Celanese 2Q 2005 Earnings
NYSE: CE
Conference Call/Webcast
Tues., August 9, 2005 10 a.m CT
David Weidman, CEO
C.J. Nelson, CFO
Second Quarter Earnings
1
This presentation may contain “forward-looking statements,” which include
information concerning the Company’s plans, objectives, goals, strategies, future
revenues or performance, capital expenditures, financing needs and other
information that is not historical information. When used in this presentation, the
words “estimates,” “expects,” “anticipates,” “projects,” “plans,” “intends,” “believes,”
and variations of such words or similar expressions are intended to identify forward-
looking statements. All forward-looking statements are based upon current
expectations and beliefs and various assumptions. There can be no assurance that
the Company will realize these expectations or that these beliefs will prove correct.
There are a number of risks and uncertainties that could cause actual results to differ
materially from the forward-looking statements contained in this presentation.
Numerous factors, many of which are beyond the Company’s control, could cause
actual results to differ materially from those expressed as forward-looking statements.
For a discussion of some of the factors, we recommend that you review the
Company’s Annual Report on Form 10-K at the SEC’s website atwww.sec.gov. Any
forward-looking statement speaks only as of the date on which it is made, and the
Company undertakes no obligation to update any forward-looking statements to
reflect events or circumstances after the date on which it is made or to reflect the
occurrence of anticipated or unanticipated events or circumstances.
Forward-Looking Statements
2
This release reflects three performance measures, net debt, adjusted EBITDA,
and diluted adjusted earnings per share as non-U.S. GAAP measures. The
most directly comparable financial measure presented in accordance with U.S.
GAAP in our consolidated financial statements for net debt is total debt; for
adjusted EBITDA is net earnings (loss); for diluted adjusted earnings per share is
net earnings (loss); and, for adjusted basic earnings per share is income
available to common shareholders. For a reconciliation of these non-U.S. GAAP
measures to U.S. GAAP figures, see the accompanying schedules to this
release.
Reconciliation of Non-GAAP Measures
to U.S. GAAP
3
Adjusted EBITDA, a measure used by management to measure performance, is defined as
earnings (loss) from continuing operations, plus interest expense net of interest income, income
taxes and depreciation and amortization, and further adjusted for certain cash and non-cash
charges. Our management believes adjusted EBITDA is useful to investors because it is one of
the primary measures our management uses for its planning and budgeting processes and to
monitor and evaluate financial and operating results. Adjusted EBITDA is not a recognized term
under U.S. GAAP and does not purport to be an alternative to net earnings as a measure of
operating performance or to cash flows from operating activities as a measure of liquidity.
Because not all companies use identical calculations, this presentation of adjusted EBITDA may
not be comparable to other similarly titled measures of other companies. Additionally, adjusted
EBITDA is not intended to be a measure of free cash flow for management’s discretionary use,
as it does not consider certain cash requirements such as interest payments, tax payments and
debt service requirements nor does it represent the amount used in our debt covenants. Net
debt is defined as total debt less cash and cash equivalents. Our management uses net debt to
evaluate the Company's capital structure. Diluted adjusted net earnings per share is defined as
income available to common shareholders plus preferred dividends, adjusted for special and
one-time expenses and divided by the number of basic common and diluted preferred shares
outstanding as of June 30, 2005. We believe that the presentation of all of the non-U.S. GAAP
information provides useful information to management and investors regarding various financial
and business trends relating to our financial condition and results of operations, and that when
U.S. GAAP information is viewed in conjunction with non-U.S. GAAP information, investors are
provided with a more meaningful understanding of our ongoing operating performance. This
non-U.S. GAAP information is not intended to be considered in isolation or as a substitute for
U.S. GAAP financial information.
Use of Non-GAAP Financial Information
4
David Weidman
President and Chief Executive Officer
5
Expansion of operating profit and strengthened cash position
Higher pricing on strong demand and high capacity utilization in
Chemical Products
Completed strategic acquisition of Acetex July 20
Sales
Operating Profit
Adjusted Diluted EPS
Dividends from Equity & Cost Investments
Adjusted EBITDA
$1,517 up
23%
$152 up 508%
$0.53
$17
$283 up 51%
2nd Qtr 2005
(in $millions)
Strong Underlying Business Results
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C. J. Nelson
Executive Vice President and Chief Financial Officer
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Financial Highlights
in $ millions (except per share data)
2nd Qtr 2005
2nd Qtr 2004
Net sales
1,517
1,229
Operating Profit
152
25
SG&A
(136)
(125)
Net Earnings (Loss)
67
(124)
Basic EPS
0.41
n.m.
Special Items
Refinancing expenses
-
-
Special charges
27
(1)
Non-Operating Foreign Exchange
(14)
-
Adjusted Diluted EPS
$0.53
n.m.
