Celanese Raises Prices, Cuts Costs, and Gets a Tax Break Worth $22 Million 


Stock news for Celanese (CE) continues to improve, even as the Celanese share price is up over 36% in 2019. 

Last week the company announced a price increase in its acetyl intermediates products, which make up the majority of Celanese’s revenue. The price increase goes into effect January 1, 2020, or on a per contract basis at the next available renewal. 

The price increase is part of a plan laid out in the company’s latest conference call to gradually increase prices while working to simultaneously cut costs. The company is proceeding with price increases despite a reported softening of demand in Asia last quarter, but with an anticipated firming of orders in 2020.

The price increase also offsets a 1% decrease in price over the last quarter caused by a combination of lowered pricing and currency exchange impacts, as described in the company’s latest quarterly earnings report. 

In conjunction with the price increases, last week Celanese also won approval for a major expansion to its Clear Lake, Texas chemical production facility. Under the agreement Celanese will receive extensive tax breaks to operate the new expansion over a ten year period.

The Texas Comptroller has agreed to tax the $400 million facility as if it were an $80 million facility, saving Celanese almost $22 million dollars over a 10 year period.

The expansion is expected to add 800,000 tons of acetic acid per year. The additional capacity is projected to come online in 2022 when the expansion is scheduled for completion. Acetic acid is used in a wide variety of applications including paint, industrial coatings, sealants, fibers, and pharmaceutical products.

The new facility is important to the company’s long term plans, in that earlier this year Celanese projected the Clear Lake expansion would allow the company to realize productivity and efficiency cost savings of over $100 million per year. 

Upon completion of the Texas production unit, the company intends to reduce capacity in Singapore and Nanjing, China by 600,000 tons per year.

The combination of the acetyl intermediates price increase, and approval of the new facility expansion, should encourage Celanese shareholders who were returned over $352 million last quarter. This was done using both dividends, totaling over $77 million, and share repurchases, coming in at $275 million.

CEO Lori Ryerkerk was pleased with the company’s performance through the latest quarter stating, “Our businesses and teams have displayed remarkable resilience in the third quarter to deliver sequential growth despite tremendous challenges, including a weak market demand backdrop.”

Steven Adams’s personal position in CE: None.

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