Celanese Corporation (CE), a leading global specialty materials company, is ramping up production at its Wilmington, N.C. plant operated under its Fortron Industries LLC affiliate to match the rising global demand for Fortron® polyphenylene sulfide (PPS). The plant is the largest in the world with an annual capacity of 15,000 tons. Celanese plans to boost production at the facility by the end of the third quarter of 2010.
Polyphenylene sulfide is used in industrial applications. Fortron PPS replaces metals and thermosets in auto pumps, valves, air ducts and powertrains; electronic connectors, plugs, switches and circuit boards; structural and non-structural aircraft components; and heater grilles, impellers, conveyors, power tools, microwave elements and for other industrial uses due to its chemical and thermal resistance, hardness, rigidity and dimensional stability, and low creep and moisture absorption properties.
Celanese owns and runs the facility under a joint venture with 2 wholly owned subsidiaries: Kureha Corporation and Ticona Engineering Polymers. Kureha Corporation is a diversified manufacturer of chemicals and plastics in Japan, China, the Netherlands and the United States, while Ticona runs the Celanese’s engineering polymers business.
Celanese produces polyphenylene sulphide under its Advanced Engineered Materials segment, which constituted more than 18% of total revenues last quarter. Other primary products under the segment are POM, long−fiber reinforced thermoplastics, polybutylene terephthalate, polyethylene terephthalate, ultra−high molecular weight polyethylene and liquid crystal polymers. Such chemicals are used in a broad range of products including automotive components, electronics, appliances and industrial applications.
The segment benefits from higher sales of the specialty engineered polymers. Higher sales at the Future Advanced Composites Technology long-fiber reinforced thermoplastics business, acquired in December 2009, boost revenues of the segment.
Apart from acquiring the long fiber reinforced thermoplastics business of Germany’s Future Advanced Composites Technology, Celanese also took over DuPont’s (DD) Zenite® liquid crystal polymer and Thermx® polycyclohexylene−dimethylene terephthalate product lines to support this segment.
The newly acquired products have strengthened Celanese's position in the Ticona Engineering Polymers business, which caters to the electrical and electronics application markets. The segment has already started benefiting from the integration of the National Methanol Company affiliate (Ibn Sina). Pricing gains in the methanol and methyl tertiary-butyl ether business with improvement in global demand leads to good results from Ibn Sina.
Celanese earnings outlook has been improving, helped by the strong performance in the Advanced Engineered Materials business. We are optimistic about Celanese’s growth strategies under the segment that should help profitability. In addition, Celanese is also operating its facilities at above 80% in the Acetyl Intermediates segment, which provides cost advantages.
Capacity utilization has also improved in the Industrial Specialties segment on rising demand in the Asia Pacific. Anticipating further demand recoveries and declining raw material costs, Celanese has raised its earnings guidance for the full year 2010.
Analysts have also remained positive on the stock after the strong second quarter result as reflected by the current up tick in the earnings estimates. However, Celanese is susceptible to volatile raw material costs, which is pressuring margins in the Consumer Specialty and Industrial Specialty business. The company has high leverage that restricts its financial flexibility. For now, we reiterate our Neutral recommendation on Celanese.
CELANESE CP-A (CE): Free Stock Analysis Report
DU PONT (EI) DE (DD): Free Stock Analysis Report
Zacks Investment Research
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Comments
Loading...
Benzinga simplifies the market for smarter investing
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
Join Now: Free!
Already a member?Sign in
