DÜSSELDORF, GERMANY (Nov. 19, 5:25 p.m. EST) — Ticona, the technical polymers business of Germany's Celanese AG, is keeping a stiff upper lip during tough economic times, and vows to carry on with many previously announced production capacity expansions.
This is despite the Summit, N.J., firm reporting a 17 percent drop in sales and a 56 percent plunge in profit for its recently completed third quarter. Hit hard by downturns in the U.S. automotive market and the global telecommunications sector, Ticona's profit before interest, taxes, depreciation and amortization, excluding special charges, is down 56 percent for the first nine months of 2001, to 52 million euros ($46.8 million).
Still, Frankfurt, Germany-based Celanese stressed it has reduced debt by 24 percent from year-end 2000, and improved cash flow from continuing operations by more than $400 million.
Meantime, Ticona maintains it is happy with its heavy dependence on the automotive sector, while also looking to increase penetration into the medical products business. And Ticona remains a strong e-business believer, despite the recent retirement of Chief Executive Officer Edward H. Muñoz, who was one of the plastics industry's most prominent Internet evangelists. His replacement at the top of Ticona, Stefan Sommer, shares Muñoz's e-passion, and also shared his own views on the company's plans in an Oct. 31 interview at K 2001 in Dusseldorf.
Sommer, currently Ticona's chief operating officer, becomes its divisional president Jan. 1 in a restructuring that has Celanese shedding 850 jobs, or about 7 percent of its global work force. He will report to David N. Weidman, CEO of Celanese Chemicals and a member of the parent's management board. Ticona will not appoint anyone to Muñoz's former post of Ticona CEO, and the Celanese board will shrink from five members to four.
Apart from delaying a polyacetal plant expansion in Kelsterbach, Germany, by “a couple of months,” Sommer said numerous other expansion projects are forging ahead as planned. The firm originally announced that the acetal project, aimed at boosting the plant's annual output to 220 million pounds, would begin operating in 2003.
The previously announced ventures that Sommer says remain “fully on track” include:
* Construction of a $50 million plant in Bishop, Texas, due to come on stream late next year with the capacity to make 66 million pounds a year of Ticona's GUR-brand ultrahigh-molecular-weight polyethylene.
* Addition of 11.7 million pounds of Vectra liquid crystal polymer capacity in Shelby, N.C.
* A project with two partners to build a world-scale polyacetal plant in China by 2004. The lead company on that project is Polyplastics Co. Ltd., a 55-45 joint venture between Japan's Daicel Chemical Industries Ltd. and Ticona. Also involved is Japan's Mitsubishi Gas Chemical Co. Inc. The plant, in Nantong, just north of Shanghai, is slated to have production capacity of 132 million pounds. Ticona estimates current Chinese demand for polyacetal resin to be more than 220 million pounds a year, and expects strong demand growth to continue.
* Construction, with Dutch partner DSM NV, of a polybutylene plant in Europe to make polymer flake, but not compounds. “We have a memo of understanding,” Sommer said, adding that the firms “have no present intentions to delay plans.” Operations are to begin in 2003.
Despite seeing 47 percent of its sales last year going into the depressed automotive sector, Ticona likes its strong position there. Noting that 2001 still will rank as the fourth-best year ever for U.S. light-vehicle sales, Sommer said, “Automotive is not a bad industry to be in. It's a very innovative industry,” he added, referring specifically to Germany's automakers.
He cites the re-emergence of weight reduction as a key driver, along with the challenges and high-end materials opportunities presented by various new technologies. Those include alternative fuel cells, the 42-volt electrical systems being introduced now into vehicles, and systems that allow for injection of hot diesel fuels directly into the engine.
Still, Ticona is working to tap new markets. About 4 percent of the firm's European sales will go into the medical sector this year, after it did no medical business just three years ago. A good example, Sommer said, is the company's Topas cyclic-olefin copolymer, which is finding use in high-performance packaging applications. Topas was chosen for an aspirin blister package in Indonesia because its barrier properties protect against high humidity. On the nonmedical front, Sommer said Topas also is being used in zipper closures for Pactiv Corp.'s Hefty storage bags.
As regards the Internet, the company has taken a multipronged strategy. In addition to investing heavily in its own transactional portal, called Buy Ticona Direct, the firm in June 2000 was one of five resin-company founding members of the public Omnexus e-marketplace. Ticona also sells its materials via GE Polymerland, is a second-tier investor via Celanese in the chemicals portal Elemica, is developing several Celanese intranet initiatives, and is working with Conferos to provide customers with real-time, online design-collaboration tools.
Sommer admits that processors' adoption of the Internet as a sales channel has taken longer than anticipated, and acknowledged that “a lot of customers were confused by all the different options.” He also suggested that some of the portals themselves may have underestimated the technical complexity of their task, and then added, “Nobody expected the e-business bubble to burst so fast.”
Still, Sommer bullishly predicts that, “In a couple of years, we see two-thirds of our sales being via online.” As an example, he noted: “Everyone said that a couple of thousand small molders in Italy would never do e-business. But they have; it's been amazing.”
