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Celanese Corp 10-K Analysis & Summary – 2/21/2025

⚠️This is not investment advice.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️

Celanese Corp

Filing date:

02/21/2025

TLDR:

Celanese Corp’s 2024 10-K filing reveals a decrease in net sales and a significant operating loss due to goodwill impairment. The company is shifting its capital allocation strategy towards debt reduction.

ELI5:

Celanese, a chemical company, had a tough year with lower sales and a big loss because some of its assets weren’t worth as much as they thought. They’re now focusing on paying off debt.

Accession #:

0001306830-25-000027

Published on

Analyst Summary

  • Net sales decreased by 6% from 2023 to 2024.
  • Operating loss was (697) million USD in 2024, compared to an operating income of 1,687 million USD in 2023.
  • Net loss was (1,514) million USD in 2024, compared to a net income of 1,964 million USD in 2023.
  • Cash and cash equivalents decreased by 46.7% from 2023 to 2024.
  • Total debt decreased by 8.1% from 2023 to 2024.
  • Goodwill decreased by 22.8% from 2023 to 2024.
  • Operating Margin: -6.8% (2024) vs. 15.4% (2023)
  • SG&A as % of Net Sales: 10.0% (2024) vs. 9.8% (2023)
  • Gross Profit Margin decreased by 3.66% from previous year.
  • Operating Profit Margin decreased by 143.98% from previous year.
  • Net Profit Margin decreased by 182.06% from previous year.
  • Return on Assets (ROA) decreased by 189.70% from previous year.
  • Return on Equity (ROE) decreased by 206.41% from previous year.
  • Basic EPS decreased by 177.35% from previous year.
  • Diluted EPS decreased by 177.73% from previous year.
  • Current Ratio decreased by 12.42% from previous year.
  • Quick Ratio decreased by 22.11% from previous year.
  • Cash Ratio decreased by 43.18% from previous year.
  • Debt-to-Equity Ratio increased by 23.76% from previous year.
  • Debt-to-Assets Ratio increased by 7.84% from previous year.
  • Interest Coverage Ratio decreased by 10.37% from previous year.
  • Inventory Turnover decreased by 5.79% from previous year.
  • Days Sales Outstanding (DSO) decreased by 3.99% from previous year.
  • Days Payable Outstanding (DPO) decreased by 14.33% from previous year.
  • Asset Turnover increased by 9.76% from previous year.
  • EV/EBITDA is 36.73, above the typical range for the chemical industry.
  • Revenue Growth: -6.03%
  • Net Income Growth: -177.09%
  • EPS Growth: -177.35%

Opportunities and Risks

  • Economic Conditions: Exposure to global economic, political, and regulatory risks.
  • Raw Material Volatility: Volatility in the prices and availability of key raw materials and energy.
  • Production Disruptions: Potential disruptions at manufacturing facilities due to various factors.
  • Integration Challenges: Difficulties in achieving the intended benefits from the M&M Business acquisition.
  • Cybersecurity Threats: Vulnerability to information and operational technology cybersecurity threats.
  • Climate Change: Financial, regulatory, physical and transition risks associated with climate change.
  • Goodwill Impairment: Risk of future goodwill and indefinite-lived intangible asset impairment losses.
  • Sustainability Initiatives: Developing products to help customers meet their sustainability goals.
  • Strategic Affiliates: Leveraging strategic affiliates to gain access to local demand and minimize costs.
  • Technological Advancements: Improving process technologies to enhance productivity and performance.

Potential Implications

Company Performance

  • Monitor the company’s progress in deleveraging and achieving cost optimization targets.
  • Assess the impact of macroeconomic conditions and geopolitical events on the company’s future performance.
  • Evaluate the company’s ability to mitigate risks related to raw material volatility and production disruptions.

Celanese Corp (CE) 2024 10-K Filing Analysis

Executive Summary

This report analyzes Celanese Corp’s 2024 10-K filing. Key findings include a decrease in net sales, a significant operating loss due to goodwill impairment, and a shift in capital allocation strategy towards debt reduction. The overall assessment is cautious, highlighting both risks and opportunities in the current economic environment. A hold rating is suggested, pending further evidence of successful deleveraging and improved market conditions.

Company Overview

Celanese Corporation is a global chemical and specialty materials company. It operates primarily through two segments: Engineered Materials and Acetyl Chain. The company’s products are used in a wide range of industries, including automotive, construction, and consumer electronics. Recent developments include the acquisition of the Mobility & Materials business from DuPont and the formation of a food ingredients joint venture with Mitsui.

