Celanese Corporation (CE): A Bull Case Theory
We came across a bullish thesis on Celanese Corporation (CE) on Substack by Kyler Johnson. In this article, we will summarize the bulls’ thesis on CE. Celanese Corporation (CE)’s share was trading at $76.50 as of Nov 25th. CE’s trailing and forward P/E were 7.62 and 7.97 respectively according to Yahoo Finance.
A large chemical production factory, with billowing smoke in the background.
Celanese Corporation, a global materials and chemicals company founded in 1918 and headquartered in Texas, operates 58 production facilities worldwide. The company is divided into two segments: Engineered Materials and the Acetyl Chain. Engineered Materials, which accounts for 56% of revenue, is project-focused and offers a range of customized products across diverse industries, including automotive, electronics, medical devices, and industrial applications. The Acetyl Chain, making up the remaining 44% of revenue, produces chemicals used both externally and within Celanese’s operations, supporting applications in paints, pharmaceuticals, agriculture, and construction. Serving a broad array of industries, the company’s performance is closely tied to global manufacturing and goods consumption trends.
Celanese’s market value has declined significantly from its all-time highs, driven by concerns over weakening demand and a substantial debt load, notably from its $11 billion acquisition of Dupont’s Mobility and Materials (M&M) segment. While the acquisition has added a revenue stream of $5 billion and a potential $400 million in additional free cash flow (FCF) by 2026, the increased leverage has raised solvency concerns. Management has outlined cost-cutting measures and operational adjustments to address the situation, including idling production facilities, reducing capital expenditures, cutting dividends by 95% starting in 2025, and leveraging term loans to manage near-term debt obligations. These moves aim to generate liquidity and stabilize the balance sheet amidst a challenging manufacturing environment.
The company’s debt profile is particularly concerning, with $6.3 billion maturing over the next three years. With only $800 million in cash on hand and annual FCF recently at $840 million, the path to deleveraging hinges on stringent cost management, incremental FCF improvements, and potential asset divestitures. Management projects that operational efficiencies, combined with synergies from the M&M acquisition, will bolster cash flow by 2026, enabling Celanese to address $1 billion in debt that year. However, the substantial $3.14 billion maturing in 2027 will likely require refinancing, asset sales, or a combination of both. Celanese’s solid credit rating and the prospect of declining interest rates could make refinancing a viable option, but execution risks remain.
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