US Celanese to slash dividend, idle plants after big Q3 earnings miss

HOUSTON (ICIS)–Celanese plans to cut its quarterly dividend by 95% in Q1 2025 and idle plants in every region after third-quarter adjusted earnings fell well below guidance, the US-based acetyls and engineered materials producer said on Monday.

Q3 adjusted earnings/share were $2.44 versus an earlier guidance of $2.75-3.00.

Celanese shares were down by more than 13% in afterhours trading.

Celanese is taking the following steps to cut down debt:

• It will temporarily idle plants in every region to reduce manufacturing costs through the end of 2024 It expects to generate an expected $200 million inventory release in the fourth quarter.
• The idling includes 10 sites in the company’s Engineered Materials segment.
• In the first half of the fourth quarter, Celanese has temporarily idled the company’s Singapore production of acetic acid, vinyl acetate monomer (VAM), esters and vinyl acetate emulsions (VAE).
• In Frankfurt, Germany, the company is idling its VAM plant and plans to use it as swing capacity to meet demand.
• It will start a program to reduce costs by more than $75 million by the end of 2025. The cost cutting will target selling, general and administrative (SG&A) expenses.
• It will target $400 million in 2025 capital expenditures, a figure below 2024 levels.
• It will close on a 364-day delayed draw prepayable term loan for up to $1 billion. It will draw on the term loan in Q1 2025 towards $1.3 billion in maturing debt.

TOUGH THIRD QUARTER
The plant shutdowns, dividend reduction and cost cutting follow a third quarter that saw demand degrade rapidly and acutely in automobiles and industrial end markets.

“Auto in Europe and North America experienced a shock to the demand patterns that had been relatively steady for the previous several quarters, with swift sales declines in both regions that led to a pullback in auto builds,” said Scott Richardson, chief operating officer. Demand remained slow in Asia but did not show the same trajectory as the Americas.

The company noted that prices in China for undifferentiated nylon polymer reflects supply that is growing faster than demand.

Demand remained weak in paints, coatings and construction. New capacity for VAM came online and outpaced demand, amplifying the weakness in construction as well as in solar panels.

Excess inventories in solar panels is weakening demand for ethylene vinyl acetate (EVA).

The weakness more than offset the gains that Celanese made from its synergy projects in its Mobility and Materials (M&M) acquisition and from its acetic acid expansion project in Clear Lake, Texas.

WORSE FOURTH QUARTER
Q4 destocking in the automotive and industrial end markets should be heavier than normal, and Celanese expects demand to worsen in the fourth quarter. The destocking should be temporary and contained in the quarter.

In Engineered Materials, Celanese expects a $40 million hit from the destocking. Another $15 million hit will come from seasonal declines associated with product mix. A further $15 million will come from temporarily idling capacity in the segment.

For acetyls, Celanese is not seeing any indications of demand growth in anticipation of the first quarter or as a result of stimulus from China.

For the company, Q4 adjusted earnings/share should be $1.25.

Q3 FINANCIAL PERFORMANCE
The following table shows the company’s Q3 financial performance. Figures are in millions of dollars.

	Q3 24	Q3 23	% Change
Sales	2,648	2,723	-2.8%
Cost of sales	2,026	2,050	-1.2%
Gross profit	622	673	-7.6%
Net income	116	951	-87.8%

Source: Celanese

Earnings in Q3 2023 reflect a $503 million one-time gain from the sale of assets.

Thumbnail shows adhesive, which is made with VAM. Image by Shutterstock.