(CE) Celanese Acquires Ashland Assets

Celanese Corporation (CE) entered into an agreement to acquire polyvinyl acetate assets from Ashland Inc. (ASH), including two product lines, Vinac and Flexbond. The transaction is expected to close within 60 days, subject to satisfaction of closing conditions. Terms were not disclosed.

The acquisition will further the growth of the Emulsion Polymers business and will expand Celanese’ product portfolio. The combined revenues of the two products were $45 million in 2010. This transaction is consistent with Celanese’s strategy to create shareholder value through strategic portfolio enhancements.

Recently, Celanese reported adjusted earnings of $1.27 per share in the third quarter of 2011, beating the Zacks Consensus Estimate of $1.11. Diluted earnings per share in the quarter were $1.05, up 12.9% year over year.

Quarterly revenues grew 20% year over year to $1.81 billion, primarily driven by higher pricing across all operating segments and favorable currency impacts. Results were above the Zacks Consensus Estimate of $1.69 billion. Operating profit was $196 million compared with $221 million in the prior-year quarter.

The company raised its outlook for full-year 2011, encouraged by the strength of its third-quarter 2011 performance, its confidence in its earnings growth programs, and its expectations for a continued modest global economic recovery.

The company now expects 2011 operating EBITDA to be at least $280 million higher than 2010’s results of $1,122 million, and adjusted earnings per share to be at least $1.30 higher than 2010’s results of $3.37, based on tax rate and diluted share count of 17% and 159 million shares, respectively.

The company had previously expected 2011 operating EBITDA and adjusted earnings per share to be at least $275 million and $1.20 higher than 2010, respectively.

Celanese is one of the world’s largest producers of acetyl products, as well as a leading global producer of high-performance engineered polymers. The company’s earnings outlook has been improving, driven by the strong performance in the Advanced Engineered Materials business.

The company is operating its facilities in the Acetyl Intermediates segment at above industry utilization rates of 80%, which provides cost advantages. Capacity utilization has also improved in the Industrial Specialties segment due to rising demand in the Asia Pacific region.

However, Celanese is exposed to volatile raw material (natural gas, ethylene and methanol) prices used in the production of basic chemicals in the Acetyl Intermediates segment, principally formaldehyde, acetic acid and vinyl acetate monomer.

The company also faces stiff competition from larger peers E.I. DuPont de Nemours and Co. (DD) and The Dow Chemical Co. (DOW) in the Advanced Engineered Material Segment, as well as in the Industrial Specialties segment. Celanese’s balance sheet leverage is also relatively high, which limits its financial flexibility.

Currently, Celanese has a short-term (1 to 3 months) Zacks #3 Rank (Hold) and a long-term (6 months and higher) Outperform recommendation.

ASHLAND INC (ASH): Free Stock Analysis Report

CELANESE CP-A (CE): Free Stock Analysis Report

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DOW CHEMICAL (DOW): Free Stock Analysis Report

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