Celanese idling some global production amid demand slump

Major drops in demand are leading materials firm Celanese Corp. to idle some of its production plants.

Dallas-based Celanese is "reducing manufacturing costs through the end of 2024 by temporarily idling production facilities in every region and driving cash generation through an expected $200 million inventory release in the fourth quarter," the company said Nov. 4.

On an earnings call, officials said Celanese is idling production units making acetic acid, vinyl acetate monomer (VAM) and similar products in Singapore and a VAM plant in Frankfurt. They added the Frankfurt plant will be used as swing capacity to meet demand. Acetic acid is used to make acetal resins and also is a primary ingredient in vinegar production. VAM can be used to make polyvinyl acetate (PVA) and other specialty resins.

Details on other sites were not provided. Celanese also reported its third-quarter sales were down almost 3 percent to $2.65 billion vs. the year-ago period, as profit for the quarter plunged almost 88 percent to $116 million in the same comparison.

"In the third quarter, we faced a severely constrained demand environment that, in some cases like auto, degraded swiftly," CEO Lori Ryerkerk said. Actions taken by Celanese "have been increasingly offset in the current environment and the earnings generated fell short of our expectations," she added.

Looking ahead, Ryerkerk said Celanese expects demand conditions to worsen in the fourth quarter as automotive and industrial segments react to recent dynamics by seasonally destocking at heavier than normal levels.

"While we expect this destocking to be temporary and contained to the quarter, we will significantly slow our production to match this demand level and to generate cash through inventory draw," Ryerkerk said.

Celanese also plans to implement additional cost reduction programs expected to realize incremental savings greater than $75 million by the end of 2025. Officials said the focus of the programs will be on driving productivity in selling, general and administrative (SG&A) costs.

News of the financial situation sent Celanese's stock price down 26 percent to $91 on Nov. 5. It closed at just under $90 on Nov. 7 as the overall stock market hit record highs. The price had started the year above $150.

Celanese is the world's largest maker of acetal resins. The firm made a major move into engineering resins in late 2022 when it acquired most of DuPont's Mobility & Materials unit in an $11 billion all-cash deal.

That deal included Zytel and Rynite nylon, Crastin polybutylene terephthalate, Vamac and Hytrel elastomers, as well as other materials. The transaction brought to Celanese 29 global manufacturing sites that employ around 5,000 in manufacturing, technical and commercial roles.

On the earnings call, stock analysts asked several questions about Celanese's Engineered Materials unit, which includes the businesses acquired from DuPont.

"Our long-term expectation for this [EM] business is no different than it's been," Ryerkerk said. "We still believe in the long-term performance of our Acetyls and our EM businesses, including the acquisition."

"The challenge we've had is the current macroeconomic conditions and recent demand deterioration," she added. "Because of that … we are not getting the cash flow we expected to be on the deleveraging plan that we had planned for."

Ryerkerk also commented on her view of the EM business.

"We still feel we have the most unparalleled portfolio of engineered materials," she said. "We have a structure that really drives, in a very disciplined way, new projects, growth into new customers [and] growth into new applications. ... This is fundamentally a very good business still in demand by our customers who demand innovation and who want to buy products from us. So, what we're seeing is a short-term turndown."

Ryerkerk added that although the nylon 6/6 market is struggling because of an oversupply of nondifferentiated polymer, Celanese's nylon 6/6 focus "is really on the differentiated polymer, the compounding."

"Even if [nylon 6/6] is less than we originally thought, many of the other parts of the [DuPont] acquisition, such as Mylar or Vamac or Hytrel or high-temperature nylon, are outperforming where we thought they'd be at this time. So, in aggregate, we still see the value of the M&M acquisition and the value of the total EM portfolio as being as strong as it ever will be once we get back to a more normalized demand condition."

Chief Operating Officer Scott Richardson said Celanese plans to "supercharge the pipeline" on engineered materials. "While we have had some good metrics, it's not been enough to offset the downside we've seen from some of the demand challenges," he added. "We've got to continue to aggressively work with customers [and] continue to penetrate in non-automotive sectors."

The EM pipeline model "is still a position of strength" for Celanese, according to Richardson. "The size of projects being up over 30 percent year-over-year is a really good example. Our project win rates are also up since the acquisition."

"The issue we're seeing now is the amount of volume that's coming with each of those projects is smaller," he said. "So, when we talk about supercharging, it's not a condemnation on where things are. It's just the opposite. It is a strength of this business."

In non-auto applications for the EM unit, Richardson said Celanese "has had some wins" in products such as oil well pipes and high-performance athletic shoes. "We're going to continue to invest resources and partner with customers in a way that allows us to be successful, because we need the pipeline to be generating more in this environment," he added.