Feature 834

The Time is Right for This Cyclical

Although COVID-19 has temporarily slowed revenue growth down for our Spotlight Stock, Celanese (CE) is part of a global marketplace that has lots of potential. According to marketsreportworld.com, the global acetyl market size is forecasted to reach 67 million by 2026, from $53 million in 2020.WSBI 834 Feature acetyls-market-analysis

The marketplace consists of several types of acetyls: Acetic Acid, Acetic Anhydride, Vinyl Acetate, and Ethylene Acetate. And Celanese has product offerings for the majority of market segments, as well as the various acetyl applications, which include Food and Beverages, Oil and Gas, Pharmaceutical, Paints and Coatings, and Furniture.

As contributor Bob Howard, editor of Positive Patterns, mentioned, the company is the biggest CH3CO producer in the world–# 1 in vinyl acetate monomer (VAM). Made from acetic acid, which makes up 28% of the total global acetyl market, VAM applications are growing at an annual rate of 6.3%. The Asia-Pacific market uses 41% of global acetyl, and that is accelerating. In the last quarter, despite the coronavirus, Celanese said its Asian business was up 2%.

Catalysts for growth in the acetyl market include green applications, advancements in organic chemistry, as well as increased demand in growing economies such as India, Philippines, and Singapore, and in sectors—particularly healthcare—that are finding new uses for acetyl.

Celanese has seen several markets for its materials rebounding, especially electric vehicles, where the market for its products is 30% more than traditional automobiles. It is also expecting higher demand in healthcare, from disinfectants and sterilization, pharma compliance, supplies, and the increase in elective surgeries (which was a $10 million surprise for the company last quarter). And it expects new uses for the 5G marketplace, in LCP printed circuit boards.

During second quarter, Celanese earned $155 million or $1.30 per share, considerably higher than the $1.05 analysts were predicting. The company’s focus on improving productivity (a $200 million target) is working, and it has so far saved about $135 million.

The company will also pick up a cool $1.575 billlion from selling its 45% stake in joint venture Polyplastics, to Daicel. The deal should close later this year.

It has a history of 12% annual growth organically, and 20% due to acquisitions. For next quarter, Celanese is forecasted to earn $1.70 per share on $1.34 billion in revenues.

Yes, the company, as Bob Howard says, is cyclical, but as long as the global economies continue their recovery, Celanese should be a happy participant.

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