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Celanese Inks Deal With Linde to Buy Syngas Production Unit

Zacks Equity Research

Celanese Corporation CE has entered into a definitive agreement to purchase a synthesis gas production unit of 365 kilo tons per annum from Linde PLC. The unit is located at the Celanese Clear Lake acetyl intermediates manufacturing facility in Pasadena, TX.

Syngas is a combination of carbon dioxide, carbon monoxide and hydrogen. It can be produced from sources like coal, biomass, natural gas, or any hydrocarbon feedstock, with the reaction of oxygen or steam. Moreover, syngas is an important resource for the production of ammonia, acetic acid, methanol, synthetic hydrocarbon fuels and hydrogen.

With this acquisition, Celanese will now have the capacity to produce a key raw material for the world’s largest acetyl intermediates production facility. Linde is the primary supplier of carbon monoxide to the Clear Lake facility and the acquisition of syngas production unit is likely to open up productivity and growth opportunities for Celanese.

Celanese and Linde are expected to complete the deal upon meeting customary closing conditions and receiving regulatory approvals. However, the financial details of the deal have been kept under wraps.

In the past six months, Celanese has underperformed the industry it belongs to. The stock has lost around 14.7% compared with the industry’s fall of 8.9%.

Celanese, in October 2018, raised its adjusted earnings per share guidance for 2018 to $10.90-$11.10, owing to strength in Engineered Materials (EM) and Acetyl Chain units. The company expects momentum in Acetyl Chain and EM to continue. The EM segment is expected to maintain the pace of earnings growth with traction from new projects and bolt-on acquisitions.

Celanese is taking appropriate pricing actions amid a volatile pricing environment for raw materials. The company’s strategic measures including operational cost savings through productivity actions and price hike initiatives are likely to provide an impetus to earnings. 

Celanese Corporation Price and Consensus


Celanese Corporation Price and Consensus | Celanese Corporation Quote

Zacks Rank & Stocks to Consider

Celanese currently carries a Zacks Rank #4 (Sell).

A few better-ranked stocks in the basic materials space are Ingevity Corporation NGVT, Israel Chemicals Ltd. ICL and Cameco Corporation CCJ.

Ingevity’s shares have gained 19% in the past year. The company has an expected earnings growth rate of 21.5% for 2019 and it currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Israel Chemicals has an expected earnings growth rate of 2.7% for 2019 and a Zacks Rank #2 (Buy). The stock has rallied 30.4% in a year.

Cameco has an expected earnings growth rate of 20% for 2019 and a Zacks Rank #2. Its shares have gained 28.5% in a year.

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