Summary
- Celanese Corporation, over a century old, uses abundant US Gulf Coast natural gas to make one of its foundational chemicals, methanol.
- While this specialty materials and chemicals company has a small 2.3% dividend, its board authorized a $1.56 billion share repurchase in July 2020.
- The company’s global diversification allows it to serve customers throughout Europe, Asia, North America, and South America.
- Looking for a portfolio of ideas like this one? Members of Econ-Based Energy Investing get exclusive access to our model portfolio. Get started today »
It bears repeating that the U.S. and global economies slowed significantly in the second quarter of 2020 due to coronavirus pandemic shutdowns and closures. While basic materials company Celanese Corporation (CE) experienced a big demand drop--for instance in goods supplied for elective surgeries--it and other chemicals companies fared better than other industry groups (travel, energy, movie theaters, restaurants, hotels). At the other end of the spectrum consumer cleaning products companies like Clorox (CLX) had a blowout second quarter.
Specifically, the automotive, building supply, consumer goods, packaging, personal care, and other areas Celanese supplies are now recovering better than expected.
I recommend Celanese for its broad-based product and geographic mix, its manufacturing expertise and leadership in acetic acid and vinyl acetate monomer (VAM), and its access to abundant natural gas production with which to make methanol. While the company’s dividend is not large, third quarter results appear to be rebounding and the company has an investor-friendly share repurchase program underway.
Second Quarter 2020 Results and Primary Divisions
For the second quarter of 2020, Celanese reported net earnings of $109 million (earnings per share of $0.93) on net sales of $1.2 billion.
Operating cash flow for the quarter was $379 million and free cash flow was $283 million. This was the sixth highest free cash flow for any quarter.
The company also announced it will realize $1.575 billion for its equity investment in the Polyplastics joint venture, expected to close in the second half of the year.
Celanese reports operating results in three divisions: engineered materials, acetate tow, and acetyl chain.
