings per share provides transparent and useful information to management, investors, analysts and other parties in evaluating and assessing our primary operating results from period-to-period after removing the impact of the above stated items that affect comparability and as a performance metric in the Company's incentive compensation plan. We do not provide reconciliations for adjusted earnings per share on a forward-looking basis (including those contained in this document) when we are unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing and amount of Certain Items, such as mark-to-market pension gains and losses, that have not yet occurred, are out of our control and/or cannot be reasonably predicted. For the same reasons, we are unable to address the probable significance of the unavailable information.

Note: The income tax expense (benefit) on Certain Items ("Non-GAAP adjustments") is determined using the applicable rates in the taxing jurisdictions in which the Non-GAAP adjustments occurred and includes both current and deferred income tax expense (benefit). The income tax rate used for adjusted earnings per share approximates the midpoint in a range of forecasted tax rates for the year. This range may include certain partial or full-year forecasted tax opportunities and related costs, where applicable, and specifically excludes changes in uncertain tax positions, discrete recognition of GAAP items on a quarterly basis, other pre-tax items adjusted out of our GAAP earnings for adjusted earnings per share purposes and changes in management's assessments regarding the ability to realize deferred tax assets for GAAP. In determining the adjusted earnings per share tax rate, we reflect the impact of foreign tax credits when utilized, or expected to be utilized, absent discrete events impacting the timing of foreign tax credit utilization. We analyze this rate quarterly and adjust it if there is a material change in the range of forecasted tax rates; an updated forecast would not necessarily result in a change to our tax rate used for adjusted earnings per share. The adjusted tax rate is an estimate and may differ from the actual tax rate used for GAAP reporting in any given reporting period. Table 3a summarizes the reconciliation of our estimated GAAP effective tax rate to the adjusted tax rate. The estimated GAAP rate excludes discrete recognition of GAAP items due to our inability to forecast such items. As part of the year-end reconciliation, we will update the reconciliation of the GAAP effective tax rate to the adjusted tax rate for actual results.

  • Free cash flow is a liquidity measure used by the Company and is defined by the Company as net cash provided by (used in) operations, less capital expenditures on property, plant and equipment, and adjusted for capital contributions from or distributions to Mitsui & Co., Ltd. ("Mitsui") related to our methanol joint venture, Fairway Methanol LLC ("Fairway"). We believe that free cash flow provides useful information to management, investors, analysts and other parties in evaluating the Company's liquidity and credit quality assessment because it provides an indication of the long-term cash generating ability of our business. Although we use free cash flow as a measure to assess the liquidity generated by our business, the use of free cash flow has important limitations, including that free cash flow does not reflect the cash requirements necessary to service our indebtedness, lease obligations, unconditional purchase obligations or pension and postretirement funding obligations. Free cash flow is not a measure of cash available for discretionary expenditures since the Company has certain debt service and finance lease payments that are not deducted from that measure.

  • Net debt is defined by the Company as total debt less cash and cash equivalents. We believe that net debt provides useful information to management, investors, analysts and other parties in evaluating changes to the Company's capital structure and credit quality assessment.

  • Return on invested capital (adjusted) is defined by the Company as adjusted EBIT, tax effected using the adjusted tax rate, divided by the sum of the average of beginning and end of the year short- and long-term debt and Celanese Corporation stockholders' equity. We believe that return on invested capital (adjusted) provides useful information to management, investors, analysts and other parties in order to assess our income generation from the point of view of our stockholders and creditors who provide us with capital in the form of equity and debt and whether capital invested in the Company yields competitive returns.

Supplemental Information

Supplemental Information we believe to be of interest to investors, analysts and other parties includes the following:

  • Net sales for each of our business segments and the percentage increase or decrease in net sales attributable to price, volume, currency and other factors for each of our business segments.

  • Cash dividends received from our equity investments.

  • For those consolidated ventures in which the Company owns or is exposed to less than 100% of the economics, the outside stockholders' interests are shown as NCI. Beginning in 2014, this includes Fairway for which the Company's ownership percentage is 50%. Amounts referred to as "attributable to Celanese Corporation" are net of any applicable NCI.

Results Unaudited

The results in this document, together with the adjustments made to present the results on a comparable basis, have not been audited and are based on internal financial data furnished to management. Quarterly results should not be taken as an indication of the results of operations to be reported for any subsequent period or for the full fiscal year.

Table 1

Adjusted EBIT and Operating EBITDA - Reconciliation of Non-GAAP Measures - Unaudited

Q2 '22

Q1 '22

2021

Q4 '21

Q3 '21

Q2 '21

Q1 '21

(In $ millions)

Net earnings (loss) attributable to Celanese Corporation

434

502

1,890

524

506

538

322

(Earnings) loss from discontinued operations

6

22

4

13

4

1

Interest income

(1

)

(1

)

(8

)

(1

)

(2

)

(4

)

(1

)

Interest expense

48

35

91

21

21

24

25

Refinancing expense

9

9

Income tax provision (benefit)

112

112

330

27

102

116

85

Certain Items attributable to Celanese Corporation (Table 8)

47

65

139

77

(1

)

13

50

Adjusted EBIT

646

713

2,473

652

648

691

482

Depreciation and amortization expense(1)

98

100

362

93

91

90

88

Operating EBITDA

744

813

2,835

745

739

781

570

Q2 '22

Q1 '22

2021

Q4 '21

Q3 '21

Q2 '21

Q1 '21

(In $ millions)

Engineered Materials

4

4

9

4

2

1

2

Acetate Tow

...