Celanese(CE) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company expects to grow EPS by $1 to $2 in 2026, driven by cost actions and progress from the EM pipeline, even in a flat demand environment [7][8] - Working capital has been a source of cash of $250 million in 2025, but a similar level is not expected in 2026 due to anticipated demand levels [37][38] - Free cash flow is projected to be at least $700-$800 million in 2026, supported by EBITDA improvements and reduced restructuring cash outlay [38] Business Line Data and Key Metrics Changes - Engineered materials volumes were down 8% year-over-year, with standard-grade materials experiencing more significant declines compared to thermoplastic elastomers, which showed growth [19][30] - The company is focusing on cost savings in engineered materials, targeting $30 million-$50 million in additional savings, net of inflation [48][49] Market Data and Key Metrics Changes - Pricing pressure in the acetyl chain has been observed, particularly in Europe, while stabilization and slight price increases were noted in China [17][18] - The company is not seeing extensive inventory destocking across the board, with some pockets of inventory reduction being managed thoughtfully [34][35] Company Strategy and Development Direction - The company is prioritizing cash flow increase, cost improvements, and top-line growth as it moves into 2026 [7] - A focus on divestitures continues, with a commitment to $1 billion in divestitures by the end of 2027, with the recent Micromax transaction contributing significantly towards this goal [54][56] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving EPS growth despite a challenging demand environment, emphasizing the resilience of the team and the actions taken to position the company for future success [78] - The dialogue around anti-involution in China is increasing, with expectations that profitability of assets in China needs to improve [80][81] Other Important Information - The company recorded a goodwill impairment due to a reduction in market cap, not due to a decline in projected cash flows [72] - The Narco enclosure is expected to yield $20 million-$30 million in productivity savings by 2027 [42] Q&A Session Summary Question: Early look at 2026 earnings control - Management highlighted priorities for 2026, focusing on cash flow, cost improvements, and top-line growth, with expected EPS growth of $1 to $2 [7] Question: EM pricing outlook - Management indicated that there are still opportunities for pricing improvements in EM, particularly in standard-grade materials [10] Question: Operating rates in the acetyl chain - Management noted that the lowest-cost assets are running at full capacity, while other assets are flexibly operated based on demand [13][14] Question: Sequential pricing pressure in the acetyl chain - Pricing pressure has been observed in Europe, particularly in downstream products, while stabilization has occurred in China [17][18] Question: Volume decline in engineered materials - The decline is primarily in standard-grade materials, while thermoplastic elastomers have shown resilience [19][30] Question: Free cash flow expectations - Working capital has been a source of cash in 2025, but similar contributions are not expected in 2026 [37][38] Question: Divestiture strategy - The company is committed to $1 billion in divestitures by 2027, with the Micromax transaction significantly contributing to this target [54][56] Question: Impact of anti-involution on acetyls chain - Management acknowledged the increasing dialogue around anti-involution in China and its potential future impact on profitability [80][81]