Detailed Analysis

Financial Statement Analysis

Key financial data from the 10-K filing is summarized below:

Income Statement

Metric 2024 (USD millions) 2023 (USD millions) Change (%)
Net Sales 10,280 10,940 -6%
Gross Profit 2,356 2,603 -9.5%
Operating Income (Loss) (697) 1,687 -2,384
Net Income (Loss) (1,514) 1,964 -3,478

Key Ratios:

  • Operating Margin: -6.8% (2024) vs. 15.4% (2023)
  • SG&A as % of Net Sales: 10.0% (2024) vs. 9.8% (2023)

Balance Sheet

Metric 2024 (USD millions) 2023 (USD millions) Change (%)
Cash and Cash Equivalents 962 1,805 -46.7%
Total Debt 12,579 13,684 -8.1%
Goodwill 5,387 6,977 -22.8%

Cash Flow Statement

Cash flow from operations decreased significantly, driven by unfavorable working capital changes and lower net earnings.

Management’s Discussion and Analysis (MD&A) Insights

  • Management attributes the decrease in net sales to lower pricing and volume, particularly in the Engineered Materials segment.
  • The MD&A highlights a strategic shift towards debt reduction and cost optimization.
  • The company acknowledges the impact of macroeconomic conditions and geopolitical events on its business.

Risks and Opportunities

Risks:

  • Economic Conditions: Exposure to global economic, political, and regulatory risks.
  • Raw Material Volatility: Volatility in the prices and availability of key raw materials and energy.
  • Production Disruptions: Potential disruptions at manufacturing facilities due to various factors.
  • Integration Challenges: Difficulties in achieving the intended benefits from the M&M Business acquisition.
  • Cybersecurity Threats: Vulnerability to information and operational technology cybersecurity threats.
  • Climate Change: Financial, regulatory, physical and transition risks associated with climate change.
  • Goodwill Impairment: Risk of future goodwill and indefinite-lived intangible asset impairment losses.

Opportunities:

  • Sustainability Initiatives: Developing products to help customers meet their sustainability goals.
  • Strategic Affiliates: Leveraging strategic affiliates to gain access to local demand and minimize costs.
  • Technological Advancements: Improving process technologies to enhance productivity and performance.

Red Flags and Uncommon Metrics

  • The significant goodwill impairment loss in the Engineered Materials segment raises concerns about the valuation of acquired assets.
  • The reduction in quarterly dividend reflects a change in capital allocation strategy and may impact investor sentiment.

Conclusion and Actionable Insights

Celanese faces challenges in the current economic environment, as evidenced by the decrease in net sales and the operating loss. The company’s strategic shift towards debt reduction is a positive step, but its success depends on improved market conditions and effective execution. The significant goodwill impairment loss warrants caution.

Overall Assessment: Hold

Recommendations:

  • Monitor the company’s progress in deleveraging and achieving cost optimization targets.
  • Assess the impact of macroeconomic conditions and geopolitical events on the company’s future performance.
  • Evaluate the company’s ability to mitigate risks related to raw material volatility and production disruptions.

Financial Ratio and Metric Analysis

Profitability

  • Gross Profit Margin:

    • Calculation: Gross Profit / Net Sales = $2,356 / $10,280 = 22.92%
    • Trend: Previous year Gross Profit Margin = $2,603 / $10,940 = 23.79%. Percentage change = (22.92% – 23.79%) / 23.79% = -3.66%
    • Industry: The chemical industry typically has gross profit margins ranging from 20% to 40%. Celanese’s gross profit margin is within this range but slightly below the average.
  • Operating Profit Margin:

    • Calculation: Operating Profit (Loss) / Net Sales = -$697 / $10,280 = -6.78%
    • Trend: Previous year Operating Profit Margin = $1,687 / $10,940 = 15.42%. Percentage change = (-6.78% – 15.42%) / 15.42% = -143.98%
    • Industry: The chemical industry typically has operating profit margins ranging from 8% to 15%. Celanese’s operating profit margin is significantly below this range.
  • Net Profit Margin:

    • Calculation: Net Earnings (Loss) / Net Sales = -$1,514 / $10,280 = -14.73%
    • Trend: Previous year Net Profit Margin = $1,964 / $10,940 = 17.95%. Percentage change = (-14.73% – 17.95%) / 17.95% = -182.06%
    • Industry: The chemical industry typically has net profit margins ranging from 5% to 12%. Celanese’s net profit margin is significantly below this range.
  • Return on Assets (ROA):

