Celanese looks to cut as earnings lag

After a challenging year in which markets such as automotive and construction faltered, Celanese is looking to mount a comeback. The chemical maker is reducing costs, shutting capacity, and even considering divestitures.

On Feb. 18, the Texas-based company reported that 2024 sales fell 6%, to $10.3 billion, because of declining prices and volumes. The firm generated a loss of $1.5 billion for the year, including a massive impairment charge stemming from its 2022 purchase of DuPont’s engineering polymer unit for $11 billion.

“This past year was one of the most difficult in my nearly two decades with the company,” CEO Scott Richardson said in prepared remarks. Richardson, who had been chief operating officer, took over as CEO Jan. 1, replacing Lori Ryerkerk, who stepped down suddenly after leading the firm since 2019.

On the day of its earnings report, Celanese’s stock price plummeted 21%.

Celanese’s largest business, engineering polymers, posted a 9% decline in sales last year. Demand was “anemic throughout the year,” the company said in its announcement, but was especially low in the second half because of a slowdown in the industrial and automotive sectors. European auto production dropped 7% during the second half.

“Early signs point to weak demand continuing through the first half of this year,” Richardson said. Forecasters, he noted, expect another flat year of auto production. And markets like paints, coatings, and construction, important outlets for Celanese’s acetyl segment, “show scant signs of any near-term improvement.”

Celanese has been trying to rein in costs. It says it is on track to exceed the $75 million cuts in expense it announced in November. At the time, the company also slashed its dividend.

In addition to the cost cutting, Celanese is closing its Mylar Specialty Films joint venture with Japan’s Teijin in Luxembourg. It says the “action is in keeping with the Company's core principle of exiting higher cost facilities.”

Richardson is considering further restructuring manufacturing. And in engineering polymer markets, the company aims to improve earnings $50 million–$100 million annually by streamlining its distribution network and cutting overhead costs more deeply.

As Celanese seeks to trim the high debt it incurred when it bought the DuPont unit, it is looking at divestitures. Richardson told analysts the company is considering deals of about the same size as the $470 million sale of most of its food ingredient business to Mitsui & Co., which it completed in 2023.

Financial analysts are cautiously optimistic about a turnaround for Celanese by the end of the year. “Despite near-term challenges, with our belief that Celanese has some high-quality business, with significant leverage when demand recovers, and valuation inexpensive . . . we remain long-term buyers of Celanese,” Deutsche Bank analyst David Begleiter wrote in a note to clients.

Frank Mitsch an analyst with Fermium Research is more skeptical. “Management credibility needs to be reclaimed,” he wrote in a note to clients.