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Celanese Tweaking Pension Accounting

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Chemical and advanced materials maker Celanese Corporation (CE) said that it is changing its accounting policy for pension plans and other post-retirement benefit plans.

Per the new policy dubbed mark-to-market (:MTM) accounting, Celanese will recognize actuarial gains and losses and changes in the fair value of the plans' assets in the fourth quarter every year. As such, it will no longer defer and amortize actuarial gains and losses into future years. The change, which is effective Jan 1, 2013, is retroactively applied to the company’s results for all periods referred in its latest Form 8-K.

Given the retrospective application of the accounting policy change, Celanese’s earnings from continuing operations for 2012 dropped to $2.35 per share from $3.81 mainly on account of the MTM adjustment of $389 million in the fourth quarter.

Barring the MTM adjustment, Celanese’s adjusted earnings for 2012 rose to $4.07 per share from $3.80 on reduced amortization of prior period actuarial losses. According to Celanese, the retrospective application of the policy change is not expected to impact its earlier announced growth rate for adjusted earnings per share for this year.

Pursuant to the accounting policy change, Celanese is also changing its allocation of net periodic benefit costs to properly reflect actual operational costs of each business segment.

Celanese expects that the accounting change will offer investors with greater transparency into its operating results and enable them to better assess its underlying operating performance. It further noted that the change will not impact benefits received by participants of the plans.

Celanese is among the world’s largest producers of acetyl products as well as the leading global producer of high-performance engineered polymers. The company’s strong presence in emerging markets will enable it to deliver incremental earnings in 2013.

Celanese is aggressively expanding capacity in the emerging Asian markets. Its expansion initiatives in China are expected to support earnings growth.

However, Celanese is witnessing weak demand and pricing in its core acetyl business. The challenging economic conditions in Europe and sluggish growth in Asia may impact the company’s results.

Celanese currently carries a short-term (1 to 3 months) Zacks Rank #3 (Hold).

Other companies in the chemical industry having favorable Zacks Rank are Akzo Nobel NV (AKZOY), Axiall Corporation (AXLL) and Eastman Chemical (EMN). All of them carry a Zacks Rank #2 (Buy).

Read the Full Research Report on EMN

Read the Full Research Report on CE

Read the Full Research Report on AXLL

Read the Full Research Report on AKZOY

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