    • Calculation: Net Earnings (Loss) / Total Assets = -$1,514 / $22,857 = -6.62%
    • Trend: Previous year ROA = $1,964 / $26,597 = 7.38%. Percentage change = (-6.62% – 7.38%) / 7.38% = -189.70%
    • Industry: The chemical industry typically has ROA ranging from 4% to 8%. Celanese’s ROA is significantly below this range.
  • Return on Equity (ROE):

    • Calculation: Net Earnings (Loss) Attributable to Celanese Corporation / Total Celanese Corporation Shareholders’ Equity = -$1,522 / $5,175 = -29.41%
    • Trend: Previous year ROE = $1,960 / $7,091 = 27.64%. Percentage change = (-29.41% – 27.64%) / 27.64% = -206.41%
    • Industry: The chemical industry typically has ROE ranging from 10% to 15%. Celanese’s ROE is significantly below this range.
  • Earnings Per Share (EPS) – Basic and Diluted:

    • Basic EPS: -$13.93
    • Diluted EPS: -$13.93
    • Trend: Previous year Basic EPS: $18.01, Diluted EPS: $17.92. Percentage change Basic EPS = (-$13.93 – $18.01) / $18.01 = -177.35%, Percentage change Diluted EPS = (-$13.93 – $17.92) / $17.92 = -177.73%
    • Industry: EPS varies widely, but negative EPS indicates underperformance compared to industry peers with positive earnings.

Liquidity

  • Current Ratio:

    • Calculation: Total Current Assets / Total Current Liabilities = $5,145 / $3,853 = 1.34
    • Trend: Previous year Current Ratio = $6,218 / $4,072 = 1.53. Percentage change = (1.34 – 1.53) / 1.53 = -12.42%
    • Industry: A current ratio of 1.5 to 2.0 is generally considered healthy. Celanese’s current ratio is below this range.
  • Quick Ratio (Acid-Test Ratio):

    • Calculation: (Total Current Assets – Inventories) / Total Current Liabilities = ($5,145 – $2,284) / $3,853 = 0.74
    • Trend: Previous year Quick Ratio = ($6,218 – $2,357) / $4,072 = 0.95. Percentage change = (0.74 – 0.95) / 0.95 = -22.11%
    • Industry: A quick ratio of 1.0 or greater is generally considered healthy. Celanese’s quick ratio is below this range.
  • Cash Ratio:

    • Calculation: (Cash and Cash Equivalents) / Total Current Liabilities = $962 / $3,853 = 0.25
    • Trend: Previous year Cash Ratio = $1,805 / $4,072 = 0.44. Percentage change = (0.25 – 0.44) / 0.44 = -43.18%
    • Industry: A cash ratio of 0.5 or greater is generally considered healthy. Celanese’s cash ratio is below this range.

Solvency/Leverage

  • Debt-to-Equity Ratio:

    • Calculation: Total Debt / Total Equity = $12,579 / $5,609 = 2.24
    • Trend: Previous year Debt-to-Equity Ratio = $13,684 / $7,552 = 1.81. Percentage change = (2.24 – 1.81) / 1.81 = 23.76%
    • Industry: The chemical industry typically has debt-to-equity ratios ranging from 0.5 to 1.5. Celanese’s debt-to-equity ratio is above this range.
  • Debt-to-Assets Ratio:

    • Calculation: Total Debt / Total Assets = $12,579 / $22,857 = 0.55
    • Trend: Previous year Debt-to-Assets Ratio = $13,684 / $26,597 = 0.51. Percentage change = (0.55 – 0.51) / 0.51 = 7.84%
    • Industry: The chemical industry typically has debt-to-assets ratios ranging from 0.3 to 0.6. Celanese’s debt-to-assets ratio is within this range.
  • Interest Coverage Ratio (Times Interest Earned):

    • Calculation: Earnings (Loss) from Continuing Operations Before Tax / Interest Expense = -$996 / -$676 = 1.47
    • Trend: Previous year Interest Coverage Ratio = $1,183 / $720 = 1.64. Percentage change = (1.47 – 1.64) / 1.64 = -10.37%
    • Industry: An interest coverage ratio of 3.0 or greater is generally considered healthy. Celanese’s interest coverage ratio is below this range.

