Celanese Targets 14 Percent Earnings Growth on Ethanol
Celanese Corp. (CE), a chemical maker that’s developed a process to turn natural gas and coal into ethanol, expects earnings to rise as it focuses on supplying the fuel additive to Asian automotive and industrial markets.
Per-share earnings are expected to increase 12 percent to 14 percent a year during the next five years, compared with 10 percent last year, Chairman and Chief Executive Officer Mark Rohr said today in a presentation in Houston. The Dallas-based company will expand earnings before interest and taxes to more than 18 percent of sales, compared with 16 percent last year, he said.
Ethanol, commonly added to gasoline, also has industrial uses as an ingredient in acetic acid and other chemicals used to make products such as paints, deodorants and hand sanitizers. Celanese plans to annually produce 1 million tons of ethanol from coal for industrial uses in China by 2016, Chief Financial Officer Steven M. Sterin said in the presentation. The company is in talks to enter automotive-fuel markets there and in Indonesia, he said.
“These aren’t the only places where there are opportunities, but they are certainly the ones we are most excited about, we’ve made the most progress in, we think the value proposition is the strongest and it represents a significant growth opportunity,” Sterin said.
Capital spending will be about $400 million a year during the next several years, Rohr said. That’s a 28 percent reduction from $553 million spent last year, according to data compiled by Bloomberg. Last year’s spending amount included about $200 million of a one-time payment from the German government to reimburse Celanese for relocating a plant, Mark Oberle, a company spokesman, said in an interview.
The company is initially targeting the industrial ethanol market, which is estimated to be about 5 million to 6 million tons globally and faces less regulatory scrutiny than the motor- fuel market, said Scott Richardson, general manager of the acetyls division. The motor-fuel market is estimated to be as big as 75 million tons globally, he said.
Celanese plans to make 275,000 tons of ethanol from coal a year in Nanjing, China, beginning in the third quarter of 2013, he said.
The shares dropped 1.5 percent to $42.03 at the close in New York.
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