Adjusted EBITDA
283
188
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Chemicals Products
Second Quarter:
Significant price increases on robust demand, high industry capacity
utilization
Pricing more than offset higher raw material costs
Outlook:
Continued favorable market conditions in the 3rd quarter
In second half 2005, new acetyls capacity expected to temporarily ease
tight supply/demand
Longer-term outlook remains positive
Sales
Segment Earnings(1)
$1,085 up 34%
$149 up 338%
2nd Qtr 05
(in $millions)
(1) –Earnings from continuing operations before tax and minority interests
Strong integrated chain of acetyl products
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Ticona
Second Quarter:
Successfully implemented price increases – offset higher raw
material and energy costs
Weakened POM sales, primarily Europe and automotive sector
2005 results include $20 million in special charges primarily
related to exit of COC business; 2004 results include $18 million
charge for purchase accounting adjustment
Outlook:
Modest volume growth due to downturn in automotive and sluggish
European economy
Consistent earnings supported by cost improvement effort
Sales
Segment
Earnings(1)
$223 up 1%
$22 down
15%
(in $millions)
(1) –Earnings from continuing operations before tax and minority interests
Focus on increased growth through innovation
2nd Qtr 05
10
Acetate/Performance Products Summaries
Sales
Segment
Earnings(1)
$183 up 6%
$12 down 14%
(in $millions)
(1)
–Earnings from continuing operations before tax and minority interests
(2)
2004 results included $12 million in inventory-related purchase accounting adjustments
Acetate
Strong results on higher volumes, pricing and productivity improvements
China venture expansions moving forward
Restructuring of operations on schedule, temporary higher manufacturing costs due to
production/inventory alignment
Performance Products
Stable earnings on strong sweetener demand
Pricing declines consistent with strategy on sales to large-volume customers
Attractive, Cash Generating Businesses
Sales
Segment
Earnings(1)
$47 up 4%
$14 up $13(2)
(in $millions)
2nd Qtr 05
2nd Qtr 05
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Dividend Payments Usually Strongest in 1st Qtr
Significant Contribution from Equity
and Cost Investments
2004 Full Year dividends = $76 million
2005 expected to be $120 - 130 million
3Q dividends expected to be $45 million
Income Statement
Cash Flow
12
Equity Investments Summary
13
Capitalization
Cash
Senior Credit Term Loan
Delayed Draw Term Loan
Floating Rate Term Loan
Total Senior Debt
Senior Sub Notes ($)
Senior Sub Notes (€ -6/30/05 translated at
1.2092)
Assumed Debt
Total Cash Pay Debt
Discount Notes Series A
Discount Notes Series B
Total Debt
Shareholders' Equity
Total Capitalization
838
624
-
350
974
1,231
272
383
2,860
103
424
3,387
(112)
3,275
1,738
1,750
-
-
1,750
800
169
369
3,088
68
283
3,439
61
3,500
December 31,
2004
March 31,
2005
(in $millions)
959
1,725
-
-
1,725
800
157
351
3,033
70
290
3,393
126
3,519
June 30,
2005
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Combined Business Outlook
Adjusted EPS to increase to $0.45 - $0.50
Includes $15 million pre-tax in special charges and $15 million for Acetex
debt redemption
Includes impact of Acetex consolidation for two months
3rd Quarter
Adjusted EPS to increase to $1.90 to $2.00 – up from previous guidance of
$1.64 and $1.69
Includes impact of Acetex consolidation for five months
Full Year 2005
Adjusted EBITDA
Full year adjusted EBITDA expected to increase to $1,060 to $1,090 million
3rd quarter expected to be $240 to $260 million
Typical seasonality in second half of year (55%/45%) and expected impact of
acetyl capacity expansions
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Full Year 2005 Key Modeling Assumptions
Income Statement
($ millions)
Depreciation = $250-$270
Special charges = $100-$110
Interest expense = $290-$300
Cash interest = $235-$245
Excluding deferred finance/debt
premium of approx. $117
Avg cost of borrowed capital = 7%
Effective tax rate of 35% for EPS
level and 24% for Adjusted EPS
Minority interest in teens/qtr beyond
1Q
Other Activities Operating Profit in
mid to upper ($30’s)/qtr beyond 2Q
Equity – CE Shares
Common stock = 158.5 million outstanding
Potentially dilutive securities as of 6/30:
12 million shares – converted preferred
12 million shares - stock options @
$16.00
August 9 guidance based on 170.5
million shares
Preferred stock dividends = approx. $10
million on 9.6 million outstanding shares
Equity – CAG Minority Interest
Approximately 8 million shares
outstanding as of June 23, 2005
Current tender offer price = €41.92/share
Net guaranteed payment = approximately
€24 million
Capital Expenditures
Capital expenditures = $215 - $225 mm
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