Activity/Efficiency

  • Inventory Turnover:

    • Calculation: Cost of Sales / Average Inventory = $7,924 / (($2,284 + $2,357) / 2) = 3.42
    • Trend: Previous year Inventory Turnover = $8,337 / (($2,357 + $2,231) / 2) = 3.63. Percentage change = (3.42 – 3.63) / 3.63 = -5.79%
    • Industry: Inventory turnover in the chemical industry typically ranges from 3 to 6. Celanese’s inventory turnover is within this range.
  • Days Sales Outstanding (DSO):

    • Calculation: (Accounts Receivable / Net Sales) * 365 = ($1,121 / $10,280) * 365 = 39.78 days
    • Trend: Previous year DSO = ($1,243 / $10,940) * 365 = 41.45 days. Percentage change = (39.78 – 41.45) / 41.45 = -3.99%
    • Industry: DSO in the chemical industry typically ranges from 30 to 50 days. Celanese’s DSO is within this range.
  • Days Payable Outstanding (DPO):

    • Calculation: (Accounts Payable / Cost of Sales) * 365 = ($1,228 / $7,924) * 365 = 56.58 days
    • Trend: Previous year DPO = ($1,510 / $8,337) * 365 = 66.04 days. Percentage change = (56.58 – 66.04) / 66.04 = -14.33%
    • Industry: DPO in the chemical industry typically ranges from 30 to 60 days. Celanese’s DPO is within this range.
  • Asset Turnover:

    • Calculation: Net Sales / Total Assets = $10,280 / $22,857 = 0.45
    • Trend: Previous year Asset Turnover = $10,940 / $26,597 = 0.41. Percentage change = (0.45 – 0.41) / 0.41 = 9.76%
    • Industry: Asset turnover in the chemical industry typically ranges from 0.5 to 1.0. Celanese’s asset turnover is below this range.

Valuation

  • Price-to-Earnings Ratio (P/E):

    • Calculation: Stock Price / EPS = $52.76 / abs(-$13.93) = -3.79
    • Industry: A negative P/E ratio is not meaningful for comparison.
  • Price-to-Book Ratio (P/B):

    • Calculation: Market Cap / Total Equity = (109,327,556 * $52.76) / $5,175,000,000 = 1.11
    • Industry: P/B ratios in the chemical industry typically range from 1 to 3. Celanese’s P/B ratio is within this range.
  • Price-to-Sales Ratio (P/S):

    • Calculation: Market Cap / Net Sales = (109,327,556 * $52.76) / $10,280,000,000 = 0.56
    • Industry: P/S ratios in the chemical industry typically range from 0.5 to 2. Celanese’s P/S ratio is within this range.
  • Enterprise Value to EBITDA (EV/EBITDA):

    • Calculation: EV = Market Cap + Total Debt – Cash = (109,327,556 * $52.76) + $12,579,000,000 – $962,000,000 = $17,374,689,217.76
    • EBITDA = Net Income + Interest + Taxes + Depreciation & Amortization = -$1,514 + $676 + $510 + $801 = $473
    • EV/EBITDA = $17,374,689,217.76 / $473,000,000 = 36.73
    • Industry: EV/EBITDA ratios in the chemical industry typically range from 8 to 15. Celanese’s EV/EBITDA ratio is above this range.

Growth Rates

  • Revenue Growth:

    • Calculation: (Current Year Revenue – Previous Year Revenue) / Previous Year Revenue = ($10,280 – $10,940) / $10,940 = -6.03%
  • Net Income Growth:

    • Calculation: (Current Year Net Income – Previous Year Net Income) / Previous Year Net Income = (-$1,514 – $1,964) / $1,964 = -177.09%
  • EPS Growth:

    • Calculation: (Current Year EPS – Previous Year EPS) / Previous Year EPS = (-$13.93 – $18.01) / $18.01 = -177.35%

Other Relevant Metrics

  • Restructuring and Asset Impairments: The company incurred significant “Other (charges) gains, net” of -$1,744 million in 2024, compared to -$68 million in 2023. This was primarily driven by asset impairments of -$1,639 million. These charges significantly impacted profitability.
  • Segment Performance: Engineered Materials segment experienced a significant operating loss of -$1,179 million in 2024 compared to an operating profit of $1,083 million in 2023. The Acetyl Chain segment, however, remained profitable with an operating profit of $951 million in 2024, although lower than the $1,109 million in 2023.
  • Pension and Postretirement Benefits: The company’s pension and postretirement benefit obligations continue to represent a significant liability. Changes in discount rates and expected returns on plan assets can have a material impact on net periodic benefit cost and projected benefit obligations.

Commentary

Celanese’s financial performance in 2024 was significantly weaker than in 2023, primarily due to substantial asset impairments and restructuring charges. While revenue declined modestly, the sharp decrease in profitability metrics raises concerns about operational efficiency and asset management. The company’s leverage remains high, although within industry norms, and liquidity ratios have deteriorated. While the Acetyl Chain segment remained profitable, the Engineered Materials segment experienced a significant downturn, highlighting potential challenges in that business